Category Archives: Economy and Meltdown

YUM Plunges After-Hours On 'Shocking' China KFC Miss

Just as we warned, the avian flu in China has had a very significant impact on its KFC chain

  • *YUM BRANDS MARCH COMP SALES DOWN 13% FOR CHINA UNIT     :YUM US
  • *YUM BRANDS: MARCH SAME-STORE SALES DOWN 16% AT KFC CHINA

It seems slashing prices did not do the trick – though we are sure this strain of the deadly virus is just a ‘storm in a teacup’ buying opportunity.

 

    

Fed Releases Names Of Early FOMC Minutes Recipients: Include Employees Of ECB, Goldman, Barclays, JPM, Law And PE Firms

We will release the full list of named recipients once we get it, but here is what we now for now, via BBG and CNN:

  • EMPLOYEES AT GOLDMAN SACHS, BARCLAYS, JP MORGAN, CITI, NOMURA, UBS, HSBC RECEIVED FED MINUTES EARLY YESTERDAY
  • MOST OF THE BANK EMPLOYEES APPEAR TO WORK IN GOVERNMENTAL RELATIONS (Lobbies)
  • ABA, SIFMA, SENATE STAFFERS RECEIVED FED MINUTES EARLY
  • FED NAMES 154 RECIPIENTS OF EARLY RELEASE OF FOMC MINUTES
  • FED MINUTES SENT EARLY TO BANKS, LAW FIRMS, PRIVATE EQUITY
  • FED EARLIER SAID RELEASE WENT MAINLY TO CONGRESS, TRADE GROUPS
  • NONE OF THE PEOPLE ON THE LIST ALERTED THE FED THAT THEY RECEIVED NONPUBLIC INFO A DAY EARLY

In other words: absolutely everyone who trades risk assets for a living!

A more detailed list, which also includes the ECB, via the WSJ is as follows:

Banks, trade groups and lobbying firms:

American Bankers Association
American Council of Life Insurers
Barclays Capital
BB&T
BNP Paribas
Capital One
Carlyle Group
Citigroup
The Clearing House Association
The Cypress Group
Fifth Third Bank
FINRA
Goldman Sachs
The Gray Company
Guggenheim Partners
HSBC
Independent Community Bankers of America
IntercontinentalExchange
J.P. Morgan Chase
King Street
National Association of Realtors
Nomura
PNC
Regions Bank
Rich Feuer Anderson
Roberts Raheb & Gradler
Securities Industry and Financial Markets Association
Standard & Poors
Sullivan & Cromwell
UBS
U.S. Bank
Wells Fargo
Whitmer & Worrall
Williams & Jensen

Government agencies or public-oriented entities:

Austria Federal Ministry of Finance
Bank of Japan
Conference of State Bank Supervisors
Congress (House & Senate)
Consumer Financial Protection Bureau
European Central Bank
Federal Housing Finance Agency
National Credit Union Administration
Treasury Department
White House

Of course, once the lobby workers got the list, they promptly forwarded it into the gaping maw of the mothership which pays the salaries and bonuses.

Naturally, to say that nobody traded once getting this material, non-public information, is about as credible as saying that nobody traded on the material, non-public information leaked by Tim Geithner in August 2007 when he informed the banks one day in advance of a critical Fed decision. Oh wait:

 

We will provide the full list of people who manipulate and cheat the market shortly, but for now we are curious to see how the Fed will spin that EVERYONE got an advance notice of its minutes a day in advance without this becoming a material issue with the regulators, and just how many billions in hush money it will take to push this all under the rug.

    

Guest Post: Survivor Of Communist Cuba Defends 2nd Amendment

Submitted by Brandon Smith of Alt-Market,


In the past, I have corresponded with a few survivors of communist despotism, and what I have found is that most if not all immigrants that actually lived in a collectivized state with a disarmed population fight harder to defend the U.S. Constitution than half of the people who were actually born here.  There are a lot of overgrown children in this country today who have NO understanding of the consequences of the path our society has been set on.  They look to big government to take care of them because they are too lazy or apathetic to do it for themselves.  They look to big government to protect them because they are cowardly and have no concept of self-defense.  They look to big government as an attack dog that they can hide behind when they seek to impose their ideology and zealotry on the rest of us.  They bow down to big government because they are afraid of becoming the “nail that sticks out”.  They submit to authoritarianism because they have no honor, and, no sense of appreciation when it comes to the concept of true liberty.

These sad but useful idiots within our population love to argue in the name of the state, constantly claiming that the ongoing restrictions of our individual freedoms and constitutional rights are “for the greater good” of our society as a whole.  They insist that even though the political measures being taken in the U.S. today are almost identical to those implemented in communist police states, this time “things will be different”.  This time, the collectivists will “get it right”.  Not surprising, though, is the fact that the vast majority of those that call for rights restrictions and socialized mega-government have never actually lived under the kind of system they are demanding.  They have absolutely NO idea what it is really like, nor do they ever attempt to learn from those who comprehend full well.

Some people know.  Some people have lived it.  Some people have experienced the consequences first hand.  And, for anyone with the intelligence to listen, this is what they have to say about gun control and the path to tyranny…

 

    

The Drone Diaries: An Interactive Tracker Of America's "Remote Control" Casualties

While previous US-offensive campaigns around the world traditionally had a face and pulse, and thus a narrative and an appropriate popular (and populist) reaction, recent years have seen most US military “intervention” devolve to the intangible world of video games: an operator in Nevada controlling predator drones half way around the world with a joystick, and launching bombs and missiles with the push of a button. In the process any aspects of the humanity (or complete lack thereof) of traditional warfare were completely lost, and the US has succeeded in engaging in countless offshore campaigns without a single peep from a population that would otherwise have long since succumbed to war fatigue. Alas, while technological superiority means little risk while imposing Pax Americana (if only in the most underdeveloped defensively nations), it certainly does not mean fewer casualties on the other side. So just to make sure that what is out of sight, is not out of mind, below we present an interactive tracker of all casualties in Pakistani drone strikes since 2004.

In brief, of the 3105 total casualties, only 47, or 1.5% have been of high profile targets. The rest, including some 175 children, is what can be classified as “collateral damage.” But who cares: the classic liberal revulsion is never an issue because the only American involvement is that by a 19 year old with a rapid response and a trigger finger. And at the end of the day, who really cares what goes on on the other side…

h/t Nolsgrad

    

Guest Post: Japan Vs. Newton (And Certain To Lose)

Submitted by Chris Martenson of Peak Prosperity,

Conventional thinking and reporting has it that Japan is conducting a larger version of the same monetary experiment they’ve been running for about 15 years.  The implication here is that we can safely analyze what Japan is up to through the same monetary lens, as always, but with a slightly wider aperture.

By now, we are all familiar with the details.  Japan has initiated a program of monetary expansion that goes by the shorthand of 2-2-2.  In two years, the Bank of Japan (BoJ) will fully double the monetary base as it seeks a minimum of 2% inflation.

In the aftermath of this announcement, the yen weakened by a whopping 8% against the dollar, the Nikkei stock average vaulted up by roughly 10%, and the $10 trillion Japanese government bond market had to be frozen twice because of intense volatility. 

In truth, what Japan is running is as much a massive social experiment as it is a monetary experiment.  It has such enormous implications to everyone, but especially the Japanese people, that we should all be paying very close attention.

Creating Inflation

The basic formula for creating inflation involves more money and credit chasing too few goods.  Whether this is more goods (just not enough to match the growth in money and credit), the same amount of goods, or even fewer goods is not important.  What matters is that there is more money and credit than goods. 

On this front, so far, so good.  Japan is going to fully double (!) the monetary base in just two years.  In any tidy, mathematical world where economics is governed by linear, rational processes, this doubling of the monetary base would result in inflation.

Unfortunately, the real world is not very tidy. 

The monetary base is really an abstraction that refers to the amount of money that the banking system has available to pyramid into a greater number of loans.  As I am sure you have figured out by now, simply having more money in the system will not automatically result in more money chasing goods. 

In fact, without a good reason to borrow and then spend that money, those new funds may well just sit in the banking system chasing nothing related to real goods and services in the real economy.  Instead, that money will simply chase financial assets such as stocks and bonds.

The BoJ knows this, and yet their plan revolves around the idea that they can create inflation by simply doubling the monetary base.  Does this mean they are confident that there is pent-up consumer demand that was stymied by a lack of cheap funds from the banking system? 

The very short answer is ‘no.’  The BoJ knows perfectly well that more base money will do nothing to stimulate additional inflation via consumer demand, and they know this because Japan has had rock-bottom borrowing costs for a very long time.

The Real Target – Trust

So if the BoJ already knows that more base money will not lead to the buying of more goods and services, then what is their plan for stoking inflation?

The answer is both simple and somewhat upsetting: They are targeting people’s trust in the yen.  The idea is simple to understand, as inflation requires that people prefer to hold ‘things’ instead of money.  That is, the preference for money is diminished and the preference for real things, perhaps anything other than money, is elevated. 

If enough people decide that holding money is a losing proposition, they will favor consumption instead.  The way to get people to favor things instead of money is to debase their confidence in money.  So people’s trust in money has to be targeted, and this is, indeed, the BoJ’s target.

The sad part of this story is that the BoJ is seeking a 2% (minimum) inflation target under the theory that higher inflation will be good for the economy and therefore Japanese businesses and therefore Japan.

The problem is that there are multiple reasons that prices might rise.  Some of them are beneficial to these inflationary aims, and some of them are destructive.  For example, if prices rise because people lose confidence in the yen, and prices rise because imports cost more, then this simply hurts consumers at the benefit of exporters.

In short, there is no net societal gain.  The accounting identity in play here is that one entity’s loss is another entity’s gain.  If consumers and importers have to pay more for imported goods simply because the yen has fallen in value, then all we have to work out is who gains.  Exporters gain, by and large, as do other sectors.  

That’s just the way these things work – it is not possible to engineer a gain where everybody benefits because one sector’s deficit automatically becomes another sector’s gain.  It is simply Newtonian physics.  For every force, there is an equal and opposing force – only the forces are economic and involve gains and losses.

The form of inflation that Japan hopes to stoke involves the kind where money currently stored in Japanese bank accounts comes roaring out into the Japanese economy.  The BoJ is willing to harness the import/export losses as a useful means of convincing the local businesses and populace that the yen is just not a safe store of value.

So the basic plan that the BoJ has put into motion is to ruin local faith in the yen.  It is actively targeting trust, a necessary component of any fiat-based currency, under the twin theories that it knows what it is doing and will know when to stop.

The problems are that I am pretty sure they will succeed beyond their wildest hopes and that nobody at the BoJ has any experience in massive social engineering experiments. 

Conclusion

The BoJ is not just running the largest monetary experiment in their history, but also the largest social engineering experiment.

Trust is an essential component in every economy and for every currency.  The BoJ has just upped the ante by explicitly and specifically targeting trust in the yen. Perhaps they know what they are doing, and we certainly hope so, but I happen to think it is playing with fire.

There really aren’t any guidebooks for it to follow, and even if there were, it is doubtful that the economists in charge would have been required to study them during their academic training and political careers.

If the notion of your pilots flying blind bothers you, then you are probably not very happy or confident with the BoJ’s actions here.  Were I a Japanese citizen, I would immediately convert my yen holdings to something, anything, else.  Swiss francs, gold, dollars – anything (!) would be preferable to me here.

Once your central bank declares war on its own currency, this is just the prudent thing to do.

For everyone else, Japan is now the largest economic Petri dish on the planet and is well worth studying for what happens next.

 

The early results, with a manic pulse in the Nikkei coincident with arrhythmic gyrations in the Japanese government bond market, suggest that something has been shaken loose in Japan.

Trust, perhaps?