Market Talk – August 4, 2015
None of the core Asian Equity Indices managed to trade in positive territory today: Nikkei (down 0.19%), Shanghai (-1.12%), and HSI (-0.92%). We saw weakness again in Asian currencies, and this mood worked its way in Europe as well. The first trading day in the Greek stock market after its official closure saw a 17% decline. The DAX was the only exceptional performer, closing higher by 1.19%. The Euro and Cable traded lower (-0.28%) and was actually a gallant performance, all things considered!
The US$ continues to draw interest and that in turn remains a negative for commodities. Brent broke the psychological $50 level (closing at $49.63 -4.94%), obviously this contributed to the very heavy loss for the Russian Rouble (down 2.6% by the end of trading).
Other commodities suffering as well. The age of deflation continues.
The Dow closed lower on its worst intraday level but was still down 95 points (-0.6%); at one stage, it was down over 200pts.
So the benefactors in all of this were the bond markets, with all core center’s seeing yield declines. To be expected, the U.S. Treasury market was the star with benchmark 10yr closing 2.145% -5.7bp on the day. This takes the 10yr Bund (0.61%) spread to 153.3bp.
August and summer markets are notoriously thin, but this year has the potential to be legendary.
–Ashley Warren
Gold & the Commodity DEFLATIONARY Wave
Gold remains extremely weak. We need a daily closing above 1108 to say the low is temporarily in place and a bounce back up is possible. The 1080 level is critical support on a daily closing basis, and it remains possible that gold can break to the downside moving into September if the July low gives way.
Since the Monthly Bearish at 1155 was elected on the closing of July, typically we would see a rally back to that level to retest it before we see lower prices. A two-month reaction rally into September would then result in a renewed decline into the Benchmarks.
The entire commodity sector is collapsing – not just gold – which illustrates that gold is not being manipulated. China’s days of growth of 12% annually are over, and their numbers reflect an economic contraction. Demand for commodities has declined, and this is all part of the DEFLATIONARY wave underway. When you open your eyes and look beyond gold, you can see the whole trend.
The ECM Date October 1 = Fiscal Year-End
Congress kicked the can down the road to precisely the ECM target date. This is when the government will go into shutdown mode. There is a greater than 50/50 chance that there will be no deal to extend the debt ceiling, which never ends. This merely reflects that there is no control over fiscal spending, for year after year they must constantly borrow more and more. With the House already in recess until after Labor Day and the Senate about to leave town this week, all of the components are in place for Congress to fail to act before the fiscal year begins on October 1.
It is clear that a battle is brewing, as leadership admitted that they are still undecided on how to even deal with this situation. It looks like the peak in the ECM is targeting October 1, which is the precise day we may see the U.S. government shutdown.
NSA: A Tax & Economics Espionage Agency
Anyone who thinks this is about terrorism is pathetically naive. The NSA is a top-notch Tax & Economic Espionage (TEE) organization; with terrorism so low on the agenda, it is laughable. You do not collect every phone call worldwide of billions of people to sort out even 100 terrorists. They store all that data and can input your name and wham – up pops everything. I am waiting for some smart lawyer in a divorce case to subpoena such a file to prove someone has been cheating to get a pile of money.
In theory, the existence of such files should be open to everyone just like the Nixon Tapes. They must have copies of all the emails Hillary erased to hide her dealings with foreign governments to get money for the pretend Clinton charity. They all exist. Why has someone not demanded that the NSA turn them over? Well, it would open the floodgate on everyone else. The NSA didn’t build that immense storage facility for nothing. They erase nothing – retain everything. They remembered their childhood songs of how Santa Claus knows everything and said gee, we can do that. So why is Congress or even Trump demanding the NSA turnover all her emails? Guess to they do not want to publicly admit Snowden was correct.
The NSA is a strategically aligned intelligence agency that has brought “1984” to life. The NSA has been deeply engaged in economic and industrial espionage. Combating terrorism, global money laundering, corruptions, and the fight against proliferation, are all excuses used to justify tracking every dollar. They might as well put a GPS chip in the currency. Terrorism is just a fig leaf for what they have been building. If they were interested in just terrorism, they would have no need to store every phone call, email, text, and written letter they can get their hands on.
New revelations claim that the NSA was spying on the French military industry, what they were producing, and to whom they were selling. Due to restrictive granting of export permits imposed by Germany, the German armaments industry is blocked. The French defense industry can count on the support of their government to ship to foreign lands. This is what distinguishes the French key industries from their German competitors. This has made the French military industry an interesting target for the NSA. This we can understand, but going beyond that opens Pandora’s Box.
The key to understanding the NSA’s mission profile for economic and industrial espionage began when the dividing line for “national security” expanded following 9/11. This has become a paradigm shift where everything from money flows, transport, energy, telecommunications, critical infrastructure, and the IT sector, has been designed to track and control eventually everything. The gathering of information is only one part of a much broader intelligence operation. They are operating in secret, not even Congress knows what they are really doing with the data. Snowden reported that staff created programs to collect nude photos that girls sent to their boyfriends, which certainly had nothing to do with national security.
This is especially true when it comes to long-term, strategic economic goals. The French newspaper “Libération” recently reported that around 100 major French companies, including almost all of the members of the Paris stock exchange CAC 40 index, will be affected by NSA spying activities. The NSA is probably tracking all German companies since they would be even more critical, given the German export economic model. The economic ties between German politics and economics contain politically interesting export markets, such as Russia or China, represents extremely valuable info regarding even the embargo against Russia.
However, there is a significant difference between the French and German key industries: German DAX companies were listed often on the U.S. stock market, whereas a French company was not. After the investigations in the course of compliance bribery scandal against Siemens unfolded, rethinking began within German industry with respect to U.S. listings. DAX companies such as Daimler (2010), the German Telekom, and even before the Alliance, BASF, Bayer, Infineon, and E.ON have retired for good reasons from the U.S. market. Siemens followed in early 2014.
Unbeknownst to most people, the Patriot Act (2001) imposed administrative requirements. The SEC obtained new compliance powers for any company traded on the U.S. stock exchange. This has resulted in many foreign companies de-listing from the USA in a mass exodus. Listing on the U.S. exchange opened the door for the NSA and other security authorities (FBI) to engage in investigations and control beyond the U.S. borders, expanding even the FBI outside the USA all in the name of terrorism. This has led to the mass exit of foreign companies from U.S. listings.
Foreign banks exposed themselves to U.S. law, even in their home offices, by merely having an office in the USA. The U.S. authorities went after and destroyed the Swiss banks by imposing all sorts of charges. This is why UBS suddenly donated to Hillary’s charity in return for her intervening on their behalf. That is outright criminal bribery, but Hillary seems to think she walks on water.
An example of a ZDF-post on May 17, 2000, shows that the NSA spied on German companies for the benefit of American companies. “The most spectacular case is probably the case of VW, where the NSA from this station has intercepted video conferencing from VW with the later manager Lopez while then, the results in the United States General Motors and then leaked to the German subsidiary Opel.” The U.S. intelligence is abusing their power for private purposes. One must wonder what the U.S. companies gave in return for such assistance. This was just the tip of the iceberg.
Systemically, the NSA has been spying on foreign banks, looking for Americans at least since the mid-90s. This includes Switzerland, Liechtenstein, and Luxembourg. This transformed into claiming they were concerned about financing terrorism, which would not take billions of dollars. In addition, the IT used by the banks has been ineffective in blocking access by the NSA.
The NSA has developed a massive means to follow the cash flows as supported by the documents of Edward Snowden. The involvement of the NSA in tracking all capital flows is documented in the global monitoring of payments, including all banks. The documents showed also that the Belgium-based SWIFT organization was an NSA intelligence target. SWIFT standardizes the remittances of the world for more than 10,000 banks and is considered a bottleneck for international payments. Tap into that and you have everything.
This activity has contributed to the DEFLATIONARY world we live in as capital flows have reduced because of crazy regulation. FATCA has prevented Americans from operating overseas. Only prior multinational are exempt. No American citizen can possibly expand into the world economy for foreign banks will not accept Americans, be it in Asia or Europe. This is the hunt for money to document every account and movement of money. This is reducing global capital flows and threatens to unwind everything that was built since World War II. Foreign companies have been delisted in the USA because of crazy regulation hidden inside the Patriot Act, and then add FATCA, and one must wonder how much longer the world economy can stand before it topples over.
Oil & BIG BANG – the Government Funding Crisis on a Global Scale
Saudi Arabia pumped a record 10.564 million barrels per day in June, showing that as prices decline, a record level of production is unfolding. Governments in the Middle East have budgets that are now in serious trouble. As oil prices decline, output is increasing beyond OPEC quotas because they need money to make up for lost revenue at higher prices. In the UAE, local gasoline prices increased almost 25% as well, which is opposite of the trend because it is effectively taxation.
Saudi Arabia is the world’s biggest exporter of oil, but now the desert kingdom is looking to conquer the refining sector as well, and will become the 4th largest refiner in the world. This will put further pricing pressure on oil companies as they are all now posting the sharpest decline in profits in more than 10 years.
Welcome to the age of DEFLATION. Whatever can go wrong, will go wrong for all governments everywhere. This is BIG BANG – the government funding crisis on a global scale.
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