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October 7, 2013

Key Market Trends Oct. 7, 2013

By Emann Charts

WASHINGTON - Republican House Speaker John Boehner vowed on Sunday not to raise the US debt ceiling without a "serious conversation" about what is driving the debt, while Democrats said it was irresponsible and reckless to raise the possibility of a US default.

"The nation's credit is at risk because of the administration's refusal to sit down and have a conversation," Boehner told ABC's "This Week," adding that there were not enough votes in the House of Representatives to pass a "clean" debt limit bill, without any conditions attached

S&P Futures Open Down As Friday's "Deal" Hope Fades

Despite the US equity market's efficient "knowing better" on Friday, the total and utter lack of progress this weekend in any and all fiscal issues in Washington has seen the gains from Friday evaporate as the S&P 500 futures open down 10 points. We are sure the headline-driven ping-pong will continue to drive stocks though as there remains over 15 hours until the US day-session opens. Gold and FX markets are practically unchanged for now.

With less than two weeks to go until the Debt Ceiling is breached, there's a lot of talk about the risk of a U.S. "default" and what happens if the U.S. does default.

Unfortunately, there's a lot of sloppiness about the meaning of this word, default.

In a note examining the debt ceiling, Goldman Sachs provides a service talking about some meanings of the word, and how it's used.

SAN FRANCISCO — The Obama administration dispatched Treasury Secretary Jack Lew to all the major Sunday television talk shows as the partial government shutdown continued and there were few signs the budget or debt ceiling impasses would be resolved.

On Oct. 17, the U.S. runs out of its ability to borrow, Lew told CNN’s “State of the Union.” Congress “is playing with fire if they don’t extend the debt limit,” he said. “There is no option that prevents us from being in default if we don’t have enough cash to pay our bills.’

Grab any Wall Street trader in a bar, or any portfolio manager in his office, and he’s likely to tell you gold is finished.
It’s silly, nothing more than a shiny metal, a substance with little use and little real value, a “barbarous relic,” and the stuff of nothing more than superstition. Only a fool would own any gold in his portfolio.

Washington politicians could slash the budget deficit by just tapping into the foreign profits of the top 20 American companies.

The upper tier of the Fortune 50 has burrowed away $743 billion in total profits in offshore accounts, a bounty that would yield about $119 billion for the Treasury, according to a study by NerdWallet Taxes.

Swiss regulators said they’re investigating several banks for allegedly colluding to manipulate the $5.3 trillion-a-day foreign exchange market.

The Swiss Financial Market Supervisory Authority “is coordinating closely with authorities in other countries as multiple banks around the world are potentially implicated,” it said yesterday in a statement. Separately, the competition commission said it opened a preliminary probe on Sept. 30 after receiving allegations of collusion among banks to manipulate some foreign-exchange rates.

According to Bloomberg, Asia’s richest man, Li Ka-Shing, is looking to make gold investments.

The Chinese born, Hong Kong business magnate, investor, and philanthropist is considered to be the richest person in Asia and the richest person of Chinese descent in the world. Forbes estimates he is the 11th richest person in the world with a net worth of $27 billion in U.S. dollars. Two of his sons are believed to be billionaires in their own right.

Portugal’s plan to leave its bailout program and return fully to international markets risks being hindered by some investors making their own exit.

Foreign money managers were net sellers in June and July after buying in May, increasing the proportion of securities owned by residents. Domestic banks held a record 33 billion euros ($45 billion) of the nation’s government debt on Aug. 31, European Central Bank data published last week showed.

Egyptian celebrations of the 40th anniversary of the Arab-Israeli War were marred by a fresh wave of violence, with at least 50 people killed and over 200 wounded in clashes between police and supporters of ousted President Mohammed Morsi.

RT's Arabic team also got caught in the turmoil in Cairo, with producer Ahmad al-Ashqar getting injured in the right leg in Giza's Dokki district.

The irony of Jesse Ventura calling for a new "American Revolution" in a conversation with Brit Piers Morgan is not lost on us but the former Governor of Minnesota asks some awkwardly open questions in this 'colorful' interview. Ventura asked if the government's shut down, "That should mean we shouldn't have to pay any taxes, right?" He called for another American revolution to push back against the "corrupt system" created by Democrats and Republicans in Washington. He told Morgan the two-party system has legalized "bribery" for access, suggesting he's fed up enough to actually run for president in 2016. Ventura called both parties "gangs," and Morgan admitted he had to agree, adding that they're "overpaid, underworked children!" The discussion then veers from Obamacare, Ventura's run for President, and the JFK conspiracy.

Now that "bail-ins" have become accepted practice all over the planet, no bank account and no pension fund will ever be 100% safe again. In fact, Cyprus-style wealth confiscation is already starting to happen all around the world. As you will read about below, private pension funds were just raided by the government in Poland, and a "bail-in" is being organized for one of the largest banks in Italy. Unfortunately, this is just the beginning. The precedent that was set in Cyprus is being used as a template for establishing bail-in procedures in New Zealand, Canada and all over Europe. It is only a matter of time before we see this exact same type of thing happen in the United States as well. From now on, anyone that keeps a large amount of money in any single bank account or retirement fund is being incredibly foolish.

It doesn’t seem like a big deal considering all the scrutiny he’s been under but Jamie Dimon’s move to give up the bank chairman role at JPMorgan Chase may be the beginning of something more ominous.

Yesterday news broke that JPMorgan Chase CEO and Chairman Jamie Dimon is stepping down as chairman of the company’s banking subsidiary. The role is now held by former Johnson & Johnson Chairman and CEO William Weldon.

The following is excerpted from a commentary originally posted at www.speculative-investor.com on 29th September 2013.

For the entire history of the Federal Reserve prior to October of 2008, the Fed was not legally able to pay interest on bank reserves. However, the Emergency Economic Stabilization Act of 2008 gave the Fed the power to pay interest on reserves and the Fed has since made use of this power. We are going to explain why this change was made and why it greatly reduces the probability of future US deflation.

As global financial markets head into a second week of a partial U.S. Government shutdown, with a debt default still a technical possibility, investors have to hope that Winston Churchill was wrong about Americans.

“You can always count on Americans to do the right thing — after they’ve tried everything else,” is a famous quote, versions of which have been attributed to the great British leader a million times. (Citation below from U.S. National Churchill Museum)

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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Item Reviewed: Key Market Trends Oct. 7, 2013 Rating: 5 Reviewed By: Econ Matters