“Moments ago we got news that the same kind of “depositor repression” aka wealth tax just implemented in Cyprus over the weekend, may spread to other stability and deposit havens. Such as Switzerland. Just before 7 am Eastern, the SNB’s Moder, who is an alternative board member, said on the wires that the SNB will not exclude negative interest rates, which followed earlier comments from the IMF that the SNB should have negative rates if there is a renewed surge in the Swissie, and a plunge in the EURCHF, as has happened as the Euro has tumbled. Sure enough, the EURCHF soared on news that even Europe’s last remaining deposit bastion is about to be impaired, because all negative rates are is an ongoingdeposit confiscation, instead of a one-time “levy” as per Cyprus.

Bottom line: it is becoming increasingly clear that “your” money is not welcome anywhere, and the the authorities would rather you withdrew it, and injected it into the economy, in a desperate attempt to raise the velocity of money….”

Full article

“Bullish sentiment posted its largest weekly gain in nearly three years, as neutral sentiment plunged according to the latest AAII Sentiment survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, surged 14.4 percentage points to 45.4%. The spike in optimism was the largest since an 18.4-point weekly gain on July 15, 2010. This week’s jump puts optimism at a six-week high. The historical average is 39%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, plunged 7.9 percentage points to 22.5%. Neutral sentiment is now at its lowest level since November 15, 2012. The historical average is 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 6.5 percentage points to 32.0%. Even with the decline, pessimism is above its historical average of 30.5% for the fourth consecutive week.

Though this week’s spike in bullish sentiment is large, it primarily represents a reversion to the mean. Two weeks ago, just 28.4% of surveyed AAII members described themselves as optimistic, the lowest level since November 2010. Furthermore, while large spikes in bullish sentiment are unusual, they are not extraordinary. Over the past five years, bullish sentiment has jumped by double-digits 17 times….”

Full article

“Struggling companies that otherwise might not be able to stay afloat have found a friend in the Federal Reserve.

The central bank’s cheap-money policies have allowed borderline companies to get low-cost financing thanks to investors who are thirsting for yield and buying risky bonds as the Fed keeps its target funds rate near zero.

While that’s been a boon for poorly rated firms, it also poses the threat that companies that otherwise might fail are getting artificial support and in danger of causing substantial economic damage once interest rates rise.

“We’re paying the price for a dysfunctional system,” said Cornelius Hurley, director of the Boston University Center for Finance, Law and Policy. “Fiscal policy is dead in the water because of the political stalemate in Washington, and as a result the Fed in its monetary policy role has to overcompensate.”

While corporate cash gets cited often as one of the strongest positives for economic potential, corporate debt is swelling as well.

Nonfinancial companies added debt at an 8.75 percent pace in the fourth quarter, the biggest jump since 2007, with the majority of debt coming from corporate bonds, according to Fed flow of funds data.

Much of that has come from companies rated below investment grade.

High-yield debt soared to $326 billion in 2012 from $226.3 billion the previous year, according to Thomson Reuters.

In 2013, junk bond volume in the U.S. is at $69.2 billion compared to $78.3 billion for the same period in 2012 – off last-year’s record pace but still well ahead of any previous year and more than double what it was at the pre-financial crisis high in 2007.

Globally, high-yield bond issuance stands at a historic mark of $108.5 billion, buoyed by central banks around the world mimicking Fed policy and cutting rates at breakneck pace.

Spreads between junk bond yields and their benchmark measuring sticks are at the lowest since 2007…..”

Full article

“On Tuesday, Jefferies strategist Sean Darby cranked up his year-end target for the S&P 500 to1,673 from 1,565, making him the most bullish strategist on Wall Street…..

“The recent trend in mergers and acquisitions might indicate that financial assets have become overheated in the short-term — or it may indicate that Fed policy is beginning to work in raising animal spirits,” said Darby.

For now, he seems to be more convinced of the latter.

Here’s the chart Darby sent us….”

Full article and chart

“Why is it that 17 nations have to fundamentally reorganize themselves and shift sovereignty away from national parliaments to new layers of transnational, beyond-control bureaucracies that can extract untold wealth from taxpayers—just to save the banks?

That’s what the Eurozone has to do, or else banks will topple, and the monetary union will not be sustainable, according to the “first ever European Union-wide assessment of the soundness and stability of the financial sector,” released Friday by the institution that the world couldn’t do without, the IMF.

“Financial stability has not been assured,” the report stated flatly about the fiasco in the Eurozone, despite ceaseless hope-mongering by Eurocrats and politicians, and banks remain “vulnerable to shocks.”

The report, which never mentioned banks or countries by name, discussed a number of “risks” that could topple these banks, with some of these “risks” already having transitioned to reality:

“Declining growth.” Banks with “excessive leverage, risky business models, and an adverse feedback loop with sovereigns and the real economy” are particularly vulnerable. Hence, most banks. A number of European countries have been in a deep recession, some of them for years. So “declining growth” is a reality, and these “shocks” are happening now, said the IMF in its more or less subtle ways.

“Further drop in asset prices.” Real estate prices are now dropping in some countries that didn’t see a collapse during the first wave, including France and the Netherlands—where it already took down SNS Reaal, the country’s fourth largest bank [A Taxpayer Revolt Against Bank Bailouts In the Eurozone]. So hurry up and do something, the IMF said.

The report points at other risks for banks…..”

Full article

“Neil Barofsky, the former watchdog for the government’s financial crisis bailout program, tweeted Friday that JPMorgan Chase appears guilty of “fraud,” or something very much like it:

Barofsky was referring to Sen. Carl Levin’s (D-Mich.) questioning of top JPMorgan executives during a Friday Senate hearing in regards to the bank’s 2012 loss of more than $6.2 billion dollars, often referred to as the “London Whale” scandal. The hearing, as well as a Senate report released late Thursday, are the culmination of a nine-month investigation into the loss….”

Full article and video

B. I. points out a chart to help cut through all the noise. Keeping your eye on jobless claims might just be the way to determine which way the market is headed.

Full article

Maybe Zervos should quit his job and trying working for Starbucks as a barista.

“Jefferies economist David Zervos has been bullish throughout this whole rally, arguing that Ben Bernanke has had everything under control, keeping markets steady, and providing proper stimulus to the economy.

His latest note to clients is probably one of his most important yet, as it’s addressed to the perma-bears that hate any notion of easy money, the Fed, or stimulus, and who argue that we’re just in a sugar high period that will all come crashing down.

You know who these people are that he’s talking about, even though Zervos doesn’t mention them by name: Rick Santelli, ZeroHedge, Jim Grant, etc.

CNBC screengrab

In his note, Zervos writes:

I actually feel a bit sorry for the bears. They have warned us for years about the dangers of central bank balance sheet expansion and monetary accommodation. And their “elite” have even banded together in the WSJ to sign protest petitions against QE. But the spoo keeps rising, jobs keep getting created and wealth keeps getting generated (at least for those who didn’t follow the bears’ ill-conceived advice). I feel sorry for them because they are simply living in the dark ages of monetary policy theory. They are stuck thinking like witch doctors rather than modern medical doctors.

What does he mean, specifically?

What he’s saying is that these policy bears argue that we need a hard dose of Austrian-economics, Great Depression-style pain to clear out the “rot” from the system. And that after we’ve taken our lumps and inflicted pain on ourselves (sending unemployment to over 10% in the process), then we can start to form a true recovery that’s not built on debt and low interest rates.

But that’s misguided.

Zervos offers a great medical analogy…”

Full article

“With anemic economic growth likely to lead to more losses on loans, risks to the financial stability of the European Union remain “elevated,” and urgent action is needed to adequately capitalize the bloc’s banks and establish a shared system for closing down or restructuring failing institutions, the International Monetary Fund said Friday.

In its first-ever review of the health of the financial system across all 27 EU members, the IMF said the bloc has made some progress in addressing the weaknesses that have exacerbated its fiscal crisis and stalled its economic recovery.

But it said much work remains to be done, with banks likely to face higher losses on loans to households and businesses to add to the losses they have suffered on their holdings of government bonds. The Fund added that low economic growth and low interest rates may also weaken insurance companies and pension funds.

“Risks remain elevated, especially in a context of low growth and fiscal retrenchment,” the IMF’s board of directors said. “Regulatory and policy uncertainty, and gaps in policy frameworks also continue to pose vulnerabilities. Further ambitious steps are thus necessary to rebuild confidence and achieve long-lasting financial stability in the region.”

The Fund recommended that bank regulators quickly review the quality of banks’ assets, “based on harmonized definitions of forbearance and non performing loans.” Since the onset of the euro zone’s fiscal crisis, investors have been skeptical of the self-declared soundness of the bloc’s banks, and that has made them unwilling to provide funding to banks…”

Full article

“A cash reserve has been raised in our US ETF accounts. A partial cash reserve has been raised in non-US ETF accounts.  Our clients will see them in the online-access versions of their account statements.

Why did we raise cash?

Stock markets have become extended, particularly in the United States.  Nothing goes straight up or straight down forever.   History shows stock markets can have 3% to 7% corrections at any time.

The present long-term bull market started in March 2009.  It was reaffirmed in November 2012.  It is still intact.  That said, most measures of market movement, sentiment, direction, and momentum have reached levels of intensity that approach extremes.  This is primarily a US phenomenon.

We believe prudence requires a cash reserve as activities in Washington and the rest of the world continue to unfold….”

Full article

“The BRIC nations – Brazil, Russia, India, and China – have been all the rage since Goldman Sachs economist Jim O’Neill coined the term in 2001.

But their luster has dulled a bit recently.

“The BRIC economies have been the brightest stars of the emerging world since the year 2000, contributing nearly two-fifths of global growth,” Mark Williams, chief Asia economist at Capital Economics, writes in a report obtained by CNBC.

More recently, they have been sources of disappointment.”

Capital Economics estimates that the four countries will decrease global growth by about half a percentage point from the International Monetary Fund’s projection of 4.1 percent.

Each country is enduring some economic sluggishness, Williams notes.

Brazil faces a heavy debt burden, weak business investment is curbing Russia’s commodities boom, India is making only slow progress in its efforts for economic modernization and reform, and China hasn’t yet been able to transform into an economy predicated on consumers….”

Full article

“The stock market is a giant bubble being inflated by margin debt, according to economist Steven Keen, author of “Debunking Economics.”

When the level of margin debt begins to fall, the bubble will deflate and investors will be punished, Keen told Yahoo.

“In 500 years’ time people will look back and see this as the biggest debt-financed bubble in human history and ask, ‘why didn’t we realize it,’” Keen said. “But we think it’s normal.”

According to his analysis, there is a relationship between the change in margin debt and the level of asset prices. More specifically, there is a correlation between margin debt acceleration and rising asset prices, Keen said.

Margin debt-to-gross domestic product (GDP) ratios are now 70 percent, meaning a qualified investor with $300,000 can borrow $1 million worth of shares from a broker.

Those levels are close to where they were in 2000 and 2007, Keen said, both of which were followed by serious stock market downturns.

“Nothing can accelerate forever. At some point the acceleration stops, and when it does the market breaks,” Keen told Yahoo.

Keen predicted the U.S. stock market would deflate similar to the way Japan’s did starting in 1989. Japan’s Nikkei averages did not stop falling until 2003.

“I think we’re in a long slow bleed, much longer and slower than the Japanese stock market crash, but there’s similar dynamics,” he said.

Writing in The New York Times, economist Paul Krugman had a simpler interpretation of why the stock market has been rising.

“Stocks are high, in part, because bond yields are so low, and investors have to put their money somewhere,” he said….”

Full article 

“Although blue-chip stocks are hitting all-time high after all-time high, former Fed Chairman Alan Greenspan told CNBC Friday that “irrational exuberance” is the last term he’d use to describe today’s market.

Greenspan said in a “Squawk Box” interview that stocks by historical standards are “significantly undervalued” even considering the recent moves higher. He added that the payroll tax increase didn’t dent spending because of rising asset prices.

Greenspan coined the phrase “irrational exuberance” in 1996, when he was asked a question about soaring stocks at that time. The year 1996 was coincidentally the last time the Dow Jones Industrial Average had its last 10-session winning streak.

Blue-chips will try to make it 11 in a row on Friday. That would be the first such run since late 1991 into 1992. And whether this makes it more or less likely, the Dow has closed higher every Friday so far this year.

Meanwhile, the broader market measure S&P 500 Index is just a couple points away from its all-time closing.

On banks and the concept of “too big to fail,” he argued that it’s the most important regulatory issue of our time, saying the problem is “getting worse, not better.” But he added that the Dodd-Frank Wall Street Reform Law was based on a faulty structure and he doesn’t think it will be fully implemented….”

Full article

“With Greenspan emerging from his crypt to confirm that he is now as clueless about everything as he was 15 years ago (although the absolutely zero reaction out of “stocks” to his statement that stocks are “very undervalued” is perhaps indicative that SkyNet may just be learning), it is appropriate to remind readers that this thing known as the “market” died some four years ago. What we have now is a vehicle with a “role in the policy fight to support spending” while “today’s stock market has arguably lost some of its ability to reflect underlying economic trends.” Not our words – those of Bank of America’s Ethan Harris, who, four years after the fringe blogs, finally “gets it.”

From Bank of America’s “A Market With A Mission”

Equity prices in the US and Europe have been hovering at multi-year highs. To the extent that this reflects powerful policy easing,equity markets may have lost some of its ability to reflect economic trends in exchange for an important role in the policy fight to support spending.

 

…

 

The ongoing climb in stocks does not look like a traditional reflation trade. US long rates remain well-behaved in face of brightening data. Equity prices thus seem to be benefiting from a diet of steadfast monetary support from G-4 central banks as well as expectations that global growth and inflation will remain tepid enough to avoid early policy exits.

 

A contribution exercise indeed suggests that earnings growth expectations have yet to become a key driver of US and European stock prices. Rather, improved confidence and diminished risk perceptions explain, to a significant extent, the equity price pickup in recent months. This is particular true for the euro area, where firms are still feeling the brunt of a long-lived recession.

 

Risk assets breathed a sigh of relief back in September, when both the Fed and the ECB reaffirmed their commitments to fight downside risks. Six months on,  and risk perceptions still seem to be receding. As Chart 2 shows, equity risk premia (ERP) have been edging down in recent months. Altogether, the ERP has shed 1pp in the US since June. In the euro area, however, the ERP has dipped by 2pp during the same time period…..”

 

Full article

SOURCE

NYSE

NASDAQ

AMEX

Derivative will destroy everything unless used in moderation…as a hedge…as they were meant to be.

Full article

“European governments loosened the shackles on national budgets as the euro-area recession deepens and unemployment climbs, with pro-growth appeals coming even from German Chancellor Angela Merkel, the leader most closely associated with austerity.

European Union leaders endorsed “structural” budgetary assessments, using code for granting countries such asFrance, Spain and Portugal extra time to bring down deficits. Still, balanced budgets remained the goal and there was no talk of large-scale spending programs or bond issues.

“If there is too much austerity, there will be too much unemployment,” French President Francois Hollande said at an EU summit in Brussels late yesterday. “Flexibility is necessary if we want to make growth the priority.”

The euro zone’s economic slump has shoved aside the financial crisis as the bloc’s biggest headache, leading the EU to push back deficit-reduction deadlines and making it perilous for politicians to wrap themselves in the flag of austerity.

European leaders are cloaking the easing up on the fiscal reins in language designed to reassure investors who have driven bond yields lower since mid-2012. They labelled the policy “differentiated growth-friendly fiscal consolidation,” with deficit targets set on a country-by-country basis.

‘Risk to Growth’…”

Full article

SOURCE
NYSE

NASDAQ

AMEX

“As a young man, I voraciously read George Orwell’s “1984”, Aldous Huxley’s “Brave New World” and Alvin Toffler’s trilogy which included “Future Shock”, “The Third Wave” and “Power Shift”. During the era of the Vietnam War, I wondered seriously about the future and how it was destined to unfold. Now being considerably older, I have the vantage point to reflect back on my early ruminations and expectations. Unfortunately, I am too old to alter the lessons that are now so painfully obvious. Instead, I pass the gauntlet to those who can understand and take action on what I have unavoidably come to expect for America.

The ‘Huxley-Orwell’ Transition..”

Full article

“Is the decade-long bull market in gold finally over? Probably not, according to observers who say short-term traders are keeping a false lid on prices and that rising production prices will lift the metal higher once more.

MetalMiner reported major exchange-traded fund (ETF) providers offer a line of defense in the ultimate direction of gold. They hold tons of gold around the world.

Nevertheless, analysts at banks such as Goldman Sachs, Credit Suisse and Societe Generale have recently trimmed their price forecasts and claimed the gold bull market may be dead.

“The major ETF providers are understandably not having any of this argument, saying it’s the action of a limited part of the ETF investment community made up of hedge funds and short-term players” MetalMiner stated. “Long-term players will keep the faith the Exodus will soon abate.”

Bruce Cook, an exploration analyst, estimated recently the average price to mine gold has risen from $300 to about $1,500 per ounce since 2000.

“New viable mines are few and far between, yet mining costs are relentlessly rising. This alone will provide a floor to prices in the medium term,” MetalMiner predicted.

Some big hedge fund managers, like George Soros and Steve Mandel, have recently become more pessimistic about gold’s prospects. But rival hedge fund manager John Paulson has been staying the course as a gold bull, according to The Wall Street Journal.,,,”

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