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Monday, 31 March 2014

More Predict Wall Street Collapse

I've been predicting the next financial crash ever since the last one.

The Coming Financial Crisis 

Yes Indeed, Another Crash Is Coming 

By Al Lewis, The Wall Street Journal

It isn't easy flapping my wings like Chicken Little while the stock market races to new highs and economists drone on about a recovery, but history is on my side.

I have witnessed the 1980s savings-and-loan crisis, the 1987 stock-market crash, the 1997 Asian financial crisis, and the 1998 collapse of a hedge fund called Long-Term Capital Management that had to be bailed out before it took down the global economy.
Then came the 2000 dot-com bust. Then, the 2008 financial crisis and the muck our economy has been stuck in ever since.

Every crisis is different in detail, but the cause is always some variation of the same game: High rollers amass debt until they can't pay it off, and then they default, setting off a string of insolvencies that can be stopped only by putting taxpayers at risk.
Systemic fraud is exposed in every crash, but little is done about it. Big business, big government and big bankers are too often from the same self-dealing clan. The most culpable among them will claim no one could have possibly seen the big crash coming, even though plenty of warnings went unheeded.
Economists working for the looting class often compare the economy to the weather. They claim that unavoidable cycles cause crashes, as if the economy were a natural phenomenon, existing apart from humanity. But humans create economies, and humans cause financial disasters.

Friday, 28 March 2014

Warren Buffet Really Doesn't Get IT!

Doomsday debunked: Warren Buffett, investing elite, deny market meltdown on cards

By Jared Lynch 
US fund manager Jeremy Grantham's gloomy predictions for Wall Street sparked lots of interest and some controversy when they ran on our website yesterday.
We took that as a prompt to check what other well-known investors are predicting. Turns out that while a bit of caution seems to be a common theme as the Fed slowly winds down the easy money, many successful fund managers and investors aren't quite as bearish as Mr Grantham.
Warren Buffett, although concerned about the effects of the Fed tapering its $US85 billion ($92.8 billion) a month asset buying program, believed the economy is going to be ''just fine'' and equities were still the most attractive investment.
''People react too much to short-term things in the stock market whereas they behave quite rationally when they get into other investments,'' he told CNBC this month.

''The American economy for five years has been moving at a fairly steady rate upwards --not as fast as people would like -- but I think that absolutely continues now.''
Billionaire Ray Dalio, whose Bridgewater Associates is the world's largest hedge fund with $US130 billion under management, wasn't as upbeat but said that the US was in its ''boring years'', hence 2014 would be forgettable.

Howard Marks, the chairman of US
investment firm Oaktree Capital, said while equities were no longer cheap, there was no cause for panic. But he said investors should be cautious.

''The price of most assets as being on the high side of fair. We're not in the low of the crisis like five years ago. But similarly, I don't think we're in a bubble,'' Mr Marks told Zero Hedge last month.

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Watch: A World on the Edge

Thursday, 27 March 2014

PIMCO: No Fears Emerging Markets???

World's top fund manager: relax about emerging markets

By Frik Els 

Francesc Balcells and Anton Dombrovsky of PIMCO, the world's largest money manager with an eye-watering $2 trillion in assets across its various funds, on Tuesday provided insights into the state of emerging markets.
More specifically, the authors ask: With troubles in Ukraine, Turkey, Argentina, Egypt, Thailand, China and elsewhere are we headed into a 1997–1998 style emerging market meltdown?
The current turmoil is not unprecedented: "Every time the Fed has removed monetary accommodation in the past, it has been followed by some form of emerging market turbulence," argues Balcells.
The same scenario played out in the early 1980s and mid-1990s, and again in the early 2000s.
There is something different this time around however: "The increased importance of growth in China to other emerging markets has introduced a new phenomenon: For the first time, a recovery in the developed markets, albeit tepid and not uniform, is not spurring a recovery in emerging markets."
Q: Should investors expect a repetition of an emerging-market-wide crisis? And if not, why?

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While more scientific thinking point to big troubles Soon!

In the end we take the side of science and logic. These countries are basket-cases and there is no hope that they will ever recover as there just won't be the energy and material available to pump into these marginal economies. Start looking for the higher ground.

Investors' Insights
March 27, 2014

Wednesday, 26 March 2014

Alibaba Cash Crunch Hits China Banks - Vampires Blamed???

China Banks Drained by Funds Called Vampires Seek Rules

By Bloomberg News 

It has been labeled a “blood-sucking vampire” by a prominent commentator on state-run television. Executives at China’s largest banks have called for regulators to curb its rapid expansion.

The focus of this ire is Internet financing, specifically Yu’E Bao, the fund pioneered nine months ago by Alibaba Group Holding Ltd.’s online-payment affiliate Alipay. Its ease of use, involving a few taps on a smartphone, has drawn deposits from 81 million customers, more than the population of Germany, as they chase returns higher than China’s banks can offer. The total exceeded 500 billion yuan ($80 billion) as of Feb. 28, according to the official Xinhua news agency, double the amount reported by Alipay in mid-January.

At least six other technology firms, including Baidu Inc. (BIDU) and Tencent Holding Ltd. (700), have embraced Internet financing with similar products offering returns as high as 10 percent and threatening to drain more cash from China’s banking system. Bank executives, unable to stop the outflow of their cheapest source of funding because interest rates on comparable deposits are fixed by the government at 0.35 percent, are calling for more regulation, saying that lack of oversight and risks related to account security, yield volatility and liquidity management threaten China’s financial stability.

Tuesday, 25 March 2014

The Death of Money - Gold Bugs Buzzing

Reality Confronts Money

James Rickards: International Monetary System Headed for Collapse

  By Dan Weil

The prognosis for the global financial system isn't bright, says James Rickards, senior managing director of Tangent Capital Partners and author of the upcoming book, "The Death of Money: The Coming Collapse of the International Monetary System."

Nowhere to run, nowhere to hide
"The international monetary system has actually collapsed three times in the past 100 years: 1914, 1939, and 1971. So these things do happen," he told Kitco News."I’m just trying to prepare the reader for first of all, the fact that it’s coming, and secondly as an investor what you can do now to protect yourself."

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Who else says so?


You may be wondering why we are showing the cover from Limits to Growth. One, because there actually are physical limits to growth. Two, as you approach those limits of physical exhaustion, then currency debasement occurs. In the end, do you think currency has any value if the originating resource inputs are depleted? 

Three. Simple - right!  But, only madmen and economists think otherwise, as the Bank of England finally declared and reported this past week. Somebody is starting to figure it out.

Who's sorry now?

Investors Insights
March 25, 2014

Monday, 24 March 2014

Chinese #IPOs Risky Business

Chinese IPOs in the US – How Low Should You Go?

So Weibo and Alibaba are planning to go public in the US. They follow a number of other Chinese companies that already went public. What has the record of these Chinese IPOs been?

US investors are generally a pretty trusting crowd. Partly this is because the word “China” makes them think of vast numbers of people and therefore presumably vast revenues and earnings. So Chinese companies look like treasure troves to many US investors, particularly unsophisticated ones. And when a new Chinese company comes to the US to go public, it’s not just the treasure aspect that is attractive. US investment banks and stockbrokers promote Chinese stocks aggressively since they all get paid commissions on the stocks they sell, even if the company is terrible or its stock performs disastrously later.

Of course, that’s exactly what has happened to many Chinese companies that went public in the US. The poster-child is Sino-Forest, whose financial statements were falsified and largely fraudulent at least under US accounting rules.

And Sino-Forest was only one of many Chinese companies whose financials were either misleading or even fraudulent. Currently there is the well-publicized example of the Chinese company Mindray whose financial statements seem to be remarkably similar to those of Sino-Forest in terms of their many problems. So now Chinese companies have a very bad reputation in the US, many being regarded as dishonest or even fraudulent.

A big part of the problem is the huge difference in auditing and accounting standards between the US and China. Right now there is a major argument between US and Chinese regulators about whether or not US regulators can get access to the working papers of Chinese auditors, with Chinese regulators so far refusing to allow that. 

That makes US investors very wary because they don’t know how to judge the quality of financials of Chinese companies especially after their experience up til now with some of the Chinese companies that already did IPOs and whose prices later crashed when the low quality of their financials became known.

Even in the best of times we are highly skeptical about investing in Chinese stocks, for obvious reasons of transparency, symmetry of accounting and audit standards as well as the cultural and political risks. Moreover, China' s bubble economy has the smell of asset and profit inflation which attracts the usual suspects. All this brings back memories of Enron, MCI Worldcom, and Bre- Ex to name a few.

That aside, the financial structure is now poised to unwind and experience the consequences of overly aggressive lending practices - Banks will ne doubt look  to take their mistakes off the books and pass them on to naive investors. Good luck. We have no interest in getting caught in these IPO and other securities traps.

March 24, 2014

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