We have recently seen a big drop in crude prices and there are talks of 30/40 dollars of crude prices.
Did the US govt engineer the move to hurt Russia? Most people think so and she might have sold reserves in the spot market to push down futures.
Silver has been below the $19/20 level a long way and that level is considered the threshold for a weak economy and sure it is now for Japan and Europe, but stocks keep on rising.
Look at crude prices vs gold, gold has been unusually strong, if there is no inflation, who would buy gold, but the $1200 level seems to hold.
So which is right, gold holds at this level and crude going up soon or crude holds at current level and gold declines?
Another strange factor is platinum [$1193 current price], it has always been more expensive than gold [$1198], why is it now in the same ballpark with gold or even lower in terms of prices.
Many conventional relationships are challenged at the same time, is it because of serious manipulation that past relationships will eventually resurface or this is a new norm for all these metals, commodities and stock prices!
Dow has also been in extra volatility, falling 300 points and rising 300/400 points, is this getting close to the peak as volatility happens at low and high points, rarely in the middle.
Time will tell, but meantime we must caution ourselves to take less risk and patiently wait for more signals to confirm the truth.
With so many anomalies happening, the chance of a 2015 recession or stock pull back becomes not so remote except in the event of a large QE by EU.
19 December 2014
16 December 2014
Bust of US Shale production?
further article from outsider club
guys who want to also read the chart or tables which are a bit out of bound here can email me.
With this huge uptick in domestic oil production, there are an increasing number of reports stating that the U.S. will become energy independent.
According to the article, "The Energy Revolution 'Made In America'":
These forecasts provide a very optimistic outlook for U.S. energy production far into the future... so why should we worry?
The Coming Bust of the U.S. Shale Oil Boom
With all booms comes the inevitable bust. This is no different with shale oil. The majority of shale oil production in the U.S. comes from two fields — the Bakken & Eagle Ford. While production has increased significantly in these two fields, it comes at a huge cost.
The typical Bakken oil well declines approximately 40% per year. That's right — oil wells in the Bakken are declining nearly ten times faster than the global 4-5% average discussed previously.
The chart below shows that the Bakken is losing an amazing 63,000 bd (barrels per day) of production as of December 2013. The trend remains unbroken through today.
This means the oil companies drilling in the Bakken had to add more than 63,000 bd in December if they wanted to increase production... and they did. According to the U.S. Energy Information Administration (EIA), the Bakken added 89,000 barrels of new production in December 2013. If you look at the chart below, you will see the +89,000 bd of new production minus the 63,000 bd of declines to equal a net increase 26,000 bd in December.
You will notice on the left side of this chart that in November, the Bakken was producing a total of 976,000 bd. When we add the 26,000 bd of net new production for December, the new overall total is 1,002,000 bd, or over 1 million barrels a day.
Even though the Bakken is now producing over 1 million barrels of oil per day, take a look how much worse the declines in oil production will get in the next few years. If we assume the current trend will continue, we can see how much production will decline by the end of 2015:
I don't want to get into too many numbers here, but the graph below shows how many new wells have been added in the Bakken since 2007. The total well figures below are for the North Dakota portion of the Bakken, which produces +90% of Bakken oil. A small portion of the Bakken is located in Montana, but the state does not publish monthly updated information.
As you can see, there were only 479 wells producing in 2008. This nearly doubled in 2009 to 891 wells and by last count was 6,447. The total number of wells will have to keep increasing if they want the Bakken to continue to grow.
The huge fall in production that is taking place in the Bakken is also occurring in the other large shale oil field in the U.S. — the Eagle Ford.
The Eagle Ford shale oil field is experiencing an even higher rate of decline than the Bakken. According to the EIA, the Eagle Ford is estimated to have a decline rate of 83,000 bd in December. This is 20,000 bd more than the Bakken, and it will continue to fall even further in the next several years. This is the elephant in the living room that no one in the oil industry wants to talk about — the huge decline rates.
Shale oil fields only contain so many sweet spots and a certain amount of total drilling locations. Moreover, the farther out from the sweet spot the company drills, the less productive the well. So once the sweet spots are exploited and the best locations are drilled, production peaks and declines.
David Hughes, a geoscientist with nearly 4 decades of experience studying the resources in Canada, including 32 years at the Geological Survey of Canada, recently wrote a report titled "The Shale Revolution: Myth and Realities." Hughes forecasts that production from the Bakken and Eagle Ford will peak in approximately 2016. This is only a few years away.
So much for the notion that we are going to have decades of a cheap and abundant domestic oil supply.
Now that we know production from U.S. shale oil fields will more than likely peak within the next few years, keeping the country from achieving energy independence, what about that supposed 100-year supply of natural gas that the shale industry has been hyping in the media?
The U.S. Shale Gas Industry Has Been a Commercial Failure
The subhead line above is an actual statement from another excellent energy analyst that I will get to in a moment. However, I wanted to first list a few of the points as they pertain to conventional wisdom regarding the U.S. Shale Gas Industry from David Hughes' report:
While I see nothing better for the United States than to become energy independent with decades of cheap oil and natural gas, it looks like the shale gas industry is in much worse shape than its shale oil counterpart. This is according to our next shale-hype slayer and energy analyst, Art Berman.
Art Berman, Director of Labyrinth Consulting Services, is a petroleum geologist with 34 years of oil and gas experience, including 20 years with Amoco (now BP) and fourteen years as a consulting geologist. Art has been one of the most outspoken critics of the shale energy hype for the past several years.
Recently, Art gave a presentation to the Houston Geological Society called "Reflections of a Decade of U.S. Shale Gas Plays."
In his presentation, Art discusses the slides below, revealing the truth about the profitability of the Haynesville shale gas field. He says that with natural gas at $4.00 (as they were at the time) there are no commercially viable areas in the Haynesville.
Art shows that at $6.00 natural gas, only 6% of the Haynesville (in yellow) is commercial. This data is significant because the price of natural gas has been trading at a low range of $2-$4.50 for the past three years.
Basically, the companies drilling and extracting shale gas in the Haynesville have been losing their shirts... selling their product for less than it costs to produce
Furthermore, what is taking place in the Haynesville is also occurring in the majority of the other shale gas fields in the country.
The Barnett shale gas field was the first to be exploited in a large way in the United States. Labyrinth Consulting Services did an in-depth study of Barnett, which Art included in a presentation titled "Shale Gas - Abundance or Mirage." In this report, it stated that of the 9,100 wells surveyed (between 2003-2009) of the total 15,000 wells in the Barnett, less than 6% met minimum economic threshold levels.
Moreover, Mr. Berman believes the average break-even price for the shale gas industry is somewhere between $6-$7. This proves that the so-called conventional wisdom that the U.S. will produce natural gas for 10 years below $4.50 and for $6.00 for the next 20 years is pure nonsense.
You see, this is the common theme in the shale gas industry — a reality not understood by the American public. Shale gas wells are suffering the same, or even higher, annual decline rates as shale oil wells. This means the shale gas drillers have to continue to drill more wells each year to keep overall production from declining. By doing so, the industry has brought on a great deal of natural gas supply that has depressed the price.
This is known as the "Drilling Treadmill." Once you start, you can't get off or else gas production falls off a cliff. Interestingly, this turns out to be the brontosaurus in the living room that the shale gas industry doesn't want to talk about.
So how is this non-commercial shale energy disaster impacting the largest shale gas companies? A great deal, as you are about to find out.
The Great Shale Gas Ponzi Scheme
Those in the energy industry probably wouldn't use a term like "Ponzi Scheme" to label what is occurring in U.S. shale gas production; however, I believe it is a perfect description of what is taking place. Because the shale gas companies have to spend an increasing amount of money on capital expenditures to keep production from falling, they are swimming in debt.
The data below also comes from Mr. Berman's most recent presentation. Here we can see that the major shale gas companies — Chesapeake, Southwestern, Devon and EOG — are spending a great deal more money on capital expenditures than they are receiving in cash flow from operations.
The combined capital expenditures from these four major shale gas companies in the five-year period between 2008-2012 was $133 billion, while their operational cash flow was only $80 billion. Thus, their free cash flow was a negative $53 billion. Which means these companies had to acquire additional funds to continue the "Drilling Treadmill."
One of the major problems companies face with capital expenditures in the shale energy industry is that they can't sit back and reap the rewards by collecting a great deal of revenue for many years like companies in other industries are able to do. This is due to the rapid decline of the shale gas wells and the considerable loss of revenue as time goes by. Many of these shale gas wells could be capped and shut after 6-10 years of production.
Also, shale gas fields, just like shale oil fields, have only so many sweet spots and a finite number of drilling locations. So at some point in time (much sooner than later), these shale gas fields will peak and decline. And wouldn't you know it... that's exactly what's happening right now.Bill Powers (another top notch energy analyst), in his recent interview, "Give Up The Shale Gas Fantasy And Profit When The Bubble Bursts," had this to say about the peaking of several shale gas fields:
Very few Americans are aware that the production from these shale oil and gas fields will not continue to grow and last for several decades.
When we look at all the data presented here, it is clear to see that the shale energy industry in the United States is behaving more like a Ponzi scheme rather than a long-term viable economic energy system. Shale oil and gas companies have to spend more money each year to increase production or it will fall off a cliff.
While it is true that there is a great deal of supposed shale oil and gas resources in many countries around the globe, several of the analysts quoted in this report do not believe this short-term U.S. shale revolution can be replicated throughout the world. This is due to several factors, such as the lack of infrastructure, water, and technical expertise, and reduced property and mineral rights.
Once the U.S. peaks in shale oil and gas production in the next several years, there is no Plan B. Art Berman got it right when he made this remark about shale energy during his presentation: "Folks, this isn't a new Energy Revolution.... it's a Retirement Party."
The peak and decline of U.S. and global oil production will have a devastating impact on the world's economies and the majority of paper assets. While some individuals already see the writing on the wall, unfortunately the majority of investors have not yet connected the dots.
guys who want to also read the chart or tables which are a bit out of bound here can email me.
The Coming Bust of the U.S. Shale Oil & Gas Ponzi
In just the past four years, oil production in the U.S. has grown a staggering 46%, adding 2.5 mbd — all due to shale oil production.With this huge uptick in domestic oil production, there are an increasing number of reports stating that the U.S. will become energy independent.
According to the article, "The Energy Revolution 'Made In America'":
- Citibank -- U.S. independence from energy imports could even begin at the end of this decade.
- NIC -- National Intelligence Council -- U.S. could become a significant energy exporter from 2020 on.
- IEA -- International Energy Agency -- U.S .could become a net exporter of gas beginning in 2020, and practically develop into a complete self-sufficient energy provider by 2035.
These forecasts provide a very optimistic outlook for U.S. energy production far into the future... so why should we worry?
The Coming Bust of the U.S. Shale Oil Boom
With all booms comes the inevitable bust. This is no different with shale oil. The majority of shale oil production in the U.S. comes from two fields — the Bakken & Eagle Ford. While production has increased significantly in these two fields, it comes at a huge cost.
The typical Bakken oil well declines approximately 40% per year. That's right — oil wells in the Bakken are declining nearly ten times faster than the global 4-5% average discussed previously.
The chart below shows that the Bakken is losing an amazing 63,000 bd (barrels per day) of production as of December 2013. The trend remains unbroken through today.
This means the oil companies drilling in the Bakken had to add more than 63,000 bd in December if they wanted to increase production... and they did. According to the U.S. Energy Information Administration (EIA), the Bakken added 89,000 barrels of new production in December 2013. If you look at the chart below, you will see the +89,000 bd of new production minus the 63,000 bd of declines to equal a net increase 26,000 bd in December.
You will notice on the left side of this chart that in November, the Bakken was producing a total of 976,000 bd. When we add the 26,000 bd of net new production for December, the new overall total is 1,002,000 bd, or over 1 million barrels a day.
Even though the Bakken is now producing over 1 million barrels of oil per day, take a look how much worse the declines in oil production will get in the next few years. If we assume the current trend will continue, we can see how much production will decline by the end of 2015:
Bakken Oil Production Decline Rate:
- Dec 2009 = -13,000 bd
- Dec 2010 = -20,000 bd
- Dec 2011 = -30,000 bd
- Dec 2012 = -47,000 bd
- Dec 2013 = -63,000 bd
- Dec 2014 = -80,000 bd (estimated)
- Dec 2015 = -97,000 bd (estimated)
I don't want to get into too many numbers here, but the graph below shows how many new wells have been added in the Bakken since 2007. The total well figures below are for the North Dakota portion of the Bakken, which produces +90% of Bakken oil. A small portion of the Bakken is located in Montana, but the state does not publish monthly updated information.
As you can see, there were only 479 wells producing in 2008. This nearly doubled in 2009 to 891 wells and by last count was 6,447. The total number of wells will have to keep increasing if they want the Bakken to continue to grow.
The huge fall in production that is taking place in the Bakken is also occurring in the other large shale oil field in the U.S. — the Eagle Ford.
The Eagle Ford shale oil field is experiencing an even higher rate of decline than the Bakken. According to the EIA, the Eagle Ford is estimated to have a decline rate of 83,000 bd in December. This is 20,000 bd more than the Bakken, and it will continue to fall even further in the next several years. This is the elephant in the living room that no one in the oil industry wants to talk about — the huge decline rates.
Shale oil fields only contain so many sweet spots and a certain amount of total drilling locations. Moreover, the farther out from the sweet spot the company drills, the less productive the well. So once the sweet spots are exploited and the best locations are drilled, production peaks and declines.
David Hughes, a geoscientist with nearly 4 decades of experience studying the resources in Canada, including 32 years at the Geological Survey of Canada, recently wrote a report titled "The Shale Revolution: Myth and Realities." Hughes forecasts that production from the Bakken and Eagle Ford will peak in approximately 2016. This is only a few years away.
So much for the notion that we are going to have decades of a cheap and abundant domestic oil supply.
Now that we know production from U.S. shale oil fields will more than likely peak within the next few years, keeping the country from achieving energy independence, what about that supposed 100-year supply of natural gas that the shale industry has been hyping in the media?
The U.S. Shale Gas Industry Has Been a Commercial Failure
The subhead line above is an actual statement from another excellent energy analyst that I will get to in a moment. However, I wanted to first list a few of the points as they pertain to conventional wisdom regarding the U.S. Shale Gas Industry from David Hughes' report:
- Shale Gas production will continue to grow for the foreseeable future (2040 at least) and prices will remain below $4.50 for the next 10 years and below $6.00 for the next 20 years.
- Shale Gas can replace very substantial amounts of oil for transportation and coal for electric generation.
While I see nothing better for the United States than to become energy independent with decades of cheap oil and natural gas, it looks like the shale gas industry is in much worse shape than its shale oil counterpart. This is according to our next shale-hype slayer and energy analyst, Art Berman.
Art Berman, Director of Labyrinth Consulting Services, is a petroleum geologist with 34 years of oil and gas experience, including 20 years with Amoco (now BP) and fourteen years as a consulting geologist. Art has been one of the most outspoken critics of the shale energy hype for the past several years.
Recently, Art gave a presentation to the Houston Geological Society called "Reflections of a Decade of U.S. Shale Gas Plays."
In his presentation, Art discusses the slides below, revealing the truth about the profitability of the Haynesville shale gas field. He says that with natural gas at $4.00 (as they were at the time) there are no commercially viable areas in the Haynesville.
Art shows that at $6.00 natural gas, only 6% of the Haynesville (in yellow) is commercial. This data is significant because the price of natural gas has been trading at a low range of $2-$4.50 for the past three years.
Basically, the companies drilling and extracting shale gas in the Haynesville have been losing their shirts... selling their product for less than it costs to produce
Furthermore, what is taking place in the Haynesville is also occurring in the majority of the other shale gas fields in the country.
The Barnett shale gas field was the first to be exploited in a large way in the United States. Labyrinth Consulting Services did an in-depth study of Barnett, which Art included in a presentation titled "Shale Gas - Abundance or Mirage." In this report, it stated that of the 9,100 wells surveyed (between 2003-2009) of the total 15,000 wells in the Barnett, less than 6% met minimum economic threshold levels.
Moreover, Mr. Berman believes the average break-even price for the shale gas industry is somewhere between $6-$7. This proves that the so-called conventional wisdom that the U.S. will produce natural gas for 10 years below $4.50 and for $6.00 for the next 20 years is pure nonsense.
You see, this is the common theme in the shale gas industry — a reality not understood by the American public. Shale gas wells are suffering the same, or even higher, annual decline rates as shale oil wells. This means the shale gas drillers have to continue to drill more wells each year to keep overall production from declining. By doing so, the industry has brought on a great deal of natural gas supply that has depressed the price.
This is known as the "Drilling Treadmill." Once you start, you can't get off or else gas production falls off a cliff. Interestingly, this turns out to be the brontosaurus in the living room that the shale gas industry doesn't want to talk about.
So how is this non-commercial shale energy disaster impacting the largest shale gas companies? A great deal, as you are about to find out.
The Great Shale Gas Ponzi Scheme
Those in the energy industry probably wouldn't use a term like "Ponzi Scheme" to label what is occurring in U.S. shale gas production; however, I believe it is a perfect description of what is taking place. Because the shale gas companies have to spend an increasing amount of money on capital expenditures to keep production from falling, they are swimming in debt.
The data below also comes from Mr. Berman's most recent presentation. Here we can see that the major shale gas companies — Chesapeake, Southwestern, Devon and EOG — are spending a great deal more money on capital expenditures than they are receiving in cash flow from operations.
The combined capital expenditures from these four major shale gas companies in the five-year period between 2008-2012 was $133 billion, while their operational cash flow was only $80 billion. Thus, their free cash flow was a negative $53 billion. Which means these companies had to acquire additional funds to continue the "Drilling Treadmill."
One of the major problems companies face with capital expenditures in the shale energy industry is that they can't sit back and reap the rewards by collecting a great deal of revenue for many years like companies in other industries are able to do. This is due to the rapid decline of the shale gas wells and the considerable loss of revenue as time goes by. Many of these shale gas wells could be capped and shut after 6-10 years of production.
Also, shale gas fields, just like shale oil fields, have only so many sweet spots and a finite number of drilling locations. So at some point in time (much sooner than later), these shale gas fields will peak and decline. And wouldn't you know it... that's exactly what's happening right now.Bill Powers (another top notch energy analyst), in his recent interview, "Give Up The Shale Gas Fantasy And Profit When The Bubble Bursts," had this to say about the peaking of several shale gas fields:
The facts are starting to
show that declines for the older shale plays such as the Barnett,
Haynesville, Fayetteville and Woodford are very serious.
This can be clearly seen in
the chart below showing the peak of gas production from the Barnett
Shale Field. Gas production increased steadily since 2000, peaking in
November 2011 at 6.3 Bcf/day (billion cubic feet per day). It fell 24%
to 4.8 Bcf/day by June 2013. This provides more evidence revealing just
how dire the future energy predicament will be for the United States.Very few Americans are aware that the production from these shale oil and gas fields will not continue to grow and last for several decades.
When we look at all the data presented here, it is clear to see that the shale energy industry in the United States is behaving more like a Ponzi scheme rather than a long-term viable economic energy system. Shale oil and gas companies have to spend more money each year to increase production or it will fall off a cliff.
While it is true that there is a great deal of supposed shale oil and gas resources in many countries around the globe, several of the analysts quoted in this report do not believe this short-term U.S. shale revolution can be replicated throughout the world. This is due to several factors, such as the lack of infrastructure, water, and technical expertise, and reduced property and mineral rights.
Once the U.S. peaks in shale oil and gas production in the next several years, there is no Plan B. Art Berman got it right when he made this remark about shale energy during his presentation: "Folks, this isn't a new Energy Revolution.... it's a Retirement Party."
The peak and decline of U.S. and global oil production will have a devastating impact on the world's economies and the majority of paper assets. While some individuals already see the writing on the wall, unfortunately the majority of investors have not yet connected the dots.
2015 Crash?
an article from outsider club
Over the past five years, we've enjoyed one of the longest, and most generous, bull markets in history.
But all good things must come to an end.
No bull market lasts forever, and this one has about run its course.
You don't have to take my word for it.
There's plenty of historical precedent to make the case for me...
You see, since 1928, the average duration of a bull market is 57 months. This one is now 68 months running. It's also returned 190%, compared to the average 165%.
Valuations have gotten so high that financial consultant Andrew Smithers believes we're in the third-biggest stock bubble in history.
Looking at key long-term measures, Smithers says U.S. stocks are now about 80% overvalued. And since 1802 (when data was first tracked), there have been only five times when stocks have been more than 50% overvalued: 1853, 1906, 1929, 1969, and 1999.
Each one of those years marked the peak of a massive, once-in-a-generation stock-market bubble. And only two of those bubbles (1929 and 1999) were bigger than today's.
Of course, historical precedent isn't the only headwind this market faces. Looking forward, anyone can see things are getting bad.
Mature economies, like Europe and Japan, are hardly growing at all.
The OECD predicts Eurozone growth will come in at 0.8% this year, and just 1.1% in 2015. Low inflation is a concern, as well, with prices expected to edge up just 0.6% next year.Worse, some countries in Europe have already seen deflation, forcing the ECB to rush to the rescue with stimulus efforts.
Things are even worse in Russia, which is lumbering under the weight of Western sanctions and cratering oil prices.
Russia's currency is at an all-time low vs. the dollar, and the country's own finance minister expects a 0.8% economic contraction next year.
Japan continues to languish in its decades-long malaise. And in China, the days of 10% and 11% growth are but a memory.
In fact, growth in China has been so sluggish that the country risks missing its 7.5% annual growth target year for the first time in 15 years.
And without China's sprawling manufacturing base, commodities-driven economies from Brazil to South Africa have lost the key export market that supported their growth for so long.
And the United States?
Well, we're doing better than most, but that's not saying much.
But that still doesn't mean we're out of the woods.
Going forward, the United States can pursue one of two paths...
If growth remains resilient, the Federal Reserve will continue to rein in monetary policy and follow through with a rate hike.
The other possibility is that the U.S. economy succombs to weak global growth, and tumbles back into a recession itself.
Either way, stocks go down.
A severe correction is inevitable, and as I said earlier, long overdue.
Analysts can dress it up however they want but the truth of the matter is that ever bull market in history can be broken into just three phases:
You saw what happened when the Dow plunged 1,100 points from September 19 to October 16. It was a blood bath.
Well guess what: Those weren't retail investors dumping their holdings, that was Wall Street.
And it's just the beginning.
Since that modest correction, stocks have bounced back, soaring to yet another record high.
That's totally unreasonable, and unsustainable, given the state of the global economy and the likelihood of a rate hike next year.
Even Federal Reserve Chairman Janet Yellen is calling it a bubble.
“Valuation metrics in some sectors do appear substantially stretched,” she said. “Moreover, implied volatility for the overall S&P 500 index, as calculated from option prices, has declined in recent months to low levels last recorded in the mid-1990s and mid-2000s.”
Translation: Stock prices are too high, and investors are too complacent.
Admitedly, that's a bit ironic considering it was the the Federal Reserve that opened Pandora's box by plying the markets with limitless, virtually free capital. But she's right. It's the end of the line.
The question is, then, what to do about it...
There's always a flight to safety when things go south, and precious metals benefit. If you don't own gold — either physically or through an ETF — now is a good time to buy some.
Gold prices have withered over the past year, mostly because investors — large and small — pulled their money out of precious metals and put it in stocks to chase the bull market.
That's a decision they'll come to regret if they don't take the proper precautions now. Soon, the trend will reverse. Stocks will plunge and everyone who's caught off guard will suddenly storm back into gold.
Another thing you might consider is adding an inverse ETF to your portfolio.
There are plenty to choose from:
Used appropriately, even a small allocation of your capital could more than make up for any losses you sustain in a market crash.
Get Ready for the 2015 Market Crash
Get Ready for the 2015 Market CrashOver the past five years, we've enjoyed one of the longest, and most generous, bull markets in history.
But all good things must come to an end.
No bull market lasts forever, and this one has about run its course.
You don't have to take my word for it.
There's plenty of historical precedent to make the case for me...
You see, since 1928, the average duration of a bull market is 57 months. This one is now 68 months running. It's also returned 190%, compared to the average 165%.
Valuations have gotten so high that financial consultant Andrew Smithers believes we're in the third-biggest stock bubble in history.
Looking at key long-term measures, Smithers says U.S. stocks are now about 80% overvalued. And since 1802 (when data was first tracked), there have been only five times when stocks have been more than 50% overvalued: 1853, 1906, 1929, 1969, and 1999.
Each one of those years marked the peak of a massive, once-in-a-generation stock-market bubble. And only two of those bubbles (1929 and 1999) were bigger than today's.
Of course, historical precedent isn't the only headwind this market faces. Looking forward, anyone can see things are getting bad.
Global Economy Stalling
The engines of the global economy are stalling, one by one.Mature economies, like Europe and Japan, are hardly growing at all.
The OECD predicts Eurozone growth will come in at 0.8% this year, and just 1.1% in 2015. Low inflation is a concern, as well, with prices expected to edge up just 0.6% next year.Worse, some countries in Europe have already seen deflation, forcing the ECB to rush to the rescue with stimulus efforts.
Things are even worse in Russia, which is lumbering under the weight of Western sanctions and cratering oil prices.
Russia's currency is at an all-time low vs. the dollar, and the country's own finance minister expects a 0.8% economic contraction next year.
Japan continues to languish in its decades-long malaise. And in China, the days of 10% and 11% growth are but a memory.
In fact, growth in China has been so sluggish that the country risks missing its 7.5% annual growth target year for the first time in 15 years.
And without China's sprawling manufacturing base, commodities-driven economies from Brazil to South Africa have lost the key export market that supported their growth for so long.
And the United States?
Well, we're doing better than most, but that's not saying much.
Damned If You Do...
The U.S. economy is on track to see 2.2% GDP growth this year, and optimistically, 3% growth in 2015.But that still doesn't mean we're out of the woods.
Going forward, the United States can pursue one of two paths...
If growth remains resilient, the Federal Reserve will continue to rein in monetary policy and follow through with a rate hike.
The other possibility is that the U.S. economy succombs to weak global growth, and tumbles back into a recession itself.
Either way, stocks go down.
A severe correction is inevitable, and as I said earlier, long overdue.
Analysts can dress it up however they want but the truth of the matter is that ever bull market in history can be broken into just three phases:
- The Accumulation Phase: This is the period at the end of a downtrend when informed investors — hedge funds, money managers, politicians, etc. — start snatching up shares on the cheap.
- The Public Participation Phase: As the market bottoms and begins its rebound, public fear and apprehension towards investing subsides, and retail investors retest the waters.
- The Excess Phase: Finally, momentum picks up and exuberance takes over. When that happens, a bear market is born, as the informed investors from Phase 1 bail out and leave retail investors holding the bag.
You saw what happened when the Dow plunged 1,100 points from September 19 to October 16. It was a blood bath.
Well guess what: Those weren't retail investors dumping their holdings, that was Wall Street.
And it's just the beginning.
Since that modest correction, stocks have bounced back, soaring to yet another record high.
That's totally unreasonable, and unsustainable, given the state of the global economy and the likelihood of a rate hike next year.
Even Federal Reserve Chairman Janet Yellen is calling it a bubble.
“Valuation metrics in some sectors do appear substantially stretched,” she said. “Moreover, implied volatility for the overall S&P 500 index, as calculated from option prices, has declined in recent months to low levels last recorded in the mid-1990s and mid-2000s.”
Translation: Stock prices are too high, and investors are too complacent.
Admitedly, that's a bit ironic considering it was the the Federal Reserve that opened Pandora's box by plying the markets with limitless, virtually free capital. But she's right. It's the end of the line.
The question is, then, what to do about it...
When All Else Fails...
One option is to buy gold.There's always a flight to safety when things go south, and precious metals benefit. If you don't own gold — either physically or through an ETF — now is a good time to buy some.
Gold prices have withered over the past year, mostly because investors — large and small — pulled their money out of precious metals and put it in stocks to chase the bull market.
That's a decision they'll come to regret if they don't take the proper precautions now. Soon, the trend will reverse. Stocks will plunge and everyone who's caught off guard will suddenly storm back into gold.
Another thing you might consider is adding an inverse ETF to your portfolio.
There are plenty to choose from:
- Rydex Inverse S&P 500 Strategy Fund (RYURX): One of the more traditional bear funds, RYURX delivers a return opposite to what the S&P 500 does. So if the S&P 500 goes down 5%, it goes up 5%.
- ProShares UltraShort S&P 500 (SDS): This fund is leveraged to give you twice the return of any drop in the S&P 500. For example, if the S&P 500 loses 5%, this fund goes up 10%. Be warned though, if the market goes up 5% this fund goes down 10%.
- ProShares UltraShort Russell 2000 (SRTY): This is a more aggressive play. Small caps are more vulnerable to sell-offs, and this fund targets the sector by delivering a return that is three times larger than any decline in the Russell 2000 index.
Used appropriately, even a small allocation of your capital could more than make up for any losses you sustain in a market crash.
26 August 2014
Inflation, Rate Hike, Economy
recently when i meet friends, the topic is always when will rates go up in the states.
my forecast is one of the two below:
the logic behind is there is no inflation on a continuous basis. yes there was quite serious inflation for a short one or two years back esp in food and fuel, condition 1, other than that price rises in goods are not easy to achieve and stay without significant impact on the sales volume.
in fact because of such low rates, those who live on their assets do not have much return [unless a high portion is in stocks] if they hold much of their assets in cash form for the past few years and it is hard for them to spend more without any investment gains or appreciation in their assets. asset appreciation esp property only happens in major cities where there are more immigrants.
the decline in unemployment you see in the us is mainly due to creation of part time and temp jobs that do not contribute much to spending for the economy, the labour participation rate stays low which means those who cant find a job could not afford to spend.
the haves and not haves are highly divided in their spending habits, the haves are still a minor segment of the population and could not cause significant inflation alone as a group. do not forget the bulk of the population are the not haves.
just look at wal-mart and mcdonald stock prices before the Mc food incidents recently, their prices are going no where as their profits are stagnant, this points to the fact that many in the population do not have the power to spend.
EUROPE and the malaise
there isnt much ongoing in structural changes in europe which is why the economy stays low and it will stay low for a long while unless you could see euro reaches parity with usd which for the moment is fantasy.
with europe in danger of deflation, i dont buy the idea of rate hikes as us has to trade with europe and the us economy cannot grow at a fast pace. the only sectors in the states now growing at a frantic pace is the shale oil/gas exploration and some parts of manufacturing.
my friends and readers, are you convinced that rate hikes are very remote? if not, time will tell.
my forecast is one of the two below:
- no rate hikes for quite some time;
- even if there are hikes, it would amount to no more than two hikes of 0.25% each
- unrestrained money printing
- a young population
- a strong economy, local and worldwide
the logic behind is there is no inflation on a continuous basis. yes there was quite serious inflation for a short one or two years back esp in food and fuel, condition 1, other than that price rises in goods are not easy to achieve and stay without significant impact on the sales volume.
in fact because of such low rates, those who live on their assets do not have much return [unless a high portion is in stocks] if they hold much of their assets in cash form for the past few years and it is hard for them to spend more without any investment gains or appreciation in their assets. asset appreciation esp property only happens in major cities where there are more immigrants.
the decline in unemployment you see in the us is mainly due to creation of part time and temp jobs that do not contribute much to spending for the economy, the labour participation rate stays low which means those who cant find a job could not afford to spend.
the haves and not haves are highly divided in their spending habits, the haves are still a minor segment of the population and could not cause significant inflation alone as a group. do not forget the bulk of the population are the not haves.
just look at wal-mart and mcdonald stock prices before the Mc food incidents recently, their prices are going no where as their profits are stagnant, this points to the fact that many in the population do not have the power to spend.
EUROPE and the malaise
there isnt much ongoing in structural changes in europe which is why the economy stays low and it will stay low for a long while unless you could see euro reaches parity with usd which for the moment is fantasy.
with europe in danger of deflation, i dont buy the idea of rate hikes as us has to trade with europe and the us economy cannot grow at a fast pace. the only sectors in the states now growing at a frantic pace is the shale oil/gas exploration and some parts of manufacturing.
my friends and readers, are you convinced that rate hikes are very remote? if not, time will tell.
22 July 2014
2030
care to know about 2030, check the link below:
http://www.dni.gov/index.php/about/organization/national-intelligence-council-global-trends
or download full document from
http://www.dni.gov/files/documents/GlobalTrends_2030.pdf
this is a document prepared by the us, so give it some doubt to whether it could be another form of ideology promotion.
http://www.dni.gov/index.php/about/organization/national-intelligence-council-global-trends
or download full document from
http://www.dni.gov/files/documents/GlobalTrends_2030.pdf
this is a document prepared by the us, so give it some doubt to whether it could be another form of ideology promotion.
03 July 2014
CAPE, what's it about?
there are many arguments about the market top or close to top, now read an article from daily ticker of yahoo.
Major stock averages remain in
earshot of all-time highs and this bull market has been nothing if not
resilient, repeatedly defying predictions of its demise for five-plus
years.
Still, Robert Shiller, Yale professor and Nobel prize winnner, is "definitely concerned" about the outlook for stocks based on the cyclically adjusted price-to-earnings ratio (CAPE) he created. At 26, the so-called Shiller PE is currently well above its long-term average of 17 and approaching levels that previously presaged doom for equities.
Shiller has plotted CAPE going back to 1881 and notes (with some alarm) it has only been higher than current levels three times: In 1929, 2000 and 2007.
"It looks to me like a peak," he says in the accompanying video. "I would think there are people thinking 'it's gone way up since 2009, it's likely to turn down again.' That's what people might plausibly think."
Anecdotal evidence does indeed suggest people are thinking "the end" of this bull run is nigh. But if the market "climbs a wall of worry," that's arguably a bullish sign as my colleague Michael Santoli describes here.
And Shiller is quick to note the CAPE is not a market-timing tool and he remains in the market in his personal account. "We don't know what it's going to do," he says. "Realistically, stocks should be in one's portfolio but maybe lighten up."
Stocks should be in one's portfolio in part because interest rates are so low and "the fixed income market just doesn't look very attractive," Shiller says.
As for the idea, proffered here by Citigroup's Tobias Levkovich, that CAPE is flawed because it doesn't "normalize" for interest rates (as it does for earnings), Shiller says the following: "He's right the very low interest rates are a sign maybe you want to keep more invested in the [stock] market now rather than getting nothing [from bonds]. That ought to help explain the high CAPE but that doesn't mean the high CAPE isn't a forecast of bad performance."
So what does Shiller, whose books include Animal Spirits and Irrational Exuberance, make of the recent steep declines in trading volume and volatility? Watch the accompanying video to find out.
Still, Robert Shiller, Yale professor and Nobel prize winnner, is "definitely concerned" about the outlook for stocks based on the cyclically adjusted price-to-earnings ratio (CAPE) he created. At 26, the so-called Shiller PE is currently well above its long-term average of 17 and approaching levels that previously presaged doom for equities.
Shiller has plotted CAPE going back to 1881 and notes (with some alarm) it has only been higher than current levels three times: In 1929, 2000 and 2007.
"It looks to me like a peak," he says in the accompanying video. "I would think there are people thinking 'it's gone way up since 2009, it's likely to turn down again.' That's what people might plausibly think."
Anecdotal evidence does indeed suggest people are thinking "the end" of this bull run is nigh. But if the market "climbs a wall of worry," that's arguably a bullish sign as my colleague Michael Santoli describes here.
And Shiller is quick to note the CAPE is not a market-timing tool and he remains in the market in his personal account. "We don't know what it's going to do," he says. "Realistically, stocks should be in one's portfolio but maybe lighten up."
Stocks should be in one's portfolio in part because interest rates are so low and "the fixed income market just doesn't look very attractive," Shiller says.
As for the idea, proffered here by Citigroup's Tobias Levkovich, that CAPE is flawed because it doesn't "normalize" for interest rates (as it does for earnings), Shiller says the following: "He's right the very low interest rates are a sign maybe you want to keep more invested in the [stock] market now rather than getting nothing [from bonds]. That ought to help explain the high CAPE but that doesn't mean the high CAPE isn't a forecast of bad performance."
So what does Shiller, whose books include Animal Spirits and Irrational Exuberance, make of the recent steep declines in trading volume and volatility? Watch the accompanying video to find out.
Aaron Task is the host of The Daily Ticker and Editor-in-Chief of Yahoo Finance. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com.
21 April 2014
WORKERS' SHARE IS DWINDLING, PROFOUND IMPACT ON JAPAN
i have always wondered why the so called recovery seems so weak, the reason now is explained in a elaborate manner in the article below, which i think in all, is due to the corp taking a bigger pie and government unwilling to take more welfare into their hands that they allow such transfer of wealth from the consumer layman to the corporates.
with lower real income, consumers can only borrow to spend or spend less, thus eventually denting corp profits in the future.
this trend will likely have a profound impact on japan as well since their corporations have even less to share with their workers as their balance sheets are in shambles. raising the inflation specter will only hurt the citizens of japan, will not heal the current ills of the jap economy and will lead to further distrust with the politicians in power and later maybe, social unrest.
April 18, 2014, 6:15 a.m. EDT
Why you can’t get a raise — it’s simple
You
deserve it, but you can’t make your boss pay you more
By Rex Nutting,
MarketWatch
MarketWatch
The share of current output that
goes to workers as wages has fallen to a record low of 57%.
WASHINGTON (MarketWatch) —
For 24 million Americans, the biggest economic question is: “Where can I get a
decent job?
For 146 million Americans, the
biggest question is: “How can I get a raise?”
Wages and salaries are stagnant,
failing to keep up with the rising cost of living. And it’s been that way for
years. Median weekly wages of full-time workers, after adjusting for inflation,
are no higher today than they were in 2001, and are just $1 more a week than
they were in 1979.
Why can’t I get a raise? Ask
your boss and he’ll tell you one of three things:
• The company can’t afford it.
• You don’t deserve it.
• You can’t make me.
Takeaways from banks'
first-quarter earnings
As we’ll see, only the third
reason makes sense. Bosses have all the bargaining power when it comes to
wages. As a worker, you’re competing against those 22 million Americans who
want a good job, plus millions — perhaps billions — here and abroad who’d be grateful
to do your job for less.
The company can’t afford it.
Maybe your boss tells you that
he’d like to pay you more, but he just can’t afford it. Extreme global
competition, and onerous regulations and taxes are
eating me alive, he says. The bottom line? I’m paying you all I can.
While it’s true that there are
many businesses that can’t afford to raise wages because they are on the edge
of failure, most businesses are doing quite well.
For corporate businesses,
after-tax profits are at record levels as a share of national income. Since the
recession ended, profits are up 65% to $1.68 trillion last year.
Small businesses aren’t doing
quite so spectacularly, but their income is up 13% and their net worth is up
33% to $8.7 trillion since the recession ended.
And the workers? Even after a big gain in the first quarter, median
wages are down 3% since the recession ended.
At the same time that wages have
been falling, productivity (output per hour) has been steadily rising. Labor is
producing more per hour, but getting paid less.
The share of national income
that goes to labor (including the CEO’s salary and his stock options) has
plunged from about 63% to 57%. The 6% of national income that’s going to
profits instead of wages amounts to nearly $900 billion a year.
He can afford to pay you more.
You don’t deserve it.
You’re working hard, your boss
says, but you aren’t worth any extra pay. Maybe you lack some essential skills
that would make you more productive, or qualify you for a job that’s higher
paying.
Some experts, including some of
the more conservative Federal Reserve presidents, put a lot of emphasis on the
skills gap, not only as a cause of so much unemployment but also as a reason
for stagnant wages.
Economic theory suggests that
workers should be paid what they are worth and no more. And what are they worth?
Theory says it’s the value that each hour of labor provides to the firm, or the
marginal revenue product.
The more skilled a worker is,
the more revenue she brings in, and the more she gets paid. At least, that’s
the theory.
But something strange is happening
in the real world. Companies say they can’t find enough skilled workers to
hire, and they say it’s hard to retain the skilled workers they have.
The obvious solution is for them
to offer a high enough salary to attract the skills they need. That’s just
basic supply-and-demand economics. And, yet, companies are not offering higher
pay for the skills they need. Wages are not rising much for occupations said to
be in short supply.
It could be that higher pay
would exceed the worker’s marginal revenue product, but in that case, the
company didn’t really need the skills, because it couldn’t put them to use profitably.
They needed skilled workers the
same way I need a free pony.
There may be another reason for
companies’ reluctance to pay more for skills: corporate culture. Cost-cutting
has become so engrained in management’s DNA that companies have become afraid
to spend money to make money. Firms lay off skilled teams of workers, even
though they could be redeployed in profitable pursuits. Firms refuse to pay
more for skills, even though it means they are leaving revenue and profits on
the table.
It makes no sense, but that’s
management for you.
You can’t make me.
The real reason you can’t get a
raise is that the boss doesn’t have to give you one. You might be “worth” it,
and the company could “afford” it, but businesses pay only what they have to
and not a penny more.
There are a billion reasons you
can’t get a raise: That’s how many people are willing to do your job for the
same pay.
Globalization is a big factor in
keeping wages down, of course. But you’re also competing against a lot of
people in the U.S.
It wasn’t always this way. In
the 1950s, 1960s and into the 1970s, trade barriers, strong unions and
discrimination gave workers (white male workers, that is) more bargaining power
to get higher pay. It created the middle class.
Ultimately, however, it helped
enable the great inflation of the late 1970s.
The 1980s changed all that.
Wages stagnated, as the U.S.
And, then, in the 1990s,
something strange happened: The Fed consciously decided to let unemployment
fall to 4%. And wages rose for the first time in 20 years, because workers were
no longer competing against millions of desperate job seekers.
Best of all, higher wages didn’t
come at the expense of lower profits or higher inflation.
We’re a long way from 4%
unemployment, especially considering the millions who might join the labor
force if they thought there might be a job for them. Let’s insist that the Fed
let us get there again.
It turns out that, if you want a
raise, the best thing to do is get your neighbor a job.
12 April 2014
Cross Border Trading - Fortune or Curse
HK/Shanghai Exchange Linked Cross Border Trading ELT
Only on Thursday have we heard the announcement of this ELT, HSI shot up right away but enthusiasm cool on Friday, why?
First of all, that is a short squeeze, timed with the announcement to make it more believable and short punters have no time to listen to others of their viewpoints of the scheme and many are frighten to close their positions.
Many fans of China opening up further on the financial front hurray this is a step in the right direction, but is it?
If you looked at the limits of Cross Border trading, it is not really opening up, it merely wants to attract further capital into China as the HK->Shanghai limit is 300b while the other way is 250b. Don't stop here, there is also a daily limit of about 13b vs 10.5b. That is to say if there is a crash, there is limit down ie once the limit is reached, you have to wait till tomorrow to sell. It will be a full 23 days before you can unload the full limit or load up the full limit.
If China is confident about her financial being, since her exchange reserves are way too high, it should allow the invest HK limit to be much bigger than the invest Shanghai limit.
How trustworthy are the financial accounts of listed companies in Shanghai and their shares in HK? No one really knows, but there is the belief that the Chinese knows better than the outside world and this is one reason for the low level of investors interest in China of A shares.
Many A/H shares have very high A share prices, but the China banking shares in HK are higher than those in China, while HSI is heavily weighted towards China Shares these days, we likely would see a southern drifting of the Shanghai market [sell those highly priced A share and buy H share in HK] and a lower HSI because China banking shares in HK will drift lower too.
There is a wait period of six months to realize the scheme and we still haven't heard the details of how to trade aside from the limits and details of qualified investors in China, there should be no comparative qualification of investors in HK.
Once all the full details are out, the markets would have adjusted to more normalized levels ie only a 2-3% difference between A/H shares that are traded on both markets.
Yet this is on the assumption that investors from China still wants to own those China shares, who knows, they might choose to avoid China heavy shares altogether.
Only on Thursday have we heard the announcement of this ELT, HSI shot up right away but enthusiasm cool on Friday, why?
First of all, that is a short squeeze, timed with the announcement to make it more believable and short punters have no time to listen to others of their viewpoints of the scheme and many are frighten to close their positions.
Many fans of China opening up further on the financial front hurray this is a step in the right direction, but is it?
If you looked at the limits of Cross Border trading, it is not really opening up, it merely wants to attract further capital into China as the HK->Shanghai limit is 300b while the other way is 250b. Don't stop here, there is also a daily limit of about 13b vs 10.5b. That is to say if there is a crash, there is limit down ie once the limit is reached, you have to wait till tomorrow to sell. It will be a full 23 days before you can unload the full limit or load up the full limit.
If China is confident about her financial being, since her exchange reserves are way too high, it should allow the invest HK limit to be much bigger than the invest Shanghai limit.
How trustworthy are the financial accounts of listed companies in Shanghai and their shares in HK? No one really knows, but there is the belief that the Chinese knows better than the outside world and this is one reason for the low level of investors interest in China of A shares.
Many A/H shares have very high A share prices, but the China banking shares in HK are higher than those in China, while HSI is heavily weighted towards China Shares these days, we likely would see a southern drifting of the Shanghai market [sell those highly priced A share and buy H share in HK] and a lower HSI because China banking shares in HK will drift lower too.
There is a wait period of six months to realize the scheme and we still haven't heard the details of how to trade aside from the limits and details of qualified investors in China, there should be no comparative qualification of investors in HK.
Once all the full details are out, the markets would have adjusted to more normalized levels ie only a 2-3% difference between A/H shares that are traded on both markets.
Yet this is on the assumption that investors from China still wants to own those China shares, who knows, they might choose to avoid China heavy shares altogether.
25 March 2014
Do you hate the FED?
check this out
FORTUNE -- If you
hate the Federal Reserve, you have a new hero.
A few weeks ago,
Jeremy Grantham, the co-founder of money management firm GMO, called newly
appointed Federal Reserve chairman Janet Yellen "ignorant" in the New
York Times. He also said the reason for the slow recovery was not the severe
financial crisis, continued high unemployment, or the many standoffs in Washington. Instead, he
blamed the Fed for ruining the recovery it was supposed to stimulate. To
someone who believes in the laws of economics, it's hard to overstate how odd
that claim is. It's positively bonkers.
Low interest rates
stimulate the economy. The Fed has done everything in its power to keep interest
rates down, lower and longer than anyone can remember. That should have helped
the economy. And yet the recovery has been just meh.
So, either Grantham
is bonkers, or he is onto something. Fortune recently caught up with him to
find out.
Fortune: You believe the Fed's policies,
particularly quantitative easing, have slowed the recovery. What's your proof?
Grantham: It's
quite likely that the recovery has been slowed down because of the Fed's
actions. Of course, we're dealing with anecdotal evidence here ecause there is
no control. But go back to the 1980s and the U.S. had an aggregate debt level of
about 1.3 times GDP. Then we had a massive spike over the next two decades to
about 3.3 times debt. And GDP over that time period has been slowed. There isn't
any room in that data for the belief that more debt creates growth.
MORE: The Fed
doesn't care about the unemployment rate anymore
In the economic
crisis after World War I, there was no attempt at intervention or bailouts, and
the economy came roaring back. In the S&L crisis, we liquidated the bad
banks and their bad real estate bets. Property prices fell, capitalist juices
started to flow,
and the economy came roaring back. This time around, we did not liquidate the
guys who made the bad bets.
Can you really
blame the Fed for the bailouts? That was an act of Congress.
I don't like to get
into the details. The Bernanke put -- the market belief that if anything goes
bad the Fed will come to the rescue -- has had a profound impact on
people and how they act.
Okay, but that's still not proof that quantitative
easing slowed the recovery.
There's no proof on the other side, that the
economy is any stronger from quantitative easing. There's some indication that
the crash would have been worse and the downturn
would have been sharper had the Fed not stepped in, but by now the
depths of that recession would have been forgotten,
the system would have been healthier, and we would have regained our growth.
It's economic doctrine that lower interest rates
boost the economy. Are you saying that's wrong?
Economic doctrine says the market is efficient. My view of the economy
is not really principle-based. Higher interest rates would have increased the
wealth of savers. Instead, they became collateral damage of Bernanke's
policies. The theory is that lower interest rates are supposed to spur capital
spending, right? Then why is capital spending so weak at this stage of the
cycle. There is no evidence at all that quantitative easing has boosted capital
spending. We have always come roaring back from recessions, even after the
mismanaged Great Depression. This time we are not. It's anecdotal evidence, but
we have never had such a limited recovery.
MORE: Janet Yellen: The Fed will steer clear
of bitcoin
But the Fed does seem to have boosted stocks. Even if it did nothing
else, doesn't a better market help the economy?
Yes, I agree that the Fed can manipulate stock prices. That's perhaps
the only thing they can do. But why would you want to get an advantage from the
wealth effect when you know you are going to have to give it all back when the
Fed reverses course. At the same time, the Fed encourages steady increasing
leverage and more asset bubbles. It's clear to most investing professionals
that they can benefit from an asymmetric bet here. The Fed gives them very
cheap leverage on the upside, and then bails them out on the downside. And you
should have more confidence of that now. The only ones who have really
benefited from QE are hedge fund managers.
Okay, but then I guess that means you think stocks are going higher? I
thought I had read your prediction that the market would disappoint investors.
We do think the market is going to go higher because the Fed hasn't
ended its game, and it won't stop playing until we are in old-fashioned bubble
territory and it bursts, which usually happens at two standard deviations from
the market's mean.
That would take us to 2,350 on the S&P 500, or roughly 25% from
where we are now.
So are you putting your client's money into the market?
No. You asked me where the market is headed from here. But to invest our
clients' money on the basis of speculation being driven by the Fed's misguided
policies doesn't seem like the best thing to do with our clients' money. We invest our clients' money based on our seven-year prediction. And
over the next seven years, we think the market will have negative returns. The
next bust will be unlike any other, because the Fed and other centrals banks
around the world have taken on all this leverage that was out there and put it
on their balance sheets. We have never had this before.
Assets are overpriced generally. They will be cheap again. That's how we
will pay for this. It's going to be very painful for investors.
11 March 2014
Tencent [700] vs Apple
click for better view
chart 1 - apple reaching 600
chart 2 - tencent [stock code 700] reaching 600
chart 3 - apple reaching 700 after a steep correction at 600
tencent is a china stock that is the favorite among fund managers and as hedged derivatives for investment banks.
can you tell the difference between apple and tencent from the chart, looks similar hah.
the road ahead for tencent will begin to look rough as 700 is going through the J curve phenomena that apple endured when it is the darling of the stock market. it must keep on rising faster to make it look attractive thus every stock will go through the J curve phenomena when it becomes a favorite in a sector or in a market.
if you have been investing in 700, do some hedge. if you want to invest in 700, you are warned here that the return on investment does not look so attractive from now on unless you see a steep correction, still then, the last leg up will be fast and the drop as well, so you must be contented with making returns that are not 10/20 folds, the time to make easy money has passed, but only in percentage terms of 20/30.
06 March 2014
Market volatility will continue, here's why
watch the video of Marc Faber at
http://www.cnbc.com/id/101386850
On Monday, U.S. stocks saw their worst start to February since 1933 after a manufacturing report heightened concern about the strength of the U.S. economy. Overall factory activity hit an eight-month low in January as new order growth plunged by the most in 33 years.
(Read more: Emerging markets – is it time to bottom fish?)
Illustrating the heightened state of concern among investors, the CBOE Volatility Index rose above 20 on Monday for the first time in four months, while the yield on the 10-year Treasury note hit a three-month low. Faber said he had been advising his readers to buy 10-year U.S. Treasurys over the last few months. He expects yields to rise as investors would seek a safe haven.
"For the next three to six months probably they are a better place to be than equities," he warned. "I don't like [10-year Treasurys] for the long-term because the maximum you can earn is something like 2.65 percent per annum for the next 10 years, but Treasurys are expected to rally because of economic weakness and a stock market decline. In the last few years at least there was a flight into quality – that is, a flight into Treasurys."
(Read more: Markets fear US chilled by more than weather)
Faber warned of the risks of the present global credit bubble and said another slowdown could follow on the back of rising consumer debt levels – which had previously helped to create growth.
"Total credit as a percent of the global economy is now 30 percent higher than it was at the start of the economic crisis in 2007, we have had rapidly escalating household debt especially in emerging economies and resource economies like Canada and Australia and we have come to a point where household debt has become burdensome on the system—that is, where an economic slowdown follows."
- By CNBC's Holly Ellyatt, follow her on Twitter
http://www.cnbc.com/id/101386850
Global market
volatility is not just down to the U.S. Federal Reserve's tapering of
its monetary stimulus program, according to influential investor Marc
Faber, who warned that the wild swings seen in recent weeks are also
down to a global slowdown in growth.
"It would seem to me that it's not just tapering that is putting pressure on markets," Faber, the author of the closely watched "Gloom, Boom & Doom Report" told CNBC on Tuesday. "In emerging economies we have practically no growth, we have a slowdown in China that is more meaningful than the strategists seem to think and than the official, Chinese statistics seem to suggest."
"That then puts pressure on the earnings of the multinationals because most of the growth in the world over the last five years has come from emerging economies," he told CNBC Europe's "Squawk Box." No growth, he said, was causing "a vicious circle on the downside" with slowing emerging economies and inflated asset markets that are now deflating, in turn putting more pressure on asset prices and on the economies.
(Read more: Global stock selloff – Rumble or rout?)
Faber's comments come as volatility in equity markets continued this week, prompting concerns among traders and investors that markets were at the start of a sharp correction. The moves lower follow a rally last year on the back of the U.S. Federal Reserve's monetary stimulus.
(Read more: Look out – Technicians see more selling)
Since the Fed started tapering its monthly asset purchases by $10 billion a month in December and another $10 billion in January, stock markets have taken a tumble. Emerging markets fell first; this week the U.S. and Europe have also seen significant weakness.
"It would seem to me that it's not just tapering that is putting pressure on markets," Faber, the author of the closely watched "Gloom, Boom & Doom Report" told CNBC on Tuesday. "In emerging economies we have practically no growth, we have a slowdown in China that is more meaningful than the strategists seem to think and than the official, Chinese statistics seem to suggest."
"That then puts pressure on the earnings of the multinationals because most of the growth in the world over the last five years has come from emerging economies," he told CNBC Europe's "Squawk Box." No growth, he said, was causing "a vicious circle on the downside" with slowing emerging economies and inflated asset markets that are now deflating, in turn putting more pressure on asset prices and on the economies.
(Read more: Global stock selloff – Rumble or rout?)
Faber's comments come as volatility in equity markets continued this week, prompting concerns among traders and investors that markets were at the start of a sharp correction. The moves lower follow a rally last year on the back of the U.S. Federal Reserve's monetary stimulus.
(Read more: Look out – Technicians see more selling)
Since the Fed started tapering its monthly asset purchases by $10 billion a month in December and another $10 billion in January, stock markets have taken a tumble. Emerging markets fell first; this week the U.S. and Europe have also seen significant weakness.
Spencer Platt | Getty Images News | Getty Images
(Read more: Emerging markets – is it time to bottom fish?)
Illustrating the heightened state of concern among investors, the CBOE Volatility Index rose above 20 on Monday for the first time in four months, while the yield on the 10-year Treasury note hit a three-month low. Faber said he had been advising his readers to buy 10-year U.S. Treasurys over the last few months. He expects yields to rise as investors would seek a safe haven.
"For the next three to six months probably they are a better place to be than equities," he warned. "I don't like [10-year Treasurys] for the long-term because the maximum you can earn is something like 2.65 percent per annum for the next 10 years, but Treasurys are expected to rally because of economic weakness and a stock market decline. In the last few years at least there was a flight into quality – that is, a flight into Treasurys."
(Read more: Markets fear US chilled by more than weather)
Faber warned of the risks of the present global credit bubble and said another slowdown could follow on the back of rising consumer debt levels – which had previously helped to create growth.
"Total credit as a percent of the global economy is now 30 percent higher than it was at the start of the economic crisis in 2007, we have had rapidly escalating household debt especially in emerging economies and resource economies like Canada and Australia and we have come to a point where household debt has become burdensome on the system—that is, where an economic slowdown follows."
- By CNBC's Holly Ellyatt, follow her on Twitter
ROME the next DETROIT
if you are wondering why the euro is so strong, you are right.
read article below from CNBC
just how much qe is still in the pipeline even with tapering ongoing?
The so-called "Save Rome" decree – which
had been passed under the administration of Renzi's predecessor, Enrico
Letta – has stirred up controversy in Italian politics.
It was obstructed by opposition parties such as the Northern League and anti-establishment 5-Star Movement (M5S) – and was in danger of not getting cabinet approval by the 28th February deadline, according to reports by the Italian news agency ANSA.
Italy's new government – which was sworn in last Sunday --is currently working on another package of aid to provide basic funding for services, Marino said, according to the Italian news agency ANSA.
(Read more: Doubts over Renzi's 'ambitious' reforms for Italy)
And yet, wrangling over the aid package will divert resources from Renzi's pivotal package of reforms. Commentators have already highlighted concern as to the five-month time frame for his reform agenda.
The new prime minister has said he wants to overhaul the country's electoral system and constitution by the end of February before tackling labour reform in March and public administration and the fiscal system in April and May respectively.
Rome's budgetary concerns are set against a backdrop of economic trouble in Italy. Its economy grew for the first time in just over two years in the last quarter of 2013 according to Rome-based national statistics office Istat. But it still faces a worryingly high unemployment rate which rose to a record high of 12.9 percent in January.
read article below from CNBC
just how much qe is still in the pipeline even with tapering ongoing?
Rome, the next Detroit?
By: Jessica Morris, special to CNBC.com
Rome could be about to follow in the
footsteps of bankrupt Detroit, after the country's new government
scrapped a measure that would have helped with the Italian capital's
budget deficit.
Italy's central government – under new Prime Minister Matteo Renzi – announced on Wednesday it would be dropping a bailout package designed to help plug city's gnawing €816 million ($1.17 billion) budget gap.
(Read more: Italy's new leader Renzi already in the soup)
Italy's central government – under new Prime Minister Matteo Renzi – announced on Wednesday it would be dropping a bailout package designed to help plug city's gnawing €816 million ($1.17 billion) budget gap.
(Read more: Italy's new leader Renzi already in the soup)
Kevin Winter | Getty Images
Artisans and merchants gathered in Rome to
demand that Parliament the new government in the midst of being formed
make an urgent breakthrough in economic policy after the economic crisis
shut down more than 372 000 businesses in 2013.
The move could bring Rome one step closer to a Detroit-style default.
Rome's mayor Ignazio Marino responded to the move by saying "In March there won't be money to pay 25,000 city employees, to pay for fuel for the buses, to keep the nurseries open, to collect rubbish or to organise that canonisation of the two popes, an event of a planetary scale" the Italian news agency ANSA reported on Thursday.
(Read more: Fears rise that Italy's 2014 budget could spark further trouble)
He also threatened to bring the city to a halt if the government failed to him answers – warning the ceremony for the canonisation of Popes John Paul II and John XXII on April 27 was at risk.
"I'll halt the city from Sunday … the politicians are lucky because they have chauffeur-driven cars, but the Romans won't be able to move around. People will have to fend for themselves" the local paper Gazetta del Sud reported.
Rome's mayor Ignazio Marino responded to the move by saying "In March there won't be money to pay 25,000 city employees, to pay for fuel for the buses, to keep the nurseries open, to collect rubbish or to organise that canonisation of the two popes, an event of a planetary scale" the Italian news agency ANSA reported on Thursday.
(Read more: Fears rise that Italy's 2014 budget could spark further trouble)
He also threatened to bring the city to a halt if the government failed to him answers – warning the ceremony for the canonisation of Popes John Paul II and John XXII on April 27 was at risk.
"I'll halt the city from Sunday … the politicians are lucky because they have chauffeur-driven cars, but the Romans won't be able to move around. People will have to fend for themselves" the local paper Gazetta del Sud reported.
'Back to normal' in Italy
Virginie Maisonneuve, deputy
CIO of PIMCO, says the political instability in Italy could provide a
buying opportunity for investors.
It was obstructed by opposition parties such as the Northern League and anti-establishment 5-Star Movement (M5S) – and was in danger of not getting cabinet approval by the 28th February deadline, according to reports by the Italian news agency ANSA.
Italy's new government – which was sworn in last Sunday --is currently working on another package of aid to provide basic funding for services, Marino said, according to the Italian news agency ANSA.
(Read more: Doubts over Renzi's 'ambitious' reforms for Italy)
And yet, wrangling over the aid package will divert resources from Renzi's pivotal package of reforms. Commentators have already highlighted concern as to the five-month time frame for his reform agenda.
The new prime minister has said he wants to overhaul the country's electoral system and constitution by the end of February before tackling labour reform in March and public administration and the fiscal system in April and May respectively.
Rome's budgetary concerns are set against a backdrop of economic trouble in Italy. Its economy grew for the first time in just over two years in the last quarter of 2013 according to Rome-based national statistics office Istat. But it still faces a worryingly high unemployment rate which rose to a record high of 12.9 percent in January.
22 February 2014
Secret Bank Bailout
i have been pondering why the usd is so weak against euro and gbp given she said her economic data are almost unbeatable, then usd should be strong.
the reason - too much pumping of credit or usd.
read below
the reason - too much pumping of credit or usd.
read below
Is a Secret Bank Bailout Coming?
By Geoffrey Pike | Friday, February
21st, 2014
I've heard a few stories about people worried about the condition of the banks.
I've heard other stories alluding to a future bank bailout.
Some people fear what happened in Cyprus is coming to the U.S. They fear their money is not safe in the banks.
And they're right to worry about the money they have in the bank... but not because of a coming confiscation in the
style of Cyprus.
Truth
is, there is little need to worry about the government coming in and
directly confiscating funds from your U.S.
bank account. You do have to worry, however, about the government and
the Fed working to destroy the value of the money that is in your bank
account.
You
also likely don't need to worry about your bank going bankrupt as long
as you are within the FDIC limit
(currently $250,000). It is not that the FDIC has the money to bail out
the major banks; it's that the Federal Reserve can do it by creating
money out
of thin air.
I
also don't think you have to worry about another bank bailout in the
fashion of 2008. There is rarely an economic
issue where there is so much agreement amongst the American people, but
in 2008, 90% or more of the American voting population was adamantly
opposed
to the bank bailouts. The government and Fed almost had a revolution on
their hands.
They are not going to let that happen again. Instead, the Fed has been quietly bailing out the banks for almost a
year and a half now with few cries of opposition. Why risk causing a revolt when they can do it this way?
The Hidden Agenda of QE3
In September 2012, the Fed announced a new buying program. It was the third round of quantitative easing, or QE3 for
short. The Fed had already gone through two previous rounds of quantitative easing starting in late 2008.
Quantitative easing is just another term for money creation. The Fed simply buys assets with new money created out of
thin air. We use the term "money printing," but most of the new money is actually in the form of digits.
Prior
to 2008, the Fed would buy government debt. It would typically buy
shorter-term U.S. Treasuries, but it could
also buy longer-term debt. It wasn't until the fall of 2008 that the Fed
started a policy of buying other assets aside from government bonds.
QE3 actually came about in two steps.
The first one, in September 2012,
announced that the Fed would buy $40 billion per month in
mortgage-backed
securities, or MBS. It wasn't until December 2012, three months later,
that the Fed upped the ante and announced it would buy $45 billion in
new U.S.
government debt each month. This was in addition to the $40 billion per
month in MBS.
So
the Fed was buying $85 billion in assets through most of 2013,
essentially creating $85 billion per month out of
thin air. It was just back in December of 2013 that the Fed finally
announced the beginning of its taper. It is still buying assets
(inflating the
money supply), but at a slower pace.
When
the buying program was first announced for the MBS, the Fed and the
media touted it as a plan to help housing.
They reasoned it would lower interest rates and help boost a struggling
housing market that had recently come off of a major bust.
While housing across the country has certainly recovered a bit (although not to the all-time highs in most areas), we
can't be sure how much QE3 has affected mortgage rates. The rates were already very low when the Fed began buying MBS.
But I believe the main purpose of QE3 was not as stated. Instead, I believe the main purpose — at least
for the portion of buying MBS — was to bail out the banks and make them more solvent.
Interestingly,
I have seen very little commentary pointing this out, even among many
websites devoted to criticizing
the Fed. In this sense, the Fed's plan has worked brilliantly (though
not for us). It has been able to bail out the banks without having any
backlash
like it experienced back in 2008.
Buying Toxic Assets
For almost a year and a half, we have been hearing about the Fed buying mortgage-backed securities (MBS). But we are
never really told exactly what they are buying and how much they are actually worth.
So what is this $40 billion "worth" of MBS per month really worth? Our best guess is that these are
so-called toxic assets. They are non-performing or under-performing loans.
When
the housing bubble burst around 2007, most new (and even not so new)
homeowners who had mortgages were
underwater. Their mortgages were bigger than the values of their houses.
In many cases, people simply could not afford the payments. They had
miscalculated their ability to pay.
Ironically, most of the distortion took place because of the Fed and its policy of loose money and artificially low
interest rates.
As a result, many mortgages held by the banks and government agencies quickly lost value because so many people
stopped paying their mortgages.
If the Fed buys $40 billion of MBS in a month, is it really paying the current market value, or is it paying what
they were originally worth? My guess is the latter.
This
is a pure bailout of the banks, plain and simple. They are buying $40
billion each month in assets that aren't
really worth $40 billion because many of the mortgages are in default.
Pooled together, they are worth something, as some people will continue
to pay
or try to resume paying.
Imagine a company buys a stock for $100 per share, and then the value falls to $40 per share. Then the Fed comes
along and says, "We are going to buy your shares from you at the original price of $100 per share."
In this scenario, the company would be getting bailed out to the tune of $60 for every share bought up by the
Fed.
It
doesn't matter what the asset was originally worth. It matters what it
is worth today. In the case of MBS, the Fed
is buying assets that are worth far less than what it is paying for
them. It's buying these assets with money created out of thin air.
If you were a bank that had a bunch of mortgages worth a total of $5 billion that originally cost you $20 billion,
then you would probably be more than happy for the Fed to come along and buy them up at the original value of $20 billion.
You can push your losses off to the Fed, which is really pushing your losses off on anyone who uses U.S. dollars.
Crazy?
This may sound crazy, but in some ways I prefer the Fed secretly bailing out the banks to it buying U.S. government
debt.
At least the money going to the banks is helping to make them solvent, so it isn't a complete waste.
It
is bad that we see big bonuses for banking executives that would
otherwise be out of business if it weren't for
the bailouts. It is bad that the bailouts create moral hazard and
encourage more risk-taking in the future. And it is bad that the whole
thing is
inflationary.
But at least the bank bailouts are going to where you keep your money. The only bigger revolt by the American people
than an open bailout would be bank failures without a bailout where the FDIC does not make good on its promises.
Meanwhile,
the other part of QE3 — the Fed's buying of government debt — is
terrible. It allows
the government to run massive deficits at lower interest rates,
preventing spending cuts and making things far more painful in the
future. The
government's spending severely misallocates resources and will only lead
to a major correction at some point in time.
Regardless
of your thoughts on the subject, you probably don't have to worry about
major bank failures right now.
Small banks will be absorbed by the bigger banks if they fail, and
bigger banks are being taken care of right now. Even with the so-called
tapering,
the Fed is still currently buying $30 billion per month in MBS.
If
you keep your money in an FDIC-insured bank account, it will probably be
safe — at least in terms of
any direct confiscation. But if you really want to keep it safe, you
will probably need to put some of it in hard assets to protect yourself
against
continued inflation.
Until next time,
Geoffrey Pike for Wealth Daily
01 February 2014
HSI MAJOR FALLOUT
during this festive season, we are supposed to celebrate, but not for long.
just early jan, i already alerted readers that market isnt looking good.
this is a 5 months chart of HSI futures of 1 hour, it shows that a true head shoulder has formed, it has already broken to the down side and the pull back has also occurred.
the market looks like to fall to at least 24100 - 22400 = 1700 points from the neckline of 22400 which makes 20700.
the break out happens on 24 Jan, thus the market will hit the above target likely not later than end april.
do go back and make your own chart for 941, 5 and others, you will see a similar pattern if not exactly the same.
when you are aware of a fallout, you should protect yourself and/or try to profit from it.
finally, hope you all have a happy horse year and getting healthier by the day.
14 January 2014
HSI 941 HSBC
CLICK FOR BETTER VIEW - 941, HSI, 5
not long ago in this blog, i have re iterated that stock markets esp hsi and a few stocks are under stress, but i dont have time to include the charts, here they are.
941 is esp bad, it formed a platform of two heads over six months and another multiple heads over two years, so dont expect much from this stock, it will also pull down hsi.
HSI is under severe manipulation because of derivatives in the market, but if you look at the chart above, there are a total of 7 long spikes up/down in the last month, but six of them are down. this tells you that the pros are not likely to push it up further.
5 has the best chart of three, but it also formed a base of multiple heads over 7 months and recent highs are already at high rsi, so the chance of it breaking the earlier high [top pink line] is not likely.
06 January 2014
JAPAN RADIATION
WND EXCLUSIVE
Japan radiation poisoning America?
New concerns hitting U.S. Pacific coast
by
Some tuna caught off California is showing evidence of radiation poisoning. (RT photo)
On March 11, 2011, the most powerful earthquake ever to hit Japan triggered a tsunami with waves that reached as high as 144 feet. These waves swamped the Fukushima nuclear power-plant complex, causing a resulting shutdown leading to the world’s worst nuclear incident since the 1986 Chernobyl disaster.
The accident has been rated a level 7, on a scale of 1 to 7, on the International Nuclear Event Scale.
As a result of this disaster, the complex’s coolant pumps failed to operate and the power plant reactors overheated, leading to a release of radionuclides directly into the ocean exceeding that from any previous accident.
Water is currently being pumped into the reactors in an attempt to keep them cool and prevent further explosions, but handling the water is becoming a problem.
The contaminated cooling water is being released directly into the ocean and is making its way into the ecosphere. Water from the storage tanks has also seeped into the groundwater and from there, into the ocean. Efforts to use a various barriers to prevent contamination have not completely stopped the leakage.
In another effort to stem the radioactive water from reaching the sea, Japan has pledged to spend $470 million to construct an “ice wall” around the reactors to contain the water. Under the Japanese plan, a wall of frozen earth will be constructed around the reactors to prevent the water being used to cool the fuel rods from comingling with the sea.
“The world is closely watching whether we can dismantle the (Fukushima) plant, including the issue of contaminated water,” said Japanese Prime Minister Shinzo Abe. “The government is determined to work hard to resolve the issue.”
This is quite a change from previous statements the prime minister has made. In a speech Sept. 7 in front of the International Olympic Committee in Buenos Aires, Abe stated categorically, “Let me assure you the situation (the contaminated groundwater problem) is under control.”
Six days later, Tokyo Electric Power Co., the operator of the plant, disputed the prime minister’s claim at a meeting in Koriyama, Fukushima Prefecture.
“We regard the current situation as not being under control,” said Kazuhiko Yamashita, a senior official at Tepco.
Tokyo was awarded the 2020 Olympic Games following Abe’s speech.
“The quantities of water they are dealing with are absolutely gigantic,” said Mycle Schneider, an independent consultant who has previously advised the French and German governments and has consulted widely for a variety of organizations and countries on nuclear issues. “What is worse is the water leakage everywhere else – not just from the tanks. It is leaking out from the basements, it is leaking out from the cracks all over the place. Nobody can measure that.”
It is clear that the repercussions from this disaster are far from over.
There has been a debate over the size of the Pacific Ocean and the quantity of the contamination. Some say that even though the U.S. is directly across the ocean from the accident, the volume of the water will easily disperse the contaminants.
Others say the particular isotopes from the reactor do not disperse easily and don’t sink to the bottom. They remain in the water column, from top to bottom.
In this last scenario, sea life has a much greater chance of contacting and carrying the suspended radiation. They either breathe it or eat it in others. Scientists are watching carefully for any signs of contamination in the ocean’s biosphere.
According to Maxim Shingarkin, deputy chairman of Russia’s State Duma Committee for Natural Resources, “Currents in the world ocean are so structured that the areas of seafood capture near the U.S. northwest coast are more likely to contain radioactive nuclides than even the Sea of Okhotsk, which is much closer to Japan. These products are the main danger for mankind because they can find their way to people’s tables on a massive scale.”
This is an issue of significant importance to the United States since, according to the National Marine Fisheries Service, the U.S. imported almost 45 million pounds of fish from Japan in 2012.
There is evidence the radioactive water emanating from the plants starting two years ago has made its way into the ocean currents and will soon start to affect the ecosystems in North America as early as the spring of 2014.
Some say it is already here.
Reports are coming in that the North American food supply is already being affected by Fukushima.
Bluefin tuna caught off the San Diego coast is showing evidence of radioactive contamination. This is the first time that a migrating fish has been shown to carry radioactivity 3,000 miles from Fukushima to the U.S. Pacific coast. It is a nutrition source that accounts for approximately 20,000 tons of the world’s food supply each year.
According to the report published by the National Academy of Sciences, “We report unequivocal evidence that Pacific Bluefin tuna, Thunnus orientalis, transported Fukushima-derived radionuclides across the entire North Pacific Ocean.”
“We were frankly kind of startled,” said Nicholas Fisher, one of the researchers reporting the findings online Monday in the Proceedings of the National Academy of Sciences.
“That’s a big ocean. To swim across it and still retain these radionuclides is pretty amazing,” Fisher said.
To rule out the possibility the radiation found in the tuna was carried by ocean currents or dropped into the ocean through rainfall from the atmosphere, the team also analyzed Yellowfin tuna, found in the eastern Pacific, and Bluefin that migrated to Southern California before the nuclear crisis. They found no trace of cesium-134 and only background levels of cesium-137 left over from nuclear weapons testing in the 1960s.
The report went on to say: “The levels of radioactive cesium were 10 times higher than the amount measured in tuna off the California coast in previous years. But even so, that’s still far below safe-to-eat limits set by the U.S. and Japanese governments.”
The results were surprising enough to conduct further tests this coming summer with a larger sampling of migratory fish. The tuna that were the subject of the previous study were exposed to radiation from Fukushima for approximately one month. The upcoming study will be looking at fish that have been swimming in radioactive waters for a longer period.
They will also be expanding their study to cover other migratory species including sea turtles, sharks and seabirds.
There have been many other reports of fish and sea-creature populations dying in the Pacific. Also, there have been many discoveries of cesium–137 in high concentrations in seafood caught in the Pacific and sold in North America. There have also been many reports of unexplained deaths among wildlife:
- Vast amounts of sea stars are “melting” off the west coast of North America
- Killer whales are dying off the coast of British Columbia
- There is an epidemic of sea lion deaths due to starvation along the California coastline. The question is: why are they starving? Has the food chain been disrupted?
- Polar bears, seals and walruses along the Alaska coastline are suffering from fur loss and open sores
- Along the Pacific coast of Canada and the Alaska coastline, the population of sockeye salmon is at a historic low
- Something is causing fish all along the west coast of Canada to bleed from their gills, bellies and eyeballs
- Experts have found very high levels of cesium–137 in plankton living in the waters of the Pacific Ocean between Hawaii and the west coast, affecting the food chain in a process called “biomagnification”
While the evidence may circumstantial at this point, it is enough for countries to take action.
Due to radiation fears, Fukushima Prefecture fishermen have had to dump most of their catch. Two years into the nuclear disaster, South Korea still bans Japanese fish and seafood imports from eight Japanese prefectures. The ban covers an area of Japan that exported 5,000 metric tons of fishery products, or about 13 percent of the 40,000 total tons imported last year to South Korea.
In eastern Japanese ports outside of the prefecture, hundreds of pounds of fresh fish are sent to Onjuku, a small town a few hours away from Tokyo.
Once they arrive, samples of the fish are checked for radiation in a move to restore the world’s confidence in Japan’s food supply in the wake of Fukushima.
Japan’s Marine Ecology Research Institute, or MERI, operates out of Onjuku and is charged with the testing. MERI was established in the mid 1970s to certify that fish supplies remain safe despite wastewater discharge from the nuclear plants. It is now working overtime to assure the world that Japan’s fish are safe to eat.
Even with these assurances, many buyers are not sure just how much to trust the quasi-government laboratories. The U.S. has recently banned agricultural and fishery imports from 14 prefectures in Japan, up from the eight that South Korea banned.
Leung Ka-sing, an associate professor at Hong Kong’s Polytechnic University’s department of applied biology and chemical technology, has stated his country should expand its ban on fish products from the current conditional ban on eight prefectures to all of Japan. This is in response to public fears of contamination from ongoing leaks at the Fukushima nuclear plant. He said the ban would act as a preventive measure and address fears over radiation.
The events in the Pacific Rim do not seem to be isolated incidents. They may not be provocative. The oceans are large, and they contain a massive population of species that get sick from time to time. But they are in numbers that warrant an in-depth discovery and full disclosure.
Radiation is found everywhere in the world, so some radiation in food can be expected. How much is a safe level seems to vary over time. Immediately following the World War II atomic bombings of Nagasaki and Hiroshima, American military construction crews were sent into the cities to clear irradiated rubble, telling the crews that the work was safe.
Only years later did they find out it wasn’t safe, and that serious, permanent injury resulted from working in the area.
Gordon McDonald, Ph.D, executive director of Research for the Koinonia Institute, contributed to this report.
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