by ilene - October 31st, 2014 4:30 pm
Courtesy of Mish.
Here's the question of the day: Could Non-Citizens Determine the Outcome of the Midterm Elections?
Some elections, especially for Senate are so close, the unfortunate answer is "yes" as the following video insight from Insight from the Libre Institute explains.
Mike "Mish" Shedlock
by Market Shadows - October 31st, 2014 3:30 pm
Predictions that the US equity market would collapse at the end of QE have so far been wrong (and in a very painful way if you shorted the market based on the Fed's actions alone). The end-of-the-world-QE bears failed to factor in another surprise move by the Bank of Japan. The BOJ announced its own QE program today — it is donating $124Bn ($80 trillion yen) to the market-propping cause. It plans to triple the amount of Japanese ETFs and REITs it buys on the open market.
As Sam Ro at Business Insider wrote on Oct. 26, If You Missed The Rally, Then You Just Made The Most Classic Mistake In Investing. Since then, the market continues higher…
Courtesy of Joshua M Brown
“When one door closes, another opens; but we often look so long and so regretfully upon the closed door that we do not see the one which has opened for us.”
– Alexander Graham Bell
The prevailing wisdom on QE in Policy Bear circles has been that the Fed was” trapped” and could never exit QE without sending the US economy into a tailspin.
This week the Fed ended QE and the stock market has exploded to the upside. The one thing the policy bears may not have counted on was that someone else would cover the Fed’s back as it walked away. That someone else is the Bank of Japan, which shocked the markets this morning with an $80 trillion yen QE program that aims to triple the amount of Japanese equity ETFs and REITs it is buying on the open market. In addition, there is continued talk that the ECB will follow the Fed and the BoJ’s lead with a QE program of its own before too long.
I can’t tell you what these programs will do for the economies of these countries or for the wages and spending of their constituent workers. But it’s pretty clear what happens to their stock markets…
Via the Wall Street Journal:…
by ilene - October 31st, 2014 2:32 pm
Courtesy of Andrew Topf of OilPrice.com
Running a multi-billion dollar energy company isn’t easy. Just ask the executives in the corner suites of some of the energy companies that have gone bust over the years. Some, like Enron, were brought down because of insider malfeasance. A few, like ATP, blamed damaging government policies, while others went off the rails due to market forces that left the company and its shareholders flat-footed, deep in debt, and eventually broke. Here are the bankruptcies that will be etched into the tombstones of failed energy fortunes for time immemorial.
1. Enron. Bankrupt December 2, 2001. Assets $65.5 billion
Enron grew from a simple pipeline company into the world’s largest energy trader by using the Internet to buy and sell natural gas and electric power to help utilities and industrial power users hedge against price fluctuations. By 2000, Enron was worth an astonishing $68 billion, but when the U.S. Securities and Exchange Commission started investigating, it was revealed that much of the money was based on shady accounting practices and un-recorded losses. In one year, Enron’s stock price plummeted from more than $90 to less than $1, resulting in $11 billion in shareholder losses. The subsequent bankruptcy remains the largest in U.S. history. CEO Kenneth Lay and fellow Enron executive Jeffrey Skilling were convicted in 2006 of fraud and conspiracy. Lay died from a heart attack while awaiting sentencing. Skilling is still in prison.
2. Energy Future Holdings. Bankrupt April 29, 2014. Assets $36.4 billion
Energy Future Holdings became the largest power producer in Texas in 2007 after a $45 billion buyout of TXU Corp. But the company struggled under the weight of $40 billion in debt after revenues plunged due to lower prices for natural gas and electricity. Energy Future Holdings was broken up in April under the terms of a restructuring deal.
3. Pacific Gas & Electric Company. Bankrupt April 6, 2001. Assets $36.1 billion
California’s largest publicly-owned utility went bust after deregulation led the company to incur billions in debt. After selling its gas power plants, the company had to buy power from other energy companies. Buying at fluctuating prices and selling at fixed prices led to losses and eventual…
by ilene - October 31st, 2014 2:08 pm
Recent trade deals and high-level cooperation between Russia and China have set off alarm bells in the West as policymakers and oil and gas executives watch the balance of power in global energy markets shift to the East.
The reasons for the cozier relationship between the two giant powers are, of course, rooted in the Ukraine crisis and subsequent Western sanctions against Russia, combined with China's need to secure long-term energy supplies. However, a consequence of closer economic ties between Russia and China could also mean the beginning of the end of dominance for the U.S. dollar, and that could have a profound impact on energy markets.
Reign of the USD
Before the 20th century, the value of money was tied to gold. Banks that lent money were constrained by the amount of their gold reserves. The Bretton Woods Agreement of 1944 established a system of exchange rates that allowed governments to sell their gold to the U.S. Treasury. But in 1971, U.S. President Richard Nixon took the country off the gold standard, which formally ended the linkage between the world's major currencies and gold.
The U.S. dollar then went through a massive devaluation, and oil played a crucial role in propping it back up. Nixon negotiated a deal with Saudi Arabia whereby in exchange for arms and protection, the Saudis would denominate all future sales of oil in U.S. dollars. Other OPEC members agreed to similar deals, ensuring perpetual global demand for greenbacks. The dominance of the U.S. "petrodollar" continues to this day.
Russia and China Cozy Up
Recent news coming out of Russia, however, suggests that the era of U.S. dollar dominance could be coming to an end, due to increasing competition from the world's second largest economy and primary consumer of commodities, China.
China and Russia have been furiously signing energy deals that indicate their mutual energy interests. The most obvious is the $456 billion gas deal that Russian state-owned Gazprom signed with China in May, but that was just the biggest in a string of energy agreements going back to 2009. That year, Russian oil giant Rosneft secured a $25 billion oil swap agreement
Nikkei Futures Up Limit, Yen Collapses, Dollar Up, Gold Down as BoJ Pledges “Unwavering Determination” to Get 2% Inflation
by ilene - October 31st, 2014 1:38 pm
Courtesy of Mish.
“Whatever it Takes” Japanese Style
It’s a world truly gone mad.
In a surprise move today, the Bank of Japan announced further quantitative easing, dominated by long-term Japanese government bonds. The BoJ also announced it and would triple annual purchases of exchange traded funds and property investment trusts.
BoJ governor Haruhiko Kuroda defied objections from four fellow board members, arguing that a tax-hit economy and a lower oil price have led to “a critical moment” in the country’s bid to escape from deflation.
The Financial Times quotes Kuroda as follows: The extra action “shows our unwavering determination to end deflation. There was a risk that despite having made steady progress, we could face a delay in eradicating the public’s deflation mindset. This is a pretty drastic step, so I think there will be a significant effect [on the economy].”
Stunning Market Reaction
- Nikkei futures up lock limit (1160 points)
- S&P 500 up 1.0% (new all-time high)
- Yen plunges 2.5%
- Dollar rises 0.9%
- Gold sinks 2.75%
- Oil down 1.1%
S&P 500 Futures
by ilene - October 31st, 2014 1:27 pm
By Jared Dillian
I had an instant-messenger conversation with one of my clients the other day. It was pretty annoying—he wrote things like “BULL MARKET, DUDE,” and harangued me about my net-short positioning.
Then he started telling me that the market was going to rip if the Republicans took both houses of Congress in the midterm elections. At that point, I felt like I needed to intervene.
First of all, just about every single piece of academic research on the subject shows that the stock market (and GDP, and many other metrics) outperforms under Democratic presidents.
You don’t need to look very far for a contemporary example, considering that the stock market has done a three-bagger under our current leader, and the economy has recovered.
Wait, that doesn’t make any sense. The current administration is the least friendly to business and private enterprise in recent history—so why have stocks been in a prolonged bull market?
There are a million reasons why, but let’s focus on the biggest and most obvious one: the Federal Reserve.
Shaping the Fed Board of Governors
Lots of people have opinions on the Fed without really knowing the Fed as an institution or how it works.
There are seven members of the Federal Reserve’s Board of Governors who live and work in Washington, DC. They are presidential appointees, and their term of service is 14 years.
There are 12 regional bank presidents, who are nominated by their respective boards of directors. They are not, theoretically speaking, political appointees. Four of them at a time serve on the FOMC, on a rotational basis. The president of the New York Fed is a permanent member of the FOMC. Their term of service is five years.
In the old days, a Fed governor would serve all 14 years, but now they have to go make money on the speaker circuit, so they serve only three to five years if they are lucky. This means that a two-term president has the opportunity to “pack the court” with Fed governors of similar political affiliation over an eight-year period.
by ilene - October 31st, 2014 10:47 am
Courtesy of Charles Hugh-Smith of OfTwoMinds
The question of "recovery" really boils down to this: how much longer can the top 10% prop up the expansion?
Here's a recent story that delves into the question of "getting by" versus "middle class": How Much Money Does the Middle Class Need to Get By?
by ilene - October 31st, 2014 9:13 am
Submitted by Tyler Durden.
Still confused what the BOJ's shocking move was about, aside from pushing the US stock market to a new record high of course? This should explains it all: as the chart below show, as a result of the BOJ's stated intention to buy 8 trillion to 12 trillion yen ($108 billion) of Japanese government bonds per month it means the BOJ will now soak up all of the 10 trillion yen in new bonds that the Ministry of Finance sells in the market each month.
In other words. The Bank of Japan’s expansion of record stimulus today may see it buy every new bond the government issues.
This is what full monetization looks like.
More from Bloomberg:
The central bank is already the largest single holder of Japan’s bonds, and the scale of its buying could fuel concerns it is underwriting deficits of a nation with the heaviest debt burden. The BOJ could end up owning half of the JGB market by as early as in 2018, according to Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo.
“Kuroda knows when to go ALL in,” Okubo wrote in a note. “The BOJ is basically declaring that Japan will need to fix its long-term problems by 2018, or risk becoming a failed nation.”
The unprecedented efforts to stoke inflation could scare bond investors, said Chotaro Morita, the chief rates strategist in Tokyo at SMBC Nikko Securities Inc.
Kuroda said earlier this month that while the BOJ holds only about 20 percent of Japan’s outstanding government bonds, the Bank of England holds approximately 40 percent of U.K. government debt.
We wish Japan the best of luck in avoiding becoming a "failed nation."
Then again there is something to be said about a nation which is now desperately, and obviously, trying to unleash hyperinflation… and, for now at least, is failing.
by ilene - October 30th, 2014 9:53 pm
Courtesy of Mish.
On June 7, 2014 I wrote Looking to Drastically Reduce College Costs? Study Abroad!
Yesterday, a writer for the Washington Post expressed the same opinion.
Since 1985, U.S. college costs have surged by about 500 percent, and tuition fees keep rising. In Germany, they've done the opposite.
The country's universities have been tuition-free since the beginning of October, when Lower Saxony became the last state to scrap the fees. Tuition rates were always low in Germany, but now the German government fully funds the education of its citizens — and even of foreigners.
What might interest potential university students in the United States is that Germany offers some programs in English — and it's not the only country. Let's take a look at the surprising — and very cheap — alternatives to pricey American college degrees.
Americans can earn a German undergraduate or graduate degree without speaking a word of German and without having to pay a single dollar of tuition fees: About 900 undergraduate or graduate degrees are offered exclusively in English, with courses ranging from engineering to social sciences.
This northern European country charges no tuition fees, and it offers a large number of university programs in English. However, the Finnish government amiably reminds interested foreigners that they "are expected to independently cover all everyday living expenses." In other words: Finland will finance your education, but not your afternoon coffee break.
There are at least 76 English-language undergraduate programs in France, but many are offered by private universities and are expensive. Many more graduate-level courses, however, are designed for English-speaking students, and one out of every three French doctoral degrees is awarded to a foreign student. "It is no longer needed to be fluent in French to study in France," according to the government agency Campus France.
Picture from Tpsdave at Pixabay; it's a school in Russia.
by ilene - October 30th, 2014 4:07 pm
Patrick starts by reviewing what a "broken record" is. (Sadly, I know and you probably do too.) He notes that biotechnology has undergone more enormous changes than the music delivery industry, and that most people do not have a proper appreciation of how big this "biotech transformation" is. Then, he reviews what mitochondria are, how they work and why they are so important to us.
Within all the cells of our bodies, microchondria produce energy - the energy supply needed to run the cells' activities. Without the ability to take nutrients and convert them to energy, via these little cellular machines, we are dead. And that, in brief, is why mitochondria are important.
By Patrick Cox
I may sound like a broken record saying this again, but it’s critical that we realize that scientific understanding of the biological world is increasing at an exponential rate. For younger readers, I should explain that the term “broken record” is a reference to a common failure of the old pressed-vinyl audio recording technology. Occasionally, the spiraled groove on a record imprinted with physical representations of sound would be scratched or otherwise damaged. As a result, the needle that transferred analog information to the amplifier would be knocked outward from the groove to play the same section of the recording over and over again.
For those of you who already knew this, it’s useful to realize that the technology of audio recording that was once universal is not just obsolete, most younger people don’t even know what a skipping record is today. The reason that this is such a useful realization is that biotechnology has undergone even bigger changes than the transformation of recorded music from bumps in vinyl grooves to streamed electrons. Most people, however, have no real appreciation of how big the ongoing biotech transformation really is.
New tools let us see deep into the atomically precise world of molecular biology. Just as important is a growing base of biological knowledge that is available to anybody. Though Google Scholar is only 10 years old, I find it hard to imagine a…