Weekly Update

Tensions Continue in Greece

Tensions in Greece mounted over Greece’s impending need for more financial aid and its plan to make additional budget cuts in order to qualify for aid.  Both internal and external pressures are squeezing the Greek government.  Hundreds of thousands of Greek workers staged a strike Wednesday to protest the anticipated new budget cuts and Greek debtors are pushing the Greek government to force through the cuts.  The Greek government is preparing to sign off on a 13.5 billion euro package of cuts and other fiscal reforms in exchange for continued bailout installments.  In return Greece is expecting 31.5 billion euros in aid next month.

Spain’s Gov Yields Start to Move Back Up

Spain introduced its own round of spending cuts and tax increases while still delaying their request for a bailout in the hopes of getting more favorable conditions.  They announced 13 billion euros in spending cuts and tax hikes for 2013.  On Friday an audit showed that Spain needs 78 billion euros to recapitalize its banks and yields on ten year Spanish government debt started moving back toward the 6% level.  All of this while rumors on the street started circulating that Spain’s credit rating could be cut below investment grade.

The Engine of the Eurozone Slowing

Germany has continued to show some signs of slowing down this week as the number of jobless claims rose for the sixth straight month in September and German business confidence fell for a fifth straight month.

China’s Central Bank Trying to keep up with the Fed and ECB

China’s central bank pumped 365 billion Yuan (58 billion Dollars) into its banking system, giving global investors new hope that the world’s second largest economy might turn around its trend of decelerating growth.  The announcement was made after China’s major industrials announced a decrease in earnings which marked the fifth straight month of reported declining earnings.

Mixed Data Out of the US

The US Department of Commerce revised the second quarter annualized growth rate down to 1.3% from 1.7%.  Us durable goods orders fell by 13.2% in August, their sharpest drop since January of 09.  However, housing data was better as home prices and the volume of home sales increased.

Markets Take Back Bernanke’s Gift

Share markets suffered a second week of declines as investors continued to worry about the slowing global economy with the US markets erasing most of the gain from after the feds QE3 announcement.  Gold and Silver on the other hand are still near their post QE3 announcement highs

 

Richest Man in France leaves France

France’s richest man Bernard Arnault is called an asshole by the left-wing French Newspaper Libération as Arnauld seeks Belgian nationality before introduction of 75% tax by the French Government.

Bernard Arnault, who said the Libération headline was vulgar and violent. He is the head of the LVMH luxury group, and the headline “Casse-toi riche con!” which when properly translated means (Get lost, rich asshole) whereas the Guardian used the polite form “jerk” for its translation.

http://m.guardian.co.uk/world/2012/sep/10/france-bernard-arnault-sues-liberation?cat=world&type=article

Governments are hunting down the rich like animals chasing capital offshore and destroying the world economy in a single bound. Even if they confiscated all the wealth of the “rich” to pay the bankers, they will not solve the problem. There is no sense of long-term reform or just how government intends to restore the economy. Unemployment among the youth is soaring everywhere. Even in the United States, those freshly out of school are finding jobs scarce. Most smart kids realize that they have to become self-employed to make a living. The smartest have left Greece and unrest is the only means of releasing frustration. Without serious economic reform to address the long-term systemic problems of a failed “socialistic” state that is collapsing in the West precisely as did Communism in 1989, we are likely to see the conclusion of this Marxist experiment by 2016.

Sovereign Debt Crisis Causing Shift from Public to Private Investment

In an interview with Michael Diekmann, international head of global Allianz insurance concerning their investment strategy, he states publicly that they now avoid sovereign debt for any new investment!

Handelsblatt Morning Briefing <Handelsblatt_Morning_Briefing@kompakt.handelsblatt-service.com>

This is demonstrating what we have been warning about. This is what ALWAYS takes place in such a economic crisis that we are confined in nowadays. Forget the nonsense of lowering rates and stimulating the economy. This is the REAL trend to pay attention to. As capital flees Sovereign Debt, interest rates will begin to RISE and that will rekindle inflation forcing banks to start bidding for capital. So hang-on tight. The worst lies ahead.

Civil Unrest – Austerity – Gold

Greetings From Hong Kong.

The Sovereign Debt Crisis continues to unfold and governments everywhere are still trying to use short-term measures to solve a systemic problem that requires major restructuring of the world economy. Spain revealed yet another plan to cut 40 billion Euro from spending and it will take 3.1 billion from state employee pension funds to help pay for the crisis. There is no way out and yet government keep trying to maintain power desperately praying for the day when they just wake up and it will be business as usual.

In gold we have a Daily Bearish at 1754.4 and that held and thus we are still looking at perhaps one more new high on Friday. The next target week will be 10/08. Overhead resistance has not changed and we should expect to see a test of that level.

I will be updating next week from Beijing.

Weekly Update for 9/15/2012

Germany’s Top Court Gives Green Light

Germany’s top constitutional court, as expected, rejected efforts to block a permanent Eurozone rescue fund.  They dismissed motions that sought to block the European Stability Mechanism but did rule that their contribution of $240 billion could not be increased without legislative approval.  Germany was the last county to ratify the permanent rescue fund which is now schedule to be setup on Oct 8th.  The ESM will increase the overall additional aid capacity to 500 billion euros from the 148 billion euros left in the temporary fund, the European Financial Stability Facility, due to be phased out in mid-2013.

Helicopter Ben Lives Up to His Name

The Federal Reserve gave the markets even more than they were expecting on Wednesday by saying they will not only start a third round of quantitative easing but also that the purchases will be open in nature.  They will buy 40 billion in mortgage debt per month until they see improvements in the economy.  They also said that they expect to keep short term interest rates near zero until 2015.  Share markets rallied around the world with the DOW reaching levels not seen since 2007 and the Nasdaq reaching levels not seen in 12 years.  The metals, oil, and other commodities all rallied as well.  One market that did not rally was US treasuries, the thirty year had its worst week in three years selling off more than 3%.

CPI Rises More Than Expected

The US consumer price index rose .6% in August higher than expected and its biggest monthly increase in three years.  Much of the increase came from higher energy prices, with the core CPI rising just .1% for the month, but the core rate did increase 1.9% year over year which is very close to the Fed’s target inflation rate of 2%.

Market Pressure Easing on Spain But Political Pressure Ramping Up

The Eurozone finance ministers met on Friday to discuss possible financial help for Spain and Greece.  Some of the funding pressure that has been put on Spain by the bond markets has decreased since the ECB announcement of their bond buying program as Spanish 10 year yields have fell to 5.58%.  However, political pressure from the Eurozone toward Spain to apply for aid and except the conditions that come along with the bond buying program has ramped up.