TTMYGH 27 Jan 2014

Hmmm...
THINGS THAT MAKE YOU GO

A walk around the fringes of finance
By Grant Williams
To learn more about Grant's new investment newsletter, Bull's Eye Investor, Click here
27 January 2014
Behold, Politics
"Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies." Groucho Marx "A week is a long time in politics." Harold Wilson "The oppressed are allowed once every few years to decide which particular representatives of the oppressing class are to represent and repress them." Karl Marx "Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience." C.S. Lewis
Copyright Mauldin Economics. Unauthorized disclosure prohibited. Use of content subject to terms of use stated on last page.
Hmmm...
Contents
THINGS THAT MAKE YOU GO HMMM... ....................................................3
Breaking Out Is Hard ..................................................................................23 The BaFin Enquiry into Deutsche Bank .............................................................25 Here's to Payday .......................................................................................26 Most Germans Don't Buy Their Homes, They Rent. Here's Why .................................27 HSBC Imposes Restrictions on Large Cash Withdrawals ..........................................28 Gold Mint Runs Overtime in Race to Meet World Coin Demand ................................30 The Farce of the EU Travelling Circus ..............................................................31 Learn from BuBa and Demand Delivery for True Price of Gold .................................33 The Bull in the Euro Zone's China Shop ............................................................34
CHARTS THAT MAKE YOU GO HMMM... ..................................................35 WORDS THAT MAKE YOU GO HMMM... ...................................................38 AND FINALLY... .............................................................................39
27 January 2014
Hmmm...
Things That Make You Go Hmmm...

Gibraltar is a British Overseas Territory. It has an area of 2.6 square miles and juts from the southern tip of the Iberian Peninsula, overlooking the entrance to the Mediterranean Sea. Roughly 30,000 people live in the territory, whose sole distinguishing feature is the very large rock which runs along the eastern edge of the territory and culminates in a dramatic promontory in the northeastern corner. That's it there, on the right ... see? Gibraltar was captured by an Anglo-Dutch force in 1704 during the War of the Spanish Succession, in which European countries fought each other over who had the right to succeed King Charles II as ruler of Spain. Charles (or Carlos) had died without heirs, bringing to its final extinction the mighty House of Habsburg, which had dominated European royalty for three centuries. In his will, Charles had designated his 16-year-old grandnephew Philip, Duke of Anjou, as his successor. Philip was the grandson of the reigning French king, Louis XIV, the famous "Sun King"; and the prospect of an early 18th-century Franco-Spanish alliance at the heart of Europe was unnerving to others, who saw it as potentially destabilizing the delicate balance of power; and so, as Europeans tended to do in the days before they got around to creating the EU, they opted to fight a war. This war turned out to be quite the bar brawl, spilling out of Spain and into Germany, the Netherlands, and, somehow, America, as the French and the English fought each other in Florida, New England, Newfoundland (huh?), and Carolina. (Thankfully, the prospect of an Hollande/Rajoy alliance at the heart of today's Europe would provoke nothing more than uncontrollable laughter, so Europe is far safer now; but then it was a different world.)
27 January 2014
Hmmm...
Anyhoo, as part of the Treaty of Utrecht, which ended the Spanish War of Succession in 1713, Spain got a French king after all (Philip V), but he was required to relinquish all future claims by his family on the French throne; various French princelings were forced to give up all present and future claims to the Spanish throne; Savoy was given Sicily; Charles VI of Austria received the Spanish Netherlands, Naples, Sardinia, and most of Milan; Portugal was handed a chunk of the Amazon rainforest ... and Great Britain got Gibraltar. Big whoop! Personally, if I'd been negotiating the deal, I'd have stuck it out for Naples, Sardinia, and Milan, but ... whatever. Gibraltar was better than nothing. Probably. To receive Grant Williams' Things That Make You Go Hmmm... delivered to your inbox: SUBSCRIBE NOW!
Funnily enough, as the years have passed, the Spanish have from time to time reasserted their claims to the rocky promontory that juts out from mainland Spain, 80-odd miles southwest of another town annexed (albeit UNofficially) by the British Marbella. And who can blame them? Gibraltar is to Spain as Cape Cod is to Massachusetts or Baja is to California only with more monkeys. Referenda proposing a return to Spanish sovereignty were held in Gibraltar in 1967 and 2002, and one would have to say that the results could certainly be classified as "conclusive." The 1967 referendum on whether to pass under Spanish Sovereignty or remain part of Great Britain left little room for doubt:
Choice British Sovereignty Spanish Sovereignty Invalid/Blank Votes Total Registered Voters/Turnout Votes 12,138 44 55 12,237 12,672 % 99.64 0.36 100 95.67
27 January 2014
Hmmm...
Thirty-five years later, the 2002 referendum, which asked "Do you approve of the principle that Britain and Spain should share sovereignty over Gibraltar?" was equally one-sided:
Choice No Yes Valid Votes Invalid/Blank Votes Total Voter Turnout Electorate Votes 17,900 187 18,087 89 18,176 % 98.48 1.03 99.51 0.49 100 87.9 20,678
Whatever your view on the Gibraltar issue (assuming you can be bothered to have one), it's pretty hard to argue with 98.48% of the voters in a (supposed) democracy; but with things in Spain being quite tight and Catalonia looking to become a new Gibraltar all of its own, the Rajoy government clearly felt that a little distraction was in order; and so "tensions" in the Strait have escalated in recent months, with Spanish-imposed delays at border crossings that would make Chris Christie's staff salivate (no need for subterfuge HERE). And, of course, in response quite by coincidence, there have been the requisite "naval exercises" conducted by the British Royal Navy off the coast of "The Rock." In early January, however, after the mood had darkened considerably over waiting times to cross the border between the Territory and the Mainland having stretched to four hours (Fort Lee residents, the people of Gibraltar feel your pain), another amazing coincidence occurred when certain diplomatic documents relating to discussions on Gibraltar were declassified by the British Foreign Office. Within these documents detailing exchanges between King Juan Carlos of Spain and the then-British Ambassador to Madrid, Sir Richard Parsons (no relation to Nicholas), was a revelation: (UK Daily Telegraph): King Juan Carlos of Spain told Britain that Spain "did not really want" Gibraltar back as it would lead to claims from Morocco for Spanish territories in North Africa, newly declassified documents from the 1980s released by the Foreign Office reveal. The King of Spain admitted privately in a meeting with the then British ambassador to Madrid, Sir Richard Parsons, that it was "not in Spain's interest to recover Gibraltar in the near future." If it did so, "King Hassan would immediately reactivate the Moroccan claim to Ceuta and Melilla," the monarch, who celebrated his 76th birthday on Sunday, reportedly said during the meeting in Madrid in July 1983. Fascinating stuff, but that's not the passage that contains the revelation.
27 January 2014
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This is: In a confidential dispatch from Madrid to Geoffrey Howe, the then Foreign Secretary, Ambassador Parsons wrote: "The King emphasised, as he had done with me before, that that requirement was to take some step over Gibraltar which would keep public opinion quiet for the time being. "It should be clearly understood in private by both governments that in fact Spain did not really seek an early solution to the sovereignty problem. "If [Spain] recovered Gibraltar, King Hassan of Morocco would immediately activate his claim to Ceuta and Melilla. "The two foreign ministers should reach a private understanding between each other, differentiating between their actual aim and the methods used to propitiate public opinion on both sides." Did you spot it? No? Well here it is again in slow motion: "T h e t w o f o r e i g n m i n i s t e r s s h o u l d r e a c h a p r i v a t e u n d e r s t a n d i n g b e t w e e n e a c h o t h e r, d i f f e r e n t i a t i n g between their actual aim and the methods used to p r o p i t i a t e p u b l i c o p i n i o n o n b o t h s i d e s." ... and here's the super-slo-mo close-up frame (if you have 3D glasses, put them on now): "... P R O P I T I A T E Let's go to the dictionary: propitiate transitive verb \pr-pi-sh-t\ : to make (someone) pleased or less angry by giving or saying something desired Behold, politics. Sometimes, in cables amongst themselves, politicians tend to forget that "real people" will eventually get to read their words (either that or they realize but just don't give a damn), and they drop the facade and talk in real terms. Sir Richard Parsons' words, translated, are telling: The two foreign ministers should work out what needs to be said to keep the public happy whilst they simultaneously pursue a completely different agenda one which they feel best benefits the political ambitions of each side. P U B L I C O P I N I O N ..."
27 January 2014
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Now, I'm not telling many of you something you didn't already know although there may be a few amongst you who still believe that all elected officials are there for the good of the people but to see how things look when the mask slips and the monster behind is revealed is important in what I suspect could be a seriously turbulent year politically. Mark the dates May 22nd to 25th in your diaries, folks. That is the time frame during which elections to the EU Parliament must be conducted this year, and the potential for the politicians and bureaucrats who creep backwards and forwards to Brussels (on expenses) to receive a major wake-up call increases by the day. Historically, turnout at EU parliamentary elections has been abysmal fairly poor and has declined consistently to the point where, in 2009, the percentage of eligible voters who turned out to select representatives to the body that would go on making ever more decisions about how they would be allowed to live their lives was just 43%. The result? Well, the people of Europe got the parliament they deserved.
EU Parliamentary Election Turnout (Europe)
80
1979 - 2009
70
60
50
50%
40
30
20
10
0 1979 EU9 1984 EU10 1989 EU12 1994 EU12 199 EU15 2004 EU25 2009 EU27
Source: EU Parliament
27 January 2014
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Nowhere was that voter apathy greater than in the United Kingdom, where the hatred of what is seen by the British as European "meddling" has always led to a smaller turnout than that which determines the winner of Strictly Come Dancing:
EU Parliamentary Election Turnout (UK)
80
1979 - 2009
70
60
50
50%
40
30
20
10
0 1979 EU9 1984 EU10 1989 EU12 1994 EU12 199 EU15 2004 EU25 2009 EU27
Source: EU Parliament
The source of Britain's apathy has been a sense that, 24 miles away across the English Channel, there is a world of bureaucratic fools whose sole aim in life is to spend taxpayers' money on new ways to interfere with the lives of those taxpayers, by ruling on matters which those taxpayers find, at best, irrelevant. We have trod this turf together before, but the EU is a writer's best friend when it comes to ridiculous rulings. These fools certainly know how important it is to call a spade a manually operated, metal-and-wood-composite, earth-moving implement. Take this ruling on the correct nomenclature for wine fruit-derived alcoholic beverages from produce sourced outside the EU: (The Parliament.com): The EU has been accused of not allowing a wine to be called wine because it is made from grapes sourced outside the EU. According to EU law, an English wine produced in Kent by Chapel Down & Wines of Argentina cannot be classified as a wine. This is despite it being made of Malbec grapes air-freighted to the UK from Argentina. As a result, the wine owner has been told he must call it a "fruit-derived alcoholic beverage from produce sourced outside the EU".
27 January 2014
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Or this one on the correct presentation of olive oil: (UK Daily Telegraph): In the middle of an economic crisis and a collapse in political confidence in the European project, an EU committee has found time to ban the serving of olive oil in dipping bowls and from re-filled jugs in restaurants. From now on you will have to douse your bread in pre-packaged, factory bottles with a dispensing nozzle and labelling that meets the EU's standards. The official explanation for the move is that it is to improve both hygiene and the "image of olive oil" within the EU.... It also says something about the size and ambition of the European Union that it now takes an interest in how people put oil on their bread. As I said, easy pickings for the writer but fun all the same. In fact, here are a couple more, (courtesy of the UK Daily Telegraph, who regularly mine this particular vein of news); and we'll begin with that most dangerous of items, bottled water: (UK Daily Telegraph): Brussels bureaucrats were ridiculed yesterday after banning drink manufacturers from claiming that water can prevent dehydration. EU officials concluded that, following a three-year investigation, there was no evidence to prove the previously undisputed fact. Producers of bottled water are now forbidden by law from making the claim and will face a two-year jail sentence if they defy the edict, which comes into force in the UK next month. Having saved the citizens of the EU from the dangers of believing that bottled water might rehydrate them, the Commission turned its attention to another potential peril, mislabeled Cornish pasties: (UK Daily Telegraph): The infamous bureaucrats of Brussels have made another baffling judgment on the nature of food, ruling that a swede can be called a turnip when it's in a Cornish pasty. [European Commission] Officials have decreed that only minced or diced beef, sliced potato, onion and swede are allowed to fill the pastry. However the Cornish are unusual in referring to swede as turnip, even though they differ markedly. The former is white with a sharp taste while the latter is orange with a more earthy flavour. Because of this linguistic quirk, the regulations have been amended to allow either term to be used on the label although only one of the two is allowed in the pasty.
27 January 2014
Hmmm...
This will mean that genuine Cornish pasties will be allowed to go on sale advertised as containing turnip, but will break the rules if they actually do contain the rogue root vegetable. But the Continent could never truly be safe until no child under 8 could ever be subjected to the potential dangers of blowing up a balloon or playing magnetic fishing games, and deadly party blowers certainly had to be removed from the mouths of anyone under 14: (UK Daily Telegraph): Children are to be banned from taking part in traditional Christmas games, from blowing up balloons to blowing on party whistles, because of new EU safety rules that have just entered into force. The EU toy safety directive, agreed and implemented by Government, states that balloons must not be blown up by unsupervised children under the age of 8, in case they accidentally swallow them and choke. Despite having been popular favourites for generations of children, party games including whistles and magnetic fishing games are to be banned because their small parts or chemicals used in making them are decreed to be too risky. Apparently harmless toys that children have enjoyed for decades are now regarded by EU regulators as posing an unacceptable safety risk. Whistle blowers, which scroll out into a long coloured paper tongue when sounded a party favourite at family Christmas meals are now classed as unsafe for all children under 14. I could go on. But I won't. For some reason, however, in mainland Europe these ridiculous rules don't seem to provoke the ire that they do in Great Britain; and the idea of "Europe" has always played rather well with your average Belgian, German, Luxembourger or, for that matter, even your common or garden Dutchman, Italian, or Frenchman. Even your standard Greek, Cypriot, or Spaniard hasn't seemed too bothered by the diktats laid down by their Brussels-based overlords. That, Dear Reader, may be about to change in a BIG way.
27 January 2014
10
Hmmm...
As I write this week's Things That Make You Go Hmmm... the EU Parliament looks like this:
EU Parliamentary Chamber
European Peoples Party (265) Alliance of Liberals & Democrats for Europe (84) European Greens-European Free Alliance (55) Progressive Alliance of Socialists & Democrats (184) European United Left-Nordic Green Left (35) European Conservatives & Reformists (54) Europe of Freedom & Democracy (32) Non-Inscrits (27)
Source: EU Commission
By the time May 26th dawns on Europe, this picture could well be completely redrawn, as a group of previously irrelevant political parties look to capitalize on the growing disaffection with the EU project and its common currency, and are prepared to seize as much power as the citizens of Europe will grant them. The problem is, these parties are nearly all extremist in nature; but whether right- or left-wing, they unite beneath an anti-Europe banner, and that may be enough to sweep them to relevance and give them a strong hand at the negotiating table. But before we get to the upstarts, a quick look at how things currently stand. Let's begin with the Presidencies of the EU all four of them. The President of the European Council is Herman Van Rompuy of Belgium (famously described by Nigel Farage as having "the charisma of a damp rag and the appearance of a low-grade bank clerk." Van Rompuy's role is described thus: (Wikipedia): The duty of the European Council president is primarily that of preparing and chairing the meetings of the European Council. This longer term President of the European Council has been described directly by some as a new "President of the European Union". According to the Financial Times, "the president would have few formal powers, but would give the EU strategic leadership and represent the bloc on the world stage on issues such as climate change, bilateral relations and development."
27 January 2014 11
Hmmm...
Next up is the familiar face of Jos Manuel Barroso of Portugal, the President of the European Commission: (Wikipedia): The President of the European Commission is head of the 27-member college of Commissioners. The Commission's responsibilities include drafting legislative proposals and managing the day to day running of the EU. It is also responsible for a degree of the EU's external representation, for example attending G8 meetings. The Commission President is proposed by the European Council, who take account of the previous European Elections, before being elected by the European Parliament for a five-year mandate. It has been described by some as the "President of the European Union" but a more common analogy is "Prime Minister of the European Union" given the style of position over a cabinet government. Thirdly, there is the Presidency of the Council of the EU, a position currently held (as of January 2014) by Antonis Samaras of Greece: (Wikipedia): The Presidency of the Council of the European Union (Council of Ministers) is rotated between member states of every 6 months. The Council is composed of the relevant national ministers depending on the topic being discussed with minister from the state holding the presidency chairing. The country holding the Presidency is able to affect the overall policy direction for the six months. Since 2007, the Presidency has been co-ordinated every 18 months by three countries (a "triplet"), though one still takes a lead position every 6 months. Finally (yeah, I know...), there is the Presidency of the European Parliament, held currently by Martin Schultz, a man who, according to a completely fabricated poll, is recognized only 63.4% of the time in his own bathroom mirror: (Wikipedia): The President of the European Parliament presides over the plenary of the Parliament, which is onehalf of the legislative branch of the Union. The President also chairs the Bureau and Conference of Presidents as well as representing the Parliament. The President's role is similar to that of a speaker in a national parliament, but also represents the Parliament externally and vis a vis the other institutions, which is a more political role.
27 January 2014
12
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OK, now that you know who the main players are, forget them. These guys are not important. The important names to know are Alex Tsipras, Marine Le Pen, Nigel Farage, and Beppe Grillo. Tsipras is the leader of the hard-left Syriza party in Greece; Le Pen heads France's right-wing Front National; Grillo commands the Italian leftist Five Star movement; and the charismatic Farage rules over the slightly more moderate but definitely right-wing UK Independence Party (UKIP). Over the last several years, as Europe has teetered on the brink of implosion, the old guard of Barroso, Van Rompuy et al. have applied numerous band-aids to their beloved European project with scant regard for the welfare of the citizens of Europe and an almost pathological refusal to countenance even the simple fact that the EU, in its current form at least, is not fit for purpose. Tsipras, Le Pen & Co. aim to change all that. (Greekreporter.com): A series of scandals, unresolved talks with the country's international lenders, and the escape of a terrorist seem to be taking their toll on Prime Minister Antonis Samaras' coalition government and his New Democracy Conservatives, who have fallen 7.7 percent points behind their rival, the Coalition of the Radical Left (SYRIZA) in the critical Attica region including Athens. SYRIZA, which opposes the austerity measures being imposed by the government, had been battling for the lead in surveys for a year with New Democracy, both sides barely one percent apart, but now has a lead of 24.6-16.9 percent in the poll taken by GPO for Newcast. That comes in the wake of a series of arrests involving a scandal at the failed stateowned Hellenic Postbank, the defense ministry, a publisher charged with failing to pay his taxes and as Samaras is trying to assert the country is poised to make a comeback. Voters aren't buying it. But, as if to underline the shift towards extremity in the Greek political landscape, behind the radical left and the incumbents lurks another danger to the status quo: Despite the arrest and prosecution of its leaders on charges of running a criminal gang, the ultra-far right extremists of Golden Dawn remain a steadfast third with 11.1 percent, even though its leader, Nikos Michaloliakos, and four other of his party's Members of Parliament are in jail awaiting trial. Uh-oh! That's the far-left in the lead and the ultra-far-right in a healthy third place. What's Greek for "powderkeg"? Oh, thank you:
27 January 2014
13
Hmmm...
The once-dominant PASOK ... is now dead last among the seven parties in the Parliament. The Communist party (KKE) is fourth with 4.9 percent, followed by the Independent Greeks at 4 percent, the Democratic Left (DIMAR) a former partner in the coalition at 3.1 percent and also in danger of disappearing as a party next, just ahead of PASOK. SYRIZA leader Alexis Tsipras, who opposes the austerity measures and said his party wouldn't repay the $325 billion in loans granted by the Troika of the European UnionInternational Monetary Fund-European Central Bank (EU-IMF-ECB), has predicted the Leftists will come to power. "What could possibly unite the radical left and the ultra-far-right?" Well, it's funny you should ask. In a study late last year into the reasons why voters defect from one party in favour of another, some interesting dynamics were exposed: (Before It's News): There are however some astonishing new signs on the "where votes were gained and lost" dimension. For example, 16% of SYRIZA defectors went to Golden Dawn suggesting that some Greeks care nothing for political ideology, they will just back anyone who stands up to the Troika and Brussels. Uh-huh. Remember those words: "anyone who stands up to the Troika and Brussels." But that's just little old Greece. Who worries about them, right? Meanwhile in France, Marine Le Pen is making some waves of her own: (The Week): MARINE LE PEN, leader of the French far-Right party Front National, has proposed joining forces with UKIP to bring down the EU's "Berlin wall of Brussels". Nigel Farage, battling accusations of UKIP being a racist party, has moved to distance himself from Le Pen's Front National, but Le Pen is nothing if not persistent: Le Pen, who has joined forces with Dutch anti-Islamic leader Geert Wilders, believes UKIP is avoiding an alliance due to "electoral considerations" and might reconsider in the future. "They say they're not in agreement with us. My foot," she told the Daily Telegraph. "OK, we don't have the same economic policies [but] they share our point of view on the European Union and immigration: everyone must control his borders, European technocrats must disappear, the European Soviet Union must collapse, everyone must have their own currency, their economic policy and decide in their own home."
27 January 2014
14
Hmmm...
Le Pen's surge in the polls is driven, unsurprisingly, by the same motivations as those propelling Greece's right and left wings forward: Front National could emerge as the leading party in France's European elections with the backing of 24 per cent of voters, according to one poll by research firm Ifop. It is just one of several anti-immigration and anti-EU parties gaining ground in Europe, where many have lost faith in the ability of the European Union to help kick-start their faltering economies, says the Telegraph. "How to improve the European Union?" asks Le Pen. "By making it collapse. We brought the Berlin Wall down. I want to bring the Brussels wall down. I expect one thing only from the European system and that's for it to explode." Fairly clear. Italy? (Europe Online): The eurozone should split, with weaker economies adopting a different currency from Germany, Italy's protest party leader Beppe Grillo said Thursday, riding on anti-euro sentiment ahead of European elections. "It is our small, modest proposal: With France, Greece, Ireland, Spain and Portugal, we should go there and ask for a two-speed euro, if we do not want to leave altogether," Grillo said. He vowed to hold a referendum on the issue even though it would require a change in Italy's constitution, which bans popular votes on international agreements. (Note the fact that an ailing France has now been co-opted by the weaker Southern economies. Core no more, it seems.) Everywhere you look around the world, there is political upheaval. In Europe it is anti-austerity and anti-euro, the fuse lit by weak economies and mass unemployment; but elsewhere similar themes are evident as governments struggle to retain control of increasingly restless populations. In the Ukraine we see mass protests as pro-European and pro-Russian factions fight each other in increasingly bloody street battles, while in Turkey and Egypt civil unrest has led to brutal government crackdowns. In Thailand, disaffection with a proposal by PM Yingluck Shinawatra to pardon disgraced former-PM Thaksin Shinawatra (What? Oh, the name? Yes... Well in actual fact, she's his sister, but obviously that had no bearing on her decision to pardon her brother the disgraced exPM) has led to two months of increasingly violent protests in the streets of Bangkok, despite Shinawatra's offering to dissolve Parliament and hold fresh elections (that's the PM Shinawatra, not her brother the ex-PM, who is currently in exile in Dubai after being found guilty in absentia of corruption, treason, tax evasion, and gagging the press).
27 January 2014 15
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(I'm waiting on confirmation from my sources in Bangkok, but my understanding is that the Thai people knew the Shinawatras were siblings when they voted in Yingluck a scant two years ago.) Meanwhile, in perennial basket cases Venezuela and Argentina, chronic inflation and the collapse of their respective currencies (again) has led to draconian capital controls, which will doubtless send thousands more into the streets:
Argentine Peso vs US Dollar
Exchange Rate 2009 - 2014
9 Matters To Everyone TOO LATE
7 Doesnt Matter To Anyone 6 Starts To Matter To Some
3 2009 2010 2011 2012 2013
Source: Bloomberg
The weakness in the peso, the Bolivar, and many other emerging-market currencies is a direct result of the Fed's attempt to taper their own QE program. The dollar has strengthened against the South African rand, the Indonesian rupiah, the Brazilian real and, an old favourite, the Turkish lira, to name but a few. The Turkish central bank was forced to intervene in the FX markets this past week and gave us, as the good folks at Zerohedge so succinctly put it, an insight into what a central bank losing control looks like. The lengths of the different phases in Turkey may differ from those in Argentina, but the outcome will not: (Zerohedge): With chatter that over $3 billion has been thrown into the FX market to buy Turkish Lira, it appears the central bank is losing control quickly, and Turkish stocks are tumbling. The Turkish Lira collapsed almost 400 pips this morning to around 2.30 to the USD an all-time record low as the combination of corruption, social unrest, and Fed taper are seeing hot money outflows faster than the Turkish central bank can keep control. This is the biggest tumble in the Lira in almost 5 months as the Istanbul 100 (stocks) drops 2.9% its biggest drop in a month; and Turkish bond yields are backing up to 2-year highs.
27 January 2014
16
Hmmm...
*TURKEY FX SALES TODAY REACHED $3B: HSBC CITES 'MARKET PLAYERS' *TURKISH LIRA WEAKENS PAST 3.15 AGAINST EURO IN ISTANBUL *TURKISH LIRA WEAKENS TO NEW RECORD 2.3029 PER DOLLAR *BORSA ISTANBUL 100 INDEX FALLS 2.9% TO 65,429.29 AT THE CLOSE *TURKEY 2YR BOND YIELDS RISE TO 10.50%, HIGHEST SINCE JAN. 2012
Turkish Lira vs US Dollar
2.50 Matters To Everyone TOO LATE
Exchange Rate 2009 - 2014
2.25
Starts To Matter To Some
2.00
Doesnt Matter To Anyone
1.75
1.50
1.25 2009 2010 2011 2012 2013
Source: Bloomberg
But let's leave for another day the simply inevitable unintended consequences of Federal Reserve actions (though you'd assume it was otherwise if you received your information only from official mouthpieces), because it's politics and politicians we are discussing this week; and as we all know, central banks are politically independent organizations. Repeat after me: "Central Banks are politically independent organizations." Good. Now, we've touched on Greece (which is always something of a tinderbox); we've touched on France (where the extremely right-wing Ms. Le Pen has laid out her manifesto in no uncertain terms); and we have also mentioned Italy (where the amusing Signor Grillo is being courted by none other than Silvio Berlusconi, a man who never saw a principled political stance he wasn't willing to take on either wing for the sake of a few votes, to form a power alliance (which will be staunchly anti-Euro of course) but what about the United Kingdom? Yes, the country that global analytic firm Maplecroft recently classified as a 'low-risk' political environment. Well, the UK is undergoing a "recovery" which has been much hailed by PM David Cameron in recent days, and that has to be good for any incumbent party in these recovery-starved times.
27 January 2014 17
Hmmm...
In fact, the recovery is so vibrant in Britain that the unemployment rate has fallen extremely fast to a mere 7.1%, a fact announced with great glee this past week by the prime minister.
UK Unemployment Rate
8.5
2008 - 2014
8.0 You Are HERE Original Threshold For Interest Rate Normalization
7.5
7.0
%
6.5
6.0
5.5
5.0 2008 2009 2010 2011 2012 2013
Source: Bloomberg
In a virtual simulcast (so as to ensure that nobody made the cardinal error of thinking for one second that BoE governor Mark Carney's 7% threshold for the beginning of the normalization of interest rates would actually be enforced), Carney announced that the UK economy was "in a new place": (UK Guardian): Mark Carney insisted on Friday that Britain's economy remains well short of achieving "escape velocity" from recession as the Bank of England governor said policy would remain on an emergency setting for some time to come. In a speech to UK business leaders in Davos, Carney said the Bank's nine-strong monetary policy committee would look at its forward guidance strategy following the sharper than expected fall in unemployment in recent months. But he hinted that he currently favoured updating rather than ditching his flagship policy initiative and pledged that the degree of stimulus would "remain exceptional for some time". The Bank has been surprised by the recent performance of the economy, having predicted last August that it could be early 2016 before the jobless rate hit 7%. "A few quarters of above-trend growth driven by household spending represent a good start, but they aren't sufficient", Carney said as he discussed the prospects for permanent exit from the deepest recession of the post-war era. "It will take sustained growth, more balanced demand and a recovery in the supply side for advanced economies to break free into a more normal universe."
27 January 2014 18
Hmmm...
A central bank governor INSISTING that the economy ISN'T very strong; that's something you didn't used to see happen. Ever. don't see every day. But this is the new world of central bankinspired subsistence, where trillions of dollars are spent to propitiate public opinion while a generation of politicians continues to encroach on everyday lives and make decisions based on their political dreams rather than on what's in the best interests of their citizens. How "low-risk" is the UK and how strong is Cameron's "Recovery for All"? (UK Daily Telegraph): Concerns about future violent protests over the Government's austerity measures have prompted chief constables to ask Theresa May, the Home Secretary, for authorisation to deploy water cannon in mainland Britain for the first time... Documents disclosed by the Association of Chief Police Officers show plans have been drawn up for the cannon to be used against protesters and rioters in the future. Police warn they expect water cannon will be required because "the ongoing and potential future austerity measures are likely to lead to continued protest". Politicians. You can tell when they're lying because their lips move. Occasionally, one of their own breaks ranks from the political circle, though. When they do, it doesn't end well. Quickly, yes, but not well. A case in point, former Greek PM Papandreou's outrageous suggestion in 2011 that the Greek people should vote on austerity: November 1, 2011: (BBC News): Greece will hold a referendum on a new European Union aid package intended to resolve the country's debt crisis, Prime Minister George Papandreou says. Last week eurozone leaders agreed on a 100bn-euro loan (86bn; $140bn) to Athens and a 50% debt write-off, in an effort to tackle the euro crisis. But there have been large-scale protests in Greece against austerity measures demanded by the EU. Opinion polls in Greece show that most people do not support the austerity deal. Mr Papandreou told a meeting of his governing Socialist party that Greek people would have the final say on the package, which is designed to reduce Greek debt by about 100bn. "The command of the Greek people will bind us", he was quoted as saying by AFP news agency. He set no date for the referendum, but indicated that it would be held after details of the deal have been finalised with the EU and the country's creditors.
27 January 2014
19
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November 3, 2011: (NY Times): In a tumultuous day of political gamesmanship, Prime Minister George A. Papandreou called off a referendum on Greece's new debt deal with the euro zone on Thursday after winning a measure of support from his opposition and managing to repair, at least for a day, a major rupture in relations with Europe. The decision to abandon his idea of holding a popular vote on the European debt deal did not end the political turmoil here; Mr. Papandreou still faces a rebellion in his own Socialist Party and the fury of some opposition figures. November 6, 2011: (UK Daily Telegraph): George Papandreou, Greece's embattled prime minister, will resign as soon as a deal for an interim coalition government is agreed, perhaps as early as Sunday night, a senior member from his party said.... [Antonis] Samaras rejected any compromise while Mr Papandreou remains prime minister. "I am determined to help. Provided that Papandreou resigns, everything will take its course..." November 7, 2011: (Der Spiegel): After days of political wrangling, Greek Prime Minister Giorgios Papandreou has agreed to step down to allow the formation of an interim coalition government including the opposition conservative New Democracy party. As Britain's Harold Wilson famously said: "A week is a long time in politics." In the case of Papandreou, within a week of suggesting a referendum be held to determine what the people of Greece wanted, he was out. Tricky things, these EU referenda. Great Britain is another country that has pledged to hold one (though not until 2017), and this past week the duplicity of political machinations was exposed to the sunlight once more as proEU members of the House of Lords tried to kill the bill. It wasn't a pretty sight: (UK Daily Telegraph): David Cameron's plan to give the public a vote on membership of the European Union could be defeated within weeks after Labour peers tabled dozens of outlandish amendments that could halt its progress in Parliament. More than 50 amendments were tabled for the committee stage of the EU Referendum Bill, including holding a petition of a million voters, posing the questions in Cornish and giving prisoners the vote, the Telegraph has learnt. As a private member's Bill, it has a limited time to pass through Parliament. It can only be debated on Fridays and must be approved by both houses by February 28.
27 January 2014
20
Hmmm...
Only debated on Fridays? What? It gets worse when we get to some of the items deemed essential to discuss by the Labour peers primarily Lord Foulkes of Cumnock, a former minister in the staunchly pro-Europe Blair government who was single-handedly responsible for forty of the fifty-six amendments tabled. What did Lord Foulkes deem crucial? Well, read his list of suggested amendments, and the full extent to which those of a political bent check their self-respect at the door becomes evident: Page 1, line 2, after "A" insert "consultative." Makes the vote non-binding Page 1, line 4, leave out "must" and insert "may." This would make holding the referendum optional rather than compulsory. Page 1, line 4, leave out "must" and insert "will." Appears to be an attempt to make the bill non-binding Page 1, line 5, leave out subsection (3) and insert: "( ) The Prime Minister shall propose a motion to the House of Commons, and the Leader of the House of Lords shall propose a motion to the House of Lords, appointing a day on which the referendum is to be held." This would remove the power to set the date from the Secretary of State and would require a motion in each House instead. Creates more chances for Commons to kill the bill. Page 1, line 5, leave out "Secretary of State" and insert "Prime Minister." This would require the Prime Minister to make the order appointing the date of the referendum. Page 1, line 5, leave out "Secretary of State" and insert "Secretary of State for Justice." This would require the Secretary of State of Justice to make the order appointing the date of the referendum. Page 1, line 5, leave out "Secretary of State" and insert "Secretary of State for Foreign and Commonwealth Affairs." This would require the Foreign Secretary to make the order appointing the date of the referendum.
27 January 2014
21
Hmmm...
Page 1, line 5, leave out "Secretary of State" and insert "Deputy Prime Minister." This would require the Deputy Prime Minister to make the order appointing the date of the referendum. Page 1, line 5, after "State" insert "after consultation with the First Ministers of the devolved administrations." This gives the First Ministers in Scotland and Wales a veto over the vote. The full article is HERE. Read it when calm. And on that note, having seen just how fragile the political situation is in Europe and beyond, we'll leave the world to its own devices, as I've already taken up far more of your precious time than I had intended. But in closing I'll say this: 2014 is shaping up to be the year when the political landscape gets altered right across the globe, and in periods of great societal change such as the one I suspect we are about to see, bad things tend to happen. Which way this goes is anybody's guess, but I strongly suspect that the European elections will cause another bout of panic in Europe this summer and lead to there being some troubling faces at the top table. Outside of the EU, look for continued political upheaval in the Middle East (of course) and South America, as well as parts of Asia. Also, South Africa's post-Mandela landscape has yet to be determined. The one thing that CAN be counted on through all this is the fact that politicians will remain politicians, no matter what part of the political spectrum they spring from. You have been warned.
******* So ... with the focus squarely on politics this week, I have a selection of articles designed to
propitiate you; and we'll kick things off with an old friend from previous editions of TTMYGH, Andy Xie, who explains just how hard it is going to be for the global economy to shake off its shackles and grow in 2014.
27 January 2014
22
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From there we take a turn for the yellow and get an update on the BaFin enquiry into Deutsche Bank's activity in the gold market, see how mints around the world are struggling to keep up with demand for gold coins, and read an amazing article that appeared (of all places) in the FT, suggesting that a valuable lesson can be learned from the Bundesbank and that not having possession of your physical gold could end in "catastrophe" (their words, not mine). Elsewhere, HSBC are restricting people's access to their own money; a merger in the beverage industry provides insiders with reason to raise a glass to themselves; the farce of the EU traveling circus is revealed; and we travel to Germany to find out why most Germans rent their houses and to profile Jens Wiedemann the bull in the EU's china shop. In our charts section there's a look at Argentina's woes and some fantastic charts from Incrementum's Ronni Stferle on the tug of war between inflation and deflation, as well as a look at a Google search autocomplete that speaks volumes. Video and audio this week include a year-ahead forecast from the great Jeff Gundlach of Doubleline, an explanation of why Bitcoin matters from someone whose opinion carries far more weight than those of most journalists you've been paying attention to, and Rick Santelli explaining the magical world that central banks have created with their fairy dust. That's a wrap, folks. Remember, vote early and vote often.
Until Next Time... ******* Breaking Out Is Hard

The global economy is unlikely to accelerate in 2014. The hope that the U.S. economy is reaching escape velocity won't pan out. Abenomics is likely to fizzle out in 2014. Emerging economies will likely remain in low gear. The chances are that the global economy, weighted by nominal GDP at current exchange rates, will grow at 2 percent Globalization, turbo-powered by information technology, has cut short the feedback loop between demand stimulus and supply response. Any growth response to demand stimulus is short-lived, as past five years has demonstrated. Holding down costs of non-tradeables like housing, health care and education is the key to economic competitiveness and sustainable growth. Any economy that grows on inflating such non-tradeables through stimulus will pay back with low growth later.
27 January 2014
23
Hmmm...
The year began with much hope that the U.S. economy would be strong enough to carry the global economy forward, just like in the old days. The United States has been gaining momentum with a strong third quarter growth rate and a string of good employment data. The euphoria was broken by a very poor non-farm payrolls report last week. Some blamed it on cold weather. There may be some truth to this. Nevertheless, the idea that U.S. economic momentum is snowballing is in doubt. I have argued for many years that this round of globalization has fundamentally changed how an economy works, even for a large one like the United States. While demand is and always has been local, the supply side has become genuinely global. Both manufacturing blue-collar jobs and most white-collar jobs have become global. Today's information technology allows a multinational company to position research, marketing, finance and managerial jobs to anywhere. Hence, when a country stimulates demand, it's met by supply from anywhere. The concept of "escape velocity" has gained popularity in the United States. It is a fancy way of saying that the economy can accelerate without stimulus. As the Fed is taking the first step to unwind its quantitative easing, investors and speculators need some psychological support to stay in the game. The term "escape velocity" has emerged in that context. While the jury is still out, I believe that the U.S. economy is likely to grow at a similar pace in 2014 as in 2013, say, between 2 and 2.5 percent. The dream of economic momentum snowballing as in the 1990s will remain just a dream. Japan had two quarters of high growth, so many became convinced that Abenomics was the real deal. The data tailed off toward the usual Japan level of 1 percent in the third quarter and likely in the fourth quarter, too. Financial markets have become wobbly lately as growth momentum cools off. But the Nikkei is still at a lofty level. Too many have a vested interest in believing in Abenomics to jump ship now. When bad numbers continue for another two quarters, they will. The Abe government has been asking Japanese companies to raise salaries to sustain the economic momentum. Even if the salary increase comes through, as people know it was forced and not likely sustainable, why would they spend it? I'm surprised by how many investors are taken in by Abenomics. Most international funds that invest in Japan have been going all out to market it to retail investors. This is the main reason that the Nikkei has stayed so lofty. I suspect that self-interest is the main driver. Such funds have been withering for a long time. They are latching onto Abenomics for a good time. Even if it doesn't last, it is better than nothing. Most important, the people who sell Abenomics may not have their own money on the line....
*** ANDY XIE / LINK
27 January 2014
24
Hmmm...
The BaFin Enquiry into Deutsche Bank

According to Reuters, Deutsche Bank has decided to quit as a member of the gold and silver fixing committees in the London bullion markets. This news comes after Deutsche Bank was instructed in mid-December by BaFin, Germany's bank regulator, to hand over documents in connection with its inquiry into suspected manipulation of gold and silver prices. The fact that Deutsche Bank is pulling out of the prestigious fixing role four weeks after BaFin requested these documents suggests Deutsche Bank has a case to answer, even though it has been sold to us through the press as part of their overall scaling-back from commodities. Furthermore the nature of market manipulations is that they usually involve a number of banks, as the scandal over Libor illustrates. So it is perfectly reasonable to suspect that other banks in the two fixing companies are likely to be involved as well. This should come as little surprise to close followers of bullion markets. The surprise perhaps is that the manipulation of gold prices is being seriously pursued by a G7 government regulator, when we all assumed the subject is off-limits, given the close relationships between bullion banks and central banks. However, inter-governmental relationships between the US and other governments, particularly Germany's, have come under considerable strain recently. To put this in context requires a brief summary of recent and relevant history. From 1952 the Bundesbank began to redeem some of its trade surplus dollars into gold bullion stored with the New York Fed, adding to their stock there every year until 1968, when it appears some of their holding was shipped or swapped to other centres. From 1969 onwards there were relatively minor changes in the amount of gold stored with the New York Fed and according to the Bundesbank's records in 2012 it amounted to exactly 49,396,880.287 ounces (1,536.4 tonnes). There is no known record of this gold being leased. The Bundesbank never fully embraced the anti-gold stance of other central banks, which is understandable given Germany's painful experience of currency destruction and the development of her strong post-war savings culture. The Bank was always careful, in the absence of gold convertibility, to pursue sound monetary policies. This perhaps makes the ownership of her gold more sensitive for the Bundesbank than for most other Western central banks. Furthermore, after the creation of the ECB she has been demoted from being one of the top four central banks with a strong policy influence at the Bank for International Settlements, to little more than a regional hub with some out-dated sound-money ideas. So when growing public pressure in 2012 forced her to eventually seek repatriation of her gold it is hardly surprising her priority would be to respond to domestic German opinion rather than the gold policies of Anglo-Saxon central banks with which she has little direct involvement. Only then did it transpire that Germany's gold at the New York Fed probably didn't exist. Bundesbank officials had even been refused sight of their own gold according to Der Spiegel, a point picked up by a previously secret report by the German Federal Audit Office.
27 January 2014
25
Hmmm...
It is hard to justify why an official from the Bundesbank should be refused sight of his own bank's gold. Instead the Bundesbank was forced to rely on written affirmations by the New York Fed that their gold was safely there....
*** ALASDAIR MACLEOD / LINK
Here's to Payday
PAYING $4 billion for a business you sold for $1.8 billion five years ago is not much of a way to make money. But Anheuser-Busch InBev (ABI), a giant brewer, may be about to do just that. It is reported to be negotiating to buy Oriental Brewery of South Korea from its private-equity owners, including KKR, to which it had sold the firm in 2009. The sale helped ABI hit financial targets which unlocked $2.5 billion of bonuses for its executives, including $289m for its boss, Carlos Brito. Although the sale may now be reversed, it appears that the bonuses will not. The eye-watering payouts came in the form of a share-option plan put in place after the merger of Anheuser-Busch (purveyor of Budweiser) and InBev (of Stella Artois fame) in November 2008. With shareholders spooked by the combined group's huge debt pile, just as financial markets were convulsing, ABI's board promised cheap shares to 40 executives if they got the firm's debtto-earnings ratio below a certain threshold. So Mr Brito flogged $9.4 billion of assets, including Oriental Brewery and a division in central Europe. Along with cuts in costs and dividends and a share issue, the sales helped ABI meet the debt target in 2011, thus unlocking the riches. Although the bonuses are now guaranteed, some of the disposals look temporary. Both the Korean and the central European units, which together accounted for around half of the disposal programme, were sold to private equity in deals that gave ABI the option of buying them back later. If it does so with Oriental, KKR and its managers will also have done very well. In part this is because they did a good job of boosting Oriental's profits. But those who inveigh against corporate excesses may disregard this and choose to see the whole transaction as ABI, in effect, pawning its assets at a staggering interest rate, with its bosses getting a cut of the proceeds. If so, the shareholders of ABI would be the injured parties. However, they should pause for thought before mounting their high horses. First, they approved the unusual bonus plan (which comes on top of other, more conventional, incentives) because it was so urgent at the time to cut ABI's debt. Second, part of the reason the bosses' bonuses are so huge is that ABI's stock has increased nearly sixfold since the merger. Shareholders can hardly complain about that. Bosses were only this month able to cash in half the stock options; they will have to stay at the firm until at least 2019 to get the rest....
*** ECONOMIST / LINK
27 January 2014
26
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Most Germans Don't Buy Their Homes, They Rent. Here's Why
It's just a fact. Many Germans can't be bothered to buy a house. The country's homeownership rate ranks among the lowest in the developed world, and nearly dead last in Europe, though the Swiss rent even more. Here are comparative data from 2004, the last time the OECD updated its numbers. (Fresh comparisons are tough to find, as some countries only publish homeownership rates every few years or so.) And though those data are old, we know Germany's homeownership rate remains quite low. It was 43% in 2013. This may seem strange. Isn't home ownership a crucial cog to any healthy economy? Well, as Germany showsand Gershwin wroteit ain't necessarily so. In Spain, around 80% of people live in owner-occupied housing. But unemployment is nearly 27%, thanks to the burst of a giant housing bubble. Only 43% own their home in Germany, where unemployment is 5.2%. Of course, none of this actually explains why Germans tend to rent so much. Turns out, Germany's rental-heavy real-estate market goes all the way back to a bit of extremely unpleasant business in the late 1930s and 1940s. By the time of Germany's unconditional surrender in May 1945, 20% of Germany's housing stock was rubble. Some 2.25 million homes were gone. Another 2 million were damaged. A 1946 census showed an additional 5.5 million housing units were needed in what would ultimately become West Germany. Germany's housing wasn't the only thing in tatters. The economy was a heap. Financing was nil and the currency was virtually worthless. (People bartered.) If Germans were going to have places to live, some sort of government program was the only way to build them. And don't forget, the political situation in post-war Germany was still quite tense. Leaders worried about a re-radicalization of the populace, perhaps even a comeback for fascism. Communism loomed as an even larger threat, with so much unemployment. West Germany's first housing minister a former Wehrmacht man by the name of Eberhard Wildermuth once noted that "the number of communist voters in European countries stands in inverse proportion to the number of housing units per thousand inhabitants."
27 January 2014 27
Hmmm...
A housing program would simultaneously put people back to work and reduce the stress of the housing crunch. Because of such political worries as well as genuine, widespread need West Germany designed its housing policy to benefit as broad a chunk of the population as possible. Soon after West Germany was established in 1949, the government pushed through its first housing law. The law was designed to boost construction of houses which, "in terms of their fittings, size and rent are intended and suitable for the broad population." It worked. Home-building boomed, thanks to a combination of direct subsidies and generous tax exemptions available to public, non-profit and private entities. West Germany chopped its housing shortage in half by 1956. By 1962, the shortage was about 658,000. The vast majority of new housing units were rentals. Why? Because there was little demand from potential buyers. The German mortgage market was incredibly weak and banks required borrowers to plunk down large down payments. Few Germans had enough money. It's worth noting that Germany wasn't the only country with a housing crisis after World War II. Britain had similar issues. And its government also undertook large-scale spending to promote housing. Yet the British didn't remain renters. The UK homeownership rate is around 66%, much higher than Germany's. Why? The answer seems to be that Germans kept renting because, in Germany, rental housing is kind of nice....
*** QUARTZ / LINK
HSBC Imposes Restrictions on Large Cash Withdrawals

Some HSBC customers have been prevented from withdrawing large amounts of cash because they could not provide evidence of why they wanted it, the BBC has learnt. Listeners have told Radio 4's Money Box they were stopped from withdrawing amounts ranging from 5,000 to 10,000. HSBC admitted it has not informed customers of the change in policy, which was implemented in November. The bank says it has now changed its guidance to staff. Stephen Cotton, from Worcestershire, went to his local HSBC branch this month to withdraw 7,000 from his instant access savings account to pay back a loan from his mother. A year before, he had withdrawn a larger sum in cash from HSBC without a problem.
27 January 2014
28
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But this time it was different, as he told Money Box: "When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for. They wanted a letter from the person involved." Mr Cotton says the staff refused to tell him how much he could have: "So I wrote out a few slips. I said, 'Can I have 5,000?' They said no. I said, 'Can I have 4,000?' They said no. And then I wrote one out for 3,000 and they said, 'OK, we'll give you that.' " He asked if he could return later that day to withdraw another 3,000, but he was told he could not do the same thing twice in one day. He wrote to complain to HSBC about the new rules and also that he had not been informed of any change. The bank said it did not have to tell him. "As this was not a change to the Terms and Conditions of your bank account, we had no need to pre-notify customers of the change," HSBC wrote. Mr Cotton cannot understand HSBC's attitude: "I've been banking in that bank for 28 years. They all know me in there. You shouldn't have to explain to your bank why you want that money. It's not theirs, it's yours." Peter, from Wiltshire, had a similar experience. He wanted to take out 10 000 cash from HSBC, some to pay to his sons and some to fund his long-haul travel plans. Peter phoned up the day before to give HSBC notice and everything seemed to be fine. The next day he got a call from his local branch asking him to pay his sons via a bank payment and to provide booking receipts for his holidays. Peter did not have any booking receipts to show. The following day he spoke to HSBC again and this time, having examined his account, it said he could withdraw the 10,000. Belinda is another customer who was initially denied her cash, in her case to pay her builder. She told Money Box she had to provide the builder's quote. HSBC has said that following customer feedback, it was changing its policy: "We ask our customers about the purpose of large cash withdrawals when they are unusual and out of keeping with the normal running of their account. Since last November, in some instances we may have also asked these customers to show us evidence of what the cash is required for."
27 January 2014
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Hmmm...
"The reason being we have an obligation to protect our customers, and to minimise the opportunity for financial crime. However, following feedback, we are immediately updating guidance to our customer facing staff to reiterate that it is not mandatory for customers to provide documentary evidence for large cash withdrawals, and on its own, failure to show evidence is not a reason to refuse a withdrawal. We are writing to apologise to any customer who has been given incorrect information and inconvenienced."...
*** BBC / LINK
Gold Mint Runs Overtime in Race to Meet World Coin Demand

Austria's mint is running 24 hours a day to meet orders for gold coins, joining counterparts from the U.S. to the U.K. to Australia in reporting accelerating demand boosted by the bear market in bullion. Austria's Muenze Oesterreich AG mint hired extra employees and added a third eight-hour shift to the day in a bid to keep up with demand. Purchases of bullion coins at Australia's Perth Mint rose 20 percent this year through Jan. 20 from a year earlier. Sales by the U.S. Mint are set for the best month since April, when the metal plunged into a bear market. Global mints are manufacturing as fast as they can after a 28 percent drop in gold prices last year, the biggest slump since 1981, attracted buyers of physical metal. The demand gains helped bullion rally for five straight weeks, the longest streak since September 2012. That won't be enough to stem the metal's slump according to Morgan Stanley, while Goldman Sachs Group Inc. predicts bullion will "grind lower" over 2014. "The long-term physical buyers see these price drops as opportunities to accumulate more assets," said Michael Haynes, the chief executive officer of American Precious Metals Exchange, an online bullion dealer. "We have witnessed some top selling days in the past few weeks." Prices rebounded 7.2 percent since reaching a 34-month low in June as physical buying rose. The Shanghai Gold Exchange, China's largest bullion bourse, delivered 2,197 metric tons to customers in 2013, compared with 1,139 tons in 2012, it said Jan. 15. The Asian country topped India as the world's top buyer last year as demand probably reached a record, the World Gold Council estimates. The U.K.'s Royal Mint, which traces its history back more than 1,000 years, ran out of 2014 Sovereign gold coins because of "exceptional demand," it said in a statement on Jan. 8. Coins weren't available to customers until six days later when inventories were replenished. Sales by the Perth Mint, which also has workers producing coins in three shifts a day, will probably beat last year's record, Ron Currie, the marketing director, said Jan. 20.
27 January 2014
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Hmmm...
Bullion tumbled in 2013 after some investors lost faith in the metal as a store of value, snapping 12 straight years of gains. Holdings through exchange-traded products fell 33 percent in the past 12 months, erasing $69.1 billion from the value of the funds, data compiled by Bloomberg show. Prices also fell as U.S. equities rallied and inflation remained low. Goldman expects bullion to fall to $1,050 in the next 12 months as the Federal Reserve reduces monetary stimulus, analysts led by Jeffrey Currie, the bank's head of commodities research, said in a report Jan. 12. Precious metals are Morgan Stanley's "least preferred" commodities, and physical demand won't be enough to buoy prices, analysts Adam Longson, Bennett Meier and Peter Richardson said in a Jan. 17 report. The bank cut its 2014 target 12 percent to $1,160 on Jan. 22. "Prices are likely to drop further as global economic conditions are stabilizing and tapering worries continue," said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $110 billion of assets. "There is no doubt that physical demand has improved, but it will not be enough to support prices."...
*** BLOOMBERG / LINK
The Farce of the Eu Traveling Circus

The full cost of the travelling circus that sees MEPs decamp once a month from Brussels to Strasbourg can be disclosed. And even though MEPs have voted to scrap a second parliament, the French government has the power to block any such move. It is perhaps the most outlandish of the European Union's excesses; a 130 million travelling circus that once a month sees the European Parliament decamp from Belgium to France. Over the course of the weekend, some 2,500 plastic trunks will be loaded on to five lorries and driven almost 300 miles from Brussels to Strasbourg. On Monday, about 1,000 politicians, officials and translators will then make the same journey on two specially chartered trains hired at taxpayers' expense. A few thousand more will go to Strasbourg by other means, as the European Parliament switches from Brussels, its permanent base, to its "official" home in northern France. For the first time, the full detail of this "madness", contained in official European documents, can be disclosed today by The Telegraph and the price to taxpayers is astonishing. In all, the EU admits that the monthly Strasbourg sitting, which lasts just four days, costs an additional 93 million a year. The Conservative Party in Europe, which is leading a campaign to abandon it, estimates the cost a little higher at 130 million, or about 928 million in the seven-year cycle of an EU budget.
27 January 2014
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Among the costs are 250,000 a year to transport the plastic boxes containing documents, diaries and other items from Brussels to Strasbourg and back again. The boxes are left outside offices in Brussels on a Friday evening, collected by a courier company and driven to Strasbourg, where they are unloaded and left outside offices there. The process is repeated in reverse on Thursday evening. It is thought it costs up to 200,000 for the EU to charter two express trains to take officials, MEPs and others there on a Monday morning and back on a Thursday afternoon. The trains stop only once at an airport in Paris to collect or drop MEPs and no ordinary member of the public can get on board, for a train which arrives in time for parliamentary sessions beginning in the afternoon. Many of the details are contained within a report into the "financial and environmental impact" of operating two parliaments, which was overseen by Klaus Welle, the secretary-general to the European Parliament, its top civil servant. Mr Welle had been requested by MEPs to give an accurate figure on the costs of two parliaments amid a growing clamour to scrap one of them. The report shows how taxpayers foot the 2.5million bill for relocating freelance translators from Brussels to Strasbourg and back again, including costs of travel, accommodation and other expenses. Providing catering services in Strasbourg costs an additional 1million, while extra medical support comes to some 330,000. In Strasbourg, extra money is needed for computers and IT support and for maintenance and security of the sleek parliament building, which was completed in 1999. In total, the cost of looking after the French buildings and infrastructure and other charges comes to about 50 million a year. One source suggested that before each session begins, a maintenance crew visits every bathroom and turns on and off every tap to make sure no pipes have been blocked since they were last used and to rid the pipes of stale water. A spokesman said that the maintenance teams looked after the building just like any other. About 100 people are employed in Strasbourg full-time, even though the European Parliament meets for 12 sessions, each lasting four days, a total of only 48 days each year. But during those four-day sessions, the circus is in town. About 5,500 people pour into Strasbourg; not only politicians and officials but lobbyists, too. Hotels in Strasbourg typically double their rates when the EU comes to stay. Last week, the Hilton Hotel in Strasbourg was offering rooms at 82 for Sunday night, but this rose to a cheapest rate of 161 a night for Monday, when the sessions begin. One MEP said he booked his accommodation a staggering five years in advance to ensure obtaining a room at a reasonable rate....
*** UK DAILY TELEGRAPH / LINK
27 January 2014
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Hmmm...
Learn from BuBa & Demand Delivery for True Price of Gold
A year ago the Bundesbank announced that it intended to repatriate 700 tons of Germany's gold from Paris and New York. Although a couple of jumbo jets could have managed the transatlantic removal, it made security sense to ship the load in smaller consignments. Just how small, and over how long, has only just become apparent. Last month Jens Weidmann, Bundesbank president, admitted that just 37 tons had arrived in Frankfurt. The original timescale, to complete the transfer by 2020, was leisurely enough, but at this rate it would take 20 years for a simple operation. Well, perhaps not so simple. While he awaits delivery, Herr Weidmann is welcome to come and look through the bars in the Federal Reserve's vaults, but the question is: whose bars are they? In the "armchair farmer" fraud you are told: "Look, this is your pig, in the sty." It works until everyone wants physical delivery of their pig, which is why Buba's move last year caused such a stir. After all nobody knows whether there are really 260m ounces of gold in Fort Knox, because the US government won't let auditors inside. The delivery problem for the Fed is a different breed of pig. The gold market is far more than exchanging paper money for precious metal. Indeed the metal seems something of a sideshow. In June last year the average volume of gold cleared in London hit 29m ounces per day. The world's mines are producing 90m ounces per year. The traded volume was many times the cleared volume. The paper gold in the London Bullion Market takes the familiar forms that bankers have turned into profit machines: futures, options, leveraged trades, collateralised obligations, ETFs ... a storm of exotic instruments, each of which is carefully logged, cross-checked and audited. Or perhaps not. High-flying traders find such backroom work tedious, and prefer to let some drone do it, just as they did with those money-market instruments that fuelled the banking crisis. The drones will have full control of the paper trail, won't they? There's surely no chance that the Fed's little delivery difficulty has anything to do with the cat's-cradle of pledges based on the gold in its vaults? John Hathaway suspects there is. He worries about all the paper (and pixels) linked to gold. He runs the Tocqueville gold fund (the clue is in the name) and doesn't share the near-universal gloom of London's gold analysts, who a year ago forecast an average $1700 for 2013. It is currently $1,260. As has been remarked here before, forecasting the price is for mugs and bugs. But one day the ties that bind this pixelated gold may break, with potentially catastrophic results. So if you fancy gold at today's depressed price, learn from Buba and demand delivery.
*** FT (VIA ZEROHEDGE) / LINK
27 January 2014
33
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The Bull in the Euro Zone's China Shop

In Jens Weidmann's world, the cup is almost always half-empty. As much as he doesn't like hearing about it, he is a man who can even find fault with a rare moment of winter sun shining through his office window in Frankfurt. "Big windows are nice," Weidmann says, referring to the view, "but the sun heats up the room very quickly." The president of Germany's central bank, the Bundesbank, then shuts the blinds. His office on the building's 12th floor becomes as dark as though it were in the basement. His large desk is covered with piles of binders and folders containing urgent European Central Bank business, reports produced by his staff and personnel issues. Weidmann points to the stacks when asked how he plans to spend the rest of his day. His facial expressions betray neither displeasure nor pleasure just the constant and comfortably friendly vibe he seems to perpetually exude. "That should keep me busy until the evening," he says, offering more of a statement of fact than any kind of hidden message. Weidmann is a man of duty. He's Europe's fiercest advocate of price stability and of a rock hard common currency. And who knows? It's possible he may be the last one. Since the people of Europe began to express doubts about the European project, since their governments began to seem incapable of producing anything more than wishy-washy compromises, the power of the money men the heads of central banks in the euro zone and European Central Bank board members has increased. Those following press conferences with ECB President Mario Draghi in recent months could be forgiven for believing that the gathered journalists were asking questions of the Continent's true president, the only one who seems to have the power necessary to make decisions for Europe. Indeed, by merely uttering a single sentence, Draghi can move markets to the tune of billions of euros, drive prices, change interest rates, bring down entire countries, topple governments irrespective of whether the statement is erroneous or deliberate. The power of the ECB and its president, a man who doesn't have to answer to parliaments, governments or voters, has increased massively during the euro crisis. That has also put Jens Weidmann, as president of the ECB's largest member bank, in the uncomfortable position of being a constant watchdog. At times when others are proposing solutions, Weidmann seems to be busy sowing doubts. He is the man who says "no" when the majority have already agreed on an issue. To put it mildly, he views the ECB's new role and political power skeptically. Over the course of the last two years, he has also steered himself into the extreme minority. Sometimes, he is the only member of the ECB's Governing Council in the minority. In theory, that could of course mean that Weidmann is the only one who has been correct about things all along. In truth, though, it often looks like a kamikaze who still believes he's the only one who knows the correct path.
27 January 2014
34
Hmmm...
It's a characterization he rejects. Weidmann says he's in no way a know-it-all and neither is he a troublemaker. He blames the media for many of what he says are false impressions of him. "As soon as I go anywhere," he says, "I am taken very seriously because of the importance of the Bundesbank. But I'm not some kind of ringleader." That was the commentary he offered in his Frankfurt office after the ECB Governing Council decided to lower the key interest rate from 0.5 to 0.25 percent in November, a move he opposed. This time he wasn't alone in his decision. It was six against 17 and Weidmann had asked that the option of waiting, and delaying the lowering of the interest rate by at least a month, be discussed. ECB President Draghi listened, thanked his colleague Jens for his remarks and then just pushed ahead with the vote. It was 17:6 against Weidmann. Business papers like the Financial Times and the Wall Street Journal made a big fuss over the vote, describing it as a major divide on the ECB Governing Council, a showdown between Draghi and Weidmann. Once again, the council's German member had revolted. The idea that, this time, the Italian ECB president may have been responsible for the division, and that Draghi would only have had to wait four weeks for a unanimous decision, didn't occur to any of the editorialists. And that's very dangerous for Weidmann....
*** DER SPIEGEL / LINK
27 January 2014
35
Hmmm...
Charts That Make You Go Hmmm...
Source: Imgur
The results
of Google's autocomplete feature to the question "Why is [insert home state here] so..." are illuminating as this graphic shows. Hey... Pennsylvania and Massachusetts, there's someone behiiiiind youuuuuuuu. (Thanks, ID)
27 January 2014
36
Hmmm...
Source: Incrementum AG
My good friend
Ronni Stferle of Incrementum AG in Lichtenstein is one of the brightest minds in the precious metals space. Regular readers will be familiar with Ronni's annual "In Gold We Trust" publication, which has become something of a bible for those with even a passing interest in the yellow metal; but in launching a new fund based on the disciplines of the Austrian School of Economics and in publishing his latest work, "Monetary Tectonics," Ronni has broadened his view to examine the competing forces of inflation and deflation. The result? Another masterpiece. Click on the link above to download the complete set of charts and click HERE to find out what Ronni & Co. are doing to outwit both inflation and deflation.
27 January 2014
37
Hmmm...
The Argentine government under Christina Kirchner has been utterly hopeless
for a long time; but as the chart in today's main article demonstrated, for some reason it suddenly seems to matter. What's the reason? Who cares? It matters. This is how it happens. Argentina's currency reserves are falling rapidly, and only gold is offering any kind of protection to the Argentine people...
Source: FT/Nick Laird Sharelynx
27 January 2014
38
Hmmm...
Words That Make You Go Hmmm...

Rick Santelli can
upon to tell it like it is. always be relied This week, with the aid of a cannonball, a refrigerator on a crane, and some fairy dust, he lays bare the mirage created by central banks and describes the likely landscape when the scales fall from everybody's eyes. It won't look good, I'm afraid. (But then, you knew that.) (via Zerohedge) CLICK TO WATCH
Jeff Gundlach is without doubt one
of the new giants of the investment world and with good reason. Last week, Jeff outlined his expectations for 2014, The Year of the Horse, in a live webcast. That webcast (during which I was incredibly flattered to get a mention) is now available as a replay, and you can access it by clicking on the link at right. More of the same: good old-fashioned, clearheaded, quality thinking from Jeff... CLICK TO LISTEN
I remain firmly of the opinion that
Bitcoin cannot be ignored or simply written off as a failure waiting to happen. In this brief video and the interview that accompanies it, Marc Andreesen of Andreesen Horowitz explains why Bitcoin matters. If you want an opinion you can trust in the tech space, Marc's pedigree is second-to-none. You will be hearing a LOT about Bitcoin in 2014, so get a head start here... CLICK TO WATCH
27 January 2014 39
Hmmm...
and finally...
Famous landmarks like the Arc de Triomphe, the Pyramids of Giza, and the
Sagrada Familia have been photographed countless times, and they are recognizable to most of us. But this collection of stunning aerial photographs gives us a bird's-eye view of these places, casting them in a totally new light. Most of the photos are of places or things that most of us could easily identify right away. The images illustrate just how much a change in perspective can alter. It's also worth noting that a few of these sites, like the Pyramids of Giza and the hotels of Dubai, were designed with an aerial perspective in mind. The designs of certain Dubai hotels can only be appreciated fully from above, and some theorize that the Pyramids of Giza were meant to be aligned with the stars in Orion's Belt. Stunning! (Thanks, AZ)
CLICK HERE TO VIEW IMAGES
Hmmm...
27 January 2014 40
Hmmm...
Grant Williams
Grant Williams is the portfolio manager of the Vulpes Precious Metals Fund and strategy advisor to Vulpes Investment Management in Singapore a hedge fund running over $280 million of largely partners' capital across multiple strategies. The high level of capital committed by the Vulpes partners ensures the strongest possible alignment between the firm and its investors. Grant has 28 years of experience in finance on the Asian, Australian, European and US markets and has held senior positions at several international investment houses. Grant has been writing Things That Make You Go Hmmm... since 2009. For more information on Vulpes, please visit www.vulpesinvest.com.
*******
Follow me on Twitter: @TTMYGH YouTube Video Channel: http://www.youtube.com/user/GWTTMYGH ASFA Annual Conference 2013: "Wizened In Oz" 66th Annual CFA Conference, Singapore 2013 Presentation: "Do The Math" Mines & Money, Hong Kong 2013 Presentation: "Risk: It's Not Just A Board Game" Fall 2012 Presentation: "Extraordinary Popular Delusions & the Madness of Markets" As a result of my role at Vulpes Investment Management, it falls upon me to disclose that, from time to time, the views I express and/or the commentary I write in the pages of Things That Make You Go Hmmm... may reflect the positioning of one or all of the Vulpes fundsthough I will not be making any specific recommendations in this publication.
27 January 2014
41
Hmmm...
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The Mauldin Economics website, Yield Shark, Thoughts from the Frontline, Thoughts from the Frontline Audio, Patrick Coxs Tech Digest, Outside the Box, Over My Shoulder, World Money Analyst, Bulls Eye Investor, Things That Make You Go Hmmm, Just One Trade, Transformational Technology Alert, and Conversations are published by Mauldin Economics, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information. Grant Williams, the editor of this publication, is an adviser to certain funds managed by Vulpes Investment Management Private Limited and/or its affiliates. These Vulpes funds may hold or acquire securities covered in this publication, and may purchase or sell such securities at any time, all without prior notice to any of the subscribers to this publication. Such holdings and transactions by these Vulpes funds may result in potential conflicts of interest, although the editor believes that any such conflict of interest will be mitigated by the nature of such securities and the limited size of the holdings of such securities by the applicable Vulpes funds. John Mauldin, Mauldin Economics, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion. Mauldin Economics, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Mauldin Economics, LLCs proprietary rights, or any other reason determined in the sole discretion of Mauldin Economics, LLC.
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Hmmm...

THINGS THAT MAKE YOU GO

Things That Make You Go Hmmm...

7 Doesnt Matter To Anyone 6 Starts To Matter To Some

3 2009 2010 2011 2012 2013

Exchange Rate 2009 - 2014

Starts To Matter To Some

Doesnt Matter To Anyone

1.25 2009 2010 2011 2012 2013

5.0 2008 2009 2010 2011 2012 2013

Until Next Time... ******* Breaking Out Is Hard

The BaFin Enquiry into Deutsche Bank

HSBC Imposes Restrictions on Large Cash Withdrawals

Gold Mint Runs Overtime in Race to Meet World Coin Demand

The Farce of the Eu Traveling Circus

The Bull in the Euro Zone's China Shop

Charts That Make You Go Hmmm...

Source: FT/Nick Laird Sharelynx

Words That Make You Go Hmmm...

Jeff Gundlach is without doubt one

I remain firmly of the opinion that

CLICK HERE TO VIEW IMAGES

Unauthorized Disclosure Prohibited

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