Merry Ba’al

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“December 23rd, 1913 is a date which will live in infamy.  That was the day when the Federal Reserve Act was pushed through Congress.  Many members of Congress were absent that day, and the general public was distracted with holiday preparations.  Now we have reached the 100th anniversary of the Federal Reserve, and most Americans still don’t know what it actually is or how it functions.  But understanding the Federal Reserve is absolutely critical, because the Fed is at the very heart of our economic problems. 

Since the Federal Reserve was created, there have been 18 recessions or depressions, the value of the U.S. dollar has declined by 98 percent, and the U.S. national debt has gotten more than 5000 times larger.  This insidious debt-based financial system has literally made debt slaves out of all of us, and it is systematically destroying the bright future that our children and our grandchildren were supposed to have.  If nothing is done, we are inevitably heading for a massive amount of economic pain as a nation. The following are 100 reasons why the Federal Reserve should be shut down forever…”

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“A cash crunch in China pushed short-term interest rates to another recent high Monday and highlighted the difficulties faced by the central bank in managing an increasingly complex and stressed financial system.

The latest jump in rates came even after the People’s Bank of China last week made cash injections into the banking system that were aimed at cooling the upward pressure on rates.

The government has the capacity to prevent the cash squeeze from developing into a systemwide financial crisis, analysts say. Still, they are watching closely because rising borrowing costs could erode Chinese companies’ already weakening profitability and exacerbate a current economic slowdown. Reduced demand from the world’s second-largest economy would hurt global resources exporters and others that are dependent on Chinese buyers.

An announcement by the central bank Friday that it had added cash to the financial system initially triggered optimism among analysts and investors that the country would avoid a a severe cash squeeze like one in June. But they said they have become less certain after the central bank’s move failed to keep money-market rates from climbing further Monday.

The central bank has tried to rein in lending this year as part of a broader effort to reduce the economy’s dependence on credit-driven growth.

But the credit squeeze highlights that in seeking to do so, the PBOC is facing crosscurrents ranging from government budget tightening and quirks in bank accounting rules to distrust among banks and rising bad-loan losses that haven’t yet been disclosed.

A broad squeeze in lending will likely continue into next year, analysts said, as the central bank tries to get control of short-term interbank lending while the government limits spending. China will also feel the effects of the reduction of monetary stimulus in the U.S…..”

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“It’s been a banner year for stocks. The Dow and S&P 500 have been in record territory since March, while the Nasdaq has been trading at its highest levels since 2000.

Though the robust gains have ignited some worries that stocks may be overvalued, most experts believe that a dose of skepticism is actually healthy and predict that stocks will continue to rise next year, albeit at a more modest pace.

Still, the fact that the Nasdaq is back at a level it last traded at during the tech bubble worries some investors. But experts say the Nasdaq is a completely different animal than it was at the start of the millennium.

“The Nasdaq has really grown up over the last decade. It’s a lot more mature now,” said Kim Forrest, senior equity analyst at Fort Pitt Capital.

For one, the Nasdaq is no longer as tech-heavy as it used to be.

Tech stocks still make up about 42% of the Nasdaq composite, but it was nearly 60% at the height of the tech bubble, according to the Nasdaq OMX (NDAQ). And the exchange has welcomed more companies from the retail sector, health care, and financials. Energy, materials and utility companies, which virtually had no presence on the Nasdaq a decade ago, are also now a small part of the exchange.

“The Nasdaq is definitely not nearly as lopsided as it used to be,” said Ryan Detrick, senior technical analyst Schaeffer’s Investment Research. “Having more diversification gives the index a whole different feel, and helps its safety factor.”

Even the top 100 companies….”

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“The U.S. economy grew at its fastest pace in almost two years in the third quarter while business spending was stronger than previously estimated, pointing to some underlying strength that should be sustained.

Gross domestic product grew at a 4.1 percent annual rate instead of the 3.6 percent pace reported earlier this month, the Commerce Department said in its third estimate on Friday.

That was the quickest pace since the fourth quarter of 2011 and beat economists’ expectations for an unrevised 3.6 percent rate. The economy grew at a 2.5 percent pace in the April-June quarter.

Business spending increased at a 4.8 percent rate instead of the 3.5 percent pace reported early this month. That reflected stronger growth in intellectual property products than previously reported.

There were also revisions to consumption. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised up 0.6 percentage point to a 2.0 percent rate. The revisions reflected higher spending on both goods and services than previously estimated.

Revisions to spending on gasoline and other energy goods accounted for part of the upward revision to spending on goods, while spending on healthcare and other services also was higher than previously estimated.

Consumer spending grew at a 1.8 percent rate in the second quarter.

Business spending on equipment was revised up to a 0.2 percent pace. It had previously been reported as being flat…..”

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Could 2014 be a breakout year ?

“I am very pleased to have had the chance to speak with Jim Rogers, a legendary investor and true international man.

Jim and I spoke about some of the most exciting investments and stock markets around the world that pretty much nobody else is talking about.

You won’t want to miss this fascinating discussion, which you’ll find below.

Nick Giambruno: Tell us what you think it means to be a successful contrarian and how that relates to investing in crisis markets throughout the world.

Jim Rogers: Well, there are two aspects of it. One is being a trader, being able to buy panic, and nearly always if you are a trader or an investor, if you buy panic, you are going to do okay.

Sometimes it is better for the traders, because when there is a panic—a war breaks out or something like that—everything collapses, and some people are very good at jumping in and buying. Then, when the rally comes, the next day or the next month, they sell out.

Now, the people who are investors can also do that, but it usually takes longer for there to be a permanent rally. In other words, if there’s a war and stocks go from 100 to 30 and everybody jumps in, it may rally up to 50, and then the traders will get out, it may go back to 30 again. I’m trying to make the differentiation between investors and traders buying panic.

As an investor, nearly always if you buy panic and you know what you are doing, and then hold on for a number of years, you are going to make a lot of money.

You also have to be sure that your crisis or panic is not the end of the world, though. If war breaks out, you have got to make sure it’s a temporary war.

I used to work with Roy Neuberger, who was one of the great traders of all time, and whenever stocks would panic down, he was usually one of the few buyers, because he knew he could get a rally—if not that day, at least maybe that week or that month. And he nearly always did. No matter how bad the news, especially if there’s a huge drop, it’s probably a good time to buy if you’ve got the staying power and your wits, because you will likely get a rally. In terms of panic buying or crisis situations, that’s normally the way to play.

Now, it’s not always easy, because you are having everybody you know, or everybody in the media shrieking what a fool you are to even try something like that. But if you have your wits about you and you know what you are doing, and you know enough about yourself, then chances are you will make a lot of money.

Nick Giambruno: What is the story behind your most successful investment in a crisis market or a blood-in-the-streets kind of situation?

Jim Rogers: Certainly commodities at the end of the ’90s were everybody’s favorite disaster, and yet for whatever reason, I had decided that it was not a disaster. In fact, it was a great opportunity and there were plenty of things to buy. In 1998, for instance, Merrill Lynch—which at the time was the largest broker, certainly in America and maybe the world—decided to close their commodity business, which they had had for a long time. I bought. That’s when I started in the commodity business in a fairly big way. So that’s the kind of example I am talking about. Everybody had more or less abandoned or were in the process of abandoning commodities, and yet, that’s when I decided to go into commodities in a big way, because of what I considered fundamental reasons for doing it, but the fact that Merrill Lynch was getting out buttressed in my own mind anyway that I must be right, because, you know, everybody was out. Who was left to sell? There was nobody left to sell at that point.

Nick Giambruno: What about a particular country?

Jim Rogers: I first invested in China back in 1999 and then again in 2005. The market at those times was very, very bad. I invested again in November of 2008, when all markets around the world were collapsing, including in China.

So I have certainly made investments in countries with crisis markets, and I’m getting a little better at it than I used to be, because I have had more experience now. That’s why I keep emphasizing that you have to know what you’re doing. And by that I mean paying attention to and doing your homework on a stock or a commodity or a country. If you do that with a crisis market, then chances are you can move in and make some money.

Nick Giambruno: In your opinion, which countries today do you think offer the best crisis or blood-in-the-streets-type opportunities?

Jim Rogers: I think Russia is probably one of the most hated markets in the world. I don’t think many people have a nice thing to say about Russia or Putin. I was pessimistic on Russia from 1966 to 2012—that’s 46 years. But I’ve come to the conclusion that since it is so hated—and you should always look at markets that are hated—that there are probably good opportunities in Russia right now.

Nick Giambruno: Doug Casey and I were recently in the crisis-stricken country of Cyprus, which is also a pretty hated market, for obvious reasons. While we were there, we found some pretty remarkable bargains on the Cyprus Stock Exchange which we detailed in a new report called Crisis Investing in Cyprus. Companies that are still producing earnings, paying dividends, have plenty of cash (in most cases outside of the country), little to no debt, and trading for literally pennies on the dollar. What are your thoughts on Cyprus?

Jim Rogers: When I saw what you guys did, I thought, “That’s brilliant, I wish I had thought of it, and I’ll claim that I thought of it” (laughs). But it was really one of those things where I said, “Oh gosh, why didn’t I think of that,” because it was so obvious that you are going to find something.

It’s also obvious, after what happened in Cyprus, that it’s a place where one should investigate. Whether it is right to buy now or not, you are certainly right to look into it. If you stay with it and you know what you are doing, you do your homework, you are probably going to find some astonishing opportunities in Cyprus. It’s the kind of thing that I’m talking about and that you are talking about…..”

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“Negotiators in Washington, D.C. are working on a trade pact this week, and it isn’t the Trans-Pacific Partnership (TPP).

Representatives from the United States and the European Union are hammering out the details of a purported trade pact called the Transatlantic Trade and Investment Partnership (TTIP). Despite its name, this bundle of commercial compromises has little to do with trade and a lot to do with the slow transfer of sovereignty to bodies of globalists outside the United States.

Notably, the men and women chosen to enforce the myriad TTIP provisions will be unelected by the American people and consequently unaccountable to them. This is in direct violation of the Constitution’s grant of sole legislative power to the Congress of the United States.

On December 16, The New American was invited to participate in a telephone press conference discussing troubling details of the TTIP agreement.

To begin the conference, it was admitted that in the official document outlining the deal, the Obama administration has made clear that an agreement will not be chiefly focused on matters related to international trade, but rather “behind-the-border” (read: domestic) policies such as health, environmental, and monetary policy. As with so many of the other panoply of recent trade deals, multinational corporations operating within the United States and the EU are achieving quasi-governmental power and using that authority to limit the ability of U.S. and EU courts to enforce domestic laws, particularly those that the corporate interests deem detrimental to their bottom line.

During the press conference, several civil society groups from the United States and Europe briefed reporters on significant threats to individual liberty lurking within the TTIP.

Leaders with Public Citizen, Sierra Club, Consumer Federation of America, and Transatlantic Consumer Dialogue voiced concerns about the effects of the TTIP on consumer rights, privacy, communities, and the environment.

“U.S. and EU negotiators are clear that their purpose in negotiating [the TTIP] is to remove ‘regulatory barriers’ to trade,” said Robert Weissman, president of Public Citizen. “Big Business is clear about what this means; giant corporations hope to use [the TTIP] as a way to roll back or stall a vast swath of consumer and environmental regulatory protections in the United States and Europe — involving everything from food safety to privacy, consumer finance to chemical safety.”

Environmentalists expressed concern about the broad rights granted to corporations through the investment rules in the proposed trade pact. Sierra Club executive director Michael Brune revealed that his organization had sent a letter to U.S. Trade Representative Ambassador Michael Froman and European Union Trade Commissioner Karel De Gucht in the name of almost 200 likeminded organizations in Europe and the United States opposing a key provision of the TTIP that extends extraordinary power to corporations to invalidate domestic laws they consider contrary to their business interests.

“This pact could jeopardize critical safeguards necessary to protect our families, our communities, and our climate by giving corporations undue rights to use secret tribunals to challenge public interest laws that they disagree with,” said Brune. “As negotiators meet this week, they must keep in mind that governments exist for the benefit of people — not corporations — and keep these dangerous rules out of the pact.”

Consumer groups also called for trade negotiators to uphold and increase privacy rights for Americans and Europeans.

“At a time of increasing commercial and government surveillance of individuals, we need stronger privacy rights on both sides of the Atlantic, not a trade deal that would allow personal information to flow across borders and into private databases and government hands, without adequate constraints,” said Susan Grant, director of consumer protection at Consumer Federation of America. “A vibrant transatlantic marketplace will only be achieved if individuals can trust that their data will be collected and used appropriately, and both partners in these trade negotiations have a long way to go to gain that trust, especially the U.S.”

The participating consumer groups also called for strong protections on shared data, in order to promote the interests of consumers who will be affected by expanded trade.

“Free flow of information around the web is essential to ensure freedom of expression and consumer choice,” said Anna Fielder, senior policy advisor of Transatlantic Consumer Dialogue and chair of the board of Privacy International. “But this does not mean rules on free flows of personal information enforced through trade agreements, at a time when consumer trust is at its lowest due to massive and unwarranted government surveillance. We need speedy adoption of ongoing data protection reforms in the EU before any talk of common privacy standards can begin — and in any case, such standards should be developed outside the trade agreement.”

Although the regulation of the environment, the Internet, and food safety do not fall within the powers granted by the states to the federal government in the Constitution, the endowment of ultra-national bodies of bureaucrats with irrevocable power to rule in these arenas is equally unconstitutional and unwise…..”

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“Citi currency analyst Steven Englander explains why the market surged on the news that the Fed will scale back its pace of asset purchases. Here’s the sentence, and then below, the explanation:

The Fed Statement is being viewed as a very dovish tapering – small reduction in purchases, indication weakening of unemployment trigger, UR trigger now conditional on inflation, no date for end….”

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“Former SAC Capital trader Michael Steinberg was found guilty of insider trading in shares of tech stocks Dell and Nvidia.

Steinberg, who worked at SAC subsidiary Sigma Capital, was found guilty on all five counts (one conspiracy, four securities fraud), CNBC’s Kate Kelly reported.

He faces up to 85 years in federal prison, according to CNBC’s Kelly.

Before the guilty verdict came out, Steinberg fainted in the courtroom…”

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“The Federal Reserve is trimming its monthly bond purchases to $75 billion from $85 billion, taking the first step toward unwinding the unprecedented stimulus that Chairman Ben S. Bernanke put in place to help the economy recover from the worst recession since the 1930s…..”

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“Picture a paradise where you can be lawsuit-proof. A place to hide your hard-earned assets far from the grasp of former or soon-to-be-former spouses, angry business partners or, if you happen to be a doctor, patients who might sue you.

Lawyers drumming up business say they have found just the place: the Cook Islands. And, thanks to a recently released trove of documents, it’s become clear that hundreds of wealthy people have stashed their money there, including a felon who ran a $7 billion Ponzi scheme and the doctor who lost his license in the Octomom case.

These flyspeck islands in the middle of the Pacific would be nothing more than lovely coral atolls, nice for fish and pearls, except for one thing: The Cooks are a global pioneer in offshore asset-protection trusts, with laws devised to protect foreigners’ assets from legal claims in their home countries.

The Cayman Islands, Switzerland and the British Virgin Islands capture headlines for laws and tax rates that allow multinational corporations and the rich to shelter income from the American government. The Cook Islands offer a different form of secrecy. The long arm of United States law does not reach there. The Cooks generally disregard foreign court orders, making it easier to keep assets from creditors, or anyone else.

Win a malpractice suit against your doctor? To collect, you will have to go to the other side of the globe to plead your case again before a Cooks court and under Cooks law. That is a big selling point for those who market Cook trusts to a broad swath of wealthy Americans fearful of getting sued, and some who have been.

“You can have your cake and eat it too….”

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“The stock market is being led by the dangerous “monetary manipulation” of the Federal Reserve’s $85-billion-a-month in quantitative easing bond purchases, Jim Grant—founder and editor of Grant’s Interest Rate Observer—said Tuesday, as the central bank began its final meeting of the year.

“The stock market is now a tool of Fed policy,” he said on CNBC’s “Squawk Box“.

“What the Fed is doing is an exercise in price control. This is ‘stocks.gov’ [and] ‘bonds.gov,'” Grant said. “The clear and present risk of the stock market is we’re living … in a hall of mirrors” because the Fed’s accommodative policy is distorting the calculations by which the market has been traditionally valued….”

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“After the 9/11 attacks, the public was told al Qaeda acted alone, with no state sponsors.

But the White House never let it see an entire section of Congress’ investigative report on 9/11 dealing with “specific sources of foreign support” for the 19 hijackers, 15 of whom were Saudi nationals.

It was kept secret and remains so today.

President Bush inexplicably censored 28 full pages of the 800-page report. Text isn’t just blacked-out here and there in this critical-yet-missing middle section. The pages are completely blank, except for dotted lines where an estimated 7,200 words once stood (this story by comparison is about 1,000 words).

A pair of lawmakers who recently read the redacted portion say they are “absolutely shocked” at the level of foreign state involvement in the attacks.

Reps. Walter Jones (R-NC) and Stephen Lynch (D-Mass.) can’t reveal the nation identified by it without violating federal law. So they’ve proposed Congress pass a resolution asking President Obama to declassify the entire 2002 report, “Joint Inquiry Into Intelligence Community Activities Before and After the Terrorist Attacks of September 11, 2001.”

Some information already has leaked from the classified section, which is based on both CIA and FBI documents, and it points back to Saudi Arabia, a presumed ally.

The Saudis deny any role in 9/11, but the CIA in one memo reportedly found “incontrovertible evidence” that Saudi government officials — not just wealthy Saudi hardliners, but high-level diplomats and intelligence officers employed by the kingdom — helped the hijackers both financially and logistically. The intelligence files cited in the report directly implicate the Saudi embassy in Washington and consulate in Los Angeles in the attacks, making 9/11 not just an act of terrorism, but an act of war….”

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“Barron’s:You’ve warned that a correction is near. Why?

Davis: Right now, about 78% of industry groups are in healthy uptrends. That would have to fall to about 60% for us to say the market had lost upside momentum. We also focus on the Federal Reserve, and it’s still in a very easy mode, despite all the talk about tapering. So, those two indicators are bullish. However, we’ve looked at all the bear markets since 1956 and found seven associated with an inverted yield curve [in which short-term interest rates are higher than long ones] — a classic sign of Fed tightening. Those declines lasted well over a year and took the market down 34%, on average. Several other bear markets took place without an inverted yield curve, and the average loss there was about 19% in 143 market days. We don’t see an inverted yield curve anytime soon. So, whatever correction we get next year is more likely to be in the 20% range…..”

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“Larry Summers, who was nearly picked by Obama as the next Fed Chairman before for some inexplicable reason the Economist lobby deemed him “hawkish” and that he would put a halt to the Fed-Treasury cross monetization complex, is no stranger to providing hours of entertainment with his aphoristic quotes. Recall from October 2011, where he said that the solution to record debt is more debt:

“The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending.” Larry Summers, source

Or his follow up from June 2012, where he submitted that insolvent governments can “improve their creditworthiness” by becoming more insolvent:

“Rather than focusing on lowering already epically low rates, governments that enjoy such low borrowing costs can improve their creditworthiness by borrowing more not less.”  Larry Summers, source.

This of course led to his pronouncement last month that the US economy needs “bubbles” to “grow“, which promptly won him accolades from none other than his former basher Paul Krugman, best known for this line from 2002: “To fight this recession the Fed needs…soaring household spending to offset moribund business investment. Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.” Yes, somehow this person was seen as hawkish.

Either way, it seems Larry was modestly disgruntled with the prevailing assessment of the media world ascribing to him the title of the next Krugs, in proposing a policy of endless bubble booms and busts, and as a result, he decided to take to the pages of that hallowed bastion of “free and efficient markets”, the FT, to explain what he really meant. His full essay is below but the punchline is as follows:

Some have suggested that a belief in secular stagnation implies the desirability of bubbles to support demand. This idea confuses prediction with recommendation. It is, of course, better to support demand by supporting productive investment or highly valued consumption than by artificially inflating bubbles. On the other hand, it is only rational to recognize that low interest rates raise asset values and drive investors to take greater risks, making bubbles more likely. So the risk of financial instability provides yet another reason why preempting structural stagnation is so profoundly important.

Apparently “some” does not include Larry, but what his clarification seems to clarify, is that while proposing bubbles as a policy tool is short-sighted, should they indeed arrive (and many have stated that the current “stock market” on the back of $10 trillion in central bank liquidity and another $25 trillion in Chinese bank asset increases is nothing else), well then – we’ll cross that bridge when we come to it. In the meantime, “stagnation may be the new normal.” Stagnation for the 90% mind you – not the 10% whoe actually benefit day in and day out from the Fed’s ceaseless attempt to get the world to said bridge as fast as possible…

From Larry Summers:

In the past decade, before the crisis, bubbles and loose credit were only sufficient to drive moderate growth

Is it possible that the US and other major global economies might not return to full employment and strong growth without the help of unconventional policy support? I raised that notion – the old idea of “secular stagnation” – recently in a talk hosted by the International Monetary Fund.

My concern rests on a number of considerations. First, even though financial repair had largely taken place four years ago, recovery has only kept up with population growth and normal productivity growth in the US, and has been worse elsewhere in the industrial world.

Second, manifestly unsustainable bubbles and loosening of credit standards during the middle of the past decade, along with very easy money, were sufficient to drive only moderate economic growth…..”

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