From James Harkin (Webmaster & Editor of LindseyWilliams.net). Here is a summary of articles of interest from around the world for this week. Please LIKE the Lindsey Williams Online Facebook Page to see stories posted daily regarding the current state of the economy around the world.
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Latest News From May 20, 2016 to May 26, 2016:
This S&P 500 Death Cross’ Could Be The Real Deal
Not all “death crosses” are created equal. In a note to clients, Intermarket Strategy Ltd. Chief Executive and Strategist Ashraf Laidi points out that the S&P 500’s 50-week moving average is falling below its 100-week moving average. This “statistically significant” death cross has only happened twice is the past two decades, Laidi points out. The first took place in 2001 and was followed by a 37 percent decline in the index, while the second pattern occurred in 2008 and preceded a 48 percent drop. With investors already growing increasingly nervous about prospects for equities, a death cross of grave proportions could give extra reason for caution.
Red Ponzi Update——-Gambling Like Never Before
In the heyday of its incredible credit and construction boom, China was building two world-scale utility plants each week and opening up a new airport every day. Economic fiction writers like Goldman’s Jim O’Neill, chief propagator of the BRICs myth, declared the Red Ponzi to be the very second coming of capitalism. Now, by contrast, a Chinese billionaire goes missing practically every day, as a recent Washington Post article explained: That’s what happened last year when China’s richest man — at least on paper — lost half of his wealth in less than half an hour. It turned out that his company Hanergy may well just be Enron with Chinese characteristics: Its stock could only go up as long as it was borrowing money, and it could only borrow money as long as its stock was going up. Those kind of things work until they don’t.
Foreign Central Banks Jettisoning US Debt at Alarming Pace; Buying Gold
Continuing a trend that started last year, central banks around the world are dumping US debt at a record pace. Central banks sold off a net $17 billion in US Treasury bonds in March. Sales set a record in January, hitting $57 billion. China, Russia, and Brazil led the way, each dumping at least $1 billion in US debt in March alone. So far in 2016, global central banks have jettisoned $123 billion in US debt. Last year, they sold off $226 billion. According to the Treasury Department, central banks are selling US Treasuries at a pace not seen since at least 1978.
Undeniable Evidence That The Real Economy Is Already In Recession
You are about to see a chart that is undeniable evidence that we have already entered a major economic slowdown. In the “real economy”, stuff is bought and sold and shipped around the country by trucks, railroads and planes. When more stuff is being bought and sold and shipped around the country, the “real economy” is growing, and when less stuff is being bought and sold and shipped around the country, the “real economy” is shrinking. I know that might sound really basic, but I want everyone to be on the same page as we proceed in this article. Just because stock prices are artificially high right now does not mean that the U.S. economy is in good shape. In fact, there was a stock rally at this exact time of the year in 2008 even though the underlying economic fundamentals were rapidly deteriorating. We all remember what happened later that year, so we should not exactly be rejoicing that precisely the same pattern that we witnessed in 2008 is happening again right in front of our eyes.
10 Stunning Parallels Between The United States And Nazi Germany
Most Americans may not like to hear this, but the truth is that modern day America very closely resembles Nazi Germany. If you initially recoiled when you read the headline to this article, that is understandable. After all, most of us were raised to deeply love this country. But I would ask you to consider the evidence that I have compiled before you pass judgment on the matter. Most citizens of this nation know that something has gone deeply wrong, and I would suggest that just like the Nazis, all of the pageantry and beauty in our society masks an evil which has grown to a level that is almost unspeakable. And just like the Germans, we don’t do ourselves any favors by turning a blind eye to what is going on. The following are 10 stunning parallels between the United States and Nazi Germany…
Member Of Congress: It’s Easy ‘To Manipulate A Nation Of Naive, Self-Absorbed Sheep’
You may not believe the incredible things that one member of Congress is saying about the corruption of our political system and the gullibility of the American people. In a brand new book entitled “The Confessions of Congressman X“, one anonymous member of the U.S. House of Representatives confesses that he hardly ever reads the bills that he votes on, that his main job is to get reelected, and that it is “far easier than you think to manipulate a nation of naive, self-absorbed sheep who crave instant gratification”. This book is being published by Mill City Press, and it is being billed as “a devastating inside look at the dark side of Congress as revealed by one of its own.” I don’t know if you would classify this anonymous member of Congress as “brave” since he does not wish to reveal his identity, but the things that he is admitting confirm suspicions that many of us have had for a very long time.
Even Target Isn’t Immune to Spending Slowdown Rippling Through Retail
Target (TGT) had a solid start to the year compared with struggling apparel retailers in the malls, but it’s still not immune to the broader consumer spending slowdown. The discount retailer signaled Wednesday that its second quarter may have started more sluggishly because of tepid consumer demand for apparel and the impact of protests over its stance on the use of women’s bathrooms. Second-quarter sales may drop as much as 2% from the prior year. Earnings should be $1 to $1.20 a share, compared with Wall Street estimates of $1.19.
Venezuela: A Prepper’s Nightmare Come to Life
Two years ago, Venezuela was a normal functioning nation, relatively speaking of course. It was by no means a free country, but the people still had a standard of living that was higher than most developing nations. Venezuelans could still afford the basic necessities of life, and a few luxuries too. They could send their children to school and expect them to receive a reasonably good education, and they could go to the hospital and expect to be effectively treated with the same medical standards you’d find in a developed nation. They could go to the grocery store and buy whatever they needed, and basic government services like law enforcement and infrastructure maintenance worked fairly well. The system was far from perfect, but it worked for the most part. However, this standard of living was a mirage. Venezuela was and still is a leftist socialist nation, and the only thing propping it up was their glut of oil reserves and $100 per barrel prices. The state owned those resources, and they provided so much wealth that even Venezuela’s highly inefficient command economy could provide everything the people needed. But socialist systems do not by their nature, respond well to shock and disruptions. They’re not flexible.
12 Signs That A Cloud Of Insanity Has Descended On The Land
What in the world is happening to America? Recently, I was asked to describe what we are watching happen to our nation. After thinking about it, I have come to the conclusion that it is almost as if a “cloud of insanity” has descended upon the United States and much of the rest of the western world. From our top leaders on down, people are engaged in incredibly self-destructive behavior and are making extremely irrational decisions. Some would describe it as being given over to a depraved mind, and I would have to agree. It is almost as if some sort of severe form of mental illness were rapidly spreading through the air and infecting everyone. Virtually every day I am immersed in news and current events, and it can be difficult to shock me after all this time. But lately, there have been quite a few stories that have stunned even me.
The US is concerned about a potential meltdown in Venezuela, destroying its oil sector
The United States is increasingly concerned about the potential for an economic and political meltdown in Venezuela, spurred by fears of a debt default, growing street protests and deterioration of its oil sector, U.S. intelligence officials said on Friday. In a bleak assessment of Venezuela’s worsening crisis, the senior officials expressed doubt that unpopular leftist President Nicolas Maduro would allow a recall referendum this year, despite opposition-led protests demanding a vote to decide whether he stays in office.
Fed officials Williams, Lockhart stress that June meeting is ‘live’
The U.S. central bank could raise interest rates as soon as June, two Federal Reserve officials said Tuesday. Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams, in a joint appearance at a lunch sponsored by the news site Politico, said that the decision on whether to raise rates at the June 14-15 meeting depends on the data. June “certainly could be a meeting at which action could be taken,” Lockhart said. “I think it is a little early at second-quarter data to draw a conclusion, so I am at this stage inconclusive about how I am going to be thinking about June, but I wouldn’t take it off the table,” Lockhart said. He said he assumes there will be two to three rate hikes this year.
A Coming Event That Is Going To Shock The World
Last year one of the legends in the business warned of a coming event that is going to shock the world. How close is this event to unfolding? The Disease – Deflation And A World Drowning In Debt Richard Russell warned last year: “The world’s balance sheet is heavily skewed toward debt and loans. On the asset side of the balance sheet we have gold and silver currencies. Cure That Will Shock The World – Reset Gold To $5,000 or $10,000! What would make the balance sheet look saner and increase the asset side? It would be to reset gold to a much higher price. Why is it that nobody is writing about this? Resetting the price of gold to $5,000 or $10,000 an ounce would be a mighty step against deflation.
Now Is Not a Normal Time: Central Banks Buying Piles of Gold
These are not normal economic times. Interest rates have remained artificially low, plunging into negative territory in many places. Central banks continue to inflate the money supply with quantitative easing. Some policy-makers have even floated the idea of helicopter money. Worldwide money printing is reportedly approaching $100 trillion. There is no end to this crazy monetary policy in sight. This led billionaire investor Stanley Druckenmiller to recommend selling US stocks to buy gold. Well-known hedge fund manager Paul Singer said the recent surge in gold is just the beginning. And Bank of America said gold is entering a new and long bull market.
ICBC buys Barclays’ US$80bn London gold vault
ICBC Standard Bank is buying Barclays’ London precious metals vault, giving the Chinese bank the capacity to store gold worth more than US$80bn in the secret location. The vault is one of the largest in Europe, with a capacity to hold 2,000 tonnes of gold, silver, platinum and palladium. It has been operational since 2012. ICBC Standard Bank said on Monday it has signed an agreement to buy the vaulting business and transfer the associated contracts, subject to consent. The deal is expected to complete in July. ICBC Standard Bank specialises in commodities, fixed income, currencies and equities and was formed in February 2015 when Industrial and Commercial Bank of China bought a 60% stake in Standard Bank’s London-based global markets business. Neither ICBC Standard Bank nor Barclays disclosed the financial terms of the deal.
BREAKING: Gerald Celente Just Issued One Of His Most Important Trend Alerts Of 2016!
Today top trends forecaster Gerald Celente just issued one of his most important Trend Alerts of 2016 exclusively through King World News! Gerald Celente: Oil is on a tear. Gold is shining and the global equity markets remain volatile. After plunging from $115 a barrel in June 2014, to hitting a 52 week low at $27.10 this past January, Brent Crude, hitting a seven month high on Tuesday, is now flirting at $50 a barrel.
Kill TTIP Now — Paul Craig Roberts
In his May 9, 2016, speech to European medical professionals, Michael Hudson points out that the result of TTIP for Europe will be the privatization of health care systems with the associated much higher costs. Hudson’s accurate description of TTIP shows that politically powerful corporations have gained the power in Western “democracies” to sacrifice the welfare of all populations to corporate greed for profit regardless of the cost to peoples, countries, and societies. The evil of American “democratic capitalism” is total and irredeemable. TTIP gives corporations unaccountable power over governments and peoples. The corporations must be slapped down hard, fiercely regulated, and forced by threat of long prison sentences to serve the public interest, and not the incomes of the executives and shareholders who comprise the One Percent.
Venezuela scrambles to head off collapse
With the nation on the brink of collapse, Venezuelan officials Monday were scrambling to keep the country afloat. But a plunge in crude prices, rampant inflation and a currency crash has left the once oil-rich nation with few options to head off political and social chaos. Opposition leaders over the weekend protested a 60-day state of emergency declared by President Nicolás Maduro on Friday night, based what he called plots from Venezuela and the U.S. to subvert him. With the economy in freefall, hungry mobs have looted food stories, power and water are in short supply and hospitals are unable to care for newborns. “You can hear the ice cracking. You know there’s a crisis coming,” a U.S. official told a group of reporters Friday, according to published reports. That crisis has been building for years, but the pace of Venezuela’s decline has worsened in recent weeks. Mobs have stolen food and clothing amid shortages of many basic consumer products.
KFC restaurant in China is now staffed by chicken-loving robots
We are living in a brave new world where robots are encroaching on our jobs, our lives, and our safety. Or, at the very least – they’re readily available to serve us fried chicken. KFC has become one of the first restaurants to make use of voice activated robots in its store. The automaton, known as Dumi, is located at a concept store in Shanghai – and its creators say that it’s clever enough to handle orders from customers, and even adjustments when diners change their minds.
When They Killed JFK They Killed America — Paul Craig Roberts
In the JFK administration I was a White House Fellow. In those days it was a much larger program than the small insider program it later became. President Kennedy’s intention was to involve many young Americans in government in order to keep idealism alive as a counter to the material interests of lobby groups. I don’t know if the program still exists. If it does, the idealism that was its purpose is long gone. President John F. Kennedy was a classy president. In my lifetime there has not been another like him. Indeed, today he would be impossible. Conservatives and Republicans did not like him, because he was thoughtful. Their favorite weapon against him was their account of his love life, which according to them involved Mafia molls and Marilyn Monroe. They must have worked themselves into fits of envy over Marilyn Monroe, the hottest woman of her time. Unlike most presidents, Kennedy was able to break with the conventional thinking of the time. From his experience with the Bay of Pigs, Cuban Missile Crisis, and the Joint Chiefs’ “Operaton Northwoods,” Kennedy concluded that CIA Director Allen Dulles and Chairman of the Joint Chiefs of Staff General Lemnitzer were both crazed by anti-communism and were a danger to Americans and the world.
Investors could yank as much as $500B from hedge funds in 2016
The $3.2 trillion hedge fund industry, reeling from its worst quarter for withdrawals since the financial crisis, is bracing for more pain. Hedge funds, which watched in horror as investors yanked $15 billion from the funds in the first three months of the year, could see that figure climb to $500 billion by the end of the year, one pension investor said. “We have all the leverage,” one investor said, echoing a familiar refrain at this year’s SkyBridge Alternative, or SALT, conference, here.
Gold Prices: One Big Reason Why $2,000 Gold Could Be Possible
Something just happened in the gold market that suggests gold prices are severely undervalued. Don’t expect to read this in the mainstream financial publications. Gold buyers are increasing in numbers. You see, in 2013, when the precious metal’s prices were plummeting (for all the wrong reasons as I see it), the mainstream media told investors that buyers would be running from gold. Big investment companies said gold prices would fall further. They were all wrong. The data proves them wrong.
Warren Buffett: “It’s a huge advantage NOT to have a lot of money…”
Warren Buffet has famously said many times that the vast majority of investors shouldn’t bother picking stocks. Instead, he’s advised everyone from Lebron James to his own children to simply buy an S&P index fund and hold it ‘for the next 50 years.’ He’s probably right; most people probably should just buy an S&P index fund. But not because it’s a superior investment. It’s because most people simply aren’t educated about business, finance, and investing. Proper financial education isn’t taught in public schools, so for a lot of folks, investing is an alien concept. Learning about investment means seeking an independent education. A real education. And it’s amazing what a real education can do. Whereas the average person is relegated to an insipid index fund, an educated investor can generate phenomenal wealth and prosperity. Buffett himself is a great example of this.
How safe are top US banks?
Recently I was having drinks with a friend of mine who is an ultra-successful US real estate developer and investor. He told me that his team had just closed a large real estate transaction worth hundreds of millions of dollars, and they got a sweetheart deal from the bank. The bank is loaning them almost all of the money at an interest rate of around 2%. But it gets better. If the Federal Reserve raises interest rates, he has the option of locking in the rate that he has now… so his interest rate will basically never go up. But if the Federal Reserve lowers interest rates, the rate that he pays on the loan will go down. In other words, he got an amazing deal from the bank… and it might even get better. But it will never get worse. Now, this is obviously fantastic for the borrower. But for the bank, this is an absolute sucker’s bet. There’s almost zero upside.
Wendy’s Turns to Self-Serve Kiosks to Offset Higher Labor Costs
In a move meant to offset higher minimum wages taking effect in states across the country, fast-food giant Wendy’s will be offering self-serve kiosks to many of its franchisees later this year. Though some reports suggested the kiosks would be made available at all Wendy’s by the end of 2016, spokesperson Bob Bertini says it will be up to individual franchisees whether or not they install the kiosks. Below, the statement from Wendy’s in full: The majority of Wendy’s restaurants are franchise-operated. We are in pilot now with self-service order kiosks, which we expect to make available for installation by our franchisees later in 2016. Whether they choose to do so will be up to them. Earlier news reports were not quite accurate. We did not say kiosks would be available at every restaurant by end of year. We do continue to invest in technology to help mitigate the inflation we are seeing on the wage front. In an earnings call on Wednesday, company president Todd Penegor said that “managing labor pressure” will be critical “to make sure that we provide a new QSR [quick-service restaurant] experience but at traditional QSR prices.”
Scenes From The Venezuela Apocalypse: “Countless Wounded” After 5,000 Loot Supermarket Looking For Food
Over the last several years we have documented with clockwork regularity Venezuela’s collapse into failed state status, which was cemented several weeks ago when news hit that “Venezuela had officially run out of money to print new money.” At that point the best one could do was merely to step back and watch as local society and civilization turned on itself, unleashing what would ultimately turn into Venezuela’s own, sad apocalypse. As we wrote then these are simply hungry Venezuelans protesting that their children are dying from lack of food and medicine and that they do not have enough water or electricity. As AgainstCronyCapitalism added, this is a country with more oil than Saudi Arabia, and the government has stolen all the money and now they bottleneck peaceful protesters and threaten them with bombs (or haul them to prison and torture them). As pure desperation has set in, crime has becomes inevitable.
This Won’t End Well – Business Inventories Signal Recession Imminent
Autos & parts inventories-to-sales ratios soared to 2.30x from 2.18x – levels that have only been higher during the financial crisis. This, combined with a rise in clothing inventories to sales, held overall business inventories at their highest to sales since the crisis and deep in pre-recessionary territory. Retail inventories rose 1.0% MoM despite a 0.3% drop in sales (with motor vehicles inventories up 2.3% as sales tumbled 3.2%) leaving the inventories to sales ratio at cycle highs… Simply put, this won’t end well.
Tim Price: Why I’m voting to leave the European Union
On 23 June 2016, this British citizen will be voting to leave the European Union. To me it’s clear: the EU has not only become too big for its own good, it’s too big to do hardly anything good. Back in 1975 when the UK first confirmed membership in the EU (when it was called the European Economic Community), it made sense. Britain has always thrived on international trade, and the EU promised more trade. But that’s not what happened. The EU didn’t turn into a peaceful, efficient, multi-national trading bloc that enables commerce and prosperity. Rather it has become an ever-expanding, unaccountable bureaucracy ruling over vastly disparate nations who are increasingly at odds with one another. And it is precisely the size of this Leviathan that’s the problem… something that was first identified several decades ago by economist Leopold Kohr.
Oil Inventories Drop by 3.4 Million Barrels as EIA Fudge Factor Swings by 664,000 Barrels Per Day
This Wednesday’s Petroleum Status reports for the week ending May 6th from the Energy Information Administration indicated that our crude oil production fell a bit once again and that our imports of oil were virtually unchanged, while US refineries saw another modest increase in the amount of oil that they used. Production of crude oil from US wells fell for the 15th time in the past 16 weeks, dropping by 23,000 barrels per day, from an average of 8,825,000 barrels per day during the week ending April 29th to an average of 8,802,000 barrels per day during the week ending May 6th. That’s now 6.1% below the 9,373,000 barrels per day we were producing during the first week of May last year, and 8.4% below the 9,610,000 barrel per day peak of our oil production that was hit during the week ending June 10th of last year.
Working 60 Hours A Week At 3 Part-Time Jobs And Still Living Paycheck To Paycheck
What can you do when you are working 60 hours a week at three part-time jobs and it is still not enough? In America today, many people have taken on more than one job in a desperate attempt to make ends meet, but they still come up short at the end of the month. And those that are actually working are the fortunate ones, because in one out of every five families in the United States nobody has a job. There are more than 100 million working age Americans that are currently not employed (yes this is true), and as I pointed out yesterday, job cut announcements by major firms are currently running 24 percent ahead of last year’s pace. But unemployment is just part of the overall problem. There is this growing misconception out there that if you “have a job” that you must be doing okay. Unfortunately for the growing number of “working poor” in America, that is not true at all.
Undeniable Evidence That The Real Economy Is Already In Recession Mode
You are about to see a chart that is undeniable evidence that we have already entered a major economic slowdown. In the “real economy”, stuff is bought and sold and shipped around the country by trucks, railroads and planes. When more stuff is being bought and sold and shipped around the country, the “real economy” is growing, and when less stuff is being bought and sold and shipped around the country, the “real economy” is shrinking. I know that might sound really basic, but I want everyone to be on the same page as we proceed in this article. Just because stock prices are artificially high right now does not mean that the U.S. economy is in good shape. In fact, there was a stock rally at this exact time of the year in 2008 even though the underlying economic fundamentals were rapidly deteriorating. We all remember what happened later that year, so we should not exactly be rejoicing that precisely the same pattern that we witnessed in 2008 is happening again right in front of our eyes.
JP Morgan: Gold Entering a New and Long Bull Market
Are Wall Street banks finally getting on the right side of the gold trade? In an interview with CNBC, Solita Marcelli, global head of fixed income at JP Morgan, revealed that the Wall Street investment bank is recommending that clients position themselves for a “new and very long” bull market in gold. She explained that negative interest rates around the world are making gold a more attractive investment. Since gold is a non-yielding asset and has minimal storage costs, it actually compares quite favorably with the increasing number of negative yield bonds on the global stage. It has a positive carry. Solita suggested that central banks might consider diversifying their reserves into gold with the fear that they might be getting negative rates on their existing holdings. Gold is a great portfolio hedge in an environment where world government bonds rates are at historical lows. It may, in fact, replace government bonds as the next risk off trade.
Fed’s Yellen says negative rates would need careful consideration
Federal Reserve Chairwoman Janet Yellen said Tuesday the Fed wouldn’t rule out using negative interest rates to boost the economy but she cautioned such a move would have to be carefully studied. “While I would not completely rule out the use of negative interest rates in some future very adverse scenario, policymakers would need to consider a wide range of issues before employing this tool in the United States, including the potential for unintended consequences,” she wrote in a letter to Rep. Brad Sherman (D., Calif.) and released by his office. Yellen also wrote she expected the economy would strengthen and inflation would return to the Fed’s 2% target “over time.”
Watch Venezuela, Because Food Shortages, Looting And Economic Collapse Are Coming To America Too
The full-blown economic collapse that is happening in Venezuela right now is a preview of what Americans will be experiencing in the not too distant future. Just a few years ago, most Venezuelans could never have imagined that food shortages would become so severe that people would literally hunt dogs and cats for food. But as you will see below, this is now taking place. Sadly, this is what the endgame of socialism looks like. When an all-powerful government is elevated far above all other institutions in society and radical leftists are given the keys to the kingdom, this is the result. Food shortages, looting and rampant violent crime have all become part of daily life in Venezuela, and we all need to watch as this unfolds very carefully, because similar scenarios will soon be playing out all over the planet.
Bayer lodges $62bn cash bid to acquire Monsanto
German chemical and pharmaceutical giant Bayer has announced a $62bn (£43bn; €55bn) all-cash takeover bid for US seeds company Monsanto. The $122-per-share offer represents a 37% premium on Monsanto’s closing share price of $89 on 9 May, before Bayer formally tabled its written takeover proposal. The Leverkusen-headquartered firm said in a statement on 23 May that the merger would create a “global agriculture leader” if it goes through. Monsanto is one of the world’s largest producers of genetically engineered seeds and has courted controversy in the past due to its lobbying of government agencies in support of GM crops.
Unemployment Claims Spike Again As We Get More Scientific Evidence The Middle Class Is Shrinking
As the U.S. economy slows down, we would expect to start to see evidence of this in the employment numbers, and that is precisely what has begun to happen. During the week before last, initial claims for unemployment benefits jumped by 17,000, which was the largest increase that we had seen in over a year. Well, last week we witnessed an even bigger spike. Seasonally adjusted initial claims shot up 20,000 more to a total of 294,000. Of course it makes perfect sense that more Americans are applying for unemployment benefits, because firms are laying people off at a much faster pace these days. Just a couple days ago I reported that job cut announcements at major firms are running 24 percent higher this year compared to the first four months of last year. So we should fully expect that the number of Americans seeking unemployment benefits will continue to accelerate.
Medicare at age 76 EVERYONE needs to read this.
If you don’t read this, and do nothing about it, don’t complain when it affects you or your loved ones! This is the second Judge to have read the Obama Care document comments. More highlights of Nancy’s “pass it and then find out what’s in the bill”! Show this to everyone nearing the ripe old age of 76. These are just a few of the things that we Seniors are going to have to deal with which started in 2014. Even far left Democrats will not like these.
Fed to delay rate hike until September on tame inflation outlook: Reuters poll
The U.S. Federal Reserve will likely wait until September before raising interest rates again, stretching to nine months the time since its first hike in nearly a decade, as it waits for clear signs inflation is picking up, a Reuters poll found. This is the second time this year that economists have delayed their rate-hike expectations, casting doubt on the likelihood the Fed will be able to deliver two rate hikes this year as the U.S. Presidential election in November could make further policy changes sensitive. Almost a third of more than 90 economists in the poll still expect the Fed will raise its federal funds rate to 0.50-0.75 percent in June, suggesting the less than 8 percent chance markets have assigned to that may be too low.
Fiscal stimulus: Industry titans indicate a fundamental shift
Calls for fiscal stimulus Joined by Bill Gross, Carl Icahn, Jamie Dimon and Larry Fink. When the largest investors across divergent sectors all reach the same conclusion at roughly the same time, chances are much higher than average that a fundamental shift is underway. With the voices of titans Bill Gross, probably one of the world’s most savvy bond investors, Jamie Dimon, the face and voice of banking, Carl Icahn, the iconic hedge fund investor and Larry Fink of Blackrock – the poster child of private equity all in unison on fiscal stimulus, you can be sure of one thing: fiscal stimulus is about to begin. What is fiscal stimulus? Essentially it means that governments take the money they’ve amassed thanks to monetary stimulus, and spend it on infrastructure development.
Canada’s banks to set aside more funds to cover toxic oil loans
Canada’s biggest banks are expected to set aside more funds to cover bad loans to the oil and gas sector, eating into their profits when they announce second quarter results next week, analysts say. Royal Bank of Canada Bank of Nova Scotia, Bank of Montreal and Canadian Imperial Bank of Commerce all reported an increase in losses from oil sector loans that turned sour in the first quarter. Although oil prices have improved since February, the banks’ second-quarter results will show the impact of credit lines to oil firms being tightened to reflect lower oil prices, a move that could lead some to default on their loans, analysts say.
Investors Piling into Gold; Demand in Record Territory
Gold demand hit near record levels in the first quarter of 2016. Despite the price rising nearly 17%, the demand for gold surged 21% in the opening quarter of the year. It was the second largest quarter on record, according to the World Gold Council. Gold demand hit 1,290 tons in Q1. Concerns about economic instability and an uncertain financial landscape drove the increase. Investors flocked to gold, and ETFs saw a huge inflow of the yellow metal. Total investment demand hit 618 tons, up 122% from the same period in 2015.
Amerigeddon: Are You Ready For The Chaos That Will Ensue When The Power Grid Is Brought Down?
What would America look like with absolutely no electricity? Could you survive in a world with no lights, no cell phones, no computers, no televisions, no ATMs, no cash registers and no refrigerators? Such a world is not as far away as you might think. A very powerful nuclear blast directly over the center of the continental United States could potentially fry electronic equipment from coast to coast, and it would take months or even years to fully restore power. During that time, the entire country would be plunged into chaos and experts tell us that tens of millions of Americans would die. But even if we are never attacked by a nuclear weapon in that manner, scientists assure us that it is inevitable that a massive electromagnetic blast from the sun will produce a similar result someday anyway. In fact, back in 1859 a giant solar storm that came to be known as “the Carrington Event” fried telegraph machines all across North America and Europe. If a similar event happened today, life as we know it would be brought to an abrupt halt, and chaos would ensue from coast to coast.
U.S. Consumer Comfort Drops to Five-Month Low on Economic Views
Consumer confidence fell last week to a five-month low as Americans became more downbeat about the economy, Bloomberg Consumer Comfort data showed Thursday. Sentiment around personal finances and the buying climate were little changed after declining the previous week. Key Points: Consumer Comfort Index eased to 41.7 in the week ended May 8, the lowest since mid-December, from 42. Decrease was led by dimming views of the national economy, with that index sinking 2 points to 30.6, also the weakest in five months. Americans’ views of their finances were little changed at 55.4 after 55.3, while a measure of the buying climate climbed to 39.1 from 38.2.
U.S. jobless claims hit 14-month high; analysts blame Verizon strike
The number of Americans filing for unemployment benefits rose last week to a more than one-year high, but economists blamed striking telecommunications workers for the surge and said the data did not signal a deterioration in the overall labor market. Another report on Thursday showed import prices increased in April for a second straight month, suggesting the disinflationary impulse from a strong dollar and lower oil prices, which has helped to hold inflation well below the Federal Reserve’s 2 percent target, was fading. Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 294,000 for the week ended May 7, the highest level since late February 2015, the Labor Department said. It was the third consecutive week of increases in first-time applications for jobless benefits.
ECB Prepares to Expand its Racket, Markets Salivate
A few weeks ago, few people had heard of the ECB’s Governing Council Member Vitas Vasiliauskas. In the last week that has all changed, thanks to a surreal interview Vasiliauskas gave to Bloomberg in which he described Europe’s central bankers, with apparent deadpan seriousness, as “magic people” endowed with limitless powers to shape Europe’s economic environment: “Markets say the ECB is done, their box is empty. But we are magic people. Each time we take something and give to the markets — a rabbit out of the hat.” It is arguably the most absurd — and honest — description by a central banker of the role of modern central banking in today’s economy. On Wednesday Vasiliauskas gave Reuters an eagerly anticipated follow-up interview. In it he waxed lyrical about the Eurozone’s rosy economic outlook. “The current situation is stable with positive perspectives,” Mr Vasiliauskas gushed. “So if you ask me what do you think about possible steps during the summer, my answer would be: nothing.”
These Charts Show the Truly Dismal State of Young People in Bailed-Out EU Countries
The human aspects of the European crisis, such as the effects of horrific youth unemployment in some countries, have largely receded from the headlines that ECB potentate Mario Draghi rules with his beautifully concocted negative-interest-rate absurdity and his efforts to manipulate the financial markets. Lesser ECB figures also try to get into the headlines edgewise, including German Bundesbank president Jens Weidmann, but no one listens to him anymore. Yet, and despite Draghi’s bluster, the real problems in the EU, particularly in Greece, Portugal, Cyprus, and Spain, have not been solved – and I mean, not at all – as shown by the results of the big poll about young people in the EU. The survey, commissioned by the European Parliament and conducted by TNS opinion, led to an evocatively-titled report, “Most young Europeans feel marginalized by the crisis, says Eurobarometer poll.” For some countries, the results are outright horrifying. Young people are the future. They’re expected to make these countries function down the road.
More Monetary Stimulus on Deck for UK, But Officials Moving Cautiously Before EU Exit Vote
In light of the economic malaise around the United Kingdom, the Bank of England may be releasing additional monetary stimulus in the near future. They will do this in response to increased unemployment rates and lack of private investing. But the BoE is waiting on a June 23 referendum in which Britain and will decide whether or not to leave the European Union before taking action. The BoE is worried about the possible negative economic consequences this decision will have on its economy. Businesses have already been putting investments on hold until after the vote is has been decided. Mark Carney, the governor of the bank of England and Chairman of the Monetary Policy Committee (MPC), said the pending vote on what has become known as Brexit is weighing on growth and clouding the economic outlook. The MPC voted to hold interest rates at a record-low 0.5% for the time being at its meeting Thursday.
11 Signs That The U.S. Economy Is Rapidly Deteriorating Even As The Stock Market Soars
We have seen this story before, and it never ends well. From mid-March until early May 2008, a vigorous stock market rally convinced many investors that the market turmoil of late 2007 and early 2008 was over and that happy days were ahead for the U.S. economy. But of course we all know what happened. It turned out that the market downturns of late 2007 and early 2008 were just “foreshocks” of a much greater crash in late 2008. The market surge in the spring of 2008 was just a mirage, and it masked rapidly declining economic fundamentals. Well, the exact same thing is happening right now. The Dow rose another 222 points on Tuesday, but meanwhile virtually every number that we are getting is just screaming that the overall U.S. economy is steadily falling apart. So don’t be fooled by a rising stock market. Just like in the spring of 2008, all of the signs are pointing to an avalanche of bad economic news in the months ahead. The following are 11 signs that the U.S. economy is rapidly deteriorating…
Next Step for the US: Looks like Helicopter Money
It just seems like human nature to ruin a good thing. As much as I am a strong proponent of free market capitalism, and against complex regulations and central planning, I understand government’s role in all this. Capitalism and democracy teamed up in the late 1700s to form the big bang in economics, or what I call “When Harry met Sally.” They’re opposites that balance each other – capitalism rewards people for their contributions, and democracy ensures that greed doesn’t take over. We took Adam Smith’s theory of the “invisible hand,” limited government and laissez faire politics… and combined it with Alexander Hamilton’s doctrine of a stronger government to enhance capitalism. We invested in common infrastructures, established a central bank with uniform monetary policies, and implemented financial and legal systems – things free market capitalism can’t do alone. That’s why, together, these two ideologies complement each other – so long as they don’t get in each other’s way.
Recession Watch: Freight Volume Drops, Worst Level since 2010
Freight shipments by truck and rail in the US fell 4.9% in April from the beaten-down levels of April 2015, according to the Cass Transportation Index, released on Friday. It was the worst April since 2010, which followed the worst March since 2010. In fact, shipment volume over the four months this year was the worst since 2010. This is no longer statistical “noise” that can easily be brushed off. The Cass Freight Index is based on “more than $26 billion” in annual freight transactions by “hundreds of large shippers,” regardless of mode of transportation, including by truck and rail. It does not cover bulk commodities, such as oil and coal and thus is not impacted by the collapsing oil and coal shipments. The index is focused on consumer packaged goods, food, automotive, chemical, OEM, heavy equipment, and retail. In a similar vein, the Association of American Railroads reported last week that loads of containers and trailers fell 7.5% in April year-over-year. “Intermodal” is a direct competitor to trucking. Combined, they’re a measure of the goods-based economy.
Now ECB chief admits European banks ARE facing ‘challenges’ amid meltdown fears
THE head of the European Central Bank (ECB) has admitted some of the eurozone’s biggest banks are facing difficult times ahead amid fears of a new financial crisis in Europe. Last week investors dumped shares in top German and French banks Deutsche and Societe Generale amid concerns over the firms’ solvency. Today Mario Draghi said: “Clearly, some parts of the banking sector in the euro area still face a number of challenges.” The central banker highlighted the litigation and restructuring costs faced by some of Europe’s banks, on top of ‘bad’ loans sitting on their books. Mr Draghi said the situation had blown up over worries that banks in Europe could struggle in an economy with lower growth and lower interest rates.
Gold’s Best Quarter in 30 Years Is Just the Beginning
Last week, we reported that billionaire investor Stanley Druckenmiller is publicly advising investors to sell United States stocks and buy gold. Druckenmiller is now joined in his gold recommendation by an equally legendary hedge fund manager – Paul Singer. In a client letter at the end of April, Singer wrote: “It makes a great deal of sense to own gold. Other investors may be finally starting to agree. Investors have increasingly started processing the fact that the world’s central bankers are completely focused on debasing their currencies… We believe the March quarter’s price action could represent something closer to the beginning of such a move than to the end.”
Research Affiliates: Where’s The Beef? ‘Lies, Damned Lies, And Statistics’
Key Points: American households, pinched by rising prices at a rate higher than headline inflation, have generally not benefited from the unrelenting stimulus of quantitative easing and zero interest rates, and instead have experienced a decade of zero growth in income and spending power. The high valuations and low interest rates born of accommodative monetary policy lower forward-looking returns for both the wealthy and the middle class, but the middle class, who must invest today to prepare for retirement tomorrow, suffers relatively more. When the Fed eventually steps away from overt market interventions, capital market valuations should revert to more normal (i.e., lower) levels, which would bring with them more sensible forward-looking returns.
Chinese Government Now Fretting about Auto Industry
Overcapacity weakened the US auto industry before the Financial Crisis, and destroyed it during the crisis, with two of the Big Three automakers, some of the biggest component makers, and numerous smaller component makers going bankrupt. It was during the bankruptcy process that the industry restructured, laid of hundreds of thousands of people, shuttered and shed plants, mauled creditors, destroyed stockholders, and finally got rid of overcapacity. Overcapacity is devastating to the industry, employees, investors, and creditors. But it feels good on the way up. And now the Chinese auto industry has that problem. The automakers active in China, including all global brands, have had no patience with doubters, and announcements of new assembly plants being built in different parts of China became a near weekly ritual.
Janus Capital’s Bill Gross Peeks into the Future and Sees Money Falling from the Sky
Bill Gross took a peek into the future in his most recent Monthly Investment Outlook for Janus Capital, and he saw money raining from the sky. Gross said he believes the structural changes currently occurring in the US economy will ultimately lead to so-called helicopter money. Of course, choppers wouldn’t literally drop cash from the sky. But helicopter money is the ultimate stimulus program. The newly printed cash goes directly into the hands of the people themselves. Basically, the government hands out money – or figuratively drops it from a helicopter.
Donald Trump’s Glorious Threat To Default On The National Debt Is Just The Conventional Wisdom
Donald Trump has pointed out that if the US got into trouble with the national debt then it would be possible to negotiate that debt down. Perhaps buy it back at a discount, negotiate somehow with the holders of the debt so that they will agree to take less than the full amount they are owed. This has of course had all sorts of people up in arms: but the glory of this is that The Donald is exactly correct here, even if we usually prefer that people don’t say so. To prove this point I would mention just four words: Puerto Rico, Argentina, Greece. For what is it that all right thinking people, all financiers, bien pensants and politicians have been calling for in those three cases? That there’s too much debt and thus those who lent the money should be paid back something less than the amount they lent. And one can see a certain similarity between those who argue so and those who are the most horrified at Donald Trump in general. Yet all Trump is actually giving voice to here is the entirely conventional wisdom. When a government owes more than it can pay then we have a sovereign default. Something that can be better or worse managed, entirely true, but this is what we do. In fact, we usually get the IMF in to help it happen, recognising that firstly this is what has to happen and secondly it’s better if it’s properly managed.
Global War Tensions Rise, Economy Getting Worse and MSM Totally Unfair to Trump
There was a new missile defense system installed in Romania. The U.S. says it is to protect Europe from an attack from a “rogue state.” Russia says this new missile defense site is a “direct threat to global and regional security.” Russia also says this is a “destructive action.” One Russian commentator said the missile deployment “. . . might even accelerate the slippery slope to nuclear war in a crisis.” Meanwhile, there is a new face-off in the South China Sea between China and the U.S. Navy. The U.S. says that China is making “excessive maritime claims” in important international waters used for massive amounts of shipping. China disagrees and says its island building is fine and says the presence of U.S. Navy ships threatens its sovereignty. It also says navigation is not being interfered with by China. The U.S. sent a guided missile destroyer within 12 nautical miles of China’s disputed man-made islands. China says the U.S. action was a “threat to peace.”
American Billionaire Warns To Get Out Of The Stock Markets And Run To Gold
Billionaire trader, Stanley Druckenmiller, recently stated that the current situation in the global economy is similar to the situation on the eve of the crisis of 2008. At the Ira Sohn Investment Conference in New York, he said, “The bull market is exhausting itself… The Fed has borrowed from future consumption more than ever before. It is the least data dependent Fed in history. This is the longest deviation from historical norms in terms of Fed dovishness than I have ever seen in my career.” And Druckenmiller was quoted by CNBC, saying, “This kind of myopia causes reckless behavior.” He warned that people should get out of the stock market and buy gold. We agree with him, of course. But, it got us to thinking about how many Americans, or other Westerners, own gold at this crucial time.
Worst is Yet to Come? US Billionaire Warns of Crisis Worse Than 2008
The current situation in the global economy is similar to the situation on the eve of the crisis of 2008, billionaire trader Stanley Druckenmiller said. According to the businessman, the main risks stem from actions of the US Federal Reserve and the People’s Bank of China. He criticized the Federal Reserve for its “myopic policy” of low interest rates which has led to growing bullish sentiments in the market. “The bull market is exhausting itself,” he said at the Ira Sohn Investment Conference in New York. The Fed’s easy monetary policy has resulted companies taking on massive debt loads which they then used to buy back shares, instead of increasing capital spending.
Which US Companies Stockpile the Most Profit “Overseas?” But where the Heck is the Money?
There is a misconception about the uncanny ability of very profitable US companies, like Microsoft and Apple, to park their profits overseas in order to dodge US taxes: the money from these profits that are parked “overseas” isn’t actually overseas. It is registered in accounts overseas, for example in Ireland, but is then invested in whatever assets the company chooses to invest it in, including in US Treasuries, US corporate bonds, US stocks, and other US-based investments. This was revealed to the public during the Senate subcommittee investigation and hearings in March 2013 that exposed where Apple’s profits that were officially parked “overseas” actually end up. “Tim Cook emerged smelling like a rose, the triumphant CEO of America’s most iconic welfare queen,” I wrote at the time. And so the practice continues in all its glory. These funds cannot even be “repatriated” because they’re already here — or wherever the company wanted to invest them.
Who’s Really Most Afraid of Brexit? And Why?
One of the glaring but oft-overlooked ironies of the Brexit debate is the fact that the UK has been one of the biggest beneficiaries of the creation of the euro, despite not being a member of the Eurozone and holding the single currency in rampant disregard. The UK economy has certainly benefited more than most Eurozone economies. Since 2001 Britain’s share of key financial markets has exploded. London is now home to almost one-half of the entire global interest-rate OTC derivatives market, compared to 35% in 2001. Its share of global forex turnover increased from 33% to 41% between 2001 and 2014. And its share of global hedge fund assets doubled, from 9% to 18%. Almost 2.2 million people work in financial and related services such as accounting and law, two-thirds of them outside London, reports a study by the financial services lobby group CityUK. They produce nearly 12% of the UK’s GDP, 11% of its tax take, and a net trade surplus of £72 billion ($104 billion).
NATO assembles its biggest military build-up since the Cold War as more troops are deployed in eastern Europe to deter Russia
NATO foreign ministers have been finalising the alliance’s biggest military build-up since the end of the Cold War in the face of a more aggressive and unpredictable Russia. NATO chief Jens Stoltenberg said the two-day meeting, which began yesterday, would address ‘all the important issues’ to prepare for a ‘landmark’ summit in Poland in July. NATO leaders will endorse plans to puts more troops into eastern European member states as part of a ‘deter and dialogue’ strategy. Lithuania, Estonia, Latvia, Poland, Romania and Bulgaria have all been meant to reassure allies they will not be left in the lurch in any repeat of the Ukraine crisis.
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