EconMatters

China Q4 GDP China`s economy grew 7.9% for the fourth quarter of 2012, signaling to some that China might be rebounding from a two-year downtrend in economic growth. When it comes to Chinese data though, transparency issues always rear their ugly head. As a result, many analysts look to Electricity usage to confirm the economic numbers. Many times the electricity numbers are at odds with the stronger economic numbers coming out of China, and analysts believe that during this downturn, the actual growth numbers were much lower than those published officially. They pointed to lower electricity numbers that have dropped off substantially more than the economic drop-off on a percentage basis. The conclusion is that China is inflating the real growth numbers to paint a more flattering picture of their economy. Is this the right Conclusion? When the latest economic numbers came out, analyst compared these numbers with the electricity numbers, and they came to the conclusion that the electricity numbers confirmed an uptick in economic growth in China. So their conclusion is that the Chinese GDP numbers are correct. Productive Growth vs. Artificial Growth I have my doubts regarding the Chinese growth numbers. But I even have a bigger
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The CME raising margins for Silver Futures to such a degree that relative to market price, futures multiplier, and physical demand by consumers is just too high has basically killed the silver market. Throw in the fact that many brokerages have even higher margins than the exchange margins, and outside of a fed announcement, the silver market has all but dried up, when compared to the much more active physical market for silver. The Silver contract which closed Friday at $31.93 an ounce has an initial margin of $16,940 with an overnight margin of $11,000 at a typical brokerage. Now I know this market went through a very volatile trading phase, and with all the turmoil regarding Europe and central bank decisions around the world, it was probably a good idea to raise margins beyond normal percent driven formulaic metrics, until things settled down given the number and magnitude of the trading losses experienced at many brokerages. As in, when brokerages institute higher margins than exchanges this tells you how many accounts were blown out with the crazy gyrations in the silver market when it was having 20% swings in a week.   I know margins have come down from
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History of Bubble Creation   Everyone on Wall Street are a bunch of evil speculators, paying off ratings agencies to rate garbage mortgage backed securities triple A, so they could resell them, pushing up worthless companies beyond ridiculous valuations like Crocs, Inc. (NASDAQ:CROX) and many others only to leave a trail of carnage on the downside, the tech bubble, apple stock, the various oil bubbles, the silver bubble, cotton, coffee, corn you name it and Wall Street will try to manipulate up far beyond the fundamentals. If you bought a car from Wall Street, they would juice it up to $200,000 for a Honda Civic, and you think you have a depreciating asset now. Gas Prices Going Higher Again Despite Abundant Supply   Well gas prices are going up again due to those evil speculators even as the economy shows signs again of recovery, the economy is threatened once again by lowering disposable income in order to pay for exorbitant gas prices. This cycle just keeps on repeating itself over and over again. The economy starts to pick up, the evil speculators juice up gas prices, consumers can`t afford these prices, the economy goes back near to recession levels as consumers and
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I would be surprised   Today Jeff Currie, Goldman Sachs chief commodity strategist put forth some comments regarding the Oil market.  Jeff Currie from Frankfurt said he wouldn’t be surprised “if we woke up in summer and oil cost $150 “. Oil high established 1st Quarter The counter argument to that statement would be the following: Brent has put in its high for the year in the first quarter the past two years, and actually put in the low for the year in the summer. The reason that oil has put in the high of the year during the first quarter is that oil doesn`t actually trade on the fundamentals. It trades as an “asset class” just like equities, so when funds are piling money into asset classes oil moves up alongside the S&P 500. Further Reading - Gold Market Dip Buying Strategy  Middle East Disturbances   A secondary factor is that the last two years the middle east has been used as a catalyst to ramp up investor`s interest on the potential for supply disruptions. But conveniently sold off as soon as President Obama utilized the release and threat of release of the SPRs to counter trader`s ebullience in the futures markets.
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EIA Report   The weekly EIA report came out today and one of the noteworthy data points was the Cushing, Oklahoma storage numbers. Already at a record, Cushing added another 1.8 million barrels to storage sending total Cushing stocks to 51.9 million barrels of oil in storage facilities at the energy hub. There has been 6.3 million barrels of oil added to Cushing during the last 6 weeks. To put these build numbers into perspective, Cushing oil inventories stood at 28.3 million barrels for this time a year ago, which is a build of 23.6 million barrels in a year.   Seaway Pipeline Expansion   The Seaway pipeline was recently expanded to 400,000 barrels per day from 100,000 barrels per day, and many analysts have predicted that this would solve the Cushing oil glut. But it is looking more and more that what the Seaway pipeline offers is a cheaper mode of delivery out of Cushing, and the real benefit is one of logistical optionality for transportation. Further Reading - Keystone XL Pipeline: Economics, Idealism and Politics However, it is shaping up due to the sheer size of these build in inventories at Cushing that the Seaway pipeline is not a magic solution
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With China slowing down, and a recessionary GDP projection (below 3%) for the developed world in the next two years or so, many analysts are also projecting far less bullish commodity prices.  Due to the very limited export capacity, the price outlook of the land-locked U.S. natural gas (Henry Hub) is even gloomier without the cushion of more robust demand from emerging nations. After hitting a decade low of $1.90/mmbtu last April, Henry Hub (HH) natural gas price has managed to climb almost 80% to $3.398 on Jan. 14.  Unfortunately, the same factors tanking natural gas to below $2.00 — increasing production from unconventional sources via new technologies such as horizontal drilling and fracking, mild weather, weak domestic demand and economic environment – are still alive and well. Further Reading - Heat Wave Can’t Get You $8 Natural Gas in 2012  Production has been rising despite a 46% drop of gas rig count during 2012 — According to Baker Hughes Incorporated (NYSE:BHI), the natural gas rig count was 434 as of January 11, 2012, vs. 811 at the start of 2012.  Natural gas working inventories already hit a record-high level in early November, and the EIA now expects natural gas consumption
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President Utilizing Media to Pressure Republicans on Debt Ceiling Let me first state that I am not a Republican or a Democrat, or a Tea Party advocate; I just look at individual issues based upon their merit.  The issues and the right solution is what is important to me, and not collective party ideology.  But president Obama trying the same tactics of negotiation in the media to frame the debt ceiling debate as the Republicans being irresponsible, and not paying the Country`s bills is just media manipulation at its finest. This tactic is very transparent and apparent to the educated members of society, unfortunately the tactic worked with regards to the fiscal cliff, and he is hoping to do the same thing again by putting all the pressure on the Republicans with these media shows, and essentially making the Republicans look like the bad guys here. This kind of tactic I find repugnant because yes I am an American president Obama and I don`t agree with this tactic or the Democratic stance on this issue. The Republicans wouldn`t have to resort to this kind of negotiation if Democrats could ever be forced to cut any type of spending in any
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“Risk On” Mode   It is pretty obvious that there is a lot of liquidity in the system, with the Fed`s loose monetary policy, extremely low interest rates, and traders  in all out “Risk On” mode with regard to their two favorite funding currency crosses in the EUR/USD and USD/JPY. Traders are banging every asset class except for the Metals into the close, pushing asset classes up overnight with the futures contracts on a regular basis, and it is definitely a “Risk On” environment in the markets. You can even hear it in the language of the markets, the tired old expressions of commodities like oil being an “Asset Class” and equities who can barely meet earnings as ripe for “Multiple Expansion” which is just a fancy term for, we know that based upon any fundamental analysis company A should not be trading at these levels, but if Wall Street has extra juice it can push up this dead in the water stock anyway!   The Retail Bag holder   And some poor retail sucker comes in and buys Company A on “Multiple Expansion” rhetoric out of Wall Street and this stock drops like a rock because it was pushed
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3-Month Depreciating Yen Trade   The 3 month Japanese Yen trade which every fund manager from San Diego to Hong Kong has taken part in will sure help Japanese exporters and help spur more economic activity in what has been a real laggard in both business competiveness, and the race to weaken their currency that has occurred during the last five years. However, there are very few free lunches in the world, and I imagine there will be some costs or unintended consequences of this newfound commitment towards a weaker Yen. Almost every currency has appreciated against the Yen the past 3 months, and the original target was placed at 90 for the USD/JPY cross, now analysts are targeting 100 for the cross. On October 1st the JPY/CNY cross was 0.0806 and today the currency cross is 0.0697 for a pretty significant move against a currency who doesn`t like to strengthen against anybody if they can help it. China has made an art out of currency manipulation, and built an entire competitive advantage on having an undervalued currency. Inflation is Back!   On Friday, China reported that inflation jumped to a six month high in December rising from 2% in November
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No Fundamental Reason for Oil to Move Higher   When is this country going to say enough is enough and start putting people in jail for this kind of blatant market manipulation? It is obvious that the Oil market is manipulated, oil has gone nowhere for five months because there is no reason for it to go anywhere, i.e., there are a ton of supplies on the market, no Middle East disruptions, Israel hasn`t attacked Iran, huge builds in gasoline products, no jump in demand. And yet Oil mysteriously rises $10 in this common period for manipulating markets at the tail end of the year, and the beginning of the new year, let`s juice it up before the contract rollover, no one cares, no one is really looking too closely at what we are doing, everybody is focusing on fiscal cliff issues and the debt ceiling debate. Another Bearish EIA Report   So we have another bearish inventory report on Wednesday, and oil refuses to go down, why so they can force it one leg higher, and get other trapped traders to buy their contracts from them so they don`t have to rollover at a huge cost. Force Stops &
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The Great Recession and the very slow pace of subsequent recovery has sky-rocketed the unemployment, as well as people on welfare and food stamps.  A record high of 15% or 46.37 million Americans are on food stamps in June last year — that’s almost one in every seven Americans.  That number is not expected to come down much without a significant improvement in the unemployment picture. Even worse, according to The Chronicle of Higher Education,  The number of people with graduate degrees — master’s degrees and doctorates — who have had to apply for food stamps, unemployment or other assistance more than tripled between 2007 and 2010.  Of the 22 million Americans with master’s degrees or higher in 2010, about 360,000 were receiving some kind of public assistance, according to the latest Current Population Survey released by the U.S. Census Bureau in March 2011. So holding a PhD does not automatically walk you into even a decent paying job any more.  This infographic below from onlinecolleges.net helps to illustrates this sad new reality in America. By EconMatters 'Get ValueWalk's Daily Edition By Email and Never Miss Our Top Stories'
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