Fed's Lacker Admits "Asset Bubble" - Reluctant To Pop It
While we have been told again and again that there are no asset bubbles - although the most recent FOMC statement referenced concerns over small-cap multiples and covenant-lite loan issuance - it seems the Fed's Jeff Lacker just let slip some ugly truthfulness...Answering questions after a speech proclaiming growth ahead and rising inflation, he said: Lacker reluctant for Fed to #$%$' asset-price bubbles.
Well there it is. There are asset bubbles? But Lacker - who has been anti-QE to some extent - knows that if the Fed moves to actually do anything about it (other than jawbone), it's all over. Perhaps as more realize the transition from a Bernanke Put to a Yellen Collar has occurred, there will be no need to jawbone any longer
HSBC won't give me more than £1,000 over the counter even after I warned them I needed it – can they block me from my own cash?
A strange thing has happened in the last few days. I went to withdraw £10,000 cash from my HSBC account in Swindon which is in credit by about £50,000.
However, HSBC will not let me take out anything over £1,000 cash over the counter. I gave them warning, but they say they must know what I will use it for - they want to see evidence of hotel bookings etc.
In short, they refuse to give me my cash. HSBC say it is new internal rules to help prevent money laundering. But for example, what if I want to buy a £5,000 car? It said I’d have to put down a deposit and show them the receipt first.
China Expected To Announce It Has More Than Doubled Its Gold Reserves", Shanghai Daily
The topic of China's below the radar accumulation of gold is nothing new: first revealed here in September 2011 as part of a Wikileaks intercept, watchers of Chinese gold imports have been stunned by the ravenous pace with which Chinese customers have been gobbling up both domestic and foreign gold production month after month. One needs merely to glance at the net imports of gold just through Hong Kong to get a sense of just how much gold has flowed into the country which has now surpassed India as the largest buyer of gold.
the biggest question mark since 2009, when China gave its last official gold holdings update, has been how much gold has the People's Bank of China accumulated. One thing is certain: it is well more than the official number of just over 1,000 tons.
Recall the confidential memo revealed through Wikileaks:
According to China's National Foreign Exchanges Administration China's gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.
This very interesting commentary was posted on the Zero Hedge website on Sunday evening EST---
If the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?
~ James Madison, Federalist Papers 62
Fed has stolen and likely sold Germany's gold! . Why is Germany harassing the U.S. government about gold?
Goldbugs long have been inclined toward the paranoia evoked by the apocryphal story about the two psychiatrists who passed each other in the hallway of a mental hospital: One said "hello" and the other thought, "I wonder what he meant by that."
Of course the first psychiatrist may have meant only "hello," even if he was glad not to have to talk about the patient of the second psychiatrist who had been admitted for claiming to be Princess Anastasia and who, after extensive treatment, had learned Russian. But plenty really has been going on with gold behind the scenes for many years, and it is no longer paranoid to figure that Germany is playing a big part in it.
Indeed, that Germany is likely getting aggressive in the great gold game was signified by the dispatch from Bloomberg News on the speech given today by the president of Germany's Federal Financial Supervisory Authority, Elke Koenig, about the potential seriousness of gold and currency market manipulation.
This comes on top of the German Bundesbank's awkward and spectacularly unsuccessful (but wonderfully publicized) efforts to repatriate the gold it thought it long had deposited with the Federal Reserve Bank of New York.
JPMorgan leads mining loan rebound amid price slump
JPMorgan Chase & Co. is leading a rebound in bank lending to mining and energy companies, which are taking out the most loans since 2011 to refinance debt as commodity prices slump and acquisitions slow.
Raw-material industries boosted borrowing by 17 percent last year to $684.7 billion, after a 22 percent drop in 2012, data compiled by Bloomberg show. The top lenders were U.S. banks JPMorgan at $57.1 billion, Wells Fargo & Co. at $47.1 billion and Bank of America Corp. at $37.8 billion. The figures reflect transactions involving more than one bank and include credit lines, project or term loans and trade finance.
While increased scrutiny from regulators is prompting JPMorgan and other banks to exit physical commodity businesses such as warehouses and power plants, lending rose as companies including Rio Tinto Group and Royal Dutch Shell Plc refinanced to take advantage of low borrowing costs. Tumbling metal prices also eroded revenue at mines and smelters last year during the first commodity slump since the recession of 2008, while the value of mergers and acquisitions slid 31 percent, data show.
“It was generally not a good year for commodities in 2013, and that required companies to raise external financing,” said Larry Landry, vice chairman of investment banking for JPMorgan in New York. “There will be less opportunistic-driven refinancing in 2014, but hopefully that will be offset by a meaningful pickup in mergers and acquisitions.”
The Bernanke team was trying to goose up asset prices. They succeeded. The ‘wealth effect’ brought an additional $21trn to the nation’s balance sheets. This was supposed to increase demand, which would lead to more spending and investing,
Say’s Law tells us that you have to produce before you consume (more or less). But here we have about $20trn of excess spending power that seemed to come from nowhere. How could that be?
Wealth is either physical, as in owning a big house or a painting by Modigliani, or it is paper wealth. Now we have new claims on $21trn of real output and real wealth. If there is no increase in real wealth, that money just competes for the same goods and services that were already priced at $50trn five years ago. We’re not a dime wealthier in other words.
All paper assets are a claim against real goods and services. And you can’t get more goods and services than the economy can produce. Since the economy of ‘08 to ‘13 produced only a fraction as much real wealth as the claims against it, those claims will have to be applied to future output.
So, when will the economy produce $21trn of new wealth so that these new claims can be realised? Let’s see: “… the future looks sluggish”, wrote Financial Times lead economist Martin Wolf.
The FT editor joins Larry Summers who argues that US growth is stuck in the mud, and may not get out any time soon. “Since the start of this century”, writes Summers in The Washington Post, “annual US gross domestic product growth has averaged less than 1.8 per cent”.
Hmm… that’s about $300bn. How long do you have to wait – at $300bn per year – to cover $21trn in claims? Answer: 70 years!
Well, that’s not going to happen, is it? Long before 2084 rolls around, those claims will be marked down and written off.
In other words, the additional wealth is mostly a mirage.
Dow down 179 yesterday. Let’s see, to make the maths easy, that’s about 1% of the stock market’s value, and the total value of the stock market is about $17trn. So, yesterday erased about $170bn worth of ‘wealth’. By our reckoning, there’s about $7trn left to go.
It’s too early to call a top, but we wouldn’t want to be sitting on the uppermost branch of this tree. The higher up you go the more dangerous your perch. From where we stand on the ground, the whole thing looks scary.
There are too many people in that tree already, all of them counting on calm, sunny weather and a longer growing season for their money. What a shame it would be if the tree fell over!
Everybody invests in stocks hoping to ‘beat the market’. But everyone is the market. Only a few outliers beat it – usually by accident. Of course, last year’s stock buyers were happy just to ride along with the market. Beating it wasn’t necessary.
As we reported, the rich saw their wealth rise by $3.7trn last year. Much of that came from the stock market, which hit new records. Investors are hoping for a repeat of this performance in ‘14. Even if it does half as well, they tell themselves, it will still be an impressive gain.
But we have some questions: against whom are they gaining ground? From whom are they taking the loot? Or, to put it another way, who’s on the other side of the trade?
The economy as a whole rose at a 2% rate. So, there was a grand total of about $340bn in real, extra wealth to divvy up. How was it possible for shareholders to get ten times as much as the value of the wealth the economy created? But wait. The mystery deepens.
Since the depths of the crash in ‘09, household wealth has gone up by $21trn. Roughly, it went from $50trn to $71trn. During that same time, real household earnings for the typical family have gone down. Wages have gone down. And the net worth of the typical family has also gone down. Growth rates have declined. And, as a proportion of the population, the number of people with jobs has also declined.
Look at a chart of real GDP and you’ll see that it is only about 6% higher than it was in 2007. So, household wealth went up nearly 20 times faster than GDP since ‘09. How could that be
Fed's Richard Fisher: Liquidity causing 'beer goggles'
The Federal Reserve should pare its bond buying as quickly as possible, even if doing so sends stock prices tumbling, because more bond buying risks inflation and makes an eventual exit from easy policies more difficult, a top Fed official said on Tuesday.
Richard Fisher, president of the Dallas Federal Reserve Bank and one of the Fed's most hawkish policymakers, said that continued purchases by the U.S. central bank of Treasuries and mortgage-backed securities carries the risk of fueling an asset price bubble, though he stressed that no such bubble now exists.
Quoting analyst Peter Boockvar, Fisher said investors are seeing the world through "beer goggles." "Things often look better when one is under the influence of free-flowing liquidity."
Not too many shades of grey here, but he left himself enough wiggle room to backtrack on parts, or all, of the above statement. This CNBC news item, with an embedded 1:51 minute video, was posted on their Internet site early yesterday afternoon EST
The end of the mortgage party? Home lending plummets at Wells Fargo, J.P. Morgan Chase
The mortgage party is officially over.
Rising mortgage rates mean that fewer people are refinancing their homes, which bludgeoned fourth-quarter mortgage results at Wells Fargo & Co. and J.P. Morgan Chase & Co., the country’s leading residential lenders, according to earnings reports released Tuesday.
During the fourth quarter, Wells, the No. 1 mortgage lender by market share, funded $50 billion in residential mortgages, down 60% from $125 billion in the year-earlier period. That’s jolting compared to the past couple of years: It’s just the second time in nine quarters that mortgage originations have been below $100 billion. But it’s also bad on a longer time frame: Wells Fargo hasn’t funded just $50 billion in mortgages since 2008, back before it basically doubled its size by buying Wachovia Corp.
Wells Fargo now controls about 19% of the U.S. mortgage market, down from 30% a year ago, according to the trade publication Inside Mortgage Finance.
Meanwhile, J.P. Morgan, the No. 2 lender, funded $23.3 billion in mortgage loans in the quarter, down 54% from a year earlier. That is the lowest amount since before the financial crisis. Until now, the lowest amount of mortgages funded in recent years was $28.1 billion in the fourth quarter of 2008, the depths of the crisis.
Brazilian hacker creates Twitter-like app shielded from NSA gaze
In a post-Snowden world where NSA surveillance has been exposed as ubiquitous, one man decided to invent a networking system akin to Twitter, but with one key difference: It would be surveillance-proof and completely decentralized. Meet ‘Twister.’
Miguel Freitas was always a big Twitter fan – especially as it drummed out information on the June mass protests in his native Brazil at a time when no competent up-to-the-minute source existed locally.
Using his programming skills, Freitas created an open-source Twitter-like service run on a Bitcoin platform. Doing so is key to the technology; Twister allows its users to share posts without them being later stored in one place or server. Its decentralized nature means that it cannot be targeted and erased by a third party. Nor will that party be able to tell if a user is online, what their IP address is and who they follow.
The test version Freitas produced with collaborator Lucas Leal runs on Android, Apple OSX and Linux, and works off a user-run server, or one run by someone the user trusts. Unlike Twitter, Twister’s peer-to-peer architecture works without a central server.
Gold Funds Hit 2008 Level Ahead of US Fed Action (The Telegraph)
Gold holdings in exchange-traded funds (ETFs) around the world have now fallen back to levels last seen before the global financial crisis in 2008. As Jeff's article above notes, speculative long and short positions monitored by the US Commodity Futures Trading Commission have dropped to the lowest since early 2006.
While most gold "dumping" has taken place in the West, Asian nations—China in particular—have been vigorously purchasing physical metal. UBS estimates that China imported 1,500 tonnes (48.2 million oz.) last year, smashing former records.
There is little doubt where much of the gold abandoned by ETFs is going: China. As a few analysts have pointed out—Grant Williams being one of them—this metal will never come back to the West once it goes to the East. Due largely to cultural reasons, Asians in general view gold as wealth and tend to hand it down from generation to generation, rather than sell it.