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Monthly Archives: February 2014

Understanding Capital Flows; How They Affect the Markets, Currencies, and Interest Rates

“The international capital flows from advanced Western Economies to Emerging Markets is not a new phenomenon. Since the abandonment of the Bretton Woods, there has been an upward trend in international capital movements. Reasons are being the growth of international trade and the liberalization of the trade and current accounts in the industrial economies, from the 1940s till the 1970s. Such capital flows are recorded in the Capital Account in the Balance of Payment of a country.

Emerging economies from Latin America such as Brazil, Mexico and Argentina are some of the pioneers in opening up their economies to international capital flows in the late 1970s. Latin America recorded about $8 billion in capital inflow in the late1980s surged to $24 billion in 1991. With the expansion of international trade, emerging market countries are beginning to open up their semi-open economies. Semi-open economies are characterized by artificial restrictions or barriers created to restrict the freedom of capital movement. Examples include the creation of taxes, quotas, licenses and so on.

The success of the Latin American countries in attracting capital inflows from Western countries also prompted many Asian Countries to follow suit. The first wave of capital inflow from the West occurred during 1988-1989. During this period the capital inflows, many Asian countries recorded capital account surplus and some to the tune of 2.5% to GDP. As a result of this, there is a marked increase in the international reserves held by those countries. To capitalize on the growth of international trade, many emerging market countries began to liberalize both their trade and capital markets. Tariffs and quotas are either reduced or eliminated; licenses are relaxed so as to promote a more open economy.

Thus, this also led to many of them abandoning their traditional protectionist model for economic growth and embracing a more open economy by liberalizing their trade or current account. Instead of promoting the import substitution and infant industry development strategy they now encourage Foreign Direct Investment inflow as their next growth strategy. Other reasons for opening up their economy are to facilitate capital inflows of cheap funds to fast track their economic development and also the urge to compete with their neighbors to attract more funds.

What causes capital inflow?

There are many reasons associated with the recent international capital flows and most are attributed to both push and pull factors. Since the last Global Financial crisis in 2008, it left many economies especially from the West in tatters. Their economies plunged into recessions and as a result there is a constriction of credit. To prevent their economies from plunging into a severe recession, funds are injected into the economy through quantitative easing. Further to that, interest rates are lowered to almost zero percent so as to promote borrowing to revive economic activity.

Historical Data Chart

The above chart shows the movement of the U.S interest rate and as can be seen rates are lowered twice. The first downward move of the interest occurred in the year 2000 to counter the recession caused by the Y2K. The second and most recent one was during the financial crisis in 2009 where the interest rate was lowered from more than 5% to 0.25% and prevailed till now.

This drop in interest rate provided an impetus for the Emerging Markets to repatriate some of their funds from Western countries and at the same time increased their borrowings. Further to that the sharp drop in the interest rate also helped improve the solvency of many Emerging Market debtors. This is due to the lower debt service obligation on external debts held by emerging market economies.

Another determinant for the increased capital inflow into Emerging Markets is the eroding trade balance positions of many Emerging Economies. Thus a deteriorating trade balance will eventually lead to a worsening current account deficit. This process or linkage is known as the Harberger-Laursen-Metzler effect. Hence, the need to finance this deficit through capital inflows also contributed to the relaxation of rules governing capital inflows.

This effect can be shown by the following terms of trade and current account graphs in the U.S from 1990 to 2014. As can be seen the U.S Current Account worsens as the terms of trade deteriorates.

Historical Data Chart

Historical Data Chart

This also correspond to the increased of private capital outflow from the U.S Capital Account due to the deteriorating Balance of Payment in the U.S. There has been an increase in the amount of investments by U.S mutual and institutional funds in overseas securities. This may be due to the need for diversification to reduce risk and also to take advantage of higher yields in Emerging Markets. The following is the net long term flows chart in the U.S as from 1990 to 2013. This chart tracks the Treasury, securities, Corporate bonds and equities flow in and out of the United States. As can be seen there has been a steady outflow of funds since the 1990s except for the year 2008 and as recently as 2013.

Historical Data Chart

Among the pull factors that encourage capital inflows into recipient countries are the availability of cheap funds to fast-track their economic development cycle and financing their current account deficits. Nations that are experiencing shortage of capital to invest can take advantage of borrowed money from capital inflow to speed up their economic development.

This can be explained using the Harrod-Domar growth model which was developed in the late 1940s by two economists namely Roy Harrod and Evsey Domar. According to the growth model, the key ingredients are the national savings ratio (or S) and capital output ratio or ICOR (Incremental Capital Output Ratio or K). For example, to calculate the rate of growth of an economy with a savings rate of 30% and a capital output ratio of 5, we then apply the following formula.

Economic Growth = S/K or 30/5 = 6% per annum.

Thus, a country’s economic growth can be enhanced by either increasing its savings from National Income which will be redirected towards investment or decreasing the Capital to Output ratio by way of increasing investment in technology to reduce the K ratio. This is because by applying technology, less capital will be needed to produce one unit of output. As a result, it gained popularity and countries like China and India have incorporated it into their 5 year Economic Plan.

As can be seen, capital deficient countries can enhance their Investments through borrowed funds by way of liberalizing their capital account. By removing barriers to capital inflows, these countries will be able to achieve higher economic growth in a shorter time span through higher investment.

This objective is only achievable if the debtor countries spend their borrowed capital wisely. Investing wisely can increase their productive capacity and hence will generate future returns to pay off the loans. Another condition to justify capital inflow is to make sure that the funds are not directed towards portfolio or personal consumption so as to prevent future complications in debt servicing. Thus, this can explain why some developing countries like China, South Korea, Taiwan and Singapore has done relatively well and able to pay the higher cost of increasing interest rates. Other countries especially from the South America and African nations could not and thus consistently plunge into financial crisis.

Problems of Capital Inflow

In theory, capital inflow can be viewed as having a positive effect on an economy like helping it to fast track its economic growth. However along the way, it also helped create some unwanted externalities. Some of them include the following.


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Birinyi Expects the S&P to Hit 1900 by July

“U.S. stocks have too much momentum to make betting against the Standard & Poor’s 500 Index a winning strategy and the gauge will probably reach 1,900 next quarter, according to money manager Laszlo Birinyi.

Birinyi, the founder of Birinyi Associates Inc. and one of the first analysts to advise clients to buy when stocks were bottoming after the 2008 financial crisis, said in a phone interview Feb. 7 that the benchmark gauge for U.S. equities will increase almost 6 percent by July.

It fell 5.8 percent in the three weeks staring Jan. 15, losses he said signal healthy skepticism that set the stage for more gains.

“I don’t like when the market just shrugs these things off,” Birinyi said from Westport, Connecticut. “It’s OK to just stop and take a deep breath. The market should have some sort of a negative reaction when you have problems in Turkey and Argentina. That didn’t make me uncomfortable.”

Weakening currencies from Argentina to Turkey, cuts to Federal Reserve stimulus and slower economic growth in the U.S. and China sent the S&P 500 to its worst performance to start a year since 2010. While almost $3 trillion was erased from share prices globally, the retreat failed to stir bearish speculators, who left bets against S&P 500 companies near the lowest level on record, data compiled by Bloomberg starting in 2006 show. The gauge’s futures slid 0.2 percent at 8:25 a.m. in London.

Lesson Learned

“Short sellers have probably learned their lesson” after a year when 460 of 500 companies in the benchmark index climbed, the most since at least 1990, Birinyi said. At the same time, “there’s nothing that you can say is a bargain or a real value” if you’re a bull, he said. “You have situations on a day-to-day basis that will give you opportunities, and that’s what we’re trying to take advantage of.”

In a short sale, a trader borrows stock and sells it, hoping to profit by replacing it after a decline.

Shares rose last week as reports suggested the U.S. economy may weather Fed stimulus reductions. The S&P 500 added 0.8 percent to 1,797.02, snapping the longest weekly losing streak since May 2012 The gauge rallied 2.6 percent in the last two days, the most since Oct. 11, to push its price-earnings ratio to 16.6. The five-year average is 15.5, according to data compiled by Bloomberg.

The 70-year-old investor has defied market pessimists throughout the five-year bull market that sent the S&P 500 up 166 percent, writing in December 2008 that stocks were near a bottom. In September 2011, he said U.S. companies were earning too much to be dragged lower by Greece’s debt crisis. The index is up 56 percent since then. A year later, with the gauge at about 1,400, he said comparisons with prior bull markets suggested it could reach 1,500 in four months. It took five.

Shorts Retreat…”

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Documentary: Water Has Memory

If you like to learn, then i promise this will be an eye opener.

Cheers on your weekend!

[youtube://http://www.youtube.com/watch?v=uNzbiLpnWX8 450 300] [youtube://http://www.youtube.com/watch?v=6giiYDlqRQs 450 300]


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Non Farm Payrolls Come In Up 113k, The Unemployment Rate is 6.6%



“Payrolls in the U.S. rose less than projected in January as retailers cut back after the holidays and government hiring fell. The unemployment rate unexpectedly declined to 6.6 percent.


The 113,000 gain in employment followed a revised 75,000 increase the prior month, Labor Department figures showed today in Washington. The median forecast of economists in a Bloomberg survey called for a 180,000 advance. The unemployment rate dropped to the lowest level since October 2008 even as more Americans entered the labor force.


Retailers and government agencies cut payrolls by the most in more than a year, while construction firms and manufacturers boosted employment. Broad-based improvement in job growth is needed to help generate bigger wage gains and spur the consumer spending that accounts for almost 70 percent of the economy.


“We’re making progress but the progress is still slow,” Stephen Stanley, chief economist at Pierpont Securities LLC in StamfordConnecticut, said before the report. On many fronts, “the labor market isn’t performing in a way that is satisfactory. We’ve had decent job growth but not a sustained period of strong job growth.”


Today’s report showed 262,000 Americans were not at work because of inclement weather in January, little changed from the same month last year, suggesting conditions played a more limited role than in December. In the Jan. 10 release of the prior month’s data, the Labor Department had said poor weather kept 273,000 people from work, the most for any December since 1977.


Construction, Manufacturing….”


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Comedy Files: Don’t Read This If You Want to Keep Your Under Garments Dry

“Following rate-rigging scandals, FX manipulation debacles, insider-trading idiocy, and over-aggressive lending practices, bankers are taking a different approach in regaining some public trust. As Jamie Dimon gives himself a “well-deserved” pay rise, Dutch bankers are turning to God… As Bloomberg reportsall 90,000 Dutch bank employees will take an oath ‘to do no harm’ as it were, punishable by the Banking Association. While Goldman may be doing God’s work; the Dutch are vowing to Him to enhance confidence in their industry….”


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A Preview to the Jobs Report

“The U.S. Bureau of Labor Statistics releases the January jobs report today at 8:30 AM ET.

The median estimate of 92 market economists polled by Bloomberg is that 180,000 workers were hired to nonfarm payrolls in January after last month’s report revealed only 74,000 hires, well below everyone’s estimates.

Meanwhile, economists predict 185,000 workers were hired to private-sector payrolls, implying a net 5,000 reduction in government employee headcount.

The big question is whether the weather effects that appeared to drag down the December number will also weigh on the January report. The consensus view seems to be that this is not likely to be the case due to the fact that temperatures were actually relatively warm over the period in which the January survey was conducted.

“The market is priced for 180,000, which implies an average gain of 127,000 over the past two months,” says Eric Green, global head of rates, FX, and commodities research at TD Securities.

“We enter the number where risks appear asymmetric. 180,000 would suggest the December number was an anomaly, but the two month trend would still be almost 80,000 off the recent pattern. Given the recent uptick in yields and a world populated with more uncertainty and volatility, that is not a number likely to push yields higher or keep risk appetites on the mend. A weaker number, however, would reinforce the fear that another false start on this recovery has reemerged.”

In its monthly National Employment Report released on Wednesday, payroll-processing firm ADP estimated 175,000 workers were hired by private-sector firms in January. The ADP report, which foreshadows the official jobs report, significantly overestimated the official December jobs number. However, this may have been due to differences in survey methodology — the upshot being that ADP’s report does not capture weather effects.

Beyond the nonfarm payrolls number, market participants will be watching the unemployment rate closely. The median estimate of market economists is that it will remain unchanged from December at 6.7%, but around 40% of those surveyed see it falling either to 6.6% or 6.5% in January…..”

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Investors Move Quick to Protect Their Money, Record Out Flows From Equities Goes Into Bond Funds

“Equity funds while at the same time putting a historic amount into bond funds, and over 95% of the flows were in and out of ETFs.

Citi analysts Markus Rosgen and Yue Hin Pong relay the details in a note to clients:

U.S. funds had record-high inflow into bonds and outflow from equities — In the week ended 2/5/2014, there was a $14.8 billion inflow into bond funds and a $28.3 billion outflow from equity funds, representing record highs in both cases. The inflow into bonds was driven by U.S. bond funds which saw $13 billion of inflow. On the flip side, U.S. equity funds were hit by a $24 billion outflow. More than 95% of these flows were attributed to ETFs.

$6.4 billion of outflow from EM funds — This was the 15th week of outflows from EM equity funds and was the largest outflow since August-2010. The major outflow was from GEM funds, at $4.8 billion, while Asia funds had $966 million of outflow. EMEA funds and LatAm funds had respective outflows of $361 million and $199 million. China funds ended a 6-week run of inflows with $132 million of outflow this week.

$3.6 billion net selling of Asia equities by foreigners — In the week ended 2/5/2014, foreign net selling in Asia widened as Taiwan and Korea saw over $1 billion of net selling. Thailand was also sold down by $516 million. In Japan, during the week of 1/31/2014, there was a massive $7.0 billion net selling by foreigners.

The chart below….”

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Grady Means on 10/2012: “The End of the Real World Will Occur on March 4, 2014”

Random surfing of the interwebs turned up  a video which was partially correct on a statement, but potentially not by the correct person.

What made the vid interesting was talk of derivatives, tapering, rising interest rates, currency reset, and market turmoil to begin in 2014. Given the volatility in the last month i thought it may be worth your consideration.

In October 2012 Grady Means Predicted The End of the Real World Will Occur on March 4, 2014

“Grady Means is a businessman, former assistant to Vice President Nelson Rockefeller and former economist at the U.S. Department of Health, Education and Welfare”


“Those wild and crazy Mayans put down their marker that the end of the world would occur on Dec. 21, 2012 — about two months from now. There is, of course, some small chance that they might be right. On the other hand, there is a very large probability that the real end of the world will occur around March 4, 2014.

The doomsday clock will ring then because the U.S. economy may fully crash around that date, which will, in turn, bring down all world economies and all hope of any recovery for the foreseeable future — certainly over the course of most of our lifetimes.

Interest rates will skyrocket, businesses will fail, unemployment will go to record levels, material and food shortages will be rampant, and there could be major social unrest.

Any wishful thinking that America is in a “recovery” and that “things are getting better” is an illusion.

The problem is not Medicare, which won’t quit on us for another six or seven years. Nor is it Social Security, which will not be fully bankrupt for another 15 years or so. The crisis is much more immediate and much more serious.

The central problem is that America is the bank of the world. What this means, simply, is that the dollar is the world’s currency (often termed the “reserve currency”).

Throughout the world, nearly all traded goods, oil, major commodities, real estate, etc., are denominated in dollars.

The world needs dollars, and the U.S. provides them and provides confidence that the dollar is the “safest” currency in the world. Countries get dollars by trading with us on attractive terms, which enables Americans to live very well.

Countries support this system and cover their risk by investing in dollars through T-bill auctions and other mechanisms, which enables us to run budget deficits — up to a point.

The central issue is confidence in America, and the world is losing confidence quickly.

At a certain point, soon, the United States will reach a level of deficit spending and debt at which the countries of the world will lose faith in America and begin to withdraw their investments.

Many leading economists and bankers think another trillion dollars or so may do it. A run on the bank will start suddenly, build quickly and snowball.

At that point, we will need to finance our own deficit, and we will not be able to do so. We will raise bond rates to re-attract foreign investment, interest rates will go up, and businesses will fail. Unemployment will skyrocket.

The rest of the world will fully crash along with us. Europe will continue to decline, and the euro will not replace the dollar. Russia will see a collapse in oil prices as market demand softens, and Russia will collapse along with it.

China will find nowhere to export and also will collapse. The Russian and Chinese governments, which see all this coming and have been stockpiling gold to hedge against such a dollar collapse, will find that you cannot eat gold…..”


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A grain of salt may be needed for this video….at least it led to an interesting article.

[youtube://http://www.youtube.com/watch?v=OOQ2jUZKKic 450 300]

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Will the Fed Let the Banks Go in Order to Save the Dollar?

“On January 17, 2014, we explained “The Hows and Whys of Gold Price Manipulation.” In former times, the rise in the gold price was held down by central banks selling gold or leasing gold to bullion dealers who sold the gold. The supply added in this way to the market absorbed some of the demand, thus holding down the rise in the gold price.

As the supply of physical gold on hand diminished, increasingly recourse was taken to selling gold short in the paper futures market. We illustrated a recent episode in our article. Below we illustrate the uncovered short-selling that took the gold price down last Friday.

When the Comex trading floor opened January 30 at 8:20AM NY time, the price of gold inexplicably plunged $17 over the next 30 minutes. The price plunge was triggered when sell orders flooded the Comex trading floor. Over the course of the previous 23 hours of trading, an average of 202 gold contracts per minute had traded. But starting at the 8:20AM Comex, there were four 1-minute windows of trading here’s what happened:

8:21AM: 1766 contracts sold
8:22AM: 5172 contracts sold
8:31AM: 3242 contracts sold
8:47AM: 3515 contracts sold

Over those four minutes of trading, an average of 3,424 contracts per minute traded, or 17 times the average per minute volume of the previous 23 hours, including last Thursday’s Comex trading session.

The yellow arrow indicates when the Comex floor opened for gold futures trading. There were not any news events or related market events that would have triggered a sell-off like this in gold. If an entity holding many contracts wanted to sell down its position, it would accomplish this by slowly feeding its position to the market over the course of the entire trading day in order to avoid disturbing the price or “telegraphing” its intent to sell to the market.

Instead, Friday’s selling was designed to flood the Comex trading floor with a high volume of sell orders in rapid succession in order to drive the price of gold as low as possible before buyers stepped in.

The reason for this is two-fold: Driving down the price of gold assists the Fed in its efforts to support the dollar, and the Comex is running out of physical gold available to be delivered to those who decide to take delivery of gold instead of cash settlement.

The February gold contract was subject to delivery starting on January 31. As of January 29, two days before the delivery period started, there were 2,223,000 ounces of gold futures open against 375,000 ounces of gold available to be delivered. The primary banks that trade Comex gold (JP Morgan, HSBC, Bank Nova Scotia) are the primary entities that are short those Comex contracts. Typically toward the end of a delivery month, these banks drive the price of gold lower for the purpose of coercing holders of the contracts to sell. This avoids the problem of having a shortage of gold available to deliver to the entities that decide to take delivery. With an enormous amount of physical gold moving from the western bank vaults to the large Asian buyers of gold, the Comex ultimately does not have enough gold to honor delivery obligations should the day arrive when a fifth or a fourth of the contracts are presented for delivery. Prior to a delivery period or due date on the contracts, manipulation is used to drive the Comex price of gold as low as possible in order to induce enough selling to avoid a possible default on gold delivery.

Following the taper announcement on January 29, the gold price rose $14 to $1270, and the Dow Jones Index dropped 100 points, closing down 74 points from its trading level at the time the tapering was announced. These reactions might have surprised the Fed, leading to the stock market support and gold price suppression on January 30.

Manipulation of the gold price is a foregone conclusion. The question is: why is the Fed tapering? The official reason is that the recovery is now strong enough not to need the stimulus. There are two problems with the official explanation. One is that the purpose of QE has always been to support the prices of the debt-related derivatives on the balance sheets of the banks too big to fail. The other is that the Fed has enough economists and statisticians to know that the recovery is a statistical artifact of deflating GDP with an understated measure of inflation. No other indicator—employment, labor force participation, real median family income, real retail sales, or new construction—indicates economic recovery. Moreover, if in fact the economy has been in recovery since June 2009, after 4.5 years of recovery it is time for a new recession.

One possible explanation for the tapering is that the Fed has created enough new dollars with which to purchase the worst part of the banks’ balance sheet problems and transfer them to the Fed’s balance sheet, while in other ways enhancing the banks’ profits. With the job done, the Fed can slowly back off.

The problem with this explanation is that the liquidity that the Fed has created found its way into the stock and bond markets and into emerging economies. Curtailing the flow of liquidity crashes the markets, bringing on a new financial crisis.

We offer two explanations for the tapering……”

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The Business Cycle Does Not Exist Anymore

“What does it mean to be the world’s reserve currency?

Everbank’s Chuck Butler sums it up nicely in the following quote:

“Remember, the country with the reserve currency gets to receive loans at discounted borrowing costs. Also, commodities are priced in the reserve currency, meaning central banks around the world must hold the currency in their reserves to facilitate trade.”


“Trading nations need dollars to lubricate trading and as foreign exchange reserves that bolster the value of their own currency and provide the asset base for the expansion of credit within their own nation”

Many different currencies have held reserve status throughout history.

This is important to note because it goes to show that, just like everything else, reserve currency status doesn’t last forever.


At present, the US dollar is the world’s main reserve currency.


That status has been a gift for the US: it has allowed it to run a deficit in perpetuity.


But it has also been a curse:

“The demand for safe assets feeds tha t exorbitant privilege enjoyed by the United States. This contributes to a weakening of US policy discipline as the country tends to excessively rely on easy credit in normal times and very expansionary macroeconomic policies in times of crisis. The outcome is excessive US indebtedness. The corporate sector was in debt prior to the burst of the dot-com bubble in 2001; so were the household and financial sectors before the eruption of the sub-prime crisis in 2007-08; and the official sector is in debt today.”

Moving on.

Let’s assume for a moment that the US recovers, the dollar appreciates in value relative to other currencies, the trade deficit shrinks, and QE comes to end.


That all sounds good, right? Yes, but maybe not for other countries – specifically those with current account deficits.

The end of easy money and artificially low interest rates will not bode well for the emerging markets.

The “faulty five” – aka the “BI ITS” – Brazil, India, Indonesia, Turkey and South Africa are particularly vulnerable because they rely on external financing to operate.

A stronger USD has multiple negative implications for their economies.

Before we continue let’s introduce the idea of Triffin’s Dilemma.


And now for a bit of history…..”

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Comedy Files: $MON, A Sustainable Agriculture Company


“A growing number of farmers are abandoning genetically modified seeds, but it’s not because they are ideologically opposed to the industry.

Simply put, they say non-GMO crops are more productive and profitable.

Modern Farmer magazine discovered that there is a movement among farmers abandoning genetically modified organisms (GMO) because of simple economics.

“We get the same or better yields, and we save money up front,” crop consultant and farmer Aaron Bloom said of non-GMO seeds. Bloom has been experimenting with non-GMO seeds for five years and he has discovered that non-GMO is more profitable.

The re-converts to non-GMO seeds are Midwestern farmers who are making a business decision, Modern Farmer discovered. They are switching back to natural seed because it is more profitable — not because of any ideology….”

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Gerald Celente: World Measures are the Exact Opposite for Growth, The Writing is on the Wall

“Today the man who remarkably predicted months ahead of time that the Fed would taper in December, then again in January, and who also predicted the global market plunge that we are now seeing, warned KWN that there is no way out this time for central planners as the global Ponzi scheme has now begun to collapse.  He also discussed the incredible turmoil taking place around the world.  Below is what Gerald Celente, founder of Trends Research and the man considered to be the top trends forecaster in the world, had to say in this remarkable interview.

Eric King:  “Gerald, so far this chaos is unfolding exactly as you said it would with the market turmoil around the world.  Some of the market participants are becoming a bit shocked at what’s unfolding here, but you called it to perfection.  My question to you is, where do we go from here?”

Celente:  “Global markets are headed down, but it may not be in a straight line because you are going to start seeing the Fed, (Washington) D.C., and the Wall Street gang move in to stop the slide in global equities.

“Look at what’s going on around the world:  The Asian markets keep tumbling, and the European markets are also continuing to tank.  Look at what’s happening in the emerging markets:  As I said to you last week, ‘These countries are raising interest rates in order to protect their currencies as their economies are declining.  Brilliant.  That’s the exact opposite strategy for growth.’

So the handwriting is on the wall now, but it’s going to try to be erased by outright lies from the Federal Reserve, its members, and it’s Orwellian propaganda machine — the mainstream media.  Washington will also play a part in the lies and propaganda, along with Wall Street gang.

You are also going to see the Plunge Protection Team go to work at some point, and they will also use every trick they can in an attempt to try to prop up these plunging global markets.  During this chaos the mainstream media and Wall Street propaganda will be non-stop and it will be proclaiming, ‘This is only a temporary correction.’

If you tune in to the major business networks they are dragging out every possible Wall Street shill that they can to spew the great lie that ‘This is a buying opportunity.’  Then these shills start spouting out half-truths and outright lies to keep promoting the Ponzi scheme.

I want to be perfectly clear about this:  There is no way out.  And as this starts to really being to unravel, and it will, just like I have predicted — the Fed will come up with a new scheme to increase the amount of money they are dumping into the system.  But this is the important point for KWN readers around the world:  This new scheme by the Fed is not going to work.

Just look at what’s going on over in Japan.  We have seen ‘Abenomics,’ with trillions of yen dumped into the system.  But just like in the US, the only ones that have benefitted from it are the big players — the elite — and now it’s all coming unwound.”

Eric King:  “Today John Embry told KWN that the global markets are now subject to “total collapse” overnight.  Is that a possibility here?”

Celente: ….”

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One Last Leg Higher?

“It’s been my opinion now for the last year that the bull market that started in March of 2009 at 666 on the S&P would come to an end either in late 2013, or early 2014. I’m confident that will be the case, but based on the cyclical pattern of the current decline I believe we still have one last leg up before this bull comes to an end. I think the intermediate decline now in progress is going to create the conditions for a final manic melt up phase over the next 2-3 months to complete this huge parabolic structure that the Fed has constructed with 5 years of QE and 0% interest rates.

We’ve come this far and tested the 2000 reaction high, I have to think we’re probably going to go all the way and test the all-time highs on the NASDAQ before this bull market comes to an end.

A similar percentage advance would place the S&P 500 at roughly 2200 points which when completed would represent a massive parabolic structure that when it collapses will tip the globe over into the next recession/depression.

So when do we buy stocks you ask? Should we buy today? The answer is, no I don’t think the intermediate decline is done just yet. We first need to break the intermediate trend line to confirm this as an intermediate degree correction.

At the very least I think the S&P needs to retrace 50% of its recent intermediate rally. That comes in at roughly 1700-1705….”

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ADP Reports the Private Sector is Creating Less Jobs

“Private companies created 175,000 new positions in January, a bit lower than in expected but in keeping with the pace of job creation over the past two years, according to the latest report from ADP and Moody’s Analytics.

Economists expected the ADP to report that private companies created 180,000 jobs in January, down from the downwardly revised 217,000 positions in December,

“Nothing changed in December or January fundamentally,” Moody’s economist Mark Zanki told CNBC. “The economy is still improving.”

Tim Boyle | Bloomberg | Getty Images
A job seeker, right, talks with a McDonald’s representative at a job fair for concession employment opportunities in International Terminal 5 in connection to the redevelopment of the international terminal at O’Hare International Airport in Chicago.

As has been the case throughout the labor recovery, services created by far the bulk of the growth, with 160,000 new positions added. Professional services declined sharply, adding just 49,000 jobs after averaging 65,000 over the past two months.

Manufacturing jobs, meanwhile, fell by 12,000 though construction added 25,000.

Small businesses also led the way, with 75,000 jobs, though that was the lowest figure since August. Large firms, with more than 500 employees, added just 34,000 positions….”

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Gangster Style, The Results of the Cyprus Banking Policies as Suggested by Troika

” “I went to sleep Friday as a rich man. I woke up a poor man. I lost all my money.” That was the tearful lament of 65-year-old John Demetriou, who lives in the fishing village of Leopetri on Cyprus’ southern coast. In one fell swoop, he lost his life savings — the result of 35 years of hard work and thrift — in the “capital levy” imposed on Cyprus by the International Monetary Fund, the European Commission, and the European Central Bank (ECB), a trio commonly known as the Troika.

In March of last year, the Troika announced that as part of its deal for resolving the Cypriot banking/financial crisis, Cyprus would have to impose a “one-off capital levy,” a one-time tax on savings deposits in Cypriot banks. This was sold to the public globally and in the EU as a necessary and just solution because Cyprus had become a haven for money laundering and Russian “oligarchs.” However, it was small depositors, not the big speculators, institutional bondholders, or Russian billionaires, who took the hit. According to reports from Cypriot, Italian, and German media, as much as 20 billion euros fled Cypriot banks in the early months of 2013, with 4.5 billion euros taking flight in just the week before the banks were closed and accounts frozen. Some of the “smart money” folks who were in the early capital flight, undoubtedly, were merely savvy savers who could see the writing on the wall and wisely moved their assets before the politicians could grab them. But credible reports charge that Cypriot president Nikos Anastasiades and Troika officials warned insider banking friends about the coming “haircut,” thus allowing those most responsible for the financial debacle to escape the levy, and leaving Demetriou, and tens of thousands like him, to foot the bill.

“It’s not Russian money, it’s not black money. It’s my money,” Demetriou told the Sydney Morning Herald. Demetriou fled to Australia from Cyprus with his wife and children in the early 1970s, during the country’s war with Turkey. Starting with nothing, he worked long hours six and seven days a week selling jewelry in the Sydney area markets. He retired to his native Cyprus in 2007, having amassed a respectable nest egg of nearly $1 million. He intended to build a home and have sufficient money to live comfortably and take care of his medical expenses. But those hopes and dreams have been largely wiped out; he may end up losing up to 90 percent of his savings.

Demetriou is but one of the many victims devastated by the Cypriot “haircut.” For many of them, especially elderly pensioners unable to go out and work to recoup the losses, a more accurate description would be “amputation,” or even “decapitation.”

However, regardless which anatomical metaphor is adopted, the key point is that the IMF-imposed “levy” should be named for what it truly was: a very brazen form of state confiscation, theft, robbery, plunder. And it represents a dangerous new phase in the politico-economic development of the “new world order.” It is not mere chance that the “capital levy” for common depositors was first tried on tiny Cyprus. With a population of barely a million and accounting for merely 0.2 percent of the eurozone GDP, Cyprus is an easy mark, and — from the standpoint of the Troika globalists — a good experimental case.

But to those who are paying attention, the signals are unmistakable that the lords of finance in the central banking fraternity do not view this as a “one-off” event; they plan to use this “tool” very broadly in the coming months. Indeed, the IMF and top central banking maestros have already said so, as we will show. And we are already seeing permutations of this (as in Poland) with the nationalization of private pension funds, and replays (as in Canada and New Zealand), with proposals for Cyprus-style depositor “bail-ins.” But the big prize being eyed, of course, is the United States. If you think that what has happened to Cyprus and Poland can’t happen here, you may end up, tragically, like John Demetriou, destitute and pauperized. Not only that, but you may find that, like the Cypriots, you have lost your freedom, your independence, and national sovereignty; that the policies affecting you most directly are being dictated by international bankers and bureaucrats beyond accountability through elections and national laws.

What the Cyprus/Poland experiences have very dramatically shown is that when the IMF and its allied politicians, economists, and central bankers start talking about “capital levies” it’s time to hide every penny you can. What they really mean is they intend to confiscate anything they can find: savings accounts, checking accounts, investments, pensions, home equity. But that is not all. In addition to a globally coordinated wave of “capital levy” taxation, the IMF/central banks axis of evil is also pushing an agenda of global inflation (under the labels of “stimulus” and “quantitative easing”) and global regulation (under the label of “macroprudential policy”). Global taxation, inflation, and regulation — all of which are aimed at confiscating global economic wealth — are a path to concentrating, and then confiscating, global political power.

Taking the Cyprus Tax Global

In October 2013, a study in the IMF’s Fiscal Monitor entitled “Taxing Times” sent shivers and shocks through the financial world. Among the most jarring proposals in the 107-page report is the suggestion of a “one-off capital levy.” Following so closely on the heels of the IMF’s Cyprus levy, the implications are ominous, to say the least. According to the IMF’s “Taxing Times”:

The sharp deterioration of the public finances in many countries has revived interest in a “capital levy” — a one-off tax on private wealth….”

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Marc Faber: I Fear a Circle Jerk Spiral to the Downside is Just Beginning

” “It’s not just tapering that is putting pressure on markets,” Marc Faber warns in thie brief clip. “Emerging economies have practically no growth and we have a slowdown in China that is more meaningful than strategists are willing to believe,” he adds and this is “causing a vicious circle to the downside” in inflated asset markets as most of the growth in the world over the last five years has come from emerging markets. Faber suggests Treasuries as a safe haven in the short-term; but is nervous of their value in the long-term as “debt is becoming burdensome on the system.”

“A lot of economic growth was driven by soaring asset prices” …”

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