Stock futures fall on stimulus plan concerns, China data

By Chuck Mikolajczak

NEW YORK (Reuters) - Stock index futures fell on Thursday, putting the S&P 500 on track for its first daily back-to-back declines in a month, amid investor concerns the U.S. Federal Reserve may begin to taper its stimulus measures and over weak data in China.
The S&P 500 (.SPX) posted its biggest decline in three weeks on Wednesday, after minutes from the latest U.S. Federal Reserve meeting showed some officials were open to tapering large-scale asset purchases as early as at the June meeting.
The minutes came in the wake of comments earlier in the session by Fed Chairman Ben Bernanke, who said the Fed could scale back the pace of its bond purchases at one of the "next few meetings" if the economic recovery looked set to maintain forward momentum.
Adding to selling pressure, China's flash HSBC Purchasing Managers' Index for May fell to 49.6, slipping under the 50-point level which indicates expansion for the first time since October. That raised concerns the recovery in the world's second-largest economy has stalled and a sharper downturn may be on the horizon.
"With new fears of easy money ending, investors are taking a pause to evaluate the situation," said Andre Bakhos, director of market analytics at Lek Securities in New York.
"This, coupled with weakening Chinese manufacturing numbers, has given investors a tangible reason to step back."
Separately, data in Europe showed that while the downturn across euro zone businesses eased slightly in May, the bloc's economy is likely to contract again in the second quarter.
Investors will eye initial jobless claims data, due out at 8:30 a.m. EDT, for signs of traction in the labor market. Economists in a Reuters survey forecast a total of 345,000 new filings after claims unexpectedly jumped by 360,000 in the prior week.
The benchmark S&P index has jumped 16.1 percent since the start of the year, boosted by slowly improving U.S. economic data and stimulus measures by central banks around the globe.
S&P 500 futures dropped 14.2 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 101 points, and Nasdaq 100 futures slumped 25.5 points.
Later in the session at 10:00 a.m. EDT, housing market data will be released, in the form of the Federal Housing Finance Agency's home price index for March and new home sales for April.
Economists in a Reuters survey forecast new home sales to show a total of 425,000 annualized units compared with 417,000 in March.
Hewlett-Packard Co (HPQ.N) jumped 11.6 percent to $23.69 in premarket trade after the computer maker raised its 2013 earnings outlook after quarterly results beat low expectations.
Hormel Foods Corp (HRL.N) reported a lower quarterly profit due to costs related to its Skippy acquisition, and higher grain costs and lower turkey meat prices at its Jennie-O Turkey stores.
Title insurer Fidelity National Financial Inc (FNF.N) and buyout firm Thomas H. Lee Partners are in advanced talks to acquire mortgage service provider Lender Processing Services Inc (LPS.N), a source familiar with the matter said.

European and Asian shares dropped and the Euro STOXX 50 Volatility Index (.V2TX) surged 18 percent to a 3-week high, spooked by concerns about the future of the Fed's stimulus program and compounded by weak economic data from China. <.>

(Editing by Bernadette Baum)

The Department of Energy Committed $11 Million Per Job

Without much fanfare, the Department of Energy (DOE) recently updated the list of loan guarantee projects on its website. Unlike in 2008, when Barack Obama pledged to create 5 million jobs over 10 years by directing taxpayer funds toward renewable energy projects, there were no press conferences or stump speeches. But the data are nonetheless revealing: for the over $26 billion committed since 2009, DOE Section 1703 and 1705 loan guarantees have created only 2,298 permanent jobs – that’s $11.45 million per job.
As the astronomical taxpayer exposure from the DOE’s loan guarantee program indicates, subsidizing renewable energy is not a good deal for taxpayers. But loan guarantees are just one of the ways the federal government bankrolls risky green energy projects.

US warned of Moody’s downgrade

Photo: EPA

The US remains the world’s biggest sovereign debtor. In 2014, its debt is expected to amount to 76% of the annual GDP. By 2018, the figure is likely to go down, but only slightly – to approximately 71% of the GDP.

Last week, the Congressional Budget Office said it expects this year’s federal deficit to amount to $642bln. This would be about $200bln less than in 2012 and represent a reduction from 7% of the GDP to just 4% of the GDP. The deficit would be at its lowest in 5 years.

On Monday, Moody’s – which together with Fitch still keeps the US at the top of its rating scale – welcomed the Office’s forecasts as inspiring hope. On Tuesday, however, Moody’s Vice President Stephen Hess warned the US of a downgrade in the event it fails to sort out its debt and deficit problems.

We have an opinion from Dr Geldy Soyunov, a senior analyst of Russia’s Alpha Bank:

"I believe Moody’s is urging the congressional Democrats and the congressional Republicans to waste no time in finding a solution to their country’s fiscal mess."

Analyst of the Moscow-based Kapital company Dr Konstantin Gulev explains the nature of the disagreements between the two major American parties:

"The Democrats would reduce the deficit by raising taxes, and the Republicans, by slashing expenditure. Unless these conflicting approaches are somehow reconciled, the US will have its Moody’s rating revised downwards."

Moody’s expects the US economy to expand by 2% in 2013, creating 2mln jobs. The year 2012 brought a similar number of new working positions.

Tatyana Golovanova

Household bills have soared by 40 per cent since 2007 with families spending £2,400 more EVERY year

Household bills have soared by over 40 per cent since before the recession - with families spending almost £2,400 a year, research has claimed.
The yearly cost of household bills has gone up from £5,834 five years ago, to £8,202 in 2012, according to Bacs Family Finance Tracker, the company behind direct debit payments.
The cost of paying for lifestyle services, such as mobile phone, gym memberships and personal loans, has also increased from its pre-recession high of £3,830 to £4,146 - bringing the average cost of bills up to £12,358 a year.

Under pressure: Household bills have soared by 40 per cent in the last five years, according to Bacs, putting more pressure on family finances.

The research – which looks at the spending habits of almost 4,000 adults in Britain – said that a quarter of people often find themselves overcommitted financially, compared with 17 per cent in 2007.
Mike Hutchinson, of Bacs, said: 'Our latest research clearly shows that hard-pressed family budgets are being strained more than ever.

 

'The household purse is increasingly being squeezed and a big bill could tip the family budget over the edge, but splitting that cost across the year could relieve some of the strain and with the discounts offered from many billers and service providers for paying by direct debit, there’s an opportunity to save some vital pounds.'

 

News today that inflation has fallen for the first time since September provided some temporary respite for household finances. Average prices went up by 2.4 per cent compared to a year earlier, according to the Office for National Statistics' consumer prices index - but that was down from a rate of 2.8 per cent in March, and considerably lower than had been expected by analysts.
But the dip in inflation, which is still above the Bank of England’s 2 per cent target rate, isn’t tipped to last as it expects inflation to spike above 3 per cent in the summer as the impact of rising gas, water and electricity bills feeds through.

Adding up: How Bacs calculated the rising cost of bills

Last week Ernst & Young ITEM Club warned that above target inflation would be a fact of life for the next four years.
In its forecast, it said that families struggling with weekly food shopping bills have seen costs soar by 40 per cent since 2007.  
Bacs has launched a campaign to encourage people to spread the cost of monthly bills by paying via Direct Debit – as many companies offer discounts to customers who pay via this method.
The campaign, called the Big Break, is being supported by utility companies, local authorities and service providers.
It includes a competition where customers can win the chance to live bill free for a year by winning £12,000. For full details visit www.thebigbreak.co.uk.

Average CEO Makes 204 Times What Employees Are Paid

S&P 500 CEO Pay vs. Worker Pay: 204 to 1

The United State’s Keynesian Economic System May Collapse Again

The Fed is pumping the US dollar out of existence. Our entire economy is being propped up by the Federal Reserve. Anyone who took Intro to Finance knows when the Fed pumps, the unemployment SHOULD DROP and inflation should rise. Yet, today, unemployment has remained at the same levels and only inflation has risen.
The yuan is surging. Economists are shortening the forecast for China to overtake the US as the largest economy in the world. Gold had the worst month in decades. Investors are scrambling. The market has a weak showing today despite the announcement for more stimulus.
Is the US economy at rock bottom?
This chart, showing what’s happened to U.S. household income in the 21st century, is reality. The stock market–not so much:
http://www.doctorhousingbubble.com/wp-content/uploads/2013/04/household-income-real-median-growth-since-2000.gif
Markets are supposed to be measures of risk. With the Fed buying equity indices hand-over-fist, and with high frequency algos representing the vast majority of trading volume, markets haven’t been accurate measures of risk for a few years now.  After all, on any given day, the market will likely rise. Why? Because markets tend to rise slowly and evenly over time, until the crash in calamitous, unpredictable events. That’s how markets work.
Here’s the reality, if the Fed were to announce that it was no longer creating eighty-five billion dollars a month, and pumping it into the TBTF banks while tramping down the interest rates, the market would collapse. If the Fed dumped the more than 2.8 trillion in impaired MBS, that it bought from the TBTF banks a full face value, back on the market, the massive wave of home foreclosures that would follow, would cause a housing market price crash, as a flood of inventory turned today’s supply and demand ratio upside down. If the TBTF banks were forced back into using mark to model accounting of assets, instead of mark to madoff, bank stocks would plummet. If the Federal Government cut off food stamps to the more than forty-seven billion people who have become dependent upon them, there would be riots in the street, and food prices would tank.
So reality is that a relatively tiny handful of highly leveraged quant boys and their algorithms control the market, and that another flash crash could happen at any time, if the stock market speculators stop ignoring the reality of an economy in which the number of structurally unemployed Americans has reached a record ninety billion. The future is not bright, and even the stock prices of US companies that operate internationally are not reflecting that reality.
“People Not In Labor Force Soar By 663,000 To 90 Million, Labor Force Participation Rate At 1979 Levels”
http://www.zerohedge.com/news/2013-04-05/people-not-labor-force-soar-663000-90-million-labor-force-participation-rate-1979-le
“47.8 MILLION AMERICANS ON FOOD STAMPS”
http://www.breitbart.com/Breitbart-TV/2013/03/29/47-Million-Americans-on-Food-Stamps

CBO: Cost of food stamp program increased 135 percent over previous 4 years

http://www.washingtontimes.com/news/2012/jun/24/top-secret-what-food-stamps-buy/?page=all
http://dailycaller.com/2012/04/20/cbo-cost-of-food-stamp-program-increased-135-percent-over-last-4-years/

Meanwhile in Europe and other parts of the world..Unemployment numbers in Spain not seen since the great depression, Germany, Ireland, France PMI numbers dropping faster then Hale’s credibility …a whole country **pooF** Bankrupt (Cyprus)…the U.S in debt to the tune of 16.8 TRILLION dollars and rising and unemployment in the U.S at 11+%…and all this 5 years after it all started after the crash in 2008 and things are getting worse and not better.
Roubini Sees 2-Year Rally for Stocks, Bonds, Then Disaster
The Fed is “creating massive fraud,” Roubini said. While “in the short term it’s great for assets, … at some point there’s a levitational problem.”

The current slowdown in global economic growth should be pushing stocks, commodities and bond yields lower, he noted.
When things do come back down to earth, the economy will suffer a depression, rather than a recession, Roubini maintained.
In the meantime, Europe’s debt crisis and economic stagnation stand as the biggest threat to continued gains by stocks, he explained.
The Fed’s easing also is destabilizing the housing market, said Edward Pinto, who was the chief credit officer at Fannie Mae from 1987 to 1989.
http://www.moneynews.com/newswidget/Roubini-stocks-bonds-depression/2013/05/01/id/502194?promo_code=11BF3-
Margin debt hitting levels only seen ONE other time in history!
http://blog.kimblechartingsolutions.com/2013/04/margin-debt-hitting-levels-only-seen-one-other-time-in-history/
Goldman Confirms Global Slowdown Is Deepening

http://www.zerohedge.com/news/2013-05-01/goldman-confirms-global-slowdown-deepening
First Euphoria Then Reality
…
We are also witnessing, I believe, the effects of reality and not what the fantasy accounting of all of the governments on Earth would lead us to believe. America may say that the unemployment rate is 7.7% but the reality is 11.6% and so the 33% differential means far less buying power in the economy which is beginning to be recognized. In Europe we can point to the uncounted liabilities in their sovereign debt numbers and then the reality there that just because liabilities are not counted does not mean that they must eventually get paid. Then the confiscation of assets in Ireland, Greece and Cyprus and the unpaid bills in these countries and in Spain, Portugal et al finally must be reckoned with so that large chunks of money leave the economy when eventuality wanders into the present. The falsification of data has taken some time to become realized but I think we are now at a moment when the truth of all of this has found roots.
Many banks in Europe are also beginning to suffer. They have pledged assets at the ECB which have deteriorated and the ECB will not be taking the hit I can assure you so that additional demands for collateral have been made. Some are just the responsibility of a given bank but some securitizations are guaranteed by the sovereign and so one or the other will have to foot the bill. I expect quite severe pressure on the balance sheets of many of the European banks during the next year as further collateral demands are made by the ECB and as these securitizations mature.
One possibility for the markets to reverse has always been some grand event but another is just the economic deterioration that wears away at the markets as current levels cannot be rationally supported. It is not just the Law of Diminishing Returns which is coming into play as the central banks create more money but the effects on the consumer of seriously declining available cash to be used to purchase goods and services.
We have been subject to a massive amount of monetary printing and an unconscionable manipulation of data but the affects ofreality cannot be ignored forever because reality forces the consequences as the fantasy gives way over time.
“Reality is that which, when you stop believing in it, doesn’t go away.”
                 -Philip K. Dick
http://www.zerohedge.com/news/2013-05-02/first-euphoria-then-reality
ALBERT EDWARDS: The Party Is Over, The US Is Just One Recession Away From Japan-Style Doom
http://www.businessinsider.com/albert-edwards-the-party-is-over-the-us-is-just-one-recession-away-from-japan-style-doom-2013-5#ixzz2S8mlRfvH

blackswan

The Picture Is Not Pretty: Chinese Economy Enters Contraction, Japanese Bond Market Halted At Open, And A ‘Bearish Shooting Star’ Is About To Emerge

Chinese Economy Enters Contraction With First Sub-50 PMI Print Since October

For the first time since October 2012, HSBC’s China PMI (Flash) printed at a sub-50 level (49.6) missing expectations (50.4) quite notably. This is the worst two-month drop in 17 months. This is problematic for the PBoC who are being arbitraged left, right, and center and know that any stimulus will merely serve to exacerbate the problems they face (as we noted here that China simply cannot function with ‘moderate’ growth). Every one of the main index’s 11 sub-indices is signaling ‘problems’ - from slower rates of output, slower new orders, employment dropping at a faster rate, stocks rising, and output prices falling. As HSBC notes,“The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds. A sequential slowdown is likely in the middle of 2Q, casting downside risk to China’s fragile growth recovery.” Of course, none of this should come as any surprise to ZH readers – as we noted here, Chinese power consumption grew at its slowest rate since May 2009.





Charts: MarkitEconomics

Japanese Bond Market Halted At Open As Bond Selling Purge Goes Global

Japanese government bonds (JGB) futures have been halted once again this evening as the market opens down over 1 point. 10Y yields smash 11.5bps higher to 1.00% and 5Y yields add 6bps to 47bps. These are quite simply unprecedented moves in what ‘was’ a safe asset class and impresses yet another VaR shock on the market (as we detailed here). What this means practically is that Japanese banks push further into insolvency land (as we explained here) today’s move wipes out another 1.5% of blended Tier 1 capital off the entire Japanese banking industry. Since the 10Y JGB yield lows of 32.5 bps on April 5, the move is rapidly approaching a full percentage point, or the parallel shift amount that the IMF warned would lead to 10% and 20% MTM losses for regional and major banks respectively. Today’s jump in 10Y yields continues the post-BoJ regime of greater-than-six-sigma moves…something no risk model can withstand for three weeks. Just a good job the BoJ didn’t have anything at all to say about this totally disorderly fiasco yesterday.
JGB Futures plunge to two-year lows…


leaving yields spiking…


…

• Legendary investor Jim Rogers: A currency collapse is happening right now

Nikkei Average, up 2% in morning, down 3%

The Nikkei hit a fresh 5.5-year high after soaring 1.9% to 15,942.60 on Thursday. But it then went red falling as much as 0.5%, only to climb back up 0.3%.
The recent rally in Japanese stocks has been attributed to ‘Abenomics’ — Japan’s aggressive stimulus campaign under prime minister Shinzo Abe.
Here’s a chart from Yahoo Finance that shows the Nikkei’s performance during Thursday’s trading session:

Yahoo Finance

Jim Rickards – Japan’s Taking The World Down With Them

ANALYST: A ‘Bearish Shooting Star’ Is About To Emerge

…
The chart below shows the bearish shooting star. The way these candlestick charts work, for those who aren’t familiar: the bottom and top of the box formed by each candlestick represent the day’s opening and closing prices, respectively, while the lines extending from the box represent the intraday range.
So, then, a bearish shooting star, according to StockCharts.com, is “a single day pattern that can appear in an uptrend. It opens higher, trades much higher, then closes near its open. It looks just like the Inverted Hammer except that it is bearish.”

FINVIZ.com

“We Are Experiencing More Than Just A ‘Soft Patch’”

STA Economic Output Composite Index (EOCI)
The EOCI index fell sharply to 26.08 in April from 30.35 in March as the brief surge in activity from “Hurricane Sandy” finished working its way through the system.  The chart below compares the EOCI index to real, inflation adjusted, GDP on a quarterly basis.

There are a couple of important takeaways with this index.  The first is that both positive and negative trends in the EOCI index track very closely to the ebb and flow of GDP.  The second is that historically when the EOCI index was below 30 the economy was either in, or about to be in, a recession.  Currently, the economy is not running in recessionary territory, as of yet, but the trend of weakness in the macro economic data is somewhat concerning.
…


Why Even Talk of Tightening Could Be Fatal
Repeat after us: There is zero chance the Fed is going to tighten…zero chance…zero chance…zero chance. While we await the global economy’s all but inevitable collapse, one thing we absolutely need not fear is that the Fed will stop easing.
Tweet from Jim Rickards
Print money. Create wealth effect in stocks & housing. Happy days. #Bernanke waited 4 yrs for this. Now he owns the crash. But he’s leaving.
Systemic Breakdown? Financial Bubbles Creating Conditions for New Crash
It is a sure sign of the systemic breakdown of the global capitalist system that the very measures put in place to try to prevent a crisis are creating the conditions for a financial meltdown beyond even the scale of 2008.
Why Austerity Kills – From Greece to US, Crippling Economic Policies Causing Global Health Crisis
The authors estimate there have been more than 10,000 additional suicides and up to a million extra cases of depression across Europe and the United States since governments started introducing austerity programs in the aftermath of the economic cris…

UK taxpayers pay for the rich’s greed

British people are struggling with their biggest squeeze on living standards at a time of austerity while many high-profile individuals, including the Royal family and giant corporations, are earning billions of pounds through the so-called legal tax avoidance.
Tax avoidance by definition is generally the legal exploitation of the tax regime to one’s own advantage, attempting to reduce the amount of tax that is payable by means that are within the law.
Tax offenders exploit loopholes in the law to remove income or assets from taxable situations into ones with lower taxes or none at all.
Similarly, Britain™s highly abusive tax loopholes allow wealthy individuals & organisations to evade their tax burden, making the most vulnerable people in the society bear the brunt of spending cuts and pay for the rich™s greed.
But who are the UK™s biggest tax evaders, depriving British people of millions of pounds that could be spent on public services?

In December 2012, Britain’s HM Revenue and Customs (HMRC) and the Public Accounts Committee (PAC) were called on to probe suspected tax avoidance by the heir to the throne Prince Charles™s £728 million hereditary estate, the Duchy of Cornwall.
The unclaimed property, which Prince Charles owns, thanks to his royal status under an ancient law, comprises around 53,408 hectares of land in 24 counties, mostly in the south west of England and including the whole of the Isles of Scilly.
Charles receives the “revenue surplus” from the estate, and the Duchy’s accounts show it grew by 2.8 percent to £18.3 million in the last financial year. The estate™s total worth also grew by £32 million to £728 million due to “buoyant agricultural property values” and accordingly, the British prince™s tax bill rose marginally from £4,398,000 to £4,496,000, an increase of £98,000.
The duchy, however, insisted that the state “is not subject to corporation tax as it is not a separate legal entity for tax purposes”. But principal judge at the information rights tribunal John Angel ruled last December the property was a separate legal body to the prince.
Earning money through tax evasion by the Royal Family is just part of the story. Business giants Starbucks, Google and Amazon were also found guilty of dodging millions of pounds in tax in Britain.
It is estimated that the corporate tax evasion is costing the UK economy something between 45 to 90 billion pounds a year, meaning that it is practically undoing all austerity measures as well as widening the gap between the rich and the poor in the British society.
Moreover, the British Broadcasting Corporation (BBC) has been accused of complicity in tax avoidance for more than 25,000 of its employees. The House of Commons Public Accounts Committee (PAC) said discovering the scale of fraud at the BBC was quite shocking.
In attempts to identify the deliberate tax defaulters in Britain, the HMRC has published two lists so far.
The lists, published in February and May, contained the names of individual tax evaders, including a hairdresser, a coach operator, a knitwear manufacturer, and a tandoori takeaway.
Not surprisingly, the British government was stringently criticized for pursuing individual tax dodgers instead of large corporations, which had largely avoided tax and harmed the most vulnerable people in the society.
MOS/HE

This article originally appeared on : Press TV

Jim Rickards – Japan’s Taking The World Down With Them

Jim Rickards, Senior Managing Director at Tangent Capital, says the Bank of Japan’s monetary easing policy is so aggressive they are forcing other central banks to cut rates.

Jim Rogers: Yen’s ‘Collapse Very Dangerous’
The dollar hit a four-year high of 103.31 yen Friday, and legendary investor Jim Rogers, chairman of Rogers Holdings, doesn’t think that’s a good thing.
“The [yen], which is one of the major currencies of the world, has collapsed 27 percent in no time,” Rogers told Yahoo. “It’s a very, very dangerous move.”
The dollar has gained 25 percent against the yen since Dec. 4, trading early Wednesday at 102.99 yen

“Everybody is in trouble!” – Real financial crisis is yet to come a sociologist speaks to RT

American sociologist Immanuel Wallerstein speaks to RT about the “quotstructural crisis” in the global financial system and the dangers facing both rich and developing countries.
“Everybody is in trouble!”

Immanuel Wallerstein

Sprott Is Bullish on Silver—and Gold—Equities

by Brian Sylvester of The Gold Report (5/22/13)
Sprott Silver Equities Class Co-Manager Maria Smirnova understands the power of leverage. She has seen the big impact even a slight increase in the silver price can have on silver producers. Every cent is multiplied and goes right to the investor’s bottom line, giving the equities more upside than possible in a coin. That is why Eric Sprott increased holdings of silver equities in certain Sprott funds. Smirnova discusses five of these companies in this interview with The Gold Report.
The Gold Report: Maria, in April Eric Sprott sold more than $45 million ($45M) worth of units in the Sprott Silver Physical Trust. A spokesperson told Canada’sGlobe and Mail that the sale was needed to cover charitable obligations and to buy shares in silver mining companies because Mr. Sprott believes silver equities will outperform the metal in the next rally. Can you fill in the details on that thesis?
Maria Smirnova: We believe in the equities—for any commodity—for several reasons. Equities represent a leverage play on the underlying commodity. To use a simple example: Assume Company X can earn $5 when the silver price is $25/ounce ($25/oz). If the silver price increases 20% to $30, that extra $5 goes directly to the bottom line. This doubles the company’s profits from $5 to $10. The silver price increases 20%; the profits rise nearly 100%—that is what I call leverage.
In addition, mining companies benefit from production growth through exploration or acquisition. We look for companies that can find millions of ounces of silver or gold.
TGR: Precious metals have certainly had their detractors of late. Why does Sprott Asset Management remain committed to precious metals?
MS: Governments are trying many maneuvers to fix the economic situation, printing money, for example. None of their actions are actually fixing the underlying economic issues. We remain committed to the precious metals because they are hard assets.
In addition, the financial market has become disconnected from the physical market. Especially since April’s two-day selloff in silver and gold, purchases of the physical metals have surged.
For example, sales of the U.S. Mint’s silver coins jumped 57% year-to-date compared to last year (as of April). Sales increased 169% in April alone. We have heard stories of people lining up to buy silver in Canada and Australia. Demand is up in China as well. Chinese jewelry sales grew 72% in April compared to 2012.
If you look at the exchange-traded funds (ETFs), silver ETFs have not had a large selloff.
The buyers are there, the physical demand is there, but the price is just not reflecting that. It is a bit frustrating, but from my perspective, it is comforting to see the numbers show that people want to own silver and are buying more of it.
TGR: Can you tell us about some of Sprott’s top picks?
MS: Earlier this year Mr. Sprott made MAG Silver Corp. (MAG:TSX; MVG:NYSE) his top pick in the silver developer space and Sprott Asset Management took a position worth more than $26M. MAG Silver has a world-class deposit, the world’s highest-grade silver development asset right now. MAG Silver owns 44% of the Juanicipio deposit in Mexico.
The grade is between 500 and 700 grams per ton (700 g/t), which is very high grade. The deposit has good thickness, so the economics have the potential for a very profitable mine. It is all about how economic the deposit is.
Fresnillo Plc (FRES:LSE) is MAG Silver’s joint venture partner. Fresnillo operates Juanicipio and is pushing the project forward. Fresnillo should do a good job putting this into production and MAG Silver will benefit. MAG Silver is trading at about a 20% discount to net asset value, so this is not a bad time to buy.
TGR: Fresnillo also owns about 17% of MAG Silver. Some market watchers believe Fresnillo will ultimately buy MAG Silver given its ownership stake and the Juanicipio joint venture, but Fresnillo lacks the money to make an all-cash bid. Does that change the investment thesis for MAG?
MS: No, not at all. Fresnillo recently raised about $350M with a company called First Eagle Investment Management. That was done to maintain FTSE free float listing requirements. If Fresnillo does not have enough cash per se, it could do a cash-and-share acquisition.
Even if Fresnillo does not buy Juanicipio, when it goes into production, MAG Silver shareholders will benefit from the 44% stake.
I never invest in companies banking on a takeout. We always look at the basics: the deposits, the management teams, the fundamentals of the projects themselves.
TGR: MAG Silver also has the Cinco de Mayo project. Could MAG sell its 44% stake in Juanicipio to Fresnillo and then focus on Cinco de Mayo?
MS: That could be an option.
TGR: In a recent radio interview, Mr. Sprott said, “The beauty of silver is that there is not much inventory in the world.” What other small-cap silver equities are slowly but surely adding to the global silver inventory?
MS: I co-manage the Sprott Silver Equities Class with Eric Sprott and Charles Oliver and have been investing in the smaller silver producers.
We own names like Mandalay Resources Corp. (MND:TSX), SilverCrest Mines Inc. (SVL:TSX.V; SVLC:NYSE.MKT) and First Majestic Silver Corp. (FR:TSX; AG:NYSE; FMV:FSE). All of these companies are growing their silver production.
TGR: One of Mandalay’s primary assets, Cerro Bayo, in southern Chile, had operational hiccups as the mine completed its ramp up to 1,200 tons of ore per day. What kind of production are you modeling from Cerro Bayo for the rest of 2013? And what cash-flow-per-share should Cerro Bayo generate?
MS: Cerro Bayo’s production dipped a bit in Q1/13, but the reason was to accommodate the installation and commissioning of some new equipment designed to improve metallurgical recoveries, so I do not view the shortfall as negative at all. I expect the company to meet its 2013 overall production guidance despite whatever hiccups it had in Q1. In fact, Mandalay tends to exceed guidance. Management is guiding around 3 million ounces (3 Moz) of silver and 20,000 oz of gold production in 2013. This year, using $24/oz silver, I estimate about $0.16 cash flow per share, which implies that the stock is at about 5.5 times cash flow right now and has a 3.5% dividend yield.
TGR: How does that compare to its peers?
MS: Very favorably. The majors are trading at 13–15 times cash flow, using a current silver price, not a high silver price.
TGR: What silver price do you use in your models?
MS: I usually just use the spot price to evaluate all companies. For me, it is a relative-standing game. I do not project the silver price going forward. If today’s price is $24/oz, I will use $24; that allows me to evaluate all companies on a fair ground.
TGR: You mentioned First Majestic. As of late March, it was the largest equity holding in the Sprott Canadian Equity Fund. Why does the fund have such a significant position in that name?
MS: Our initial investment in First Majestic was at less than $4/share. Today, the stock is $10 or $11/share. The position has grown because of price appreciation, as well as subsequent purchases.
First Majestic is one of the best silver plays out there. The management team has definitely delivered on its promises. The company built five mines and is adding two more. It is one of the purest silver producers out there; 90% of the production is silver.
Management has done well keeping costs under control. The total cash costs are virtually unchanged since 2008 at about $9/oz. Production is still growing. We think the silver equivalent production could double from 2012 to 2014. The stock is trading at about eight times next year’s projected cash flow. This is a very reasonable multiple using the current silver price.
TGR: Is First Majestic an example of Sprott’s approach to the equities? Even though overall things may not be that great in the sector, some very good performers exist.
MS: Absolutely. To me the key is to find the companies that can survive a tough market, exceed expectations, deliver on their promises and generate free cash flow. That describes First Majestic.
TGR: You mentioned SilverCrest. In Q1/13, SilverCrest sped up removal of waste rock at its Santa Elena mine so it could produce more silver and gold in the summer months when machinery tends to break down more frequently. Is that a typical mine management move?
MS: That decision was prudent. SilverCrest built the Santa Elena mine and has made money in the last couple of years. Now management is deciding to transition the mine from an open-pit to an underground operation. It is building a mill to grow production.
TGR: Where will SilverCrest’s production growth come from?
MS: Last year SilverCrest produced about 2.4 Moz silver equivalent, and the target is to grow production to 4.5 Moz silver equivalent. That may not happen next year, but it will get there by 2015.
TGR: Are there any other small-cap names you would like to talk about?
MS: I want to mention International Northair Mines Ltd. (INM:TSX.V) in Mexico. It is small, but interesting, run by an experienced management team. The market cap is $10M, but the company has defined a deposit of more than 50 Moz silver in an open-pit resource. To date, the company has drilled 40% of a 6-kilometer (6km) mineral strike. The deposit is open on both ends and to depth. Two things here appeal to me: There is a lot of potential to find more ounces and the market cap is tiny.
TGR: How would you compare International Northair’s La Cigarra deposit with other development-stage silver assets in Mexico?
MS: I like the deposit. The initial metallurgical tests are positive—no red flags. I think the resource could be increased by 50% to 100%. Just drilling the remaining 4km could more than double the resource. I do not see that kind of blue-sky potential in many companies right now.
TGR: Do you have a time frame for when the market might begin to favor precious metals again?
MS: That is hard to predict. A lot of what is taking place right now does not make sense. It is very difficult to predict when things will turn. We take a long-term view.
TGR: A number of the companies we have talked about have operations in Mexico. There has been some talk of increased royalties and some quiet forms of nationalization. Is that a concern at all?
MS: Nationalization is not a concern at all. Regarding royalties, the proposal appears to be for a net profits royalty tax of about 5%. That would equate to a 2% top-line net smelter royalty, lower than what people expected. This is not atypical and it is not a windfall tax. Therefore, in my mind, it will not have a huge impact on these companies.
The removal of the uncertainty about the tax is probably good for the mining industry in Mexico. We will move on and live our lives.
TGR: How do you view the silver space and what is your outlook for small-cap silver miners?
MS: I think you have to remain optimistic that the prices of the commodities, especially silver and gold, turn around. I do not even want to call them commodities, to be honest. I would call them currencies, especially gold. Silver is a hybrid because it also has industrial applications.
Once the turn happens, these stocks could explode in a good sense and completely revalue to the upside. Today, they are at depressed valuations.
TGR: Is there an across-the-board percentage recovery you would predict?
MS: Some stocks are down 50%–60%; they could double or triple. First Majestic used to be a $20/share stock; it will go back there and then some based on earnings alone.
TGR: To what do you attribute the two-day fall in mid-April? Was it manipulation?
MS: Yes, I would agree with that characterization. It is very difficult to believe that something could fall that much in just two days. A whopping 1.8 billion ounces of silver was traded on the COMEX on April 12 and 15—that’s in a 1 billion ounce market!
TGR: And what are the reasons behind the more general mining equity slump?
MS: A lot of people believe we are fixing our economic problems and things are getting better. People are going to the U.S. dollar and to other assets and other sectors.
There have also been disappointments in the mining sector with companies not meeting their guidance and costs coming in higher. This too has put a damper on investor sentiment.
TGR: Can you leave us with a positive thought about the space in general?
MS: It is very comforting to see retail buyers choosing in droves to own the physical metal. We hope that leads to higher market prices for gold and silver, and in turn to a rally in the stocks.
TGR: Maria, thank you for your time and your insights.
Maria Smirnova joined Sprott Asset Management as a research associate in May 2005, and was appointed associate portfolio manager in February 2010. She currently co-manages the Sprott Silver Equities Class with Eric Sprott and Charles Oliver. She is also responsible for supporting the portfolio management team in the precious metals and mining space. Smirnova has over 12 years of experience in the financial services industry; she began her career at Excel Funds Management as operations manager, and subsequently worked in product development at Fidelity Investments. Smirnova graduated with distinction from the University of Toronto with a Bachelor of Commerce degree and obtained her CFA charter in 2002. She graduated as a Bregman Scholar from the University of Toronto’s MBA program in 2005.
Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.
DISCLOSURE:
1) Brian Sylvester conducted this interview for The Gold Report and provides services to The Gold Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: International Northair Mines Ltd., MAG Silver Corp., Mandalay Resources Corp. and SilverCrest Mines Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Maria Smirnova: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None My company has a financial relationship with the following companies mentioned in this interview: Certain Sprott funds own shares of all five companies. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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Jim Grant: The Fed Doesn't Have A Clue When To End QE

shar.es/ZzGdc 

Why the whole banking system is a scam

Why the whole banking system is a scam

Argentine Inflation: It’s Tough When All You Get Is Lies

Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter
The issue of inflation is complex everywhere. Official rates are disputed. People can’t reconcile them with what they see at the store. There are different formulas and data sets, resulting in different rates, and everyone picks and chooses what suits their needs. But nowhere is the issue as “complex,” infested with lies, and shrouded in obscurity as in Argentina.
The debacle took on hilarious overtones when a Greek reporter, in her soft, harmless-looking manner, began to crucify Economy Minister Hernan Lorenzino during an interview at his office: “I have a very simple question for you, which seems very complicated these days: how much is Argentine inflation at this moment?” His response was an epic journey into obfuscation that got him entangled in such verbal spaghetti that the video, when it was released in April, went viral instantly. “We never speak about inflation, not even with the Argentine media,” an unseen aide explained after the minister had skedaddled.
But his jab at official inflation was on target. The interview took place late last year. By April, inflation, as reported by the Instituto Nacional de Estadista, was 10.5%, down from 10.6% in March, and from 11.1% in January, its recent peak, nicely heading once again in the right direction, after having been below 10% for much of 2012. But it’s a joke – though not nearly as hilarious as Lorenzino’s verbal spaghetti.
In early 2007, the staff at the statistical agency were booted out and replaced with political appointees who would toe the line on inflation and other inconvenient statistics. Since then, official inflation has been decided by edict.
Private economists, brushing off these figures with a nervous smile, kick around 25% as the current annual inflation rate. Mid-May the government nodded. With elections coming up in October, President Cristina Fernández de Kirchner has to hand some goodies to her base to buy their votes. So during the impeccably timed wage negotiations, she personally met with leaders of six unions representing 2 million workers, and struck the same kind of deal she’d made with the Railway and Bus Drivers’ unions, a deal that might get close to preserving purchasing power: wages would be increased by 24%! The closest to an official and somewhat realistic CPI that Argentina has.

To pour some oil on the fire, Torcuato Di Tella University (UTDT) – a non-profit private university in Buenos Aires – publishes the Inflation Expectation Survey. It measures what the public expects inflation to be over the next 12 months. For much of 2006, when the surveys began, median inflation expectation was 10%. The just-released index for April came in at 30%; and average inflation expectation rose from 34.2% to 34.9%.
UTDT concedes that the public has a tendency to overestimate changes in consumer prices. Nevertheless, it’s another ray of light in an obscure environment where the government has done its darnedest to replace any visibility with lies. Yet ordinary people, managers, and investors alike need to make decisions daily based on their understanding of inflation. And they’re making those decisions – just not the way the government wants them to.
The impact on the peso has been, let’s say, noticeable. In 1999, when I first traipsed around Argentina, the peso was interchangeable with the dollar one-to-one. ATMs would distribute both, depending on the button you pushed. Quite impressive. But Argentina seemed expensive, compared to other Latin American countries. And the economy was bogging down. Something was amiss.
The peso mirage ended in 2001, when people cleared out their bank accounts, converted pesos to dollars, and sent them overseas. To stop this torrent, the government froze all bank accounts; only small amounts of cash could be withdrawn. The people didn’t accept this quietly, which led to the declaration of a state of emergency, and more riots. In January 2002, the government lifted the dollar-peso parity, and set an exchange rate of 1.4 pesos to the dollar. People with money still frozen at the bank had been robbed.
And it never stopped. In early May on the black market, the peso fell through yet another floor: for the first time ever, it took over 10 pesos to buy a dollar. People have been scrambling to convert every peso they didn’t need at the moment into dollar bills. The official exchange rate is 5.25 pesos to the dollar. But it too is a lie, for most people. In one of those ironies that follow reckless deceitful governance, the government is running out of dollars and few people can buy them at the official rate – though the country is awash in dollar bills.
Since I write so much about financial fiascos, debacles, and nightmares, I’ve been asked about ways to protect assets in this environment. Thankfully, I don’t give financial advice. Even if I did, I wouldn’t have all the answers. But I just finished reading an excellent book on precisely that topic, so I decided to review it. Read…. Diplomatic Immunity For Your Assets In Interesting Times!

Gold shipment valued at $625,000 vanishes from Miami airport

 

• 
  American Airlines planes taxi past a terminal at Miami International airport in Miami, Florida. (Reuters)
  

A shipment of gold valued at $625,000 vanished in a suspected heist after arriving in Miami on an American Airlines flight, authorities announced Thursday.
A police report says the gold, which arrived in a box, was brought on the flight from Guayaquil, Ecuador to the Miami International Airport early Tuesday, WSVN reports.
The plane's cargo was unloaded by five crew members, but the box containing the gold disappeared after apparently being loaded onto a motorized luggage cart or tug, the report said.
The cart was found in front of a gate of the same terminal were the flight from Ecuador was unloaded, about an hour after workers emptied the cargo hold, but without the box containing the gold.
The police incident report did not say who owned the gold or what its final destination was and an American Airlines security official at the airport declined to comment to Reuters on the case, saying only that it was being investigated by the FBI.
"The FBI is aware of the situation," FBI spokesman Michael Leverock told Reuters in an email.
Miami International serves as a major trans-shipment point for large quantities of gold produced in South America and exported primarily to Switzerland for refining.
The city has seen the trans-shipment of gold rise sharply in recent years as investors have turned to gold and its price has risen.
Gold is Miami's No. 1 import valued at almost $8 billion last year, mostly from Mexico and Colombia, and almost all destined for Switzerland, according to World City, a Miami-based publication that tracks trade data.

Senate panel OKs tax-welfare benefits for newly legal immigrants

The SenateJudiciary Committee voted Monday to allow illegal immigrants who get legal status to begin collecting tax-welfare payments, as the panel spent a fourth day working through amendments to the massive immigration bill and party-line splits began to emerge.
In one major change, the committee voted 17-1 to make a third drunken-driving conviction a deportable offense for the newly legalized immigrants if at least one of those offenses occurs after they are approved for legal status.

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But immigrant-rights groups called that a rollback of due-process rights for the immigrants and said a drunken-driving incident shouldn’t cost someone a chance at citizenship.
“We cannot and will not support hard-line proposals that take away discretion and limit an individual’s ability to pursue the pathway to citizenship,” said Paromita Shah, associate director of the National Lawyers Guild’s National Immigration Project.
Overall, the committee continued to maintain the delicate balance struck by the “Gang of Eight” senators who negotiated the 867-page bill: Quick legal status for illegal immigrants, but delaying citizenship rights until after the administration spends more money on border security, puts in place a new electronic verification system to check workers’ status, and enacts an entry-exit system to check visas at airports and seaports.
In previous days’ action, two Republican members of the Gang of Eight — Sens. Lindsey Graham of South Carolina and Jeff Flake of Arizona — joined with Democrats to block a series of GOP amendments to stiffen the bill’s security.
But on Monday, the two Republicans sided with their party colleagues on key questions on giving illegal immigrants public benefits.
The 10 Democrats on the committee still outnumber the newly unified Republicans, but the votes signaled tough fights ahead on the Senate floor.

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In one vote, Sen. Jeff Sessions, Alabama Republican, tried to prevent anyone but citizens and green-card holders from being able to claim the Earned Income Tax Credit, which uses the tax code to transfer money to the poor.
But Sen. Charles E. Schumer, New York Democrat, said that would deny the tax credit not only to legalized immigrants but also refugees, asylum-seekers and other legal workers.
And Sen. Mazie K. Hirono, Hawaii Democrat, said denying the tax credit to legalized immigrants would hurt their children, many of whom are U.S. citizens.
The committee avoided what likely would have been a bitter fight over guns and whether those on the government’s terrorist watch list should be allowed to buy firearms when Sen. Sheldon Whitehouse, Rhode Island Democrat, withdrew his amendment.
“Evidently we think it’s OK for people on the terrorist watch list to buy a gun,” Mr. Whitehouse said.
He said he would try again later when the bill comes to the Senate floor.

Nobel Laureate Phelps Warns Against EU as Iceland Abandons Talks

Nobel Laureate Edmund Phelps warned against the dangers of European Union membership as Iceland became the latest nation to question the sense of affiliation with a bloc mired in economic crisis.
Iceland’s new government said yesterday it will halt its EU bid and drop the previous coalition’s goal of euro adoption. Prime Minister-elect Sigmundur Gunnlaugsson, whose Progressives won last month’s vote together with the Independence Party, said he doesn’t want to join a bloc in crisis as his own economy recovers. According to Phelps, the decision will spare Iceland many of the risks plaguing the EU.

Enlarge image

Sigmundur David Gunnlaugsson, seen here right, who will take over as prime minister this week, has decided that a January decision to freeze EU membership talks will be extended indefinitely, his political adviser Johannes Thor Skulason said. Photographer: Halldor Kolbeins/AFP via Getty Images

“We’re still learning about the European experiment and to what extent it’s going to succeed,” Phelps, 79, said in a telephone interview. “The possibility is not foreclosed that the experiment is going to prove unworkable, unsuccessful.”
The appeal the EU once held to nations seeking economic stability and access to free trade is crumbling as the region fails to emerge from its crisis. The U.K. is now openly questioning its allegiance with the EU while other members like Denmark have distanced themselves from the goal of euro adoption to protect their economies. Iceland, which in 2008 became the first nation to succumb to the global financial crisis, now enjoys faster economic growth than the EU average.
“I can’t believe that anybody’s serious about joining the EU right now,” Phelps said. “It’s like saying: ‘it’s a beautiful house -- it happens to be on fire at the moment -- we should buy it!’”

Nobel Prize

Phelps, who won the Nobel Economics Prize in 2006 for his theories on the interplay between inflation expectations and unemployment, questions the future of the euro -- and the larger EU -- after three years of debt crisis have left five nations relying on bailouts.
Since emerging from its 2008 banking meltdown, Iceland’s $14 billion economy has outpaced the euro zone’s and the government has tapped international debt markets twice. Unemployment in the Atlantic island is less than half the average in the euro area and credit derivatives show a smaller likelihood of default than in Italy or Spain, according to data compiled by Bloomberg.
Iceland froze EU accession talks in January as parliament awaited the outcome of parliamentary elections. Though the winners of April 27 elections say Iceland will survive better on its own, the central bank has argued a free floating krona will be difficult to maintain once capital controls are lifted.

Main Hurdle

One of Iceland’s main economic hurdles now is to exit its currency controls, according to Bjarni Benediktsson, the leader of the Independence Party and the country’s new finance minister. Euro membership would offer no protection from the kind of capital flight currency restrictions are designed to stem, Phelps said.
“It’s clear that there are huge blanks, huge gaps, in what they’ve done so far” in the euro area, Phelps said in the May 16 interview. “We’re seeing now that each country is subject to a flight of capital, currency flight; flight out of the currency, flight out of bank deposits into other countries.”
Cyprus in March resorted to the first ever capital controls inside the euro area in an effort to stem a run on its banks. In Iceland, similar controls intended to be temporary following a krona sell-off have now been in place for almost five years.
While any steps closer to the EU and the euro would be ill-advised, Iceland would be better off considering exchange rate regimes that link it to other currencies, including the Canadian dollar or the Norwegian krone, Phelps said.
“It’s certainly worth a look,” he said. “Of course, once you ask that question it leads naturally to other possibilities. What about Australia or Switzerland? Or, by the way, what about the U.S. dollar? I’ve seen worse currencies in the world.”
Iceland should ask itself whether linking its krona to Canada’s dollar would be any better than tracking the U.S. dollar, he said. “Has America grown so unpopular that the dollar is dismissed out of hand?”

Thanks To QE Bernanke Has Injected Foreign Banks With Over $1 Trillion In Cash For First Time Ever

Source: Zero Hedge

Two years ago, Zero Hedge first made the observation that the bulk of Fed reserves (also known simply as “cash created out of thin air” because money is first and foremost fungible no matter what textbook theoreticians may claim, and the only cash allocation preference is the capital allocation IRR analysis) had been parked not with US banks, but with foreign banks with US-based operations. We followed that with more analyses, showing explicitly how the Fed was providing a constant cash injection to foreign bankscourtesy of the rate on overnight reserves which is the amount Fed pays to banks that hold reserves with it, as the bulk of reserves continued to end up with foreign banks – a situation set to become a huge political storm some time in 2014-2015 when the IOER has to rise and the Fed is “found” to have injected tens of billions of “interest” not into US banks but in foreign banks operating in the US, and which then can upstream the “profits” to insolvent offshore domiciled holding companies.
So it was our expectation that while if not slowing down its rate of money-creation (i.e., reserve-production) – something that won’t happen for a long time as it would crash the stock market – the Fed’s reserves would at least revert to being accumulated at US-based banks. No such luck. In fact as the latest H.8 report demonstrates, as of the most recently weekly data, the Fed’s policies have led to foreign banks operating in the US holding an all time high amount of reserves, surpassing $1 trillion for the first time, or $1,033 billion to be precise.

This means that, as we expected several months ago, the only recipient of ongoing Fed money printing are not US banks, but foreign banks operating in the US. For those confused about the big picture, here is a chart showing the breakdown of cash held by big and small US banks as well as foreign banks, superimposed to total reserves created by the Fed since the start of the Great Financial Crisis. The correlation is 100%.

And just to prove that ALL the unsterilized cash from both QE2 and QEternity has essentially gone to support offshore banks, here is the conclusive chart showing the change in Fed reserves and cash held by foreign banks:

• A d v e r t i s e m e n t

Finally, tying it all together, here is chart showing cash at US banks vs cash at foreign banks operating in the US. At $1.03 trillion in foreign cash, the Fed’s policies have once again led to more cash being held by foreign banks than all cash held by domestic banks.

We are confident that we speak for all when we say: “Thank you Ben – insolvent foreign banks appreciate your ongoing QE2 and QEternity-funded generosity“

Gold spikes then drops on Bernanke talk

GCM3
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Gold futures GCM3 +0.56%  went on a wild ride as Fed Chairman Ben Bernanke testified on Capitol Hill Wednesday, with prices going on a 40 point swing in minutes as markets struggled to interpret when the FOMC will begin to curb its accommodative policies.
Initially, gold GCM3 +0.56%  spiked as Bernanke began to talk, particularly as he said ”A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further.”
But after quickly rising to $1,410 an ounce, the precious metal began a sharp retreat, falling more than $40 an ounce to below $1,370 as Bernanke went on to say that Federal fiscal austerity measures are hurting the economy and that “with short-term interest rates already close to zero, monetary policy does not have the capacity to fully offset an economic headwind of this magnitude.” 
In recent action, gold has been trading below $1,380 an ounce.
– Tom Bemis

QE-INFINITY: Will take at least 3 to 4 months before Fed even Thinks about Tapering. Goldman Sachs goes Uber Bullish!

RIDE THE STOCK MARKET GRAVY TRAIN ALL THE WAY TO THE BANK.
New York Fed President William Dudley said Tuesday that it will take three to four months to know if the Federal Reserve will be in the position to decide on tapering its asset purchases adding that it is “too soon” to make that determination and depends on how the economic outlook evolves.
https://www.mr-topstep.com/index.php/layout/market-updates/2942-fed-s-dudley-will-take-3-to-4-months-to-decide-on-tapering

S&P 500 Projections – Goldman Sachs goes uber bullish on equities and raises S&P targets for multiple years: 
“Our positive 2013 outlook for S&P 500 has played out much faster than we expected. Our earnings estimates remain unchanged but we raise our dividend estimates and index return forecasts for 2013 through 2015. We expect S&P 500 will rise by 5% to 1750 by year-end 2013, advance by 9% to 1900 in 2014, and climb by 10% to 2100 in 2015. Our 2013 return implies a year-end P/E of 15.0x, a one multiple point premium to our fair-value estimate. We forecast dividends will rise by 30% during next two years. Dividend yield is likely to stay around 2%, in line with the 20-year average.”
http://blogs.wsj.com/moneybeat/2013/05/21/goldman-sachs-turns-even-more-bullish-on-stocks/
The bears cannot catch a break. 
Yesterday is the latest frustration as the 8 MA attempts to drop through the 34 MA but Fed’s Bullard says full steam ahead with QE stick-saving the markets (pink box).
The pink boxes show the downside teases resulting in save after save.
The 8 MA remains above the 34 MA signaling bullishness for the hours ahead.
The Fed will not allow a market correction.
http://thekeystonespeculator.blogspot.com/

Once they stop printing, interest rise, then next leg down
http://www.dailyjobcuts.com/


What’s behind heavy VXX put buying
Traders are looking for the iPath S&P 500 VIX Short-Term Futures Note to continue its slide.
optionMONSTER systems detected the purchase of 7,859 January 13 puts for the ask price of $1.30 yesterday. Earlier in the session a a block of 6,000 August 15 putstraded for $0.64, also apparently bought. Volume was multiples of the previous open interest at each strike, so these are new positions.
http://www.optionmonster.com/news/article.php?page=whats_behind_heavy_vxx_put_buying_81860.html
Stocks keep climbing before Bernanke
http://www.optionmonster.com/news/article.php?page=pmc/stocks_keep_climbing_before_bernanke_81868.html

DB

JAPAN: The Beginning of it’s Economic End – Get Ready To Short Japanese Equities And Expect Another Real-Estate Bubble Burst

Just got this very reliable financial intel.
Get ready to short Japanese equities and expect another real-estate bubble burst.

Christine Hughes, President and Chief Investment Strategist, discusses details of Japan’s radical monetary policy.
the key part of the video, for ease of viewing:

The USDJPY has is trying to break the 103 barrier again after the BoJ meeting and Cabinet Secretary Suga commented the “BoJ should continue to steadily strive to reach inflation targets as soon as possible”.
https://www.mr-topstep.com/index.php/layout/forex/2937-eur-fed-watching
Abenomics in Review: Yen, Inflation, Exports, Imports
With the Yen collapsing vs. all other currencies, inquiring minds may be wondering how prime minister Shinzo Abe’s inflation policy is working out in practice. Let’s start with a look at the Yen.
Yen Daily Chart for One Year


In the last year, the Yen has fallen from 124.79 to 97.56. That is a decline of 21.82%. Recall that Abe’s policy is an attempt to raise inflation and spur exports.
Japan Still in Deflation 
On May 19, Reuters reported Japan’s Amari: core core CPI showing signs of turning positive due to BOJ.

 Japanese Economics Minister Akira Amari said on Monday that core-core consumer prices, which exclude fresh food and energy, are showing signs of turning positive due to the Bank of Japan’s aggressive monetary easing. Amari, speaking to reporters, also said the government still judges Japan to be in mild deflation as other measures of consumer prices are still falling when compared to the same period a year ago.

Fancy that. Consumer prices are still falling in spite of a 21% plunge in the currency. OK, but what about exports and imports?
Read more at http://globaleconomicanalysis.blogspot.com/2013/05/abenomics-in-review-yen-inflation.html#hhvuvFPRuEP2eI9Z.99

JAPAN “voted unanimously to stick with April’s massive QE” – big reason stocks have not corrected in 2013
https://twitter.com/CiovaccoCapital

EU agrees to end ‘dangerous’ tax evasion and bank secrecy

In a period of record recession and unemployment, the EU has decided to recover a reported €1 trillion in tax revenue lost in loopholes and fraud, and has set a one year deadline to end banking secrecy.
Parliament Officials meet in Brussels to address the burden the
€1 trillion tax evasion is having on the EU economy, and have again
called to end fraud and ‘offshore’ zones. 
The European Parliament agreed to halve the 1 trillion figure by
2020 through an aggressive dismantling of tax loopholes and
havens.  The MEP’s also approved state resources to go
after and prosecute tax evaders, in hopes of recovering lost
assets.
“At a time when finances are tight and taxpayers are
squeezed, it’s only right that we crack down on those who pursue
illegal means to avoid making any contribution to public coffers,
and who put smaller competitors at a disadvantage,” said
Conservative MEP Martin Callanan, in a direct challenge to British
PM David Cameron to make tax evasion a priority in the UK
Austria, notorious for its banking secrecy, has joined
its EU partners in the quest against tax fraud, and supports the
one year banking secrecy deadline. According to Tax Research UK, a
blog maintained by an “anti-poverty campaigner and tax expert”
according to the Guardian.

The blog’s owner also is involved with Tax Justice Network and
is the director of Tax Research LLP.
The poverty charity Oxfam said on Tuesday that the EU has missed
out on £100 billion from individual tax scammers.
Oxfam has called for a blacklist of tax havens and believes EU
member states should impose sanctions on members who provide
platforms for such activity.
Ireland has vehemently denied it is a tax haven and on Wednesday
called for an international clampdown on multinationals, yet sits
at the center of the controversy. On Monday, it became known that
Apple Inc. paid just 2 percent on $74 billion
overseas income, which was mostly facilitated by a loophole in
Ireland’s tax code.
The ‘Irish double dip’ allows a company to file two subsidiaries
in Ireland with a corporate tax rate of 12.5 percent, which is far
less than the 35 percent rate in the US, for example.
This ‘legitimate tax abuse’ by high-profile corporates such as
Amazon, Google, and Apple hijacked the EU summit agenda.
Martin Callanan has called for an end to tax-havens and doesn’t
blame the companies, but the governing bodies which allow such a
framework.
“Nobody can blame companies for wanting to look after
share-holders’ capital by minimizing their tax bill in a legal
manner,” he said.
Getting all member states to abide by one tax code, seems near
impossible.
“While companies may be using loopholes to pay as little tax
as possible, the truth is it’s a national issue. It’s up to the
relevant member states to change their tax codes and tighten the
net.”
The EU has already agreed to strengthen savings tax agreements
with European countries widely regarded as tax havens -
Switzerland, Liechtenstein, Monaco, Andorra and San Marino.
Luxembourg has taken a lead and has agreed to an automatic
information exchange with the United States.
This article originally appeared on : RT

Bachmann: God will ‘answer our prayers’ and repeal Obamacare with a ‘miracle’

Source: Raw Story

(Yeah I don’t think it quite works out that way Ms. Bachmann…)

Rep. Michele Bachmann (R-MN) is telling her constituents that God will “answer our prayers” and create a “miracle before our eyes” to repeal President Barack Obama’s health care reform law.
In a Tuesday interview with evangelical radio host James Dobson, Bachmann noted that the House of Representatives had recently voted for the 37th time to repeal the Affordable Care Act and that she was hopeful that the Democratically-controlled Senate would do the same.
“I think the President will ultimately be forced to repudiate his own signature piece of legislation because the American people will demand it,” she explained. “And I think before his second term is over, we’re going to see a miracle before our eyes, I believe God is going to answer our prayers and we’ll be freed from the yoke of Obamacare.”
“I believe that’s going to happen and we saw step one last week with the repeal of Obamacare in the House. We have two more steps. We serve a mighty God and I believe it can happen.”
At a tea party rally last week, Bachmann had falsely warned that Obamacare would allow the Internal Revenue Service to deny health care to patients.
“Many people said this issue was dead, many people have said that Obamacare is here to stay,” she told the crowd. “We are here as the people’s representatives, as real people across the United States to say, this issue is now revived! It’s is back on the table!”