Category Archives: Economy and Meltdown

The GAAPL Closes

Yesterday, just as AAPL was plumbing its intraday lows ahead of its earnings announcement, and just as gold was about to break out to the upside (at least until Dennis Gartman turned bullish on the metal) we relayed a “rumor” suggesting that the most sturdy pair-trade of the past few months: the AAPL-Gold compression was Ben Bernanke’s #timestamp for the day.


Rumor Bernanke is pitching the AAPL-gold compression trade

— zerohedge (@zerohedge) July 23, 2013


Sure enough, following yesterday’s AAPL spike and today’s gold take-down, Bernanke Asset Management can claim one more win in its impeccable recommendation track record.

GAAPL Filled…


As the strangest correlation continues to re-gather pace…


Charts: Bloomberg

(h/t @Not_Jim_Cramer)


House Narrowly Rejects Proposal To End NSA Surveillance In 205-217 Vote

Moments ago, an unlikely grouping between a 33-year old Republican, Rep-Justin Amash, and an 84-year old Democrat, Rep-John Conyers, resulted in a House vote, that if passed, would have suspended the NSA’s “indiscriminate collection of phone records” and effectively ended the program’s statutory authority. Yet despite significant lobbying by the White House, security experts and representative on both sides of the aisle, the vote came within a startlingly close 12 votes of passage. A majority of Democrats, 111, voted for Amash’s amendment despite the full court press while 83 Democrats voted no. The GOP vote was 94-134. That the vote did not pass is not surprising. However, that it came to just 12 votes of passage is the stunning development and shows a sea change of how Congress approaches both personal and the broader implications of the Patriot Act. All of it thanks to the action of one man who at last check was still stuck in the transit terminal in Moscow.

From The Hill:

Wednesday’s vote came after the White House and lawmakers who support the NSA’s surveillance activities launched a major offensive against Amash’s measure after it was granted a vote Monday evening.


The offensive underlined the significance of Wednesday’s vote, which was the first time that Congress weighed in on the NSA’s spying programs since they were revealed by The Guardian and The Washington Post last month.


Director of National Intelligence James Clapper released a statement Wednesday against Amash’s amendment, saying it risked “dismantling an important intelligence tool.”


And on Tuesday, White House press secretary Jay Carney issued a rare evening statement announcing the White House’s opposition.


“We oppose the current effort in the House to hastily dismantle one of our Intelligence Community’s counterterrorism tools,” Carney said.


NSA Director Gen. Keith Alexander, meanwhile, made himself available to answer lawmakers’ questions about the program on Tuesday in classified, members-only briefings.

WaPo has more on the progeny of the Amash-Conyers amendment:

Lawmakers voted 217 to 205 to defeat the proposal by an unlikely political pairing: Rep. Justin Amash (R-Mich.), a 33-year old libertarian who often bucks GOP leadership and Rep. John Conyers (D-Mich.), an 84-year old liberal stalwart and the chamber’s second longest-serving member. Usually divergent in their political views, they joined forces in recent weeks in response to revelations about the NSA’s ability to collect telephone and Internet records that were leaked by Edward Snowden, a former NSA contractor who is seeking asylum in Russia.


The plan would restrict how the agency can collect bulk phone records and metadata under the Patriot Act. Agency officials would be able to continue collecting telephone records, but only for people connected to relevant ongoing investigations.


The proposal also would require that secret Foreign Intelligence Surveillance Act (FISA) court opinions be made available to lawmakers and that the court publish summaries of each opinion for public review.

The opposition to defunding Big Brother was fast and furious by virtually everyone involved:

House Intelligence Committee Chairman Mike Rogers (R-Mich.) blasted the Amash-Conyers proposal Wednesday, calling it “inflammatory and certainly misleading.”


In an interview with a Michigan radio station, Rogers said that Amash was trying “to take advantage, at any rate, of people’s anger of the IRS scandal, which is real, and the AP — Associated Press dragnet by the Attorney General, Benghazi. All of those things are very real, and there’s no oversight function. What they’re talking about doing is turning off a program that after 9/11 we realized we missed — we the intelligence community — missed a huge clue.”


Other Republicans agreed that the amendment would jeopardize ongoing counterterrorism operations. Rep. Tom Cotton (R-Ark.), a U.S. Army veteran who served tours of duty in Iraq and Afghanistan, said the amendment “takes a leaf blower and blows away the entire haystack.”


The amendment earned a strong rebuke from the Obama administration, which had spent the last several days attempting to blunt support for the proposal.


And Rep. Michele Bachmann (R-Minn.), a member of the House Intelligence Committee, told her colleagues that she opposed the amendment because telephone records are not considered private property. She also blasted Snowden for disclosing sensitive information to the news media, saying “This was not an act of a patriot, this was an act of a traitor.”

We sure hope they mean intelligence in the “other” sense of the word.

We will provide the full roll call of the 217 who voted against the amendment, in a narrow sense, and the Bill of Rights, in a broader, as soon as it is available.


Brazil: Not the Place to Be!

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This was meant to be Brazil’s moment of glory. The Pope on his first official visit outside of the Vatican in 2013. Hosting the World Cup in 2014. Then the Summer Olympic Games in 2016. But, right now the only thing that looks like taking precedence over all of that are the soaring cost of daily necessities for Brazilians and the overall cost of living that is rising without precedence in the country, plunging many into economic hardship and financial difficulty. It looks very much as if Brazil is not the place to be either this year and the coming months and next couple of years will be just as troublesome as today.

Today average Brazilians are having trouble making ends meet paying for everyday products or household goods. Riots erupted in Brazil against the Pope’s visit to Rio de Janeiro. Anger has erupted because the country is paying out more than $50 million for the man from Rome. But, most of those that are actually protesting are doing so for political reasons, rather than anything to do with religion. It’s just another straw on the camel’s back, but this one looks as if it may break that back, snapping the country in two.

Brazil: Rio de Janeiro

The World Cup has also been the cause for great concern. The building of the super-stadium in Manaus, for example, that will be so big that it won’t be able to be used after the World Cup has finished. The World Cup is costing $13.73 billion. At least, that is the price at the moment, but we all know that predicted prices and actual prices at the end when the last ball gets kicked have nothing to do with each other.

The Olympic Games are said to be covered by the total cost of $14.4 billion (that was included in the bid that was put in for their election as the host). Again, prices rarely remain fixed and the chances are they (like everyone else) will go over budget.

It’s quite understandable that Brazilians are taking to the streets with regard to the money being thrown at the Pope, at football and at the Olympics. Take the example of products that we already consider to be rather expensive in our own countries. Apple’s iPad and iPhone, for example, are the most expensive in Brazil than anywhere else in the world! The average price of one of those products retails at $1, 348, or 28% more than on US soil.

one-bedroom apartment in the centre of Rio costs an average of over $900 a monthThree bedrooms in the city centre increases that rent to $1, 800 a month. Cars in Brazil could cost anything up to twice the price of the same make and model in the US.

The main reasons for the high prices?

  • Inflation: Brazil is suffering from inflation which stands at 6.7% (June 2013, as reported by the Brazilian Institute of Geography and Statistics (IBGE)). Between 1980 and 2013 it averaged out at 406.59%! Its all-time low was in December 1998 at 1.65% and the highest it ever reached was 6821.31% in April 1990.
  • Taxes: Brazil has a complex system of taxation, taking money from everyone involved in the supply-chain process. That means that taxes in the country are extortionate and the reason why goods that are cheaper in other countries are double or triple the prices being used in Brazil. For example, cars in Brazil tend to cost roughly 42% more than they should since this is due to the taxes levied on their sale in the country.
  • Legislation that is circumvented by the state itself. Just one amazing example is the fact that students get 50% off all entertainment and cultural activities in Brazil. So, as a consequence people get fake identity papers and student cards to get the discount. As a result, the state increases the price of those events by about 80%. That way they get around the loss of money from people who should not be benefiting from the discounts. Counter-productive!
  • Imports:  Brazil has one of the highest import taxes, which could sometimes range from 14% to 100%, depending on the product being brought into the country. It’s the tax and the original price of the product that therefore determine the sale price for that product.
  • Underground economy: This is the cause of inflated prices in the Brazilian economy. Many transactions take place by word of mouth or by a network of individuals that are inter-connected in the economy. That means that products that are on sale rarely actually enter the real, legalized marketplace. So, the few products that are on sale in that real market seem as if they are few and far between. Scarcity or apparent lack in supply means that the prices are inflated and people pay over the odds in the real market, thus driving them back into the underground economy. The story just goes round and round.

How are the Brazilians showing that the once celebratory feel of getting the World Cup in their country and the granting of hosting the Olympic Games there is no longer the order of the day? They are taking to the streets and demonstrating against their government for not listening to them and not providing for everyday living of the country’s citizens. Brazil has the highest tariffs on manufactured goods today in the world. It also has the third highest non-tariff barriers to trade. The government provides precedence to Brazilian-made products. But, that means, due to inflation in the country, the products have inflated prices and so (in particular, for pharmaceutical products, which are 25%more expensive when produced in Brazil) people have reduced access to them. Per capita income in Brazil stands at just $11, 630 today according to the World Bank.

Brazil’s growth prospects are already being downgraded by financial analysts around the world (i.e. HSBC). Growth for the economy of Brazil has been reduced to 2.4% this year and next year it stands at 3%.

Originally posted: Brazil: Not the place to be!

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Guest Post: Japan’s Future: Less Sex, More Shoplifting

Submitted by Jonathan DeHart via The Diplomat,

A troubling trend has emerged among Japan’s elderly – who represent around a quarter of its 128 million citizens – which is closely bound up with the nation’s greater demographic problems at hand. For the first time ever, Japanese aged 65 and up account for a higher percentage of shoplifting cases than do the country’s teens.

Bloomberg tells the story of 67-year-old Fumio Kageyama, who has been arrested a handful of times for petty theft. It began in 2008 when he unsuccessfully tried to rob a drunk train passenger, before being caught two years later stealing a bowl of fried rice and pork. He was sentenced to two years in prison. Apparently the lesson did not stick. In 2011 Kageyama was caught stealing hot dog buns and fried noodles.

In 2012, Tokyo’s elderly who resorted to stealing rose to 3,321 (24.5 percent of the total) while 3,195 juveniles (23.6 percent of the total) were arrested for the same crime. Kyodo reported that 70 percent of the items lifted by the elderly are consumables, as illustrated in Kageyama’s case.

Kageyama, who worked on construction projects for 40 years, told Bloomberg: “It wasn’t great to get caught, but I just didn’t give a damn. I never did it when I had a job.” This upsurge in senior citizens who are stealing is the tip of a much larger iceberg.

Japan’s demographic challenges are well documented. As noted in an article written by John W. Traphagan for The Diplomat this February, the nation’s population has been dropping for three consecutive years, with the decline in 2012 estimated at 220,000. Worse, births last year were also at an all-time low of 1,033,000, down 18,000 from the previous year.

This trend is unlikely to change anytime soon. The Japan Family Planning Association found in January 2012 that 36 percent of males aged 16-19 had no interest in sex – that’s 19 percentage points higher than the same numbers reported in 2008. Meanwhile, 59 percent of females from the same age group reported they felt the same, up 12 percent from 2008. What’s more, the fertility rate is expected to drop from 1.39, where it stands now, to 1.35 by 2060 – and life expectancy is set to increase.

The result of these trends: the national population will shrink by around one-third by 2060. Of the decreased population, only half will fit into the age range of 15-65 while those over the age of 65 will account for 40 percent of the total. The silver shoplifting trend is but one more outgrowth of this complex crisis.

Facing the reality of increasing strain on a shrinking workforce, the government is taking steps to reform the nation’s flimsy social security and tax systems. However, no satisfying solutions are forthcoming. In fact, Prime Minister Shinzo Abe plans to cut welfare in August, rather than increase government help for the nation’s burgeoning elderly population. With this cut, theft among the elderly could very well increase.

“Crime is one of the problems regarding the elderly, along with pensions, nursing care, and the increased welfare burden,” said Koichi Haji, executive research fellow at the NLI Research Institute in Tokyo. “The government doesn’t know what to do. There is no underlying idea of how to deal with the falling population.”

Haji added, “Elderly people are gradually digging into their savings, and the rate at which they dig into those savings will accelerate.”

It is admittedly a knotty issue. In the next ten years 4.47 million Japanese will retire. Further, national debt is predicted to hit 245 percent this year, according to the International Monetary Fund. Japan’s welfare spending soared to 103 trillion yen ($1.02 trillion) in the year ended March 2011, of which pension outlays accounted for a whopping 52 trillion yen and medical costs 32 trillion yen. It is anyone’s guess how to find a balanced fix for this cocktail of problems.

Much has been made of Japan’s seemingly asexual “herbivore men”, who are often blamed for the country’s plummeting birth rate. Similarly, loneliness has been blamed for the numbers of elderly who are resorting to shoplifting. There could be an element of truth to this.

While many senior shoplifters may be motivated by economic factors, AFP reported that the bodies of deceased, single elderly citizens often lie undiscovered for weeks or even months. Further, 3.5 million elderly women and 1.4 elderly men in Japan live by themselves. Sadly, these numbers are expected to rise by 54 percent, to 7.17 million elderly citizens living alone by 2030, according to the National Institute of Population and Social Security Research, as reported by Bloomberg.

Faced with these complex realities, rather than crack down harshly some suggest a softer approach. As reported by The Asahi Shimbun, the Tokyo District Public Prosecutors Office hired a part-time social worker in February to assess if assisting the needy could reduce petty crime. The verdict on the trial is still out.