Saturday, July 20, 2013

THE COMING ECONOMIC PERFECT STORM. 3 Major Bubbles about to Burst: Oil, China, & Wall St

BEIJING (AP) — China has ended controls on bank interest rates in a move toward making its financial system more market-oriented.
The change announced Friday by the central bank comes amid promises by the ruling Communist Party to make the economy more efficient and productive.
Analysts say one of the most important changes will be to overhaul China’s banking industry that subsidizes state industry and lends little to entrepreneurs.
http://www.usatoday.com/story/money/business/2013/07/19/china-bank-lending-rates/2567583/?utm_source=dlvr.it&utm_medium=twitter&dlvrit=110940
Krugman: “China is in big trouble. … Not some minor setback along the way, but something more fundamental.”
http://www.nytimes.com/2013/07/19/opinion/krugman-hitting-chinas-wall.html?_r=1&
Key point Krugman misses: China isn’t so much hitting a wall as bringing itself to an emergency stop. It’s deliberate
https://twitter.com/Max_Fisher
$ES_F $19.7bn was invested in global equity funds in the past week, the most for six months $$
$ES_F $700m was pulled from bond funds.The amount put in US equity funds was the most since June 2008
https://twitter.com/MrTopStep
People’s Bank of China decided to further promote market-oriented interest rate reform
Approved by the State Council, People’s Bank of China, from July 20, 2013 from the full liberalization of financial institutions lending rate controls.
First, the cancellation of financial institutions lending rate 0.7 times the lower limit, by a financial institution lending on commercial principles independently determine the level of interest rates.
Second, cancel bills discounted interest rate controls, changing the discount rate at the rediscount rate plus points in a manner determined by the financial institution determined independently.
Third, the establishment of rural credit cooperatives are no longer lending rate caps.
Fourth, to continue to strictly implement differentiated housing credit policies to promote the healthy development of the real estate market, individual housing loan interest rate floating range temporarily adjusted.
Full liberalization of lending interest rate controls, the financial institutions in consultation with the customer pricing will be further expanded space, and promoting financial institutions to take differentiated pricing strategy, and reduce financing costs; favor of financial institutions to continuously improve the ability of independent pricing, changing the operating mode , improve service levels, increase business, residents financial support; help to optimize the allocation of financial resources, better play the role of financial support for the real economy, but also strong support for economic restructuring and transformation and upgrading.
http://www.zerohedge.com/news/2013-07-19/pboc-scraps-lending-rate-floor-full-liberalization-interest-rate-controls

“Economists and investors around the world are finally getting used to the idea that China’s years of blazing hot growth are a thing of the past.”
http://www.businessinsider.com/scary-china-charts-2013-7
The True Chinese Credit Bubble: 240% Of GDP And Soaring
http://www.zerohedge.com/news/2013-04-11/true-chinese-credit-bubble-240-gdp-and-soaring


Crude Oil
In yesterday’s Crude report: “Short term, watch LVNs at 106.77 and 105.02 as resistance and support, respectively. A break through either of these levels could start the initial party for a breakout.”
Crude finally got a breakout from the tightly-coiled 6-day range, as price rallied through the 106.77 LVN before topping out at 108.43. Each key bull target was taken out except the 125% target at 108.68, which I was actually shooting for on my last scale late in the day.
Again, Crude Oil is rallying in pre-market trading, and new highs are being seen. The 109.04 level has is a Fib extension from Thursday’s trading, so that level may offer resistance. Additionally, program trading algorithms are beginning to see a high number of Fib matches at these levels, which means we could see some selling in Crude at some point off these highs. Also, keep in mind my 109.51 weekly bull target is still above and could be reached today.
Continue to buy pullbacks in Crude until 109.51 is reached. Selling is not advised until support at 107.70 is taken out.
http://pivotboss.com/2013/07/19/goog-hits-nq-on-the-close/
Crude Oil’s Fast & Furious Rise Will Hit Consumers Hard, Warns Kilburg
While most of the trading universe was preoccupied with other things the price of crude oil has been ripping higher in an almost straight line. KKM Financial CEO and founder Jeff Kilburg says Americans aren’t going to be able to ignore the spike for long.
In early trading Friday WTI crude oil tacked on another dollar, topping $109 a barrel, and racing to break $110 for the first time in multiple years.
A close here would mark the second straight week of multiple percentage point gains.
“We’re seeing oil prices unfortunately rise and that’s going to mean pain at the pump,” Kilburg told Breakout from the floor of the CME.
“On July 1st crude was trading $96, now we interject some Egyptian turmoil and people are really scared.”
Traders are frightened not just because many of them missed the move but they’ve been shorting crude during the rally.
As WTI rallies those same traders are taking off the short position by purchasing upside calls or get long in other ways, all of which adds fuel to the rally.
http://finance.yahoo.com/blogs/breakout/crude-oil-fast-furious-rise-hit-consumers-hard-123644491.html?l=1

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