Lunes 27/07/15 órdenes de bienes duraderas

[Fenix]

Deflation Is Winning - Beware!
Submitted by Tyler D.
07/26/2015 - 13:30

Deflation is back on the front burner and it's going to destroy all of the careful central planning and related market manipulation of the past 6 years. Clear signs from the periphery indicate that a destructive deflationary pulse has been unleashed. After years of suppression, the forces of reality are threatening to overwhelm our managed global ""markets"'.


Revenue Recession: Investors Are Paying Too Much For Growth, Barclays Says
Submitted by Tyler D.
07/26/2015 - 15:35

In the U.S., the economy has failed to accelerate, with GDP growth stubbornly below 2.5%. It is worse in Europe and even China has slowed. Stagnant global economic growth, a strong USD, and lower oil prices have combined to cause revenue growth for the S&P 500 to fall. The first quarter of 2015 was the first quarter of negative sales growth for the S&P 500 since the financial crisis. 2Q15 is expected to be worse

[Fenix]

Central Banks Ready To Panic - Again
07/26/2015 15:00 -0400

Submitted by John Rubino via DollarCollapse.com,

Less than a decade after a housing/derivatives bubble nearly wiped out the global financial system, a new and much bigger commodities/derivatives bubble is threatening to finish the job. Raw materials are tanking as capital pours out of the most heavily-impacted countries and into anything that looks like a reasonable hiding place. So the dollar is up, Swiss and German bond yields are negative, and fine art is through the roof.

Now emerging-market turmoil is spreading to the developed world and the conventional wisdom is shifting from a future of gradual interest rate normalization amid a return to steady growth, to zero or negative rates as far as the eye can see. Here’s a representative take from Bloomberg:

Cheap Money Is Here to Stay



The Fed’s Countdown



Take New Zealand and Australia. Yesterday, the Reserve Bank of New Zealand slashed borrowing costs for the second time in six weeks even as housing prices continue to skyrocket. A day earlier, its counterpart across the Tasman Sea (already wrestling with an even bigger property bubble of its own) said a third cut this year is “on the table.”



Just one year ago, it seemed unthinkable that officials in Wellington and Sydney, more typically known for their hawkishness and stubborn independence, would join the global race toward zero. But with commodity prices sliding, China slowing and governments reluctant to adopt bold reforms, jittery markets are demanding ever-bigger gestures from central banks. Even those presiding over stable growth feel the need to placate hedge funds, lest asset markets falter. When this dynamic overtakes countries such as New Zealand (growing 2.6 percent) and Australia (2.3 percent), it’s hard not to conclude that ultralow rates will be the global norm for a long, long time.



Indeed, the major monetary powers that are easing — Europe, Japan, Australia and New Zealand — have all suggested rates may stay low almost indefinitely. Those angling to return to normalcy, meanwhile — the Federal Reserve and Bank of England — are pledging to move very slowly. Even nations with rising inflation problems, like India, are hinting at more stimulus.



“As interest rates continue to fall across most of the globe, central banks are also united in their main message: Once rates have come down, they’re likely to stay down,” says Simon Grose-Hodge of LGT Bank. “And when they finally do tighten, the ‘normal’ rate is going to be a lot lower than it used to be.”



Could the People’s Bank of China be next? “With underlying GDP growth still looking weak, more monetary policy moves are likely,” says Adam Slater of Oxford Economics. “And China may even face the prospect of short-term rates dropping towards the zero lower bound.”

This is not how the Fed, ECB or Bank of Japan envisioned the year playing out. They see ultra-low rates as an emergency measure, temporary in nature and to be dispensed with asap. From MarketWatch:

Here’s the real reason the Fed wants to raise rates



Federal Reserve policy makers are hoping, even praying, that no unexpected domestic development or international crisis intervenes to prevent them from taking the first baby step to normalize interest rates at the Sept.16-17 meeting.



Why? Fed officials point to a number of reasons: the unnatural state of a near-zero benchmark rate; the potential risk of financial instability; an improving labor market; diminishing headwinds; and yes, expectations of 3% growth just over the horizon.



Fed Chairman Janet Yellen, usually considered a member of the Fed’s dovish faction, sounded determined to act when she testified to Congress last week.



“We are close to where we want to be, and we now think that the economy cannot only tolerate but needs higher interest rates,” Yellen said during the Q&A. “Needs,” as in the patient needs his medicine.



What’s the urgency with an economy chugging along at 2-something percent and low inflation? I suspect Fed officials are terrified of being caught with their pants down, in a manner of speaking. Should some unforeseen event come along to upend the economy, the Fed’s arsenal would be dry. They’d like to put some space between their policy rate and zero.

That “unforeseen event” has arrived, leaving most central banks with a stark choice:

1. Let the deflationary crash run its course at the risk of blowing up the quadrillion or so dollars of interest rate, credit, and currency derivatives hidden on bank and hedge fund balance sheets.
2. Or push interest rates into negative territory pretty much across the developed world.

Since option number one carries a statistically-significant chance of ending the modern financial era it is absolutely unacceptable to Goldman et al, and is thus a non-starter. Which leaves only option two: more of the same but bigger and badder.

So…the central banks will panic. Again. Countries that retain some control over their monetary systems will see their interest rates fall to zero and beyond, while those that don’t will be thrown into some kind of new age hyperinflationary depression. Not 2008 all over again; this is something much stranger.

[Fenix]

Reports Of Secret Drachma Plots Leave Tsipras Facing Fresh Crisis
Submitted by Tyler D.
07/26/2015 - 16:20

Now that Tsipras has succeeded in compelling Greek lawmakers to cede the country’s sovereignty to Brussels in exchange for the right to use the euro, tales of unrealized redenomination plots have come out of the woodwork. Just two days after FT reported that former Energy Minister Panayotis Lafazanis planned to seize the country's mint and currency reserves, Kathimerini reports that Yanis Varoufakis, on orders from Tsipras, developed a top-secret parallel banking system. Now, the opposition lawmakers who helped Tsipras pass the new bailout measures through parliament are demanding answers.



Forget Banks - GMOs Are The New "Too Big To Fail' System

07/26/2015 16:10 -0400

Authored by Mark Spitznagel and Nassim Nicholas Taleb, originally

Before the crisis that started in 2007, both of us believed that the financial system was fragile and unsustainable, contrary to the near ubiquitous analyses at the time.

Now, there is something vastly riskier facing us, with risks that entail the survival of the global ecosystem — not the financial system. This time, the fight is against the current promotion of genetically modified organisms, or G.M.O.s.

Our critics held that the financial system was improved thanks to the unwavering progress of science and technology, which had blessed finance with more sophisticated economic insight. But the “tail risks,” or the effect from rare but monstrously consequential events, we held, had been increasing, owing to increasing complexity and globalization. Given that almost nobody was paying attention to the risks, we set ourselves and our clients to be protected from an eventual collapse of the banking system, which subsequently happened to the benefit of those who were prepared.

The fallacies used in the arguments against us at the time were as follows:

First, we were said to be “against science.” Our adversaries invoked consensus among economists in favor of these methods, a serious fallacy. Had science operated solely by consensus, we would still be stuck in the Middle Ages. According to scientific practice, scientific consensus is used in telling us what theory is wrong; it cannot determine what is right. Nor can it apply to risk management, which requires much greater scrutiny.



Second, we faced the argument that “more technology is invariably better,” a corruption of the notion of progress. In fact, only a small minority of technologies end up sticking; most fail because of some flaw identified over time.



Third, we were told that had ideas such as ours prevailed in the past, they would have hindered risk-taking. Yet, the first rule of risk-taking is to not cross the street blindfolded.



Fourth, toxic financial exposures were deemed to be “safe,” according to primitive risk models. But Fannie Mae went bust exactly because of overconfidence in its bad models (and, incidentally, after its bailout, appears to use the same risk models).



Fifth, the system kept relying on “predictions,” not noticing that the past track record of predictions by central bankers and economists can be used to make astrologists look good. Yet the entire economic system rested on these flimsy predictions — while we were advocating a system that had isolated parts to withstand prediction errors.

We were repeatedly told that there was evidence that the system was stable, that we were in “the Great Moderation,” a common practice that mistakes absence of evidence for evidence of absence. For the financial system to be viable, the solution is for it to resemble the restaurant business: decentralized, with mistakes that stay local and that cannot bring down the entire apparatus.

As we said, the financial system nearly collapsed, but it was only money.

We now find ourselves facing nearly the same five fallacies for our caution against the growth in popularity of G.M.O.s.

First, there has been a tendency to label anyone who dislikes G.M.O.s as anti-science — and put them in the anti-antibiotics, antivaccine, even Luddite category. There is, of course, nothing scientific about the comparison. Nor is the scholastic invocation of a “consensus” a valid scientific argument.



Interestingly, there are similarities between arguments that are pro-G.M.O. and snake oil, the latter having relied on a cosmetic definition of science. The charge of “therapeutic nihilism” was leveled at people who contested snake oil medicine at the turn of the 20th century. (At that time, anything with the appearance of sophistication was considered “progress.”)



Second, we are told that a modified tomato is not different from a naturally occurring tomato. That is wrong: The statistical mechanism by which a tomato was built by nature is bottom-up, by tinkering in small steps (as with the restaurant business, distinct from contagion-prone banks). In nature, errors stay confined and, critically, isolated.



Third, the technological salvation argument we faced in finance is also present with G.M.O.s, which are intended to “save children by providing them with vitamin-enriched rice.” The argument’s flaw is obvious: In a complex system, we do not know the causal chain, and it is better to solve a problem by the simplest method, and one that is unlikely to cause a bigger problem.



Fourth, by leading to monoculture — which is the same in finance, where all risks became systemic — G.M.O.s threaten more than they can potentially help. Ireland’s population was decimated by the effect of monoculture during the potato famine. Just consider that the same can happen at a planetary scale.



Fifth, and what is most worrisome, is that the risk of G.M.O.s are more severe than those of finance. They can lead to complex chains of unpredictable changes in the ecosystem, while the methods of risk management with G.M.O.s — unlike finance, where some effort was made — are not even primitive.

The G.M.O. experiment, carried out in real time and with our entire food and ecological system as its laboratory, is perhaps the greatest case of human hubris ever. It creates yet another systemic, “too big too fail” enterprise - but one for which no bailouts will be possible when it fails.

[Fenix]

Europe's New Colonialism: ECB Rejects Greek Request To Reopen Stock Market
Submitted by Tyler D.
07/26/2015 - 16:44

To understand what really happened earlier today, one should read the Bloomberg explanation, according to which it was the ECB which rejected proposals by Greek authorities to reopen country’s financial markets with no restrictions in place for both Greek and foreign traders, citing an Athens Exchange spokeswoman. And just like that, we wave goodbye to the Hellenic Republic, and greet the Mediterranean Vassal Province of Mario and Merkel. Because as of this moment, no Greek decision can be taken without the direct or indirect express prior approval of either the ECB and/or Berlin.



Gold and Gibson's Paradox
Submitted by Tyler D.
07/26/2015 - 17:15

There is a myth prevalent today that the gold price always falls when interest rates rise. The logic is that when interest rates rise it is more expensive to hold gold, which just sits there not earning anything. And since markets discount future expectations, gold will even fall when a rise in interest rates is expected. With the Fed's Open Market Committee debating the timing of an interest rate rise to take place possibly in September, it is therefore no surprise to market commentators that the gold price continues its bear market. Only the myth is just that: a myth denied by empirical evidence

[Fenix]

It's Not Just Margin Debt: Presenting The Complete Chinese Stock Market Ponzi Schematic
Submitted by Tyler D.
07/26/2015 - 17:45

Late last month, we suggested that the pressure on Chinese equities - which at that point had only begun to build - was at least partially attributable to an unwind in the country’s CNY1 trillion backdoor margin lending edifice. Precisely measuring the amount of shadow financing that helped drive Chinese stocks to nosebleed levels is virtually impossible, as is determining how much of that leverage has been unwound and how much remains or has been restored, but BofAML is out with a valiant attempt to not only identify each shadow lending channel, but to quantify just how much leverage may be built into the Chinese market. The figures will shock you.


Energy M&A Hits A Brick Wall: Ex Shell-BG Megadeal, Q2 Deal Value Was Lowest Since 2008
Submitted by Tyler D.
07/26/2015 - 20:38

If one excludes the gargantuan April merger between Shell and the BG Group, Q2 M&A activity was the slowest in since 2008! If the price of oil continues to decline, one can be certain that Q3 M&A activity will be a dead zone. And since with the exception of just one mega-deal, the merger and acquisition landscape has hit a brick wall, one needs no explanation to understand just how "market participants view future opportunities."

[Fenix]

Gold's Two Stories: Paper Markets Collapse... While The Retail Public Buys At A Record Pace
07/26/2015 20:10 -0400

Submitted by Mac Slavo via SHTFPlan.com,

We’ve seen some significant swings in precious metals over the last several years and if we are to believe the paper spot prices and recent value of mining shares, one would think that gold and silver are on their last leg. Last weekend precious metals took a massive hit to the downside, sending shock waves throughout the industry. But was the move really representative of what’s happening in precious metals markets around the world? Or, is there an effort by large financial institutions to keep prices suppressed? In an open letter to the Commodity Futures Trading Commission First Mining Finance CEO Keith Neumeyer argues that real producers and consumers don’t appear to be represented by the purported billion dollar moves on paper trading exchanges.

With China recently revealing that they have added some 600 tons of gold to their stockpiles and the U.S. mint having suspended sales of Silver Eagles due to extremely high demand in early July, how is it possible that prices are crashing?

As noted in Mike Gleason’s Weekly Market Wrap at Money Metals Exchange, while it appears that gold is currently one of the world’s most hated assets, the retail public continues to buy at a record pace:

The paper market is telling one story. But the actual physical bullion market is telling quite another.



The U.S. Mint has sold over 100,000 ounces of American Eagle gold coins so far in July. That’s the highest monthly demand volume registered since April 2013. And that’s just as of this week. There’s still another week left to go before the final sales tally for Gold Eagles comes in for the month of July. It could be one for the record books with 109,000 1-ounce Gold Eagles sold — with bargain hunters purchasing 6% of the U.S. Mint’s production from Money Metals Exchange.



As for Silver Eagles, the U.S. Mint has given up on trying to keep up with demand. After brisk sales during the first week of July, Mint officials suspended deliveries of Silver Eagles to dealers. Sales of the popular coins are set to resume next week. But we expect the Mint will be unable to get its act together and keep up with demand.



Listen: Full Interview With Chris Powell Of The Gold Anti-Trust Committee (GATA)

It’s not clear exactly who is suppressing precious metals or why, but it is quite apparent that prices on paper exchanges are completely disconnected from reality, as retail buyers are taking this opportunity to scoop up gold and silver at prices that are 50% or more off their highs.

But what happens next? That, of course, is anybody’s guess, but considering current prices and movements within the context of a broader economic crisis, there is a precedent for what we have seen in recent years.

We need only look back to the recession of the 1970’s.

gold-chart-1970s

You’ll notice that gold saw some significant price movements, not dissimilar to what we’re experiencing today. There were several down swings of 25% or more within the broader gold bull market. Most notably, take a look at what happened from 1975 to 1976. Gold shot up to nearly $200 an ounce, only to be pounded just twelve months later by 50% to a price of just over $100 an ounce.

As the crisis accelerated in severity into the late 1970’s, complete with gas shortages, job losses and geopolitical tensions, we saw gold explode in value to a high of $850 by January of 1980.

We’re not necessarily suggesting that gold will follow the exact same pattern. But history does rhyme, and the world again finds itself in serious financial, economic, and monetary crisis.

As we’ve noted before, gold is and always has been the historical asset of last resort for preserving wealth. Should the current crisis accelerate as we saw in the 1970’s, the value of gold will likely rise accordingly. We may not be looking at a 700% increase in price like we did from 1976 to 1980, but there is a distinct possibility that we will witness serious gains in real value as crisis and panic unfold.

You can’t eat gold and silver, of course. If crisis is coming we have always urged our readers to prepare themselves for disruption to credit-dependent commerce systems with reserves of food, emergency cash and other supplies. But having a physical asset with real monetary and barterable value in your possession is certainly an important strategic consideration going forward.

It’s been said that an ounce of gold could buy 350 loaves of bread in Biblical times. Today, an ounce of gold still buys about 350 loaves of bread. However you slice it, whether the system falls into a deflationary depression like the 1930’s or an inflationary recession like the 1970’s, gold will maintain its purchasing power.

Though past performance is not necessarily an indicator of future results, we have over 6,000 years of history backing gold’s legitimacy as a true mechanism of exchange.

[Fenix]

Clinton Favorability Plunges, Sanders Surges Amid Classified Emails Scandal
Submitted by Tyler D.
07/26/2015 - 21:40

Despite all her proclamations of new fairness doctrines, false promises of her truthfulness, and exclamations of 'everyday Americanism' Hillary Rodham Clinton is seeing her favorability ratings collapse. As populist as she dares to be, in the face of her donating captors, it appears the everyday American just isn't buying it as Gallup reports just 43% Americans view her favorably (down from 66% just a few years ago) while none other than Bernie Sanders is bounding up the popularity ladder, rising from 12% to 24% favorability in recent weeks.

[Fenix]

There Is No Exit: Why China's Plunge Protection Is Here To Stay
Submitted by Tyler D.
07/27/2015 - 11:12

Update: CHINA TO CONTINUE STABILIZING MARKET, SENTIMENT, PREVENT RISKS, CSRC SAYS

As Beijing pledges to remain supportive amid a harrowing decline in Chinese stocks, China may find itself with no exit strategy for its plunge protection program. As BofAML notes, "An 'indefinite' holding period is certainly possible – it’s how the government had dealt with the last round of bad debts in the banking system, i.e., by shifting them to bad banks and never crystalizing the losses. But even under such a scenario, there may be unintended consequences."


Who Is To Blame For The Global Oil Supply Glut In Charts (Hint: Not Iran)
Submitted by Tyler D.
07/27/2015 14:17 -0400

When crude oil decidedly broke its recent support level, and slid right back into the $40-handle range which served as a springboard for the dead oil bounce earlier this year, many blamed the imminent surge of Iran oil deliveries for as a the downside catalyst. The reality, however, is that a long time will pass before significant Iran oil may flood developed markets, and yet even without Iran oil the market has recently seen a surge in supply and production over the past few months - it is this sudden oil glut that has been the true driver of most recent slide in prices.

But who is the culprit? We present the answer on the following several charts showing oil exports from both OPEC and non-OPEC oil producing countries. Note that Iran has gone exactly nowhere - it is "others" who are to blame for the most recent downturn in oil prices.



What about non-OPEC production: despite speculation that the US production is peaking (and Saudi Arabia is winning), US production is virtually at its all time highs.



So with everyone is overproducing, is global oil demand rising? Nope. In fact, while everyone knows that the US has just a modest oil "glut", this has moderated in recent months, but as the highlighted chart the oil glut across the entire OECD region has never been greater.



End result? This:

Absent either a dramatic slowdown in oil production, mostly by Saudi and Iraq, (where we hope the marginal producer is not ISIS) or a just as dramatic surge in oil consumption (now that the world is rapidly running out of places to store drilled oil) the price is going lower.

[Fenix]

The Stock Market's Ugly Truth - Only 6 Stocks Matter
Submitted by Tyler D.
07/27/2015 - 12:26

When we first exposed the shockingly dire lack of breadth in US equity markets, it was shrugged off by the mainstream media as yet another 'worry' in the wall to climb. It seems, however, that facts inevitably force their way to the surface and so both Bloomberg (more than 100% of this year’s increase in the S&P 500 Index is attributable to two sectors, health-care and retail. That’s the tightest clustering for an advancing year since at least 2000) and The Wall Street Journal (Amazon, Google, Apple, Facebook, Gilead and Walt Disney Co. account for more than all of the $199 billion in market-capitalization gains in the S&P 500) have been forced to expose the ugly truth about US equities... it is not a stock market - it's a market of 6 tail-chasing momentum stocks.


What Loss Of Control Looks Like: Chinese Regulator Urges Traders To Rat Out "Malicious Sellers"
Submitted by Tyler D.
07/27/2015 - 12:31

After pledging a whopping 10% of China's GDP, or just about $1 trillion, to its various (at last check over 40) discrete measures to prop up its collapsing market, among which such threats as arresting shorters of stock and "malicious sellers", China has finally reverted to what the communist regime does best to preserve "order" - implement witch hunts in which the population rats out any criminals who dare to go against the protocols of the communist party. In this case, the targets are "malicious sellers" with the regulator adding that those found guilty of shorting will be "dealt with severely."

[Fenix]

"Rammed" - Fiat Chrysler Forced To Buy Back 500,000 Pickup Trucks From Customers In Historic Settlement
Submitted by Tyler D.
07/27/2015 - 13:29

In a stunning ruling, US safety regulators have mandated that Fiat Chrysler must offer to buy back from customers more than 500,000 Ram pickup trucks and other vehicles as part of a costly deal with safety regulators to settle legal problems in about two dozen recalls. As WTOP reports, this is the biggest such action in US history, and is in addition to a $105 million civil fine and owners of more than a million older Jeeps with vulnerable rear-mounted gas tanks will be able to trade them in or be paid by Chrysler to have the vehicles repaired. Think the punishment is harsh, consider that at least 75 people have died in crash-related fires, although Fiat Chrysler maintains they are as safe as comparable vehicles from the same era.


185 Billion Reasons Why The US Agreed To Nuclear Deal With Iran
Submitted by Tyler D.
07/27/2015 - 13:49

Many have questioned just why President Obama was so keen to get the Iran nuclear deal done - apparently with almost no real concessions - in the face of allies home and abroad deriding the agreement. Well, if one were so inclined, OilPrice.com explains that Iran's deputy oil minister for commerce and international affairs, Hossein Zamaninia, told Reuters that the country has already identified 50 oil and gas projects it will offer for bids - with the government pegging the value of these properties at $185 billion...

[Fenix]

American Automakers High Exposure In China Is Not Good; Here's Why
07/27/2015 14:36 -0400

Via BidnessEtcNews.com,

The Chinese stock market crash has hit the world’s largest auto-market hard; BidnessEtc explores the terrain and evaluates the damage to players in the ‘game’

Between June 12 and July 9, China’s Shanghai Index fell 32% after rising 150% between June 2014 and early June of this year. In recent days, at the behest of the government, large investors have stopped selling their stock, which explains the market’s current stability.

Although the stock market plunge badly hit investors, it has also hit China’s automobile market, currently the world’s largest.

Automobile Sales In Asia-Pacific Region Decline As The Shanghai Index Plummets

Sales were already falling. The above chart illustrates automobile sales in the Asia-Pacific region over the past 12 years. Regional sales nose-dived between January 2014 and January this year. June’s sales retreat amounted to 3.20% year on year (YoY).



General Motors Bankruptcy – A Case In Point

Notoriously, Detroit, MI’s General Motors Company (GM) was bankrupted as a consequence of the great crash of 2008. This new situation is alarming for GM in China, the region accounted for 35% of its global sales in 2014.

Also in 2014, the corporation earned 40% of its net income from investments made in Chinese equities. Alongside profits from equities, GM’s investments in China further added between 20% and 30% to the multinational’s operating cash flow last year, says a report by Barclays PLC (ADR) (BCS).

With China’s stock market crumbling in recent weeks, Barclays analyst Brian Johnson, thinks that the automaker may reduce its Chinese sales target.

American Automaker’s High Exposure To The Chinese Market

Last year, Ford Motor Company (F) sold approximately 6.33 million vehicles globally. Of these, almost 1.08 million vehicles were bought in China, up 77% from 2012’s reported sales of 0.61 million.

Ford’s sales in China comprise 17.10% of its global tally, far lower than the 40% portion sold in the United States. Despite this, Ford’s Chinese joint venture added $1.30 billion to the company’s pre-tax profit, almost 30% of the company’s bottom-line for the year.

Ford’s high exposure to the Chinese automobile market increases the risk of its being undermined by a more difficult economic environment in the country. Nor will GM escape unscathed, in fact it could face harsher reverberations than its rivals.

China’s market conditions don’t simply challenge US manufacturers. Volkswagen AG’s (ADR) (VLKAY) position within China is a precarious one. The country provides 50% of the conglomerate’s net profit and 71% of its free cash flow (FCF).

During the last week, Volkswagen’s subsidiary Audi said it would consider revising its 2015 Chinese sales target in response to signals that the downturn could be deeper than previously thought.

The Bottom-Line

For now, China is a dream turned sour for the Michigan-based Ford and General Motors and Germany’s Volkswagen.

The risks are enormous and will become greater with time. The government has introduced a ban on selling in the stock market, to put a stop to its precipitous decline. If this stabilizes the situation, as many hope, it will provide a breathing space for the auto-market... but judging by last night's collapse, it's not working.

However, China’s growth has slowed to its lowest for 24 years, which suggests deeper underlying problems in the wider economy, perhaps its growth model has run its course and requires substantial rethinking. There are other clouds too within the financial sector such as the unregulated shadow banking system.

All of these point to a longer lasting, more fundamental problem in the country. The message to send to investors at this point is not to expect a quick turnaround. Returns on China of the kind we had become used to, are over for now. China though, is a long-term project not a short term party.

Investors and automakers need to make short-term alternative plans, but keep a long-term view because it probably will get better.

[Fenix]

Knife-Catching Hedge Fund Oil Bulls Dump Crude At Fastest Pace In 3 Years
Submitted by Tyler D.
07/27/2015 - 14:51

Hedge Funds' net long position in WTI Crude collapsed 27% (the biggest single 'dump' in over 3 years) ahead of the big plunge last week (and is now down almost 60% in the last month - the most since 2010). Part of a broader deflationary collapse in commodities, as Bloomberg reports, long positions dropped to a two-year low while short holdings climbed 25%, erasing more than $100 billion in market value from the 61 companies in the Bloomberg E&P stock index. With crude supplies still almost 100 million barrels above the five-year average, "there's a lot more room for prices to slide," warned one trader, "it's going to take a long time for this to work itself out."


Why Greece May Want To Reconsider Reopening Its Stock Market
Submitted by Tyler D.
07/27/2015 - 17:20

As The Greek government presses The ECB for 'permission' to reopen its stock market, it may want to reconsider. GREK, the Greek Stock Index ETF trading in US markets, is down over 3% today and has plunged to its lowest since the peak of the crisis in 2012 (near its lowest since 1989). Just as in China, The ECB (who is now very much in charge) seems to believe that if markets are not open for locals, then they have no 'real' idea just how bad things are.. and with National Bank of Greece stock trading at record lows (below $1), and the expectations of bail-ins looming, that is not what The ECB wants the people to see...

[Fenix]

Is The Biotech Bull Market Still Intact?
07/27/2015 15:10 -0400

Submitted by Eric Bush

Biogen’s $85 (or 22%) drop on Friday has put a spotlight on the biotechnology sub-industry as a whole. And rightfully so, as biotech has been the best performing sub-industry in the United States over the past four years (as always, this data is on an equal-weighted basis). Biogen, which was the third largest biotech stock by market cap before the drop and is now the fifth largest, has generally been a stock market leader. Whenever leadership begins to turnover that is usually an important signal for the market. So has biotech run its course?

Top 5 Sub-Industries Over The Past Four Years

image

Let’s take a look at the other five largest biotech stocks (there are 17 total biotech stocks in the GKCI US Biotech Sub-Industry), to see how any market cap weighted biotech index may perform in the near future.

The two largest biotech stocks by market cap are Gilead Sciences and Amgen. Gilead just poked out to new highs after trading in a tight trading range for most of the past year. While it is always positive for a stock to be making new highs, given the extended run that Gilead has been on its a bit concerning to see the stock not exploding higher to new highs. The longer the run for a stock the more momentum it needs to continue to keep powering ahead.

Amgen’s chart looks a lot like Gilead’s except that its been a slightly less volatile stock and hasn’t had quite as strong of a bull move. Amgen has been stuck in a sideways pattern for about a year as well and has yet to move to new highs as Gilead recently did.

image

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Celgene continues to show strong momentum. It has clearly broken out to new highs while remaining on its “high performance” trend line. Of the 6 largest biotech stocks, Celgene seems to have the most moementum behind it.

image

Regeneron Pharmaceutical has been on a steady upward trend for the past four years. It hasn’t retested its support line for about year and currently is pretty extended. However, it is interesting to note that while Gilead, Amgen, and Celgen experienced a loss of momentum in 2014 (by either moving sideways or going down in Celgene’s case), Regeneron continued on a solid upward trend.

image

Here is Biogen’s chart after falling into a bear market in one day. It has fallen back almost exactly to a former resistance level, which is now support, for the stock. However, it seems that Biogen is in the process of forming a top, a formation it has been working on since the end of 2013, and whenever it breaks below support it will be a long drop from there. While there may be a short-term bounce given the dramatic single day decline, the longer term outlook is poor and Biogen will most likely market perform for the foreseeable future with considerable underperformance risks outweighing any postive attributes for the stock.

image

Finally, let’s look at the 6th largest biotech stock, Alexion. Alexion looks a lot Gilead. While it has recently made new highs after trading in a sideways range for over a year, it doesn’t look like it has the strong momentum behind it like Celgene has. It also has failed to keep on the right side of its bullish trend line that has been in a place for the past four years. That is a negative sign.

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Overall, the bull market in biotech stocks doesn’t look like it will end in a fury today or tomorrow. However, as Biogen has shown, a high flying group of stocks like this can blow up performance at any moment. The trend in these stocks is still mostly positive, however, momentum seems to be changing for the worse on the margin. As a stock market leading group for most of this bull market, it will be worth investors’ time and effort to keep a close eye on biotech’s performance.

[Fenix]

"The Bucks Stop Here": Why Keynesian Economics Will Get Blamed For The Crash
Submitted by Tyler D.
07/27/2015 17:45 -0400


Submitted by Gary North

For as long as the present economic system lumbers along, Keynesians will control the levers of power and influence. But when at last the system goes down in a heap, and central banks cannot restore the system, there will be a quest for answers.

Keynesians have the long-run disadvantage of being in control of the tax-funded educational system. They are in charge of the major economic institution of our day, the Federal Reserve System. They will get blamed. When people's retirement plans are smashed, they are going to look for somebody to blame. That means Keynesians. The Keynesians will not be able to transfer this responsibility to somebody else. When you are in charge, the buck stops on your desk. In the case of Federal Reserve policy, it's not just the buck that stops on your desk. It's trillions of bucks.

Academic economists never want to take responsibility for the outcome of their recommended policies. They always try to blame somebody else for not having implemented what the recommended. But when you come to the 14 people who are on the Federal Open Market Committee, which sets policy for the Federal Reserve, there is no place to hide. The FOMC almost always is unanimous in its policy recommendations. There may be one dissenter, but that's about it. So, there really is no place to hide. When the Federal Reserve finally is not in a position to restore economic growth by means of inflating the currency, Keynesians are going to get blamed.

When you live by the Federal Reserve, you die by the Federal Reserve.

HOW KEYNESIANS CONQUERED

I first began reading economics in 1958. Like so many of my contemporaries who began to study free market economics in that era, I was introduced to economics by The Freeman. The editor was a good writer, and he did not let bad writers' articles into the magazine.

In 1960, I took my first course in college-level economics. The instructor seemed incompetent to me. In reviewing his economic textbook 55 years later, I am still convinced that he was indeed incompetent. He was never famous. He never got tenure. He disappeared into academic oblivion. He was a Keynesian.

I understood from my time in that class that academic economics is not based on any kind of logic that the average person can follow. This is one of the advantages that free market economists have. John Maynard Keynes could write cogent prose, but The General Theory (1936) is incoherent. Yet it gained an army of academic followers. It is the classic case of the emperor who had no clothes.

How did Keynes get his followers? Because he defended what the academic world wanted in 1936. It defended government intervention. Governments had been intervening for five years by the time the book was published. There was no academic defense of this intervention. Younger economists had become disillusioned with free market economics, because free market economists, with the exception of the Austrians, could not explain why the depression in 1936 was as bad as it was in 1931.

In other words, there was a loss of faith among younger economist regarding the academic establishment of 1936. The older academic economists in 1936 could not avoid this responsibility. The buck stopped there. They never recovered. By 1946, the year of Keynes's death, among younger economists, Keynesianism was becoming dominant. With the publication of Samuelson's textbook in 1948, it became dominant. By 1950, Keynesians dominated the economics profession, and the old-timers who may not have agreed were unable to follow the logic of Keynesianism. They were unable to do the mathematics that Samuelson was able to do. They looked like old fogies. They in fact were old fogies. They were not Austrian fogies. They could not defend their position.

Today, the Keynesians are in the position of the non-Austrian economists in 1930. Things look shaky, but not out of control. The Federal Reserve seems to be beyond criticism. Central banking runs the world, but the world is obviously in trouble.

ACADEMIC SCREENING

Keynesians are not good writers. When it gets down to explaining economic cause-and-effect to the average person, the Keynesians helpless. The average person cannot follow Keynesian logic. There is a reason for this: there is no logic to it. The General Theory is illogical.

Most critics inside the academic establishment had been fearful of saying this directly. They may refer to the dense text of the book, but they do not come out and say that the book was completely illogical. That would mean that their colleagues are holding to a system that is, at bottom, illogical. This would be true, but would keep you from getting tenure.

Outside of the Keynesian academic establishment, there have been a few people who have said that Keynes's book is incoherent, and there is no logic to his system. The best example is Henry Hazlitt, but he only said it in 1959, and almost nobody read the book: The Failure of the "New Economics." The book is never footnoted by scholars. It is a fine book, but it was not written for an academic audience. It was not written in academic jargon. This is why it had zero influence in academia. It never had enough book sales within the conservative movement to gain a reputation.

By 1959, Keynesianism was dominant in academia. In fact, it had been dominant for at least a decade. Hazlitt was truly John the Baptist, crying in the wilderness. So, in the year of my high school graduation, there was virtually nothing available that anyone had heard of to refute Keynesian orthodoxy. It was like some freshman college student trying to find out what was wrong with Freud. Orthodoxy was entrenched in academia.

Nevertheless, the Keynesians' dominance in academia does not make the system coherent. It only enables members of the academic establishment to lord it over outsiders and amateurs who did not pass the screening process that academia imposes on candidates for the classroom.

The Keynesians have always made a point never to mention Austrian economics. This was true in the late 1940's. It was true in my days in the 1960's. It is also true today. Keynesians do not introduce students to the most consistently anti-Keynesian materials. In the classroom, students might get a cursory reference to Marx, but nobody ever makes students study Marx's theory of surplus value, and certainly nobody is ever asked to read Baohm-Bawerk's refutation. In the early 1960's, almost nobody in the classroom ever mentioned Milton Friedman. Today, I suspect that Friedman and the monetarists do get some attention, but the Keynesians control the departments, and therefore they control the selection of the textbook for the undergraduate course in economics.

They control the certification process. Monetarists can get through, as long as their mathematics is good enough. Keynesians use mathematics to screen candidates for the M.A.. Mathematics inherently is not applicable to economic theory, for the assumption that makes math applicable is market equilibrium: human omniscience. Only the Austrians maintain that mathematics is inherently inconsistent with economics. They defend this as an issue of epistemology, but no other school of opinion believes this.

This is why there was no way to get from The Freeman in 1958 to a Ph.D. There still isn't. The academic guild screens out most people who believe in the unhampered free market. But in doing this, they also screen out people who can communicate well. This is the Achilles heel of academic economics today.

SALVATION BY JARGON

The students who get through the screening process have been forced to go through Keynesian economics and high-level mathematical training, neither of which leads to anything resembling the ability to communicate in English to an audience outside the academic guild.

In other words, these people talk only to each other. Most professors in every field are tempted to enter into the world of jargon. They get tenure in a research university only by being able to communicate in this jargon. They have to get articles published in journals that are edited by specialists in the guild's jargon. At no stage of the academic process above the master's degree is there any attempt to communicate the truth of the guild to the public. Actually, there is almost no training in communications at all, at any level, but certainly above the freshman level. The materials introduced thereafter are designed to screen out people who can communicate to the general public.

From the point of view of communicating to the general public, Keynesianism is at a distinct disadvantage. Keynesians espouse slogans. They tell us their goals. They insist that the government is capable of achieving these goals. But, as we look around ourselves, we see signs that the government is faltering.

Back in the early 1970's, I met a very bright young man who was about 19 years old. He had become enamored with the free market by reading The Freeman. I was then on the staff of the Foundation for Economic Education, which published The Freeman.

He told me that he had gone through an intellectual crisis. He had begun to doubt Austrian economics. He was told in college about the Keynesian system. So, he decided he would test the two theories of economics. He sat down to read Hayek's Road to Serfdom. Then he read Keynes's General Theory. He said that this exercise had cured him of Keynesianism.

I think it would cure anybody who can think straight. Anyone who sits down to read Rothbard's Man, Economy, and State, and then reads the latest addition of Samuelson's economics textbook, is likely to come to the conclusion that he is not going to commit his life to defending Keynesianism.

When you cannot communicate the logic of your position to an intelligent decision maker, and the key institution that you have defended has failed to deliver the goods, you are in trouble. So is the ideology you defend.

The academic economists can get away with this, because funding is provided by taxpayers. Taxpayers have no say in any of this. The guild exists because of tax-funded education. This is true in every field. But in some fields, it is expected that you have the ability to communicate to the general public. The field of history is one of these. There are academic journals, and the journals are filled with narrowly focused articles. But historians are expected to be able to communicate the broad sweep of history to freshman students, which means that they have to be able to stand in front of a group and discuss historical cause-and-effect.

THE AUSTRIANS' ADVANTAGE

Today, unlike 1958, there is a huge body of supporting material, both academic and popular. This material is available free of charge on the website of the Mises Institute. This is why I am optimistic about the long run future of economic discussion. Austrians are trained to discuss. Keynesians are not.

The Austrian School has a tremendous advantage over Keynesians. In fact, it has an advantage over virtually all other schools of opinion. The Austrians can communicate in simple terminology the basic truths of their position. The graduate school level of communication is still accessible by people who read The Freeman, as long as they read carefully. The topics of the graduate school are probably not interesting to people who can read The Freeman, but if they ever do get interested, they have access to this body of material.

The Ludwig von Mises Institute is proving this on a regular basis. It has a lot of Internet traffic. It has more traffic by far than the website of the American Economics Association. The reason for this is obvious: the authors write in order to be understood. They want intelligent laymen to be able to follow their arguments.

There will come a time when it will pay to be able to communicate. In a time of economic crisis, which is surely coming, the economist who can communicate the logic of his position, and then persuade people to take action in terms of this position, is going to have an advantage over any economist who does not have this ability. It is a matter of both logic and rhetoric. The Keynesians are short on both.

[Fenix]

Majority Of Americans Now See Guns As The Solution To Mass Shootings
Submitted by Tyler D.
07/27/2015 - 19:05

Obama failed: in the aftermath of the 2012 Newtown, CT school massacre which left 26 unarmed, defenseless people dead, the president pushed as hard as he could to pass legislation that would enact strict gun control and further limit the applicability of the Second Amendment. Not only did he not succeed, but according to a 2014 Pew Research Poll there has been a 9% rise in the number of Americans who think gun ownership could "protect people from becoming victims of crime."