U.S. Dot-Com Bubble Was Nothing Compared to Today’s China Prices http://www.bloomberg.com/news/articles/2015-04-07/u-s-dot-com-bubble-was-nothing-compared-to-today-s-china-prices … $FXI $PEK
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Good On You, Alexis Tsipras (Part 1)
Good On You, Alexis Tsipras (Part 1)
Late Friday night a solid blow was struck for sound money, free markets and limited government by a most unlikely force. Namely, the hard core statist and crypto-Marxist prime minister of Greece, Alexis Tsipras. He has now set in motion a cascade of disruption that will shake the corrupt status quo to its very foundations.
And just in the nick of time, too. After 15 years of rampant money printing, falsification of financial market prices and usurpation of democratic rule, his antagonists—–the ECB, the EU superstate and the IMF—-have become a terminal threat to the very survival of the kind of liberal society of which these values are part and parcel.
In fact, the Keynesian central banking and the Brussels and IMF style bailout regime—which has become nearly universal—-eventually fosters a form of soft-core economic totalitarianism. That’s because the former first destroys honest financial markets by falsifying the price of debt. So doing, Keynesian central bankers enable governments to issue far more debt than their taxpayers and national economies can shoulder; and, at the same time, force investors and savers to desperately chase yield in a marketplace where the so-called risk free interest rate has been pegged at ridiculously low levels.
That means, in turn, that banks, bond funds and fast money traders alike take on increasing levels of unacknowledged and uncompensated risk, and that the natural checks and balances of honest financial markets are stymied and disabled. Short sellers are soon destroyed because the purpose of Keynesian central banking is to drive the price of securities to artificially high and unnatural levels. At the same time, hedge fund gamblers are able to engage in highly leveraged carry trades based on state subsidized (free) overnight money, and to purchase downside market risk insurance (“puts”) for a pittance.
…click on the above link to read the rest of the article…
Its 1929 In China—-Here’s The Chapter And Verse
Its 1929 In China—-Here’s The Chapter And Verse
I’ve mentioned the Chinese stock market mania here briefly in recent weeks. I’ve now compiled a fair amount of data along with some interesting anecdotes that show just how crazy it’s gotten so I thought I’d spend this week’s market comment laying it all out for you.
The first thing I like to focus on is valuations. If the dot-com bubble is the gold standard, then China is a bona fide financial bubble. According to Bloomberg:
Valuations in China are now higher than those in the U.S. at the height of the dot-com bubble just about any way you slice them. The average Chinese technology stock has a price-to-earnings ratio 41 percent above that of U.S. peers in 2000, while the median valuation is twice as expensive and the market capitalization-weighted average is 12 percent higher, according to data compiled by Bloomberg.
Another way to look at it is to compare current valuations around the world:
One of these bars doesn’t belong. http://www.bloomberg.com/news/articles/2015-06-16/real-cost-of-china-stocks-dwarfs-2007-bubble-as-valuations-jump …
I’ve made the case that US stocks are more overvalued than they appear due to the fact that the median stock is now more highly valued than ever. There’s now a very similar but far more dramatic situation going on in China. Again, from Bloomberg:
…click on the above link to read the rest of the article…
The problem with the Shanghai Composite is that 94 percent of Chinese stocks trade at higher valuations than the index, a consequence of its heavy weighting toward low-priced banks. Use average or median multiples instead and a different picture emerges: Chinese shares are almost twice as expensive as they were when the Shanghai Composite peaked in October 2007 and more than three times pricier than any of the world’s top 10 markets.
…click on the above link to read the rest of the article…
The War Party’s Foolish Confrontation With Russia Is Heading Into A Dangerous Dead End
The War Party’s Foolish Confrontation With Russia Is Heading Into A Dangerous Dead End
“U.S. Poised to Put Heavy Weaponry in East Europe: A Message to Russia,” ran the headline in The New York Times.
“In a significant move to deter possible Russian aggression in Europe, the Pentagon is poised to store battle tanks, infantry fighting vehicles and other heavy weapons for as many as 5,000 American troops in several Baltic and Eastern European countries,” said the Times. The sources cited were “American and allied officials.”
The Pentagon’s message received a reply June 16. Russian Gen. Yuri Yakubov called the U.S. move “the most aggressive step by the Pentagon and NATO since the Cold War.” When Moscow detects U.S. heavy weapons moving into the Baltic, said Yakubov, Russia will “bolster its forces and resources on the western strategic theater of operations.”
Specifically, Moscow will outfit its missile brigade in Kaliningrad, bordering Lithuania and Poland, “with new Iskander tactical missile systems.” The Iskander can fire nuclear warheads.
The Pentagon and Congress apparently think Vladimir Putin is a bluffer and, faced by U.S. toughness, will back down.
For the House has passed and Sen. John McCain is moving a bill to provide Ukraine with anti-armor weapons, mortars, grenade launchers and ammunition. The administration could not spend more than half of the $300 million budgeted, unless 20 percent is earmarked for offensive weapons.
Congress is voting to give Kiev a green light and the weaponry to attempt a recapture of Donetsk and Luhansk from pro-Russian rebels, who have split off from Ukraine, and Crimea, annexed by Moscow.
If the Pentagon is indeed moving U.S. troops and heavy weapons into Poland and the Baltic States, and is about to provide arms to Kiev to attack the rebels in East Ukraine, we are headed for a U.S.-Russian confrontation unlike any seen since the Cold War.
And reconsider the outcome of those confrontations.
…click on the above link to read the rest of the article…
The Euro Was Doomed From The Start—–And Still Is
The Euro Was Doomed From The Start—–And Still Is
Next week will be a momentous one for Europe, with a string of crucial meetings including the summit at which the PM will table his renegotiation demands. We may be focused on our renegotiation but it is Greece which will dominate. For some time it has looked as though the Greek drama must reach its final denouement. But the Greeks have become highly skilled at managing to push back deadlines ever further into the future. Whether Greece leaves the euro or stays in, a decision surely cannot be delayed much longer. So what will this mean for the EU?
I had the privilege of negotiating Britain’s opt-out from the then new European single currency in 1991. My abiding memory is how clear it was that the euro had nothing to do with economics and was a political project with a dubious rationale. Some representatives of other countries were openly sceptical, but their political masters were firmly in control.
The creation of the euro has been an error of historic dimensions and done great harm to the EU, which in its first 40 years had brought economic prosperity to the citizens of the Continent. Then the less well-off countries benefited from the lowering of tariffs and the increase in internal trade. After the creation of the euro, however, economic growth slowed markedly. Poorer countries fared worse than the more prosperous countries, like Germany, which benefited from the new, weaker currency.
The Greek crisis epitomises the complete mess that Europe has made of the single currency. Greece should never have been admitted in the first place, though it was not the only country – Belgium and Italy were two others – that didn’t meet the strict criteria for membership. From the beginning, the rules put in place for the euro, relating to bail-outs, monetary financing and deficit levels, have been ignored. Europe claims to be a rule-based organisation. But however else the eurozone is run, it is not run strictly according to its own rules.
…click on the above link to read the rest of the article…
Australia’s Housing Bubble—–The Mania Down Under
Australia’s Housing Bubble—–The Mania Down Under
Australians are being “irrationally exuberant” and borrowing too much to invest in housing, exposing the economy to financial shocks, global bond fund giant PIMCO says.
In a detailed statistical study that compares Australian borrowers to those in other countries, PIMCO researchers found that Australians’ decision to borrow is driven by falling interest rates and rising house prices – not economic fundamentals that reflect the health of the economy like employment.
In the US wages and other measures of economic health drive people’s decisions to borrow.
The world’s biggest bond investor said Australians’ focus on capital gains and cheap credit “may not be sustainable or linked to the productivity of the asset.”
Australians also appear to be ‘trigger happy’ about debt – they respond far quicker than other borrowers to changes in interest rates and asset prices. They start borrowing more after only six months of increases in house prices compared with a year in the US.
“Households are exhibiting irrational exuberance because they are placing little weight on broader fundamentals like unemployment that may be more representative of future incomes or asset price returns, increasing the likelihood of asset price bubbles,” the report released by the bond fund on Wednesday said.
Australians react faster and “more vigorously to a shock in asset prices or mortgage rates” which makes the economy more vulnerable to an external shock, such as a sharp slow down in China’s economy or another financial market sell-off, the report said.
The conclusions may bolster those who believe parts of Australia’s property market are into a bubble, including Treasury secretary John Fraser, and put pressure on regulators to take action. A sharp fall in property prices could hit the big banks, which borrow billions each year from overseas investors like PIMCO.
“The key point is that the speed which Australian households reacted to changes in housing assets and mortgage rate was much faster,” the researchers said.
…click on the above link to read the rest of the article…
Global Cooling Alert: World Faces Longest Oil Glut In Three Decades
Global Cooling Alert: World Faces Longest Oil Glut In Three Decades
The world is on the brink of the longest-lasting oil glut in at least three decades and OPEC’s quest for market share makes it almost unavoidable.
Oil supply has exceeded demand globally for the past five quarters, already the most enduring glut since the 1997 Asian economic crisis, International Energy Agency data show. If the Organization of Petroleum Exporting Countries were to keep pumping at current rates it would become the longest surplus since at least 1985 by the third quarter, the data show.
There are few signs the 12-nation group will cut back. Saudi Arabia, OPEC’s biggest member, will probably increase production to intensify pressure on U.S. shale drillers, Goldman Sachs Group Inc. predicts. OPEC’s supplies may be swollen further this year if Iran reaches a deal with world powers to ease sanctions on its exports, Commerzbank AG says.
“It seems to be taking longer for the oil surplus to clear, and, even without the return of Iran, IEA data indicates it could last for the rest of the year,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. “Any expectations the oversupply will be gone by 2016 don’t look justified at this stage.”
OPEC pumped 31.3 million barrels a day in May and will probably continue to pump around that level “in coming months,” the IEA said in a report on June 11. The agency doesn’t forecast OPEC production.
Brent for August settlement gained 28 cents to $64.23 a barrel on the London-based ICE Futures Europe exchange at 12:04 p.m. Singapore time.
…click on the above link to read the rest of the article…
Lies the Government Is Telling You—The Freedom Of Information Act Is A Fraud
Lies the Government Is Telling You—The Freedom Of Information Act Is A Fraud
Last week, Republicans and Democrats in Congress joined President Barack Obama in congratulating themselves for taming the National Security Agency’s voracious appetite for spying. By permitting one section of the Patriot Act to expire and by replacing it with the USA Freedom Act, the federal government is taking credit for taming beasts of its own creation.
In reality, nothing substantial has changed.
Under the Patriot Act, the NSA had access to and possessed digital versions of the content of all telephone conversations, emails and text messages sent between and among all people in America since 2009. Under the USA Freedom Act, it has the same. The USA Freedom Act changes slightly the mechanisms for acquiring this bulk data, but it does not change the amount or nature of the data the NSA acquires.
Under the Patriot Act, the NSA installed its computers in every main switching station of every telecom carrier and Internet service provider in the U.S. It did this by getting Congress to immunize the carriers and providers from liability for permitting the feds to snoop on their customers and by getting the Department of Justice to prosecute the only CEO of a carrier who had the courage to send the feds packing.
In order to operate its computers at these facilities, the NSA placed its own computer analysts physically at those computers 24/7. It then went to the U.S. Foreign Intelligence Surveillance Court and asked for search warrants directing the telecoms and Internet service providers to make available to it all the identifying metadata – the times, locations, durations, email addresses used and telephone numbers used – for all callers and email users in a given ZIP code or area code or on a customer list.
…click on the above link to read the rest of the article…
Stay Out Of Harm’s Way—-The Casino Is Fixing To Blow
Stay Out Of Harm’s Way—-The Casino Is Fixing To Blow
Shock waves have been rumbling through the global bond market in the last few days. On April 17 the yield on the 10-year German bund pierced through the 5bps level, but yesterday it tagged 100bps. That amounted to a 20X move in 39 trading days.
It also amounted to total annihilation if you were front running Mario Draghi’s bond buying campaign on 95% repo leverage and didn’t hit the sell button fast enough. And there were a lot of sell buttons to hit. The Italian 10-year yield has soared from a low of 1.03% in late March to 2.21% last night, and the yield on the Spanish bond has doubled in a similar manner.
Needless to say, this is not by way of a lamentation in behalf of the euro-bond speculators who have had their heads handed to them in recent days. After harvesting hundreds of billions of windfall gains since Draghi’s mid-2012 “whatever it takes ukase” they were overdue to get slapped around good and hard.
Instead, what we have here is just one more striking demonstration that financial markets are utterly broken. The notion of honest price discovery might as well be relegated to the museum of financial history.
The exact catalyst for yesterday’s panicked global bond sell-off, apparently, was Draghi’s public confession that although the ECB would stay the course on its $1.3 trillion QE program, it cannot prevent short-run “volatility” in the trading pits.
Why that should be a surprise to anyone is hard to fathom, but it does crystalize the “look ma, no hands” essence of today’s markets. The trading herd goes in the direction enabled by the central banks until a few dare devils finally fall off their bikes, causing an unexpected pile-up and inducing the pack to temporarily reverse direction.
…click on the above link to read the rest of the article…
From Whence Cometh Our Wealth—–The People’s Labor Or The Fed’s Printing Press?
From Whence Cometh Our Wealth—–The People’s Labor Or The Fed’s Printing Press?
It is hard to believe that in these allegedly enlightened times this question even needs to be asked. Are there really educated adults who believe that by dropping helicopter money conjured from thin air, the central bank can actually make society wealthier?
Well, yes there are. They spread this lunacy from the most respectable MSM platforms. And, no, I’m not talking about professor Krugman and his New York Times column. At least, he pontificates from a Keynesian framework that has a respectable, if erroneous, intellectual heritage.
What I am talking about here is the mindless bunkum issued by so-called financial journalists who swish around Wall Street and Washington exchanging knowing tidbits with policy-makers, deal-makers and each other. Call it the bubble finance “narrative”, and recognize that its gets more uncoupled from economic facts, logic and plausibility with each passing day in the casino.
The estimable folks at The Automatic Earth put a bright spotlight on this crucial matter this morning, even if not by design. Their trademark daily vintage photo was a 1911 picture of a family including all the kids picking berries in the field; they were making GDP the old fashioned way.
In its usual manner, the site’s “debt rattle” list of links to timely reads followed, and the first was a Bloomberg View opinion piece called“QE For The People: Monetary Policy For The Next Recession” by one Clive Crook. It was actually a case for literally dropping central bank money from the skies to enable policy-makers to better “support demand and keep their economies running”.
In thoughtfully supplying a photo of a helicopter in full flight to accompany Crook’s discourse, the Bloomberg graphics department crystalized the essential economic issue of our times. Namely, whether wealth is made by the Berrie Pickers or the Money Printers.
…click on the above link to read the rest of the article…
