Chicago MERC Ends Floor Trading after 167 Years
Clerks in the Euro Dollar Futures pit at the Chicago Mercantile Exchange trade after the news that interest rates will remain the same Tuesday Sep. 16, 2003. The Fed said that the low rates, currently at a 45-year low, “can be maintained for a considerable period.” (AP Photo/Anne Ryan)
This is the end of an era. The Chicago trading pits have closed after 167 years. What is a shame about this is that great traders need the “feel” and you just do not get that from looking at flashing screens. It is like playing chess against a great opponent v the computer or flying a plane in a computer simulation v real life. There are differences one just does not achieve.
One of our projects on the back-burner is to try to bring back that “feel” to trading, It is something that taught me from a young age. After Socrates, we will start to recreate something I always wanted to do.
Market Talk
On Wednesday, China’s Securities Finance Corporation — known as CSF — announced that it will lend billions to big Chinese brokerage firms so they can buy more stocks. The goal is to purchase enough shares that stock prices stop plunging. These measures have resulted in a positive performance for the Chinese market (+5.8% on the day) which also had positive effects on other Asian markets, with the Nikkei managing to also close in positive territory (+0.6%). China Securities Regulatory Commission called the decline in Chinese stocks an “irrational sell-off”, but some extent it has been a retail speculative bubble. Roughly half of all listed companies have actually pulled their shares off the market as reported by CNN. Clearly, that wouldn’t be allowed in the U.S. markets.
Many so-called pundits are calling this China’s 1929. They clearly do not understand what they are saying. True, a 30% drop was more than the entire value roughly equivalent to the UK’s economic output last year. Nevertheless, this is a fall from a recent reaction rally, not a Phase Transition, as was the case in the USA back in 1929 or Tokyo in 1989. In the case of the USA, the 1929 high was not exceed until 1954, or 25 years intraday, or 26 years from the highest closing of 1928. We do not see that happening in the case of China. Still, the reversal in the immediate downtrend should have taken place on July 9th. So far that appears to be correct. The next key turning point is two weeks from now.
Nevertheless, the bounce in China has in turn provided a strong European opening which gained pace throughout the day. The European peripheral (Equity) markets provided some strong closes tonight with Portugal, Italy and Spain all closing +4%, +3.55% and +2.65% respectively.
The tone was similar in the bond markets but as Bunds traded lower (price/higher yield) the peripherals spreads tightened to core. Markets do not need an excuse to be thin these days but many were offered that the tube strike had delayed traders getting to the office and so a support bid was being shown – until the trader arrived! Any excuse these days I guess!
The Euro continues to play around the 1.10 level and Sterling finds it difficult to climb above the 1.54 handle. Yesterday’s budget really has not helped cable and the long term trend appears to be setting its course.
Greece attempts once again this evening to present a palatable plan to Brussels — increasing pension age and VAT increases (23% for restaurants is the rumor); but really the writing is on the wall and the only people that can not see that is the Greek government itself! They seem to keep trying to stay in the Euro and that is just amazingly stupid. Greece will not recover until it leaves the Euro.
The London Property Market is Crashing
British politicians have just made the same stupid mistake as the American Democrats who created the S&L Crisis of the 1980s. In the U.S., they were greedy and changed the tax status on real estate to increase taxes. They created a one-way market of all sellers. British Conservatives have just done the same thing, sending shares in the housing construction industry crashing in what may prove to be a waterfall event.
Chancellor of the Exchequer, George Osborne, delivered the budget and one of the big announcements was a crackdown on so-called “non-doms” — the people who live in Britain but claim their “permanent” home is abroad. Osborne announced a shake-up of the tax system that will drive both wealthy foreigners out of the property market and send prices crashing, impacting the values behind mortgages. The London property boom is over and looking at the other side of 2015.75 is starting to appear like an abyss.
Those claiming the non-dom status have limited taxes on any money they earn abroad, paying only on income earned in Britain. Osborne just abolished the indefinite non-dom tax status, and changing the rules now at the peak of the London property market is typical for brain-dead politicians who just will never get it regardless of which side of the line they claim to be. Conservative or Labour, it’s all the same – tax’em till they die and then grab what’s left like the Roman soldiers at the foot of the cross. Osborne’s timing is impeccable; right on schedule for 2015.75.
Now, anyone who has lived here for 15 of the last 20 years is officially taxed the same way as any other Briton. Osborne has also announced a crackdown on properties owned “through foreign companies or other opaque structures” that are often used to minimize taxes. It is easy to attack the foreigners since they do not vote. They have given Britain the appearance of wealth and if they leave, the stores, shops, restaurants, and every industry will feel the sting of an economic collapse.
Already, the property companies at the top-end of the market have crashed. The wealthy are already looking at New York City. It is shocking just how instantaneous the flocking of Europeans to New York City as the alternative to London has been.
Money is Irrelevant – Deal With the Issue Directly
QUESTION:
I understand austerity is self defeating and crippling, but is there any other way to constrain elected officials from driving into unsustainable public debt as they pander for votes and campaign support?………or must we just go through periodic sovereign debt bubbles? and i understand austerity protects the bondholders at the expense of the people [the electorate], but afterall it is the people that collectively elect the officials that run up this debt.
Scott
ANSWER: Socialism has been the bribing of the population representing the worst side of democracy – the denial of equal protection of the law based upon wealth. Earn more than someone else and you are evil; they cheer politicians who say they will legally rob the rich, and will legally give it to you. This is no different than racism or denying equal protection to any group based upon gender, creed, ethnicity, or association of some kind. So yes, the people voted for politicians based upon greed and bribery. Socialism even violates the Ten Commandments: “thou shalt not covet thy neighbor’s goods” (Exodus 20:17). How can you pretend to go to church on Sunday and then justify robbing others under the cloak of good intentions called SOCIALISM?
The only way to prevent this type of system was to adopt what the Founding Fathers did in the USA – two-year terms for Congress – because there was no pay and they met only for a few weeks each year. That was closer to a citizen government. The mistake was this should have been hard-coded into the Constitution for once they tasted power they began to pay themselves, becoming career politicians. Jefferson agreed to Hamilton’s proposal of a national debt, provided it was paid-off. This was actually accomplished, as illustrated above. You can see there was no national debt and there was no direct taxation (Income Tax) until 1913.
To solve the problem, there should be NO career politicians and the government should be barred from borrowing money. Those are the key issues. Claiming to make a gold standard or some other nonsense to make “sound” money is pointless. You cannot create sound money with taxes and borrowing intact. We had a gold standard and that failed because politicians borrowed and spent more than there was when gold was fixed at $35. Therefore, a gold standard will always flop because you are trying to use that as a restraint upon government. Deal with the problem directly, for indirect means will never succeed.
How Much Cash Should One Have Outside of the Banks?
QUESTION: How much cash should one have?
ANSWER: No institution is safe for all can be closed by decree, including credit unions. This is true of safe deposit boxes as well. They may not confiscate it, but they can deny access. PLAN B should be an amount of cash that is enough to live on for at least one month if not three months insofar as basic essentials, not mortgages, etc. Effectively this is food money and gas for the car. Gold coins will not help in this case, nor will silver coins, for we are not talking about trying to preserve wealth; this is the emergency stash for living purposes in case you need CASH, which is recognized by everyone. Try explaining a silver quarter to a teenage clerk who has no authority to accept a quarter for more than a quarter. Precious metals will be more of an underground economy of barter; it will not be useful at the local supermarket.
Also, keep in mind that cash could come in handy in a computer failure, whereas you cannot access a bank, exchange, etc. just to survive for there could be a scenario where not even plastic credit cards or debt cards would offer any help.
Our corporate clients have increased their cash positions tremendously in preparation for 2015.75. They learned their lesson from 2007.15 and do not want to get caught in a liquidity crisis. Hence, they have increased their cash position albeit in banks.
Cyber Attacks
The FBI testified that they want backdoors to all encryption. The problem with granting the government such access so that no one can have private data means that hackers will also find a way in. You cannot create exclusive access for anyone with backdoors. Government did just fine before technology; they act as if they cannot solve any crime without total access today. International commerce cannot be conducted without secure encryption. Of course, politicians are only concerned with grabbing more money. They will more likely than not destroy all commerce by creating access for the FBI and NSA.
You will be able to put your portfolio into our system for Socrates to monitor. However, unlike Bloomberg, Socrates is fully encrypted so no one, even in our organization, can view it. You alone will have the password key, and you will be able to change it. Therefore, no court will be able to order us to provide anything to the government whatsoever regarding those who want a portfolio watch.
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