18 months ago we first brought the world’s attention to the end of what has now been exposed as among the largest ponzi schemes in history – the Chinese Commodity Financing Deals (CCFDs) – pointing out how this meant commodities like copper were likely to come under pressure as firms liquidate what minimal holdings they had (and sell out futures hedges) to manage the risk of unwinds in these quasi-collateralized deals. Since then, copper prices have indeed plunged, as has global growth expectations and global bond yields as a realization that ‘demand’ implied by previous prices was entirely artificial. Now, as Goldman notes, the real world is catching up (or down) to the reality of mal-investment and how copper is set to drop notably further…
As Goldman Sach’s Max Layton,
Metals and mining commodities – including the base and bulk commodities, steel and cement – are highly exposed to a slowdown in the Chinese property, with over 40% of Chinese demand for cement and copper in particular consumed in the construction sector. The recent slowdown in Chinese property sales, prices and early-cycle new starts has most impacted physical demand for (and sentiment towards) commodities exposed to the earlier stages of China’s construction cycle – steel and iron ore – which have underperformed commodities more exposed to latter stages of the construction cycle, such as copper. However, as the recent slowdown in new starts flows through to late-cycle, copper-intensive construction completions, we expect copper to come under further pressure.
Understanding the construction cycle and commodity demand
The property development timeline for a typical Chinese building (such as an apartment building) from new start to property completion takes around 18 to 24 months. An “early-cycle” construction phase can be characterized as a period with strong new starts, relatively weak completions, and falling inventories (associated with higher sales). Conversely, “late-cycle” construction phases are typically associated with weak new starts, relatively strong completions, and rising/and or high property inventories (associated with weak sales). The intensity of basic material consumption varies significantly across these phases: consumption of steel and steel-making raw material (such as iron ore and coking coal) tends to be strongest in the earlier stages, while copper tends to be consumed in the later stages.
Specifically, as much as c.61% of Chinese and c.25% of global copper consumption is related to Chinese housing and property activity. Of the c.61% of Chinese consumption that may be related to property, up to c.45-50% is directly associated with project completion (plumbing, wiring for lighting, local power infrastructure, telecom, etc.), and c.12% is associated with the actual property sale, when the property is fitted with copper-intensive consumer appliances and/or tiling intensive in mineral sands. The strong link between completions and copper demand owes to the fact that internal and external copper wiring (for connection to the grid) tends to be installed around project completion. There is strong empirical evidence for the relationship between completions strength and copper prices: using completions as the primary indicator of China’s copper demand, together with ex-China demand data, explains the vast bulk of variation in copper prices over the past decade.
Bad news for copper
In 2012/2013, the Chinese construction sector transitioned from an early-cycle construction phase to a late-cycle one, as completions surged following a wave of new stimulus-related construction post the Global Financial Crisis. Since then, the cycles have been relatively muted, with both new starts and completions growing sub-trend, for the most part. More specifically, the observed weak growth in new starts over the past two years has bearish medium-term implications for late-cycle copper-intensive construction completions. In our view, this weakness has not been priced in, as it has not flowed through to the physical market via higher inventories, and therefore supports our bearish copper view over the next year ($6,600/t and $6,200/t at 6- and 12-month horizons).
Double whammy (at the margin): commodity financing deals
In the past three years, China has increasingly employed complex commodity financing deals to import relatively low-cost US dollar funding, which in some cases has likely been used to fund property development. While the profitability of these financing deals has already fallen owing to lower Chinese interest rates, higher rates outside of China, and – in the case of copper – persistent LME backwardation, we expect a further gradual unwind in such deals over the course of 2015 as China opens up its capital account gradually over time. This broader reduction in financing deals, combined with an expected rise in US interest rates, could result in higher costs of funding for Chinese property developers, potentially further slowing property starts and property-related commodity consumption. At the same time, a further reduction in deals would reduce demand for copper imports into bonded warehouses in China (a key component of the financing transactions), potentially raising inventory visibility outside of China. This scenario would be a double whammy for copper, which is both highly exposed to the property sector and supported by low visible exchange stocks.
via Zero Hedge Read More Here..
CDC whistleblower: “Oh My God…what we did”
By Jon Rappoport
October 25, 2014
On October 14, Brian Hooker and Andrew Wakefield sent an official and detailed complaint to the CDC and the US Dept. of Health and Human Services.
The devastating and explosive complaint concerns scientific misconduct in a now-infamous 2004 CDC study, which gave the MMR vaccine a free pass and concluded the vaccine had no connection to autism.
CDC whistleblower William Thompson was a co-author on that study, and on August 27 he admitted he and his co-authors committed fraud and covered up the vaccine-autism connection.
(The full 34-page complaint can be accessed at Age of Autism and rescuepost.com.)
The complaint references a 5/24/14 phone call between whistleblower Thompson and Brian Hooker. The call was recorded.
Thompson references one aspect of the fraud, a group of children with “isolated autism,” who were at higher risk of developing autism after receiving the MMR vaccine—the true data on these children were intentionally omitted from the study. Thompson says to Hooker:
“…the effect [autism] is where you would think it would happen. It is with the kids without other conditions [“isolated autism”]…I’m just looking at this and I’m like ‘Oh my God….I cannot believe we did what we did…but we did [bury the data on these children]…It’s all there…It’s all there. I have handwritten notes.’”
Concerning the overall fraud he committed in the 2004 study, Thompson states, in another phone conversation with Brian Hooker, “I have a boss who’s asking me to lie…Higher ups wanted to do certain things and I went along with it. In terms of command, I was 4 out of 5.”
Thompson named several of those higher ups. They were his co-authors on the 2004 study: Coleen Boyle, Marshalyn Yeargin-Allsop, and Frank Destefano.
In other words, those co-authors were among those who wanted Thompson to commit fraud.
This is highly significant, because Destefano and Boyle are not merely researchers. They are also high-ranking executives at the CDC, in the area of vaccines—director of the Immunization Safety Office (Destefano) and director of the National Center on Birth Defects and Developmental Disabilities (Boyle).
As the complaint states, Thompson wrote a note to the head of the CDC at the time (2004), Julie Gerberding. He was very nervous about a presentation he was due to make at a large Institute of Medicine vaccine-autism meeting.
Thompson wrote: “I will have to present several problematic results relating to statistical associations between receipt of the MMR vaccine and autism.”
Thompson was considering blowing the whistle, in public.
Gerberding never answered his note. Thompson did not make his presentation.
But we know this. After Gerberding stepped down as head of the CDC in 2009, she went to work for Merck, assuming the position of president of Merck Vaccines.
Merck manufactures the MMR vaccine.
That was, of course, the vaccine at the center of the whole 2004 fraud at the CDC. The vaccine whose connection to autism was buried.
To say this merging of facts is explosive is a vast understatement.
But the major media, who will report and trumpet flimsy scandals with great enthusiasm, have instituted and maintained a total blackout on this one.
Can they begin to imagine what parents of children who received the MMR vaccine, and then developed autism, think and feel about all this?
The author of three explosive collections, THE MATRIX REVEALED, EXIT FROM THE MATRIX, and POWER OUTSIDE THE MATRIX, Jon was a candidate for a US Congressional seat in the 29th District of California. He maintains a consulting practice for private clients, the purpose of which is the expansion of personal creative power. Nominated for a Pulitzer Prize, he has worked as an investigative reporter for 30 years, writing articles on politics, medicine, and health for CBS Healthwatch, LA Weekly, Spin Magazine, Stern, and other newspapers and magazines in the US and Europe. Jon has delivered lectures and seminars on global politics, health, logic, and creative power to audiences around the world. You can sign up for his free emails at http://ift.tt/KQeBZA
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Vía Jon Rappoport’s Blog http://ift.tt/1rA4U1Y
We discuss the increasingly bankrupt British government as a sinking ship on George Osborne’s river of denial. We also discuss the remedy for the ‘too many poor people’ for democracy problem being global trade deals like TTIP and TPP whereby elected leaders can claim ‘their hands are tied’ by contractual obligations. In the second half, Max interviews Helena Norberg-Hodge of LocalFutures.org about the Economics of Happiness in a time of rising inequality.
Vía Max Keiser http://ift.tt/ZOvxst
The tragic murders of two Canadian soldiers has prompted early requests for poppies.
The Royal Canadian Legion traditionally starts its annual poppy campaign on the last Friday in October, and says it’s too late to start it any earlier this year.
However the Legion says many of its branches already have their stock of poppies on hand, and they’re available to anyone who comes by and asks for them.
The post DEATHS OF TWO SOLDIERS CAUSES EARLY DEMAND FOR POPPIES appeared first on Zoomer Radio AM740.
Vía Zoomer Radio AM740 http://ift.tt/1xo5tj2
What the New York Fed attempted to pull off this past Monday with its full-day conference for the execs of wayward Wall Street banks was a public relations stunt to switch the national debate from its culture to Wall Street’s culture. Styled as a “Workshop on Reforming Culture and Behavior in the Financial Services Industry,” the event came less than a month after ProPublica and public radio’s “This American Life” released internal tape recordings made by a former New York Fed bank examiner, Carmen Segarra, revealing a regulator with no bark or bite.
ProPublica’s Jake Bernstein wrote that the tapes and a confidential report by an outside consultant demonstrated the New York Fed’s “history of deference to banks.”
But there is far more to this story. Wall Street banking executives, who elect two-thirds of the Board of Directors of the New York Fed and have frequently served on its Board, have structured the institution to be its sycophant. Consider the fact that Jamie Dimon, CEO of JPMorgan Chase, sat on the Board of the New York Fed from 2007 through 2012 as the regulator failed to follow through on three separate staff recommendations that JPMorgan’s Chief Investment Office undergo a thorough investigation, as reported this week by the Federal Reserve System’s Inspector General.
JPMorgan’s Chief Investment Office in 2012 finally owned up to losing $6.2 billion of bank depositors’ money in wild bets on exotic derivatives in London.
A Wall Street regulator, like the New York Fed, which has staff positions called “relationship managers” that are considered senior to, and can bully and intimidate, their bank examiner colleagues, is in no position to be lecturing Wall Street on its culture. Indeed, the culture on Wall Street of “it’s legal if you can get away with it,” grew out of its cozy, crony relationships with its regulators like the New York Fed, an enshrined revolving door at the SEC, self-regulatory bodies delivering hand slaps and its own private justice system to keep its secrets shielded from the public’s view.
To suggest that a one-day conference and a few speeches are going to make a dent in a structure intentionally created to deliver heads we win, tails you lose on behalf of Wall Street interests is deeply insulting – especially coming from the New York Fed, the target of future Senate hearings on its own culture.
The seriousness with which disciplinary lectures by the New York Fed are taken by the big Wall Street players is evidenced by those who snubbed Monday’s conference – namely, the CEOs of the serial miscreants. Not in attendance, according to the participant list released by the New York Fed were: JPMorgan CEO, Jamie Dimon; Citigroup CEO Michael Corbat; and Goldman Sachs CEO Lloyd Blankfein.
William Dudley, President of the New York Fed, whose wife receives $190,000 a year in deferred compensation from JPMorgan where she was previously employed as a Vice President, sized up the loathsome regard that Wall Street now holds in the public mind as follows:
“Since 2008, fines imposed on the nation’s largest banks have far exceeded $100 billion. The pattern of bad behavior did not end with the financial crisis, but continued despite the considerable public sector intervention that was necessary to stabilize the financial system. As a consequence, the financial industry has largely lost the public trust. To illustrate, a 2012 Harris poll found that 42 percent of people responded either ‘somewhat’ or ‘a lot’ to the statement that Wall Street ‘harms the country’; furthermore, 68 percent disagreed with the statement: ‘In general, people on Wall Street are as honest and moral as other people.’ ”
Further cementing that public distrust, the media was barred from attending Monday’s conference at the New York Fed. Press members who nonetheless reported on the event evoked a recurring theme of violent acts to deal with incorrigible actors.
Aaron Elstein at Crain’s New York used an analogy comparing the Fed to the 15th century Vatican which dealt with a problem it was having by calling a big conference and burning alive the outlier and casting his remains into the Rhine.
This thought about the conference constituted the first paragraph of Bartlett Naylor’s reporting at Huffington Post: “The Roman army responded to desertion by randomly executing a tenth of those soldiers remaining. They called it decimation, derived from the word ‘tenth.’ This discipline, of course, prompted all soldiers to police against desertion so as to save their own skins.”
Jon Hilsenrath at the Wall Street Journal was thinking along similar lines. Hilsenrath reflected on the book, Manias, Panics, and Crashes, which carries a chapter by University of Chicago Professor Robert Aliber in its revised sixth edition. Hilsenrath quotes as follows from the book: “At the time of the South Sea Bubble, (Lord) Molesworth, then a member of the (British) House of Commons, suggested that parliament should declare the directors of the South Sea Company guilty of parricide and subject them to the ancient Roman punishment of that transgression – to be sewn into sacks, each with a monkey and a snake, and drowned.”
Business media is not the only source pondering violence against Wall Street scoundrels. This summer, venture capitalist, Nick Hanauer, worried aloud to his fellow plutocrats in Politico Magazine about when public anger might spill over into pitchforks. Hanauer writes:
“What everyone wants to believe is that when things reach a tipping point and go from being merely crappy for the masses to dangerous and socially destabilizing, that we’re somehow going to know about that shift ahead of time. Any student of history knows that’s not the way it happens. Revolutions, like bankruptcies, come gradually, and then suddenly. One day, somebody sets himself on fire, then thousands of people are in the streets, and before you know it, the country is burning. And then there’s no time for us to get to the airport and jump on our Gulfstream Vs and fly to New Zealand. That’s the way it always happens. If inequality keeps rising as it has been, eventually it will happen. We will not be able to predict when, and it will be terrible—for everybody. But especially for us.”
There are currently a stunning 8,477 comments under the article. The following two, listed together, capture the current divide between Main Street and Wall Street:
Betsarama: “Thank you! Exactly. My father had a saying with regard to how much he charged and what his company earned, and that was ‘Enough.’ People loved him for his intelligence, simplicity and hard work. That’s American. Being filthy stinking rich — what is there to admire?”
Crapulous Mass responds: “One of the beauties to being filthy stinking rich is really not having to care what others think of you.”
This might well explain why Dimon, Corbat and Blankfein snubbed the lectures on Monday.
via Zero Hedge Read More Here..
The US dollar gained on most of the major foreign currencies last week, but the overall tone, leaving aside the yen, was largely consolidative in nature. The greenback was soft in the first half of the week but recovered in the second half.
The Australian and Canadian dollars were the only major currencies that managed to hold onto some of their gains (0.55% and 0.40% respectively). The yen was the weakest of the majors, losing 1.2%, as the panic from the week before died down. Equity markets were mostly higher, with the Nikkei’s 5.2% rise, leading the major markets. US 10-year Treasury yields rose 8 bp. Core bonds generally traded heavier, but European peripheral bonds were firmer, in line with the calmer conditions.
We were never persuaded that last week’s turmoil would prevent the Fed from completing its tapering operation, and see that in the market, cooler heads are prevailing. Talk of “tapering the tapering” has diminished, and no one is taking too seriously the prospects of QE4. Nevertheless, we note that both the December 2015 Fed funds and Eurodollar futures contracts were unchanged on the week at 46 bp and 77 bp respectively.
Perhaps offsetting the diminished interest rate support for the dollar has been speculation that more action from the European Central Bank and the Bank of Japan could be imminent. Reports suggested that the ECB may consider adding corporate bonds to its asset purchase program. There were also report suggesting that the BOJ sees risk that inflation may fall, and this could prompt an extension of the already aggressive Qualitative and Quantitative Easing. We are skeptical that either will materialize in the coming weeks. The BOJ meets next week and the ECB the following week.
Technically, the euro looks poised to continue to consolidate. Most of last week’s price action took place within the $1.2625-$1.2886 range set on October 15. In recent session, the euro flirted with the lower end and slipped to about $1.2615. The euro spending the second half of the week below the 20-day moving average, which comes in near $1.2690. This is the nearby cap. Of note, the nearly four-cent bounce in the euro has not been accompanied by a sharp change in euro positioning The confidence of the euro bears is palpable and quite widespread.
The bearishness toward the yen was more evident in the price action than in the euro. We had identified the yen’s gains as among the most exaggerated in last week’s technical note. The dollar’s recovery last week recouped 61.8% of its slide from the push marginally above JPY110 on October 1. It closed above its 20-day moving average in the two sessions before the weekend for the first time since early this month. The RSI has been recovering, and the MACDs have now crossed higher. The risk is that the speculation of more action by the BOJ is getting ahead of itself. This may help cap the dollar, where a trendline drawn off the early October highs comes in around JPY108.70-80 next week.
From a technical perspective, sterling continues to look constructive. Bullish divergence continue to be evident in the daily RSI and MACD. It could be important that the $1.60 area largely held in the second half of last week. It appears that sterling may be carving out a head and shoulder near $0.8650. Before the weekend, the Aussie tested both sides of the pattern. It closed firm, in an outside day, though off its high and just below the previous day’s high. This is still impressive because of increased speculation that the central bank is considering cutting interest rates. This chart pattern is notorious for false breaks, and the technical indicators do not appear to be generating strong signals.
The US dollar pulled back against the Canadian dollar to challenge the past month’s uptrend. It is found near the 20-day moving average, just above CAD1.1210. The US dollar could not get back above CAD1.13 in the first half of the week and came down to test CAD1.1180-CAD1.1200 in the second half of the week. It has been unable to close below the 20-day average for a month. The MACDs are turning lower, though the RSI is in neutral.
The US dollar has also been riding the 20-day moving average higher against the Mexican peso. It comes in now near MXN13.48. The greenback has lost some momentum in recent day but has not pulled back from the highs very much. There is no compelling technical evidence to conclude a dollar top is in place.
Last week we anticipated that the S&P 500 could recover toward 1940, and it finished jut above there on the week. It retraced more than 61.8% of the drop from the record highs. To keep the bullish momentum intact, the 1920 area should remain intact. On the upside, there is previous congestion in the 1980-1995 area. There was an interesting gap that was created last week that is found between 1905.03 and 1909.28. This is Monday’s high (October 20) and Tuesday’s low. That it has not been filled suggests it is unlikely to be a “normal” gap. The “measuring gap” takes places in the middle of a move. That would also project the S&P 500 toward 1990.
US 10-year yields trended higher last week but remained unable to return to its former range. On the top side, yields look capped in the 2.30%-2.40% area. On the downside, the new range may extend to 2.10%-2.15%. The MACDs are consistent with higher yields, while the RSI is soft.
The CRB Index has been hugging the 270 area since October 15. It represents two-year lows. Although technical readings are stretched, especially MACDs, there is still no sign of a convincing low. The 2012 low, which itself was a two-year low, was near 267. The 2010 low was just above 247. The December crude oil futures contract lost $1 last week and recorded lower highs for the last three sessions. Bids around the $80 level are being absorbed without much consternation. The market still feels heavy. The $83 level may be the top of the near-term range. A break of $80 could see a push toward $76.
Observations from the speculative positioning in the futures market:
1. Despite the large swings in the spot market, position adjustments in the currency futures were limited. There was only one gross position adjustment larger than 10k contracts. Gross short yen positions were culled by 25.6k contracts to 98.4k. This was the largest short-covering since March.
2. Speculators responded to the large price swings by reducing positions. Of the 14 gross positions we track, nine were reduced. Gross long positions were cut except in the Japanese yen, where they grew by less than 4k contracts. Gross euro long euro positions were flat, but at 60.2k contracts, it remains the largest gross long position among the currency futures. Short positions were also generally reduced but did edge higher in the euro, Australian dollar and Mexican peso.
3. The net short euro position has grown for three consecutive weeks. Speculators are accumulating a large short position in the dollar-bloc currencies and the Mexican peso. The net short Canadian dollar position of 21.5k contracts is the largest since late-May. The 31.5k net short Australian dollar contracts are the largest net short position since March. Speculators are net short 21.1k peso contracts, which is the largest since late-February.
4. The net short 10-year US Treasury speculative futures position was reduced to 90k contracts from 123k. Speculators piled into the longs, growing the gross position by almost 37k contracts to 456.7k. The short added a slight 3.6k contracts to 546.7k.
via Zero Hedge Read More Here..
In Europe, we already know the economy is in tatters. Italy is back in recession for the third time since 2008. Germany’s economy contracted in the second quarter of 2014 and will likely be in recession before the first quarter of 2015. France has registered zero growth for six months now.
None of this should shock anyone. From an economics perspective, Europe has been dead for four years now. Sure, there were little bumps in various data points here and there during that time… but overall unemployment remains at or near record highs, debt continues to grow, and human conditions in some regions now resemble third world countries.
However, the bigger story is one of politics. If you’ve been reading us for some time you know that a key theme for us is that politics drives everything in Europe.
Europe as a whole is socialist in nature. You will never hear a discussion of “how involved should the Government be in the economy?” in most of Europe; it is just assumed that the Government should always be involved to a significant degree.
The question is whether it should be a lot (the public sector accounts for 30% of jobs in Germany) or almost entirely (the public sector accounts for 56% of jobs in France).
In simple form, politics drives the economy and everything else in Europe. This is how Europe managed to squeak through a banking crisis that would have cratered any other region (it will still happen, but down the road). It’s also why the real European crisis will be political in nature. What I mean is that Europe will finally break apart based on politics, not finance or economics.
And by the look of things, it’s just begun.
I’m sure you’re aware of the fact Scotland attempted to break away from the UK earlier this month. What you may not be aware of is that fact that secessionist movements are spreading throughout Europe.
In Belgium, tensions between French-speaking Walloons and the Flemish (Dutch) population have been on the rise in recent years and there is a simmering sense among many in Flanders that they should be independent. Belgium would not simply split in half: it is likely that the map of Europe would have to be redrawn, with Wallonia perhaps attaching itself (de jure or de facto) to Paris and other splinters attaching to Luxembourg. In any event, Belgium as a country would be done and none of these tiny countries would make a major contribution to NATO or European unity.
More likely is Catalan independence, the effort to break up the country of Spain. Spain’s Catalans feel that they carry a disproportionate economic load as their wealth is redistributed around the country. They have an independent history, language, and spirit, and a Catalan “revolt” could re-inspire the vision of a separate Basque state, resulting in the demise of Spain as we know it today.
To the surprise of many, the old Republic of Venice seems to have resurrected itself in 2014. Earlier this year, 89 percent of voters in Venice approved a ballot calling for Venetian independence. Of course, it is unclear what will happen in the future, but united Italy is less than a century and a half old and thus one can imagine parts of it—like Venice—going their own way.
These cracks in the EU edifice are the beginnings of real trouble. Even larger cracks are emerging in the relationship between Germany and the ECB:
According to German officials, Merkel felt betrayed by Draghi's speech at a central banking conference in Jackson Hole, Wyoming in August in which he pressed Berlin for looser fiscal policy to stimulate the economy.
Her entourage is also deeply sceptical about Draghi's plan to buy up asset-backed securities (ABS) and covered bonds in the hope of encouraging commercial banks to lend.
Most of all, politicians in Berlin worry that if this scheme doesn't work, the ECB president will be tempted to launch full-blown government bond buying, or quantitative easing. This is a taboo in Germany and a step Merkel's allies fear would play into the hands of the country's new anti-euro party, the Alternative for Germany (AfD).
Losing the support of the euro zone's biggest and most influential member state would be fatal for the ECB's credibility, eroding confidence in its ability to work with governments to get the euro zone economy growing again.
Note that the primary concern for German officials is not that the ECB has no clue what it’s doing… but that if QE fails it will provide fodder fro Merkel’s primary competitor in the Germany elections…
Again, politics drives everything in Europe.
How this will all end up is obvious to anyone: the EU Crisis will return and the whole mess will come crashing down.
Prepare now, the next round of the crisis beckons.
If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.
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Phoenix Capital Research
via Zero Hedge Read More Here..