Thursday, September 5, 2013

Turkey on the edge

by SoberLook.com

In addition to struggling with the ongoing emerging markets rout, Turkey is feeling the pressure from the Syria conflict. The Turkish government is now pushing the US to conduct a Kosovo-style bombing campaign lasting for months.

FT: - “Where is the West? What is it doing? Only talking?” Mr Erdogan asked this week. He also recently rejected the idea of a “24 hour hit and run attack”, which he contrasted with the weeks of strikes in the 1999 Kosovo conflict, the equivalent of which he said would force President Bashar al-Assad from power.
Instead of taking the lead on the Syria issue using its military capabilities, a wealthy nation like Turkey wants the US to take care of the regional security problems, as refugees pour across its border. Turkey's markets are under pressure, particularly the currency, which is adding to the nation's urgent call for dealing with the Assad regime.

Turkish liras per one dollar (source: Investing.com)

With the Turkish stock market down considerably, investors want relief - which some believe should come from the US in the form of ousting Syria's current regime. Of course that by no means guarantees that Turkey's regional problems will be resolved (see Libya example).

Borsa Istanbul National 100 Index (source: Bloomberg)

With the upcoming military conflict now a near certainty, markets are pricing in the risk of Turkey's significant involvement (whether or not Turkey wants to be militarily involved.) The combination of rising rates in the US, capital outflows from Turkey, and the Syria situation has forced a significant widening in Turkey's sovereign CDS spread. Investors are on the edge and to the extent they have Turkey exposure, are willing to pay a premium to protect themselves.

Source: DB

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Gold Price, What Can We Infer From Copper and Palladium?

By: P_Radomski_CFA

According to Reuters, gold rose after President Barack Obama won the backing of key figures in the U.S. Congress, including Republicans, in his call for limited strikes on Syria to punish the government for its suspected use of chemical weapons against civilians. Earlier on Tuesday, a missile test by Israeli forces training in the Mediterranean with the U.S. Navy set nerves on edge. These circumstances stimulated safe-haven buying in the gold market and resulted in an increase in price to above $1,416 an ounce.

However, this improvement didn’t last long. The yellow metal gave up some of its gains as the dollar rose after strong U.S. data boosted prospects the Federal Reserve would trim its stimulus this month. Despite this decline, prices held above $1,400 on continued concerns around Syria.

Speaking of Fed… markets are awaiting jobs data on Friday for clues on when the U.S. Federal Reserve will dial back its commodities-friendly stimulus measures that have helped push gold to record highs. However, the Fed meeting later this month will be much more important. It seems that as the days go and we approach this event, the precious metals market is getting nervous about a possible start to QE tapering and we see some price weakness.

In our previous essays we took a closer look at the situation in gold from different perspectives. In our essay on gold and the dollar on September 3, 2013 we wrote about the dollar‘s and the euro‘s implications for gold. At the end of August we also checked the stock market and the mining stocks for clues. In today’s essay we want to introduce you to the copper and palladium charts. Why have we decided to feature these charts? Because commodities usually move together on a short-term basis, even though they may evolve into different formations in the medium- and long term. Do they provide us with interesting clues as to the next possible moves in the entire sector? Let’s take a closer look at the charts below and find out. Let’s start with the copper chart (charts courtesy by http://stockcharts.com).

On the above chart, we see that there was another short-term pullback in the past few days. This upward move took copper to the neck level of the bearish head-and-shoulders pattern once again; however, there was no breakout above it, and the price of copper declined shortly after this neck level was reached. What this means is that nothing has changed as far as the bearish implications of this pattern are concerned.

From this point of view, it was just another pullback, which did not invalidate the previous large head-and-shoulders pattern or its implications.

Consequently, the medium-term outlook for copper remains bearish.

Now, let’s move on to the palladium chart.

On the above chart, we see that palladium moved above its upper resistance line (marked with a dashed line on the chart) in the first half of August.  However, the improvement didn’t last long, and palladium moved back below this resistance line in the following week.

Last week we saw further deterioration as the price of palladium dropped below the declining resistance line based on the 2013 top and the May peak (in terms of weekly closing prices).

From this point of view, we have an invalidation of two breakouts, which is a bearish signal. This is likely to result in further declines, and the implications for the rest of the precious metals sector are therefore bearish as well.

Summing up, as you know from our previous essay, the medium-term outlook for gold remains bearish despite a recent show of strength. Additionally, Tuesday’s strength didn’t change anything in the overall outlook. Taking into account the situation in copper and palladium and their implications for gold, it seems that the rally that we have seen in recent weeks was just a correction and that the metals will move much lower in the coming weeks.

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King Dollar…The End is near!

by Chris Kimble

CLICK ON CHART TO ENLARGE

The U.S. Dollar has been trapped inside of a multi-year pennant pattern, which continues to narrow, frustrating both bulls and bears, due to lack of movement or conviction.

The "End of the pattern is near!"

Power of the Pattern shared a few weeks ago King Dollar should rally due to this (see post here)

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ISM surprise, other data point to solid employment report tomorrow

by SoberLook.com

Today's ISM report caught many economists by surprise.

Source: Econoday

The US non-manufacturing composite index shot up to the highest level since the Great Recession (in fact this highest in nearly 8 years). This, combined with improved ISM manufacturing data (see Twitter chart), completely contradicts the earlier results that describe a weak start to the second half of the year (see post).

Source: ISM

The improvements in the non-manufacturing portion of the economy are also surprisingly broad with factors from orders to employment showing strength.

Source: ISM

What does this tell us about the employment report tomorrow? Gallup (see post), ADP (see chart), and now the ISM report - all point to a solid payrolls gain.

WSJ: - The service sector has been the main driver of job growth in this recovery. The ISM reading suggests Friday's employment report should contain another solid gain in August service-sector payrolls.
It is possible however that the unemployment rate will tick up, as more people enter the workforce (see Twitter post). But that should not prevent the Fed from starting to slow the securities purchases program. The market is now pricing in this policy change, with the 10yr treasury yield approaching 3%.

Source: Investing.com

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Playing a potential breakout in the Nasdaq

By James Ramelli

Last month the Nasdaq composite came within 1 point of 13-year highs before retreating with the rest of the market as concerns over the situation in Syria put pressure on equities. Speculation over the timing and pace of the Fed taper also weighed on markets into the end of August. The Nasdaq lagged the broader market through the first half of the year, weighed down by the weakness in AAPL and tech in general. With the Nasdaq coming so close to making new multi-year highs before selling off, many traders believe that this is the last gasp of this year’s bull market. E-mini Nasdaq 100 futures traded at a new 52-week high on Aug. 13 at 3148 before selling off to a one-month low of 3052.50. Since then NQ has been trading in a range as markets await decisions on military action in Syria, the Fed taper, and the employment situation to be released tomorrow. Trading near the top of this range in a period of contracting volatility, Nasdaq futures look primed for a breakout higher, especially as AAPL is beginning to show some signs of strength. Using options can help a trader that expects the unemployment number to come in strong set up a trade with a great risk vs. reward profile.

So if a trader expects the Nasdaq to breakout higher, what products can he trade to capitalize on this opportunity?

  1. A basket of Nasdaq listed equities. A trader could buy single equities to construct a portfolio that would track the Nasdaq. This is very capital intensive and would cost a trader a lot in commissions.
  2. Trade the ETF. There are several listed Nasdaq ETF’s that do a good job of tracking the index. There are also several double and triple bull and bear ETFs that a trader can use. While these products trade well, they don’t offer a trader the best opportunity to profit.
  3. E-mini Nasdaq 100 Futures (CME:NQZ13) and Options. The cleanest way to trade the index and the best way to set up a trade with great reward potential relative to risk.

Knowing that options on NQ futures gives us the best opportunity, we now need to calculate an upside target. With the September futures trading near 3130.00 and the September at-the-money straddle trading around 75 points, we can calculate an upside target of 3205 for September expiration. We can now use this target to set up a trade.

Trade:

Buying the NQ Sep 3190-3210 Call Spread for 4.75
Risk: $95 per 1 lot
Reward: $305 per 1 lot
Breakeven: 3194.75

This trade sets up with a 3.2 reward to risk ratio and a breakeven point well inside the measured move target for September.

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U.S. jobs number could be decisive for dollar and Fed tapering

By Justin Pugsley

This Friday the all-important U.S. nonfarm payrolls (NFP) number is released for August and a strong number could be very bullish for the U.S. dollar (NYBOT:DXZ13) whilst hammering risk currencies and assets given the implications for U.S. monetary policy.  

Various polls of economists suggest NFP could come in around 180,000, compared with 162,000 in July, which was below forecasts for 182,000 and left U.S. dollar bulls disappointed. This shows the number can be relatively unpredictable and is more than capable of delivering surprises.

However, August was a good month for the U.S. economy with various hiring surveys implying a positive trend and weekly unemployment benefits claims trended lower. So the run of good economic numbers from the U.S. may start to drive faster employment creation, which is a lagging indicator.

A number that surprises on the upside, say 200,000 or over, should see a higher USD against EUR, JPY and GBP and would be particularly bad news for many already struggling emerging market currencies suffering in anticipation of a winding down of U.S. quantitative easing.   

Friday should see big volatility burst

Strong jobs number likely to see start of Fed tapering 

A strong number also would imply that the Fed will wind down its $85 billion a month purchasing program soon, possibly even this month. However, given the relatively strong performance by the U.S. dollar of late, it is probably more vulnerable to a knee-jerk sell-off on a surprise weak number.

But even then, dollar weakness may only be short-lived given the brewing Middle East crisis involving Syria. There are also a host of other potentially bullish, read risk-aversion inducing, events for USD. These include the next round of haggling over the U.S. budget deficit in October and of course the replacement of the current Fed chairman on Jan. 1, 2014. A new Fed chairman always injects a certain amount of uncertainty while the markets get used to them.

Upside targets for EUR/USD are around 1.3180, 1.3200, 1.3230 and 1.3240 and on the downside at 1.3130, 1.3100-1.3090, 1.3050 and 1.2990-1.3000.

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Draghi signals ECB officials watching rising market rates

By Paul Gordon

ECB President Mario DraghiECB President Mario Draghi

European Central Bank President Mario Draghi signaled that officials are watching rising money market rates, which are threatening his drive to reassure investors that borrowing costs will stay low.

“We will remain particularly attentive to the implications that these developments may have to the stance of monetary policy,” Draghi said at his monthly press conference in Frankfurt today after the ECB left its benchmark rate at a record low of 0.5 percent. “I’m very, very cautious about the recovery. The shoots are still very green.”

Draghi is trying to convince markets that he will keep interest rates low for an extended period to support the euro area’s recovery from its longest-ever recession. Rate expectations have risen close to levels that he described last month as “unwarranted,” suggesting some investors are questioning his promise.

The overnight rate that banks expect to charge each other by the ECB’s August 2014 meeting, as measured by Eonia forward contracts, was at 0.31 percent at 3:15 p.m. in Frankfurt. That’s near the level that triggered Draghi’s promise on July 4 to keep rates low for an extended period. The rate fell to 0.09 percent by July 8.

Bank Repayments

The euro fell after Draghi’s remarks, declining to $1.3146 from around $1.32 when the press conference spoke.

Draghi said that liquidity in money markets is tightening as banks repay loans taken out at the depths of the euro crisis, reducing “excess liquidity.”

“Repayments of funds taken up in the context of the three- year longer-term refinancing operations reflect improvements in financial market confidence, some reduction in financial market fragmentation and the ongoing deleveraging by euro area banks,” he said.

Draghi also said that the economy will recover “at a slow pace” and reiterated the ECB’s position that policy will “remain accommodative for as long as necessary.”

The ECB today raised its forecasts for the euro area’s economic growth. Gross domestic product will shrink by 0.4 percent this year compared with a previous forecast of 0.6 percent and rise by 1 percent in 2014. Inflation will be 1.5 percent this year, versus a prior projection of 1.4 percent. Next year’s estimate was unchanged at 1.3 percent.

“Risks continue to remain to the downside,” Draghi said.

The Bank of England kept its bond-purchase target at 375 billion pounds ($587 billion) today and maintained its key rate at 0.5 percent. Sweden’s Riksbank left its key repo rate unchanged at 1 percent for a fourth consecutive meeting.

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Growth in U.S. services unexpectedly accelerated in August

By Jeanna Smialek

Growth in U.S. service industries unexpectedly accelerated in August as orders picked up, showing further progress in the world’s biggest economy.

The Institute for Supply Management’s non-manufacturing index increased to 58.6 from 56 the prior month, a report from the Tempe, Arizona-based group showed today. The median projection in a Bloomberg survey of economists called for a decline to 55. Readings above 50 indicate growth in the industries that make up almost 90 percent of the economy.

The pickup followed the group’s report this week that showed manufacturing grew the most since June 2011, indicating the four-year economic expansion is broadening. The rebound in housing is reverberating through the rest of the economy and driving sales at companies such as Lowe’s Cos. at the same time car dealers benefit from increased demand for new vehicles.

“The service sector will continue to expand,” Harm Bandholz, chief U.S. economist at UniCredit in New York, said before the report. “I’m positive on the economic outlook for the coming quarter. Housing has been strong. Credit is improving and the job market is improving.”

Estimates of the 78 economists in the Bloomberg survey ranged from 53.5 to 57.5 for the index, which includes industries from utilities and retail to health care, housing and finance. The gauge has averaged 53.7 since the recession ended in June 2009, before today’s report.

New Orders

The ISM non-manufacturing survey’s measure of new orders increased to 60.5 in August, the highest since February 2011, from 57.7 the month earlier. A gauge of business activity climbed to 62.2 from 60.4.

A measure of employment in non-manufacturing industries rose to 57 from 53.2 in July.

The group’s factory index earlier this week showed manufacturing, which accounts for about 12 percent of the economy, rose to 55.7 in August, the strongest since June 2011, from 55.4 a month earlier.

Service industries in other parts of the world are showing signs of stabilizing or improving outright. U.K. services growth unexpectedly accelerated last month, indicating the economy is gaining momentum. A gauge of services activity increased to 60.5 from 60.2 in July, the highest since December 2006, Markit and the Chartered Institute of Purchasing and Supply said in a statement yesterday.

Markit’s gauge of new business at services companies rose to the highest in more than 16 years in August. Construction grew at the fastest pace in six years and manufacturing expanded the most in more than two years, it said earlier this week.

European Economy

In the euro area, a services index increased to 50.7 in August from 49.8 in July.

Among non-manufacturing industries in the U.S., home- improvement retailers are enjoying increased sales as the housing market recovery. Lowe’s Cos. Chief Executive Officer Robert Niblock said the market’s growth depends on how much higher mortgage rates affect Americans’ buying decisions.

The average rate on a 30-year fixed mortgage climbed to a two-year high of 4.58 percent on Aug. 22 after reaching a recent low in May of 3.35 percent, data from Freddie Mac show.

“The stronger-than-expected pace of home-improvement industry growth so far this year was fed by modestly stronger gains in housing turnover and job growth than originally forecast, further offsetting the negative effects of higher taxes,” Niblock said on an Aug. 21 conference call.

Mortgage Rates

Higher mortgage rates, they “shouldn’t derail it as long as job gains persist, homes continue to appreciate, and rates rise more gradually going forward,” he said.

A report tomorrow from the Labor Department is projected to show employers stepped up the pace of hiring in August, taking on 180,000 workers after adding 162,000 a month earlier, according to the median forecast in a Bloomberg survey.

Job gains and cheaper financing by some automakers are spurring motor vehicle demand. Cars and light trucks sold last month at a 16 million annualized rate, the fastest since October 2007, according to Ward’s Automotive Group data.

General Motors Co. recorded its best month since 2008 and Ford Motor Co. its strongest month of retail sales since 2006. Chrysler Group LLC sales rose for the 41st straight month.

Americans spending more on cars and housing helped the economy maintain a “modest to moderate” pace of expansion from early July through late August, even as borrowing costs increased, the Federal Reserve said yesterday.

“Consumer spending rose in most districts, reflecting, in part, strong demand for automobiles and housing-related goods,” the Fed said. “Residential real estate activity increased moderately in most districts, and demand for nonresidential real estate gained overall.”

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Has Gold's Rally Lost Its Luster?

by Tom Aspray

Stocks rallied on better-than-expected auto sales and several of the big tech names had nice gains. The short-term technical outlook for the stock market has improved as the NYSE McClellan oscillator moved above the zero line for the first time since July. This allows for more gains over the near term but there are still no strong signs that the correction is over.

Gold was hit with the heaviest selling in some time as December Comex gold lost $22 while the SPDR Gold Trust (GLD) closed 1.2% lower. The precious metals have been strong since the stock market topped in early August as GLD is up well over 8%.

Of course, both the stock market and the precious metals are waiting for Friday’s monthly jobs report and a better-than-expected number could pressure the metals.

Many are wondering if the rally from the July lows have been strong enough to change the major trend and whether they should be buying gold or the gold miners now?

chart
Click to Enlarge

Chart Analysis: The weekly chart of the SPDR Gold Trust (GLD) shows the eight-week rally to last week’s high at $137.55 as a doji was formed.

  • Therefore, a close below last week’s low at $134.15 would trigger an LCD sell signal. It would stay in force until the doji high at $137.55 is overcome.
  • The long-term chart shows that the major 38.2% Fibonacci retracement resistance is at $141.87.
  • A weekly close above this level would make the 50% resistance at $150.26 the next upside target.
  • The long-term downtrend, line a, is now at $164.40
  • The weekly OBV has been above its declining WMA for the past three weeks.
  • The OBV did test the long-term support from 2010-2011, line c, at the June lows.
  • The OBV did make new lows with prices in June.
  • There is monthly pivot support now at $131.91 with the quarterly pivot at $129.89.
  • The major support is at the early August low of $123.55.

The daily chart of GLD shows that the minor 38.2% retracement support, calculated from the 2012 high at $174.07, at $137.39 was just exceeded last week.

  • GLD has, so far, failed to close above this level.
  • If the rally from the August lows equals the rally from the June low to the July high, the 100% target is at $139.01 (red line).
  • This also corresponds nicely to the upper boundary, line d, of the trading channel.
  • Despite the impressive rally, the daily OBV has just tested but not exceeded the long-term downtrend, line f, that goes back to the 2012 highs.
  • The daily OBV, like the weekly, is also above its WMA.
  • The daily OBV did make new lows with prices, which is not consistent with an important low.
  • There is daily support now at $131.39-$131.51 and a close below this level would complete a short-term top.

chart
Click to Enlarge

The Market Vectors Gold Miners (GDX) closed last week on its lows as the rally appears to have stalled at $31.30.

  • GDX is already down 8.7% from its high and has reached its short-term 38.2% support and the quarterly pivot.
  • GDX is slightly below its flat 20-week EMA at $29.11.
  • The minor 38.2% retracement resistance, calculated from the 2012 high of $55.25, is at $34.70.
  • The weekly OBV did make new lows in June but has moved well above its long-term downtrend, line b.
  • The OBV is also well above its now flat WMA and the daily OBV (not shown) has held above its WMA on the drop.
  • There is further support in the $26.50-$27 area.
  • The monthly projected pivot low is at $24.23 with chart support at $23.89.

The Market Vectors Junior Gold Miners (GDXJ) spiked to a high of $54.86 last week and tested the downtrend, line b, but then closed well off the highs.

  • The longer-term downtrend is at $83.86 with the major 38.2% resistance at $88.50.
  • The weekly OBV is still well below its long-term downtrend, line e, but has moved above its declining WMA.
  • The weekly OBV did make new lows in June, line f.
  • The daily OBV (not shown) has dropped below its WMA and has broken its uptrend.
  • There is next good support at $44.93, which is the quarterly pivot and also corresponds to the July high.
  • There is further support in the $41-$42 area.

What It Means: There is clearly a mixed technical outlook for these three ETFs.

The rally in the SPDR Gold Trust (GLD) has been impressive in terms of price but not in terms of my volume analysis. A move above the downtrends in the daily and weekly OBV would be a sign of accumulation. Though we may not see a drop below the June lows, the $123.55-$126 area could be tested.

The Market Vectors Gold Miners (GDX) looks the best technically, as while the OBV did confirm the lows, it now appears to have bottomed. The flattening out of the WMA on the OBV is a good sign. The key support is at $23.89 and stops need to be under this level at this time. I may adjust the buy levels in the next week or so.

The 29% gain in the Market Vectors Junior Gold Miners (GDXJ) in the last month has been impressive but also makes it vulnerable to profit taking and you should protect profits if you have them.

How to Profit: For the Market Vectors Gold Miners (GDX), go 50% long at $26.74 and 50% long at $25.22, with a stop at $23.77 (risk of approx. 8.5%).

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Maybe This Is Why We Now Have a Serial-Bubble Economy

by Charles Hugh Smith

Who benefits from serial bubbles? The financial sector and the central government.


If there is any one strikingly obvious feature of the U.S. economy in the past 15 years, it's the serial asset bubbles, one after another. Take a look at this chart:


Why did our economy become dependent on asset bubbles for "growth"? One way to find an answer is to ask: cui bono, to whose benefit? Correspondent Jeff W. has the answer: the financial sector and the central government.

Here is Jeff's commentary.

We should always bear in mind how lucrative asset bubbles are for the banks, the government, and super-wealthy insiders. The banks make money by loaning to speculators because their collateral gets a boost. As collateral is boosted, they can make loans to borrowers who are poor credit risks (no job, no income liar loans). Government makes money by taking a cut of speculative profits through taxes. Clued-in insiders get to ride the bubbles up and down, getting advance signals of the turns.
When Ben Bernanke says in effect of the housing bubble, “What bubble? We didn’t know there was any bubble. We don’t have any way to know if there is a bubble or not,” I am not impressed. The housing bubble of 1981-2006 gave rise to a huge expansion of the finance, insurance and real estate sectors; enriched government, which expanded greatly during those 25 years; and witnessed the emergence of super-wealthy who measure their wealth in the tens of billions.
To me, when Ben Bernanke says, “What bubble?” it is like a kid with chocolate all over his mouth, saying, “What cookies? I didn’t eat any cookies.”
Each asset bubble is a bonanza for the banks, government, and wealth insiders, and because those exact groups run this country, and because we have lived through serial bubbles since 1971, I say that if a person says there will be no more asset bubbles, the burden is on him to explain why. Why should the Powers That Be deny themselves a bonanza?
Those who managed the 2008 crisis (Bernanke, Paulson, and an assorted cast from Goldman Sachs), saw to it that the government and the Fed emerged unscathed. The Federal government is now much bigger than ever. They also saw to it that the TBTF banks emerged unscathed. They are now larger and more dominant than ever. Other super-wealthy such as Warren Buffett and George Soros also profited from the crisis.
Ben Bernanke is hailed as a genius for his masterful handling of the 2008 financial crisis. He may protest that he never saw the crisis coming, and that might even be true (though I doubt it), but he was well prepared to use the crisis to enrich the TBTF banks, the government, and super-wealthy insiders.
So in summary, because every asset bubble is a bonanza for the Powers That Be, I do not believe they blindly stumble into them. The work together as a team to engineer asset bubbles.

Thank you, Jeff. I would add that the serial-bubble economy has a pernicious appeal to debt-serfs and those with minimal financial capital, because each bubble holds out the promise that any debt-serf who manages to catch the ride up and exit at the top can vastly increase his/her wealth, just like the top 1/10th of 1%.

But timing the bubble is not necessarily easy (except in hindsight), and the state of mind required to sell when everyone else is buying must overcome powerful forces in human psychology: the herd instinct, greed, confirmation bias, etc.

Those enabling and extending the bubbles know very few participants will overcome greed and the herd instinct and sell near the top; rather, they will become bagholders of phantom assets that quickly lose value, leaving only the debt to service.

To escape the crushing burden of debt (except for student loans, which are fiendishly difficult to escape), the bagholders must sell out, losing whatever wealth they might have had. Those who sold early have cash to buy the assets on the cheap. If the assets no longer have value, that's OK, too--the money has already been made originating and offloading the debt that was borrowed to buy the assets.

As the saying goes, rinse and repeat. No wonder the serial-bubble model is so attractive to the Powers That Be.

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Sugar falls as world production grows

By Jack Scoville

SUGAR (NYBOT:SBV13)

General Comments: Futures closed a little lower on reports in quiet trading. There is a lot of Sugar in the world, but not much on offer in the cash market for now. Processors in Brazil remain more interested in Ethanol production as it pays better. Traders are also noting good weather for Sugar production in India, and the crop is expected to be big there. Countries like Thailand and India also expect more production this year, and both countries are actively offering their supplies into the world market. Demand for ethanol has been good, but there is still a lot of Sugar and the supply side fundamentals seem to overwhelm any demand side strength over time. Chinese demand has been soft, but Middle East demand appears to be relatively good. Price appears to be in a trading range for now due to solid demand and big production.

Overnight News: Brazil could see dry weather and moderate temperatures Short term trends are now sideways.

Chart Trends: Trends in New York are mixed. Support is at 1625, 1610, and 1595 October, and resistance is at 1650, 1665, and 1685 October. Trends in London are mixed. Support is at 473.00, 470.00, and 465.00 October, and resistance is at 481.00, 486.00, and 488.00 October.

COTTON (NYBOT:CTV13)

General Comments: Futures closed a little lower and short term trends remain down. Futures traded lower as traders weighed slow crop development against improving conditions and improved weather. Very hot weather conditions in China continue, and the weather in Cotton areas is not really improving right now in that country. However, some showers are in the forecast to provide some help. Weather is moderate in the US. US crops remain behind the normal pace, but overall crop ratings are high and current conditions are called good. Texas is dry and warm. Weather for Cotton still appears good in India. The market is getting ready for the harvest, and any rallies now might be very limited in scope.

Overnight News: The Delta will be dry and Southeast will see a few showers. Temperatures will average above normal in the Delta and mostly above normal in the Southeast. Texas will see dry weather. Temperatures will average above normal. The USDA spot price is now 79.38 ct/lb. ICE said that certified Cotton stocks are now 0.016 million bales, from 0.016 million yesterday.

Chart Trends: Trends in Cotton are down with objectives of 82.70 and 81.20 October. Support is at 81.80, 81.20, and 80.00 October, with resistance of 84.00, 85.05, and 85.30 October.

FCOJ (NYBOT:OJX13)

General Comments: Futures closed a little higher. It is the midpoint of the hurricane season and all remains mostly quiet. There are still no real threats showing in the tropical Atlantic for Florida or Oranges production. The weather in the tropics has started to show a little more life as some of the conditions for tropical development have improved, but there are no threats showing anywhere right now, or at least not moving into Florida. Growing conditions in the state of Florida remain mostly good. Showers are reported and conditions are said to be very good in almost the entire state. Temperatures are warm. Brazil is seeing near normal temperatures and mostly dry weather, but production áreas will turn warmer again this weekend.

Overnight News: Florida weather forecasts call for some showers. Temperatures will average near normal.

Chart Trends: Trends in FCOJ are mixed to down with objectives of 129.00 and 121.00 November. Support is at 129.00, 126.00, and 125.50 November, with resistance at 137.00, 139.00, and 140.00 November.

COFFEE (NYBOT:KCZ13)

General Comments: Futures were a little lower in all markets as traders noted little interest. London was higher as deliverable supplies are falling. The cash market seemed relatively quiet. Most Brazil Coffee producers apparently plan to move Coffee into the support programs and hope for higher prices, and that has cut offers to the market. Differentials overall appear weak for Arabica. Coffee appears to be available in Central America as farmers and mills clear inventories before the next harvest. Colombia is offering Coffee into the cash market at weaker differentials. Markets are very quiet, with little buyer interest seen and little selling interest reported. Buyers are said to be well covered. Current crop development is still good this year in most production areas of Latin America. Central America crop conditions are said to be good overall. Colombia is still reported to have good conditions. Harvest conditions are good in Brazil.

Overnight News: Certified stocks are lower today and are about 2.784 million bags. The ICO composite price is now 112.35 ct/lb. Brazil should get dry conditions. Temperatures will average near to above normal. Colombia should get scattered showers, and Central America and Mexico should get showers and rains. Temperatures should average near to above normal.

Chart Trends: Trends in New York are mixed. Support is at 116.00, 114.00, and 111.00 December, and resistance is at 120.00, 122.00, and 125.00 December. Trends in London are mixed. Support is at 1770, 1750, and 1730 November, and resistance is at 1800, 1825, and 1840 November. Trends in Sao Paulo are down with objectives of 134.50 and 123.50 December. Support is at 137.00, 134.00, and 131.00 December, and resistance is at 145.50, 148.50, and 150.50 December.

COCOA (NYBOT:CCZ13)

General Comments: Futures closed higher on what appeared to be chart based buying. There was no real news out there to support a big rally yesterday. Ideas are that crop conditions there are generally improving. West Africa is expected to get scattered showers, and conditions there are said to be improving for almost all producers. Ghana has been getting rains, too. Temperatures are moderate. The harvest will be getting underway soon, and has already begun in Nigeria, with mixed results so far there. Malaysia and Indonesia crops appear to be in good condition and weather is called favorable.

Overnight News: Scattered showers are expected in West Africa. Temperatures will average near normal. Malaysia and Indonesia should see scattered showers, but southern areas could be dry. Temperatures should average above normal. Brazil will get mostly dry conditions and warm temperatures. ICE certified stocks are lower today at 4.607 million bags.

Chart Trends: Trends in New York are mixed. Support is at 2455, 2405, and 2390 December, with resistance at 2505, 2525, and 2545 December. Trends in London are mixed. Support is at 1630, 1610, and 1600 December, with resistance at 1660, 1670, and 1705 December.

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Fear Increases Productivity and the Old

By tothetick

We live in a throw-away world where we don’t repair and as soon as things start looking a bit shabby round the edges and curled up as if they were sandwiches left over from the night before, with the hangover thrown in for good measure, we just bin them. No point trying to repair what’s got past its sell-by date is it? Enough to make you ill. Anyhow, reheating left-overs was never the forte of people in society and we might well wonder why we all have microwaves.

Well, we treat the old people like that in society. Past their sell-by date which is coming down lower and lower each year, there’s really no point keeping them on. They guzzle salaries like a Hummer on heat and they are far too demanding. They always need more and more and we all know that salaries are not even satisfying. They are just disatisfiers. That was proved long-ago. You are happy with your salary for about a year, then you ask for a pay-rise because you have got used to what you are earning and living within (or beyond) your means. At some point, you just aren’t going to get the pay-raise you want. The boss will just turn you down. Saying ‘no’ always keeps people in check and on their toes. Just the right amount of fear that you are going to lose your job makes for a good worker.  But, when it comes to that crunch-time and you don’t get the pay-increase, then your salary will become a source of dissatisfaction; nothing else.

Productivity: Work!

Productivity: Work!

But, maybe all of that is not quite true. Apparently, we have to make do with nothing during times of crisis and we do often better under the pressure of that than in times when the fat cows are grazing on the lush pastures. Lean times focus our attention on what we have to get done, some say. Being old too is not the throw-away Kleenex replacement that it once was either.

According to studies that were carried out in the USA and in Germany regarding how we work during the crises that hit the companies we have been taken on by show that first of all we work better under pressure and make do with less when we have to and secondly a company with just young people in it does less well than companies that have older workers.

Productivity

The research shows that when the crunch comes to the crunch in times of crisis like the financial crisis that caused production to plummet and the economy to tank all over the place, then workers know what will happen: the least productive guy gets the boot first. It has been shown through the research of three economists (Edward P. Lazear, Kathryn L. Shaw and Christopher Stanton) that workers know this only too full well and consequently they step up their production and work harder for fear of getting the boot.

It’s only in times of economic prosperity that the good-will employer that thinks that four-day weeks or Friday casual-dress days with an office full of toys and couches are motivating factors. That all goes out of the window when the money starts going down the tubes. It’s back to basics in the office. The harder the chair you sit on, the worse the economic times are for the company you’re working in.

As the following graph shows, worker productivity increased at the height of the economic crisis. We made do with less then, worked harder and it was the recession. According to the analysts that carried out the study in the USA, 85% of increased productivity came through only due to workers’ increasing the effort that they were making. Does that mean we are lazy otherwise? We could soon be asking for more recession, I fear.

Productivity

Productivity

It was also shown by the research that in states where unemployment was higher than the US national average at the time, people worked even harder and provided even more effort than in other states. Those workers were able to weigh up the relative difficulty of finding a job elsewhere if they lost the one they were in and so it was less ‘costly’ to work harder and to provide more effort in their present job.

Increase the pressure of your job security and you increase the productivity of the workers.  But not only that.

  • Another study shows that when surveillance cameras were installed in the workplace in a chain of restaurants in the US (to stop pilfering from the tills), savings were only very modest (on average $100 per week and per restaurant in 392 restaurants across 39 states).
  • However, surprisingly, revenue per restaurant increased by 7% across the board. Were those employees working harder because they were being watched?

I guess the majority of us would rather be without the surveillance. We get enough of that at home already and every time we connect to the Internet or use our mobiles thanks to the National Security Agency.

Age

The ZEW Institute in Germany has carried out studies that show that old is good still. Nobody can deny that the German economy is leaving the rest of the EU behind as it blazes a trail. The rest of them shall probably be consumed by those flames if they are not careful.  German is pulling the rest of Europe up for the moment, with other countries desperately trying to latch on such as the sluggish and weak French economy that is showing very little gains (France lost two places just today in the World Economic Forum ranking of competitive countries in the world, falling from 21st to 23rd place). So, the Germans must be doing something right.

According to the ZEW Institute’s studies, the findings show that if a company employs workers between the ages of 45 and 50, then productivity increases by 0.5%.  That should be good news. We are told every day that we are living longer and so we have to apparently work longer. Except past the sell-by date nobody wants that, do they? Least of employers. They still believe that old is bad. But, we do it every day when we rummage at the back of the chilled counter down the grocery store for the date on that pack that lasts the longest.

Germany needs a study like that anyhow.

  • It has the biggest ageing population of the European Union today, with 20 million retirees today.
  • 7.7 million people between the ages of 50 and 65 are at work in Germany.
  • 40% of workers were aged 60-64 in Germany in 2010.
  • That increased by 2.4% in 2011.
  • But, even in Germany, despite all of these factors, there are still 800, 000 people aged 55 to 64 in the country that have nothing more than a part-time job that is temporary with great precarity and a small salary, worth nothing more than pin-money (on average 400 euros).
What now?

It seems that being old and grey is the answer to increasing the productivity of a company with just a dose of fear from a financial recession that you won’t be able to pay the mortgage anymore (don’t forget, you might be old, but you have taken out the mortgage over an extended period due to the increase in house prices, haven’t you?).

But, productivity doesn’t only have a connection with the fact that we’re in a rut economically. But it also has something to with the fact that our boss is good or not. A good boss boosts output and productivity of the workers studies have shown. Doughnut-stuffing coffee-drinking bosses don’t motivate their workers and slackers only produce slackers. I wonder why we might be in an economic recession. Did the slackers start this all?

But, how many employers actually consider that older people are the ones that make the productivity of a accompany increase, anyhow. Very few. If they did, they wouldn’t be making them redundant or given them a retirement party (early, of course).

It’s a shame that certain people at the top of the countries we live in are not older than they already are. Perhaps if we restricted them to make up for their lack of ageing, they might just do better than they are currently doing. I’d give it a go! MOAR restriction please, Sir!

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World sugar surplus 'far smaller than thought'

by Agrimoney.com

The surplus in global sugar supplies "is nothing like as large as it is assumed to be", Czarnikow said, warning that investors were underestimating the boost to consumption from lower prices.

The London-based sugar merchant slashed to 2.0m tonnes, from 3.9m tonnes, its forecast for the world sugar surplus in 2013-14, a figure well below that from other commentators.

The International Sugar Organization two weeks ago forecast a surplus of 4.5m tonnes, while an analysts' poll taken in late July put the figure at 4.0m tonnes – although some care must be taken in making comparisons given that commentators start marketing years in different months.

Czarnikow's downgrade reflected in part a weaker forecast for output, reflecting in Europe a drop in beet sowings and a "tough growing season", and a 10m-tonne reduction, to 585m tonnes, in the estimate for the cane harvest in Brazil's important Centre South region.

The Centre South is responsible for nearly 90% of sugar output in Brazil, the top producer and exporter of the sweetener.

'A lot stronger than expected'

However, Czarnikow also raised its forecast for consumption growth, to 2.3% in 2013 and 2% next year, adding that even after these upgrades it was likely "still being conservative".

"Demand for sugar has been a lot stronger than we had been expecting," the broker said, saying that it had been "consistently surprised the strength of physical demand" over the last 12 months.

"What we believe has happened is that the falls in price and increases in affordability have been enough to encourage a sharp rise in marginal demand."

Market signals

The broker cited in support of its argument that supplies are tighter than thought sugar prices which, while down some 15% so far in 2013 on New York's futures market, have not fallen "anything like the extent predicted".

Furthermore, the New York futures curve had remained unusually flat, rather than showing the typical spread of some 0.6 cents per pound between October and March contracts, Czarnikow senior analyst Stephen Geldart told Agrimoney.com.

And, in the physical market too, Brazilian mills were not offering the discount, of some 1 cent a pound to futures, typical at this time of year, when sugar output is at a seasonal high.

"Our view is that the explanation has to be logical - the surplus in sugar is nothing like as large as it is assumed to be."

'Good indicator'

And consumption data, which the merchant said are "very difficult to verify", looked likely a source of surprise given indications from trade data.

"The strength of global trade in physical sugar, which is up over 10% year-on-year, is a good indicator of the way in which consumers have reacted to low prices."

Mr Geldart said that, if the surplus was as strong as suggested, there would be more evidence of rising inventories, with Brazilian producers, for instance, offering discounts to get shot of supplies.

Instead spot sugars are actually trading at a premium.

"As it is, China is the only real destination for world market sugar that has built stocks," he said.

"China aside you have to look at the US, the European Union and India to see good stocks and those markets are not really that fungible with the global market for all sorts of reasons."

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The Failure of Free-Market Finance

by Adair Turner

LONDON – Five years after the collapse of the US investment bank Lehman Brothers, the world has still not addressed the fundamental cause of the subsequent financial crisis – an excess of debt. And that is why economic recovery has progressed much more slowly than anyone expected (in some countries, it has not come at all).

This illustration is by Paul Lachine and comes from <a href="http://www.newsart.com">NewsArt.com</a>, and is the property of the NewsArt organization and of its artist. Reproducing this image is a violation of copyright law.

Illustration by Paul Lachine

Most economists, central bankers, and regulators not only failed to foresee the crisis, but also believed that financial stability was assured so long as inflation was low and stable. And, once the immediate crisis had been contained, we failed to foresee how painful its consequences would be.

Official forecasts in the spring of 2009 anticipated neither a slow recovery nor that the initial crisis, which was essentially confined to the United States and the United Kingdom, would soon fuel a knock-on crisis in the eurozone. And market forces did not come close to predicting near-zero interest rates for five years (and counting).

One reason for this lack of foresight was uncritical admiration of financial innovation; another was the inherently flawed structure of the eurozone. But the fundamental reason was the failure to understand that high debt burdens, relentlessly rising for several decades – in the private sector even more than in the public sector – were a major threat to economic stability.

In 1960, UK household debt amounted to less than 15% of GDP; by 2008, the ratio was over 90%. In the US, total private credit grew from around 70% of GDP in 1945 to well over 200% in 2008. As long as the debt was in the private sector, most policymakers assumed that its impact was either neutral or benign. Indeed, as former Bank of England Governor Mervyn King has noted, “money, credit, and banks play no meaningful role” in much of modern macroeconomics.

That assumption was dangerous, because debt contracts have important implications for economic stability. They are often created in excess, because in the upswing of economic cycles, risky loans look risk-free. And, once created, they introduce the rigidities of default and bankruptcy processes, with their potential for fire sales and business disruptions.

Moreover, debt can drive cycles of over-investment, as described by Friedrich von Hayek. The Irish and Spanish property booms are prime examples of this. And debt can drive booms and busts in the price of existing assets: the UK housing market over the past few decades is a case in point.

When times are good, rising leverage can make underlying problems seem to disappear. Indeed, subprime mortgage lending delivered illusory wealth increases to Americans at a time when they were suffering from stagnant or falling real wages.

But in the post-crisis downswing, accumulated debts have a powerful depressive effect, because over-leveraged businesses and consumers cut investment and consumption in an attempt to pay down their debts. Japan’s lost decades after 1990 were the direct and inevitable consequence of the excessive leverage built up in the 1980’s.

Faced with depressed private investment and consumption, rising fiscal deficits can play a useful role, offsetting the deflationary effects. But that simply shifts leverage to the public sector, with any reduction in the ratio of private debt to GDP more than matched by an increase in the public-debt ratio: witness the Irish and Spanish governments’ high and rising debt burdens.

Private leverage levels, as much as the public-debt burden, must therefore be treated as crucial economic variables. Ignoring them before the crisis was a profound failure of economic science and policy, one for which many countries’ citizens have suffered dearly.

Two questions follow. The first is how to navigate out of the current overhang of both private and public debt. There are no easy options. Paying down private and public debt simultaneously depresses growth. Rapid fiscal consolidation thus can be self-defeating. But offsetting fiscal austerity with ultra-easy monetary policies risks fueling a resurgence of private leverage in advanced economies and already has produced the dangerous spillover of rising leverage in emerging economies.

Both realism and imaginative policy are required. It is obvious that Greece cannot pay back all of its debt. But it should also be obvious that Japan will never be able to generate a primary fiscal surplus large enough to repay its government debt in the normal sense of the word “repay.” Some combination of debt restructuring and permanent debt monetization (quantitative easing that is never reversed) will in some countries be unavoidable and appropriate.

The second question is how to constrain leveraged growth in the future. Achieving this goal requires reforms with a different focus from those pursued so far. Fixing the “too big to fail” problem is certainly important, but the direct taxpayer costs of bank rescues were small change compared to the damage wreaked by the financial crisis. And a banking system that never received a taxpayer subsidy could still support excessive private-sector leverage.

What is required is a wide-ranging policy response that combines more powerful countercyclical capital tools than currently planned under Basel 3, the restoration of quantitative reserve requirements to advanced-country central banks’ policy toolkits, and direct borrower constraints, such as maximum loan-to-income or loan-to-value limits, in residential and commercial real-estate lending.

These policies would amount to a rejection of the pre-crisis orthodoxy that free markets are as valuable in finance as they are in other economic sectors. That orthodoxy failed. If we do not address the fundamental fact that free financial markets can generate harmful levels of private-sector leverage, we will not have learned the most important lesson of the 2008 crisis.

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Why Attack Syria?

by Robert Howse

NEW YORK – As President Barack Obama makes the case for military intervention by the United States in response to the Syrian government’s use of chemical weapons, Americans and many others around the world are asking what the objective should be. Is the purpose of using military force to prevent future attacks against Syrian civilians, or is the proper goal to punish President Bashar al-Assad’s regime for violating the law of nations?

This illustration is by Pedro Molina and comes from <a href="http://www.newsart.com">NewsArt.com</a>, and is the property of the NewsArt organization and of its artist. Reproducing this image is a violation of copyright law.

Illustration by Pedro Molina

So far, Secretary of State John Kerry has invoked both purposes – degrading Syria’s chemical-weapons capacity, as well as ensuring “accountability” and “deterrence” – in advocating US military intervention. But a mission limited to reducing the Assad regime’s capacity to use chemical weapons in the future is far more justifiable under international law than a mission conceived as a punitive or law-enforcement action.

Preventing future attacks has a clear humanitarian objective. While some argue that humanitarian intervention is never justified without approval by the United Nations Security Council, the UN Charter itself provides a dubious foundation for this view.

The Charter does not prohibit all unilateral use of force. It prohibits only such uses of force that are aimed at a state’s “territorial integrity or political independence,” or that otherwise contravene the principles of the UN.

But promoting and encouraging respect for human rights, including the right to life, are also among the UN’s purposes, as stated in Article One of the Charter. Can Assad really hide behind the notion of territorial integrity or political independence to forestall an effort to stop his illegal brutality toward Syria’s citizens? Massacres of civilians conducted with chemical weapons hardly correspond to the principle of defending states’ territorial integrity and political independence.

Humanitarian intervention in Kosovo in 1999 was often described as “illegal but legitimate.” But, because the use of force was not well tailored to the objective of preventing genocide, it could be – and was – perceived by some as punishment of the Serbian people as a whole for supporting Slobodan Milošević’s regime. Indeed, the example of Kosovo suggests the wisdom of not entangling humanitarian action in notions of deterrence or punishment.

Since World War II’s end, collective punishment has become increasingly unacceptable as a response even to grave or egregious violations of international law, and this approach has been codified in a widely accepted set of principles – the so-called ILC articles – concerning the responsibility of states. At the same time, non-forcible sanctions, such as economic measures, are generally compatible with current international law. So is insistence on prosecution of war crimes at the International Criminal Court. Indeed, the emergence of international criminal tribunals suggests that accountability for crimes against international law ought to be a matter addressed by independent courts, not by the unilateral exercise of military power.

Accepting that humanitarian intervention without Security Council authorization is in principle compatible with the UN Charter gets us only so far, however. For purposes of both legality and legitimacy, it is vital to ensure that an unwise and ineffective intervention does not undermine the overall balance of legal rights and obligations in the UN Charter and related human rights and humanitarian norms.

Is it really possible to degrade significantly the Assad regime’s capacity to engage in similar atrocities in the future, given the means at hand? How much humanitarian harm will the mission itself cause?

These are the key questions that those who advocate military intervention must address. They are moral and practical, but also legal, for international law is not just the UN Charter; it also encompasses long-standing principles of necessity and proportionality.

Above all, where the objective of using force is humanitarian, minimizing the humanitarian harms from intervention follows from the logic of necessity, as both a legal norm and moral principle. By contrast, the trouble with using military force to punish is that necessity and proportionality cannot easily be applied to the calculus: a slap on the wrist would trivialize the gravity of the offense, while large-scale intervention would wreak death and destruction on many who are innocent.

Well-designed humanitarian intervention, as well as legal accountability for war crimes and atrocities, can send a strong signal to thugs and tyrants that they must reckon with the values that underpin international law. But conflating these two purposes – to save lives and to mete out justice – could end up undermining both.

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The Dow Shark May Be Done Feeding

by Greg Harmon

The Dow Jones Industrial Average has had a hard time over the last month. In August it made a new all time high but them began a pullback. This has led to some dramatic shifts in sentiment. Ralph Acampora, the Godfather of Technical Analysis got skittish, posting early Wednesday:

ralph

So with Wednesday’s action now in the books I am happy to point to one set of technicals that show the worst may be over. The chart below is the equivalent of a Wayne’s World Extreme Close Up for the past 4 months. The Shark Harmonic that took control has now retraced 78.6% of the full pattern and started higher out of consolidation Wednesday. It still has work to do to get healthy, and it may reverse, but if this low holds there are a lot of positives in this chart. The RSI is moving back higher is the first. When looking at the low in the RSI below the RSI low at the June 24th price low, it also gives rise a a Positive RSI Reversal which would target a new high at 15,867.57. It also has support from the MACD histogram moving back towards positive territory and the the MACD line about to cross up through the signal line. A reversal would be much more secure with a move back over 15,050 but this is a start.

dow

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Dancing with Gorillas & the Yin & Yang of Yields

by Marketanthropology

As yields continue to move with all the grace and gentility of your average 800-pound gorilla, we thought we'd revisit our Pole Reversal chart we occasionally reference from time to time to see where things line up.

For those not familiar, the chart below presents the correlation reversal that took place between equities and 10 year yields after the 1998 sovereign debt/LTCM crisis. In essence, stocks went from being anchored by an inverse correlation with yields to a positive correlation. For some, this time period also represents the first salvo in a secular shift in the equity markets from long-term bull to bear.

Extending further out on the theoretical continuum, one can interpret the chart below as not only having a polarity shift, but also an offset mirrored distribution of the negative correlation cycle prior to the summer of 1998.

What?

Think Pangaea - just with a fold along the July 1998 divide.

The interesting thing from this perspective is that the current run-up in yields would be the cycle equivalent of the blowoff in 87' where yields spiked then recoiled after the equity markets crashed.  Although we have been quite impressed with the stock market's resilience to date in the face of rising yields, the apple cart might have some trouble handling another rapid move.

Judging by the now coiled symmetry of momentum typically representative of a blowoff - that just may be in the cards coming through the fall.

While we're not calling for another 1987 crash - the continued rise in yields is the 800-pound gorilla waltzing in the room that everyone continues to stare at.

So far she dances pretty well with the music.

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David Stockman On "The End Of The American Imperium"

by Tyler Durden

Submitted by David Stockman via LewRockwell.com,

Next week Congress can do far more than stop a feckless Tomahawk barrage on a small country which is already a graveyard of civil war and sectarian slaughter. By voting “no” it can trigger the end of the American Imperium - five decades of incessant meddling, bullying and subversion around the globe which has added precious little to national security, but left America fiscally exhausted and morally diminished.

Indeed, the tragedy of this vast string of misbegotten interventions - from the 1953 coup against Mossedegh in Iran through the recent bombing campaign in Libya - is that virtually none of them involved defending the homeland or any tangible, steely-eyed linkages to national security. They were all rooted in ideology—that is, anti-communism, anti-terrorism, humanitarianism, R2Pism, nation-building, American exceptionalism. These were the historic building blocks of a failed Pax Americana. Now the White House wants authorization for the last straw: Namely, to deliver from the firing tubes of U.S. naval destroyers a dose of righteous “punishment” that has no plausible military or strategic purpose. By the President’s own statements the proposed attack is merely designed to censure the Syrian regime for allegedly visiting one particularly horrific form of violence on its own citizens.

Well, really? After having rained napalm, white phosphorous, bunker-busters, drone missiles and the most violent machinery of conventional warfare ever assembled upon millions of innocent Vietnamese, Cambodians, Serbs, Somalis, Iraqis, Afghans, Pakistanis, Yemeni, Libyans and countless more, Washington now presupposes to be in the moral sanctions business?  That’s downright farcical.  Nevertheless, by declaring himself the world’s spanker-in-chief, President Obama has unwittingly precipitated the mother of all clarifying moments.

The screaming strategic truth is that America no longer has any industrial state enemies capable of delivering military harm to its shores: Russia has become a feeble kleptocracy run by a loud-mouthed thief and the communist party oligarchs in China would face a devastating economic collapse within months were it to attack its American markets for sneakers and Apples. So the real question now before Congress recurs: how is it possible that the peace-loving citizens of America, facing no industrial-scale military threat from anywhere on the planet, find themselves in a constant state of war?  The answer is that they have been betrayed by the beltway political class which is in thrall to a vast warfare state apparatus that endlessly invents specious reasons for meddling, spying, intervention and occupation.

In pursuit of nothing more ennobling than raw self-perpetuation, the propaganda machinery of the warfare state - along with its media affiliates such as the War Channel (CNN) and the War Press (Washington Post) - have over recent decades churned out a stream of vastly exaggerated “threats”, falsely transforming tin-pot dictators and tyrants like Ho Chi Minh, Daniel Ortega, Slobodan Milosevic, the Taliban, the Ayatollah Khomeini, Saddam Hussein and now Bashar Assad into dangerous enemies. At length, triggering incidents are concocted such as the phony gulf of Tonkin episode, the Madison Avenue based fabrications about Iraqi soldiers stealing babies from incubators in Kuwait, the vastly exaggerated claims of ethnic cleaning in Kosovo, and Saddam’s reputed WMDs.  Eventually, the drumbeat for military intervention is cranked to a fever pitch, and cable TV drives it home with non-stop telestrators and talking heads. Only after the fact, when billions in taxpayer resources have been squandered and thousands of American servicemen have been killed and maimed, do we learn that it was all a mistake; that the collateral destruction vastly exceeded the ostensible threat;  and that there remains not a trace of long-term security benefit to the American people.

Setting aside the self-evident catastrophes in Vietnam, Afghanistan and Iraq, even the alleged “good” interventions are simply not what they are cracked up to be by warfare state apologists. The 1991 Persian Gulf War, for instance, only insured that Saddam Hussein would not get the oilfield revenues from what he claimed to be Iraq’s “19th province” so that he could fund projects to placate his 30 million deprived, abused and restless citizens. Instead, the loot was retained for the benefit of the despicable Emir Al- Sabah IV and a few hundred gluttonous Kuwaiti princes.

Yet in the long-run, “saving” the Kuwaiti regime and its unspeakably decadent opulence did not lower the world price of oil by a dime (Iraq would have produced every barrel it could). And it most surely subtracted from national security because it resulted in the permanent basing of 10,000 U.S. troops on Saudi soil. This utterly stupid and unnecessary provocation was the very proof that “infidels” were occupying Islamic holy lands—the principal leitmotif used by Osama bin Laden to recruit a few hundred fanatical jihadists and pull off the flukish scheme that became 9/11.

Likewise, the “triumph” of Kosovo is pure grist from the national security propaganda mill. The true essence of the episode was a mere swap-out among the ethnic cleansers:  The brutal Serbian army was expelled from Kosovo so that the Albanian thugs of the KLA (Kosovo Liberation Army which was on the terrorist list until it was mysteriously dropped in 1998) could liquidate minority Serbs and confiscate their property—–a tragic routine that has been going on in the Balkans for centuries.

The recurrent phony narratives that generate these war drum campaigns and then rationalize their disastrous aftermath are rooted in a common structural cause: a vastly bloated war machine and national spying apparatus, the Imperial Presidency and the house-trained lap-dogs which occupy the congressional intelligence, foreign affairs and defense committees. This triangle of deception keeps the American public bamboozled with superficial propaganda and the media supplied with short bursts of reality TV when the Tomahawks periodically let fly.

But it is the backbone of the permanent warfare state bureaucracy that keeps the gambit going. Presidents come and go but it is now obvious that virtually any ideological script - left or right - can be co-opted into service of the Imperium. The Obama White House’s preposterous drive to intervene in the Syrian tinderbox with its inherent potential for fractures and blowback across the entire Middle East is being ram-roded by the dogma of “responsibility to protect”. In that context, its chief protagonists—Susan Rice and Samantha Power - are the moral equivalent of Bush’s neo-con hit-men, Douglas Feith and Paul Wolfowitz. In both cases, ideological agendas which have absolutely nothing to do with the safety of the American people were enabled to activate the awful violence of the American war machine mainly because it was there, marching in place waiting for an assignment.

And that truth encapsulates the inflection point now upon us. There should be no $650 billion war machine with carrier battle groups and cruise missile batteries at the ready to tempt Presidents to heed the advice of ideological fanatics like Power and Wolfowitz.  The cold war ended 25 years back, and like in 1919 and 1946 the American war machine should have been drastically demobilized and dismantled long ago; it should be funded at under $300 billion, not over $600 billion. The five destroyers today menacing the coast of Syria should have been mothballed, if not consigned to the scrap yard. No President need have worried about choosing sides among ethnic cleansers in Kosovo or Islamic sectarians and tribalists in Syria because his available tool-kit would have been to call for a peace conference in Portsmouth, New Hampshire, not a Tomahawk strike from warships in the Eastern Mediterranean.

In this context, Barack Obama may yet earn his Nobel Peace prize, owing to the Syria debate he has now unleashed. It will finally show that there is no threat to America’s security lurking behind the curtain in the Middle East—only a cacophony of internal religious, ethnic, tribal and nationalist conflicts that will eventually burn themselves out. Rather than the “new caliphate” of Fox News’ demented imagination, the truth on the ground is that the Islamic world is enmeshed in a vicious conflict pitting the Shia axis of Iran, Syria, Southern Iraq and the Hezbollah-Lebanon corridor against the surrounding Sunni circle which is nominally aligned with the Syrian rebels. Yet even the Sunni world is noisily fracturing, with Turkey and Qatar lined-up with the Muslim Brotherhood and Saudi Arabia and the other Gulf State aligned with the Egyptian generals. Meanwhile, Jordan cowers in the shadows.

The cowardly hypocrisy of the Arab League should tell the Congressional rank-and-file all they need to know about why we should stay out of Syria and shut down the CIA-sponsored rebel training camp in Jordan through which Saudi arms, including chemical weapons according to some reports, are being interjected into the slaughter in Syria.  If the Assad regime is truly an existential threat to regional peace and stability, let Saudi Arabia and Turkey take it out. After all, during the last several decades they have received a combined $100 billion in advanced aircraft, missiles, electronic warfare gear and other weaponry from American arms merchants financed by the US government.

Needless to say, the spineless Arab League/Saudi potentates who are now demanding “deterrence” never intend to do the job themselves, preferring to stealthily hold the coats of American mercenary forces instead.  The truth is that at the end of the day, they find the threat of Iranian retaliation far more compelling than ending Assad’s brutality or building a pipeline through a prospective Sunni-controlled Syria to supply Qatar’s natural gas to European markets.

That leaves the need to dispatch the final and most insidious myth of the warfare state: namely, the lie that Iran is hell-bent on obtaining and using nuclear weapons. Even the CIA’s own intelligence estimates refute that hoary canard. And whatever the proper share of blame ascribable to each side for failed nuclear negotiations in the past, the Iranian people have once again freely elected a President who wishes to normalize relationships with the US and its allies - notwithstanding the cruel and mindless suffering visited upon them by the West’s misbegotten economic “sanctions”. Indeed, if Obama had the wisdom and astuteness President Eisenhower demonstrated going to Korea, he would be now headed for a peace conference table in Tehran, not the war room in the White House.

So let the sun shine in. Perhaps the unruly backbenchers on Capitol Hill will now learn that they have been sold out by their betters on the jurisdictional committees, such as knee-jerk hawks like Senators Feinstein and Menendez, who chair the key Senate committees, and Mike Rogers who chairs the House (alleged) Intelligence Committee. If they do, they will understand that the US has no dog in the Middle East hunt, and that the wise course of action would be a thorough-going retreat and disengagement from the internecine conflicts of the Levant, North Africa and the Persian Gulf, just as Ronald Reagan discovered after his nose was bloodied in Lebanon.  But however the current debate specifically unfolds, the good news is that the world greatest deliberative body is now back in charge of American foreign policy. By long standing historical demonstration, the US Congress specializes in paralysis, indecision and dysfunction. In the end, that is how the American warfare state will be finally brought to heel and why the American Imperium will come to an end - at last.

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Mapping The 7 "Risk" Horsemen Of The Sept-ocalypse

by Tyler Durden

Ahead of September, historically the worst month for stocks, Deutsche Bank notes that volatility has picked up and corporate bond issuance has slowed. There are several possible risks over the next few weeks that could trigger a further escalation in market volatility...

Via Deutsche Bank,

1. Emerging markets could become more vulnerable as the Fed tapers QE and capital outflows from EM intensify

2. Central banks forward guidance may fail to keep rates low for an extended period

3. US consumers could come under pressure from higher energy costs and rising mortgage rates

4. Political deadlock amid US budget talks and the mid-October debt ceiling could rattle markets

5. The next Fed chair will soon be nominated and the main candidates differ in style and policy. The markets may take note

6. While Chancellor Merkel is on track for re-election on September 22, the governing coalition may change

7. The crisis in the Middle East may escalate, impacting oil prices, inflation and growth

But Deutsche's Base Case is that none of these risks pose a systemic threat...

and yields will 'normalize' higher gradually...

Or so they hope...

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Gold…Two bearish wicks should lead to good buying opportunity!

by Chris Kimble

CLICK ON CHART TO ENLARGE

Members bought Gold on support as it hit its 38% Fibonacci retracement level in the chart below. The rally off this support point has now taken Gold up to a key Fibonacci resistance level and created a bearish rising wick.

Last week members harvested some gains at this level as it was creating a bearish wick.

CLICK ON CHART TO ENLARGE

Pattern suggest a buying opportunity could take place in the near future.

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About the Proposed Military Action Against Syria Being Considered in the Congress

by Jesse

I have not said much on this, and I do not intend to say much more than this here.  This is a financial site, but sometimes political events intrude so deeply on the state of the economy that they cannot be overlooked even on a non-political site.
I have not made up my mind on this, and I am very open to facts.
However, I would like to point out that so far there has been no clear evidence presented that there was a gas attack on the Syrian people that was perpetrated by the government forces of President Assad so as to persuade the international community.  And no independent authority has made a clear pronouncement on this matter.
Has the UN said that they have examined the evidence and have concluded beyond all reasonable doubt that it was indeed a crime against humanity, and that it was not some false flag by the al-Qaeda rebels who are fighting to overthrow the government?  These are al-Qaeda, who are otherwise our enemies in several recent wars and domestic terror attacks, ruthless and unprincipled, and who would be a major beneficiary of the ability to use the US as their strategic air support in their civil war.
Can one be so politically tone deaf as to not understand how important it is to make a case to the people that is reasoned and factually solid, so that there could be little question of the fitness and the appropriateness of the proposed military actions?
I am saddened, deeply, by pictures of injured people and especially children. There are far too many of them from around the world.   But I also remember stories about children and infants being callously injured in the lead up to the first two Iraq wars by both Bush I and Bush II that were later shown to be fabricated.
Before any more lives are risked, both American and Syrian, it seems eminently reasonable to expect a clear rationale for any action, and strong evidence that persuades at least a meaningful number of our international allies, besides the few who are already predisposed to attack Iran and its allies no matter what else because it provides a substantial benefit to them.
And I believe that this principle has been eloquently stated, and ignored, in the recent past, as shown in the example below.   There are a number of like-minded people around the world who wish to see the evidence, and to be persuaded of the principle of the cause and accuracy of the facts before they commitment themselves to any actions, only to find themselves disappointed afterwards once again.

"I don't oppose all wars. What I am opposed to is a dumb war. What I am opposed to is a rash war. What I am opposed to is the cynical attempt by Richard Perle and Paul Wolfowitz and other armchair, weekend warriors in this administration to shove their own ideological agendas down our throats, irrespective of the costs in lives lost and in hardships borne.
What I am opposed to is the attempt by political hacks like Karl Rove to distract us from a rise in the uninsured, a rise in the poverty rate, a drop in the median income, to distract us from corporate scandals and a stock market that has just gone through the worst month since the Great Depression.
That's what I'm opposed to. A dumb war. A rash war. A war based not on reason but on passion, not on principle but on politics...
I know that an invasion of Iraq without a clear rationale and without strong international support will only fan the flames of the Middle East, and encourage the worst, rather than best, impulses of the Arab world, and strengthen the recruitment arm of al-Qaeda.
I am not opposed to all wars. I'm opposed to dumb wars. So for those of us who seek a more just and secure world for our children, let us send a clear message to the president."
State Senator Barack H. Obama, October 2002

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