This past week had several major economic developments that show the state of our economic downturn and the manipulation of financial markets.
1a. Baltic Dry Index Crashes 18% In 2 Days
We noted Friday that the much-heralded Baltic Dry Index has seen the worst start to the year in over 30 years. Today it got worse. At 1,395, the the Baltic Dry index, which reflects the daily charter rate for vessels carrying cargoes such as iron ore, coal and grain, is now down 18% in the last 2 days alone (biggest drop in 6 years), back at 4-month lows. The shipping index has utterly collapsed over 40% in the last 2 weeks. We are sure this is just a storm in a teacup and that all the hopes and prayers of a global manufacturing renaissance will come true. Cue, “this is not a demand issue, it’s an over-capacity issue” excuses in 3…2…1… now where would the container ships get their idea to increase capacity? (hint: central planner-based mal-investment).
1b. Baltic Dry Continues Collapse – Worst Slide Since Financial Crisis
Despite ‘blaming’ the drop in the cost of dry bulk shipping on Colombian coal restrictions, it seems increasingly clear that the 40% collapse in the Baltic Dry Index since the start of the year is more than just that. While this is the worst start to a year in over 30 years, the scale of this meltdown is only matched by the total devastation that occurred in Q3 2008. Of course, the mainstream media will continue to ignore this dour index until it decides to rise once again, but for now, 9 days in a row of plunging prices is yet another canary in the global trade coalmine and suggests what inventory stacking that occurred in Q3/4 2013 is anything but sustained.
Baltic Dry costs are the lowest in 4 months, down 40% for the start of the year, and the worst start to a year in over 30 years…
2. I doubt that Best Buy is the only retailer that suffered disappointing sales at Christmas. See layoffs below at J.C. Penneys.
Best Buy says holiday season disappointing, stock tanks
Best Buy Co. watched its stock plunge more than 27% in morning trading Thursday after announcing poor holiday results that suffered from heavy competition and deep discounting.
The consumer electronics retailer said revenue for the nine weeks ended Jan. 4 slumped 2.6% to $11.45 billion from the same period a year earlier.
Same store sales slipped 0.9% in the U.S., though they managed at 0.1% boost internationally.
In late morning trading in New York, Best Buy stock tanked nearly 28%, or $10.45, to $27.11 a share.
3a. German Gold Manipulation Blowback Escalates: Deutsche Bank Exits Gold Price Fixing
Germany’s blowback against gold manipulation is accelerating. Following yesterday’s report that Bafin took a hard line against precious metals manipulation, after its president Eike Koenig said possible manipulation of precious metals “is worse than the Libor-rigging scandal“, today the response has trickled down to Germany and Europe’s largest bank, Deutsche Bank, which announced that it would withdraw from the appropriately named gold and silver price “fixing”, as European regulators investigate suspected manipulation of precious metals prices by banks. As a reminder, Deutsche is one of five banks involved in the twice-daily gold fix for global price setting and said it was quitting the process after withdrawing from the bulk of its commodities business. The scramble away from gold fixing was certainly assisted by the recent first (of many) manipulation expose in the legacy media, when Bloomberg revealed “How Gold Price Is Manipulated During The “London Fix.” And sure enough, with Germany already very sensitive to the topic of its gold repatriation, and specifically why it is taking so long, it was only a matter of time before any German involvement in gold manipulation escalated to the very top.
3b. One More Sign of Manipulation in the Gold Market
As we very well know, 2013 was a difficult but also puzzling year for precious metals investors. The price of gold, silver and their related equities declined by a significant amount while demand for physical bullion from emerging markets and their Central Banks was exceptionally strong.
A common argument that has been made to explain the precipitous decline of the price of precious metals in 2013 is of investors’ disenchantment with precious metals, which had been piling up in exchange traded products as a way for investors to gain exposure to the metals. Proponents of this theory point to the large declines in the total holdings of those ETFs as evidence of investors fleeing the precious metal trade. As shown in Figure 1, the price of both gold and silver suffered very significant declines throughout 2013. Therefore, if this explanation is correct, one would expect the total ETF holdings of both metals to be lower as well.
However, this is not the case.
4a. Intel to cut over 5,000 jobs
Chipmaker Intel said Friday it plans to reduce its global workforce by over 5,000 people over the next year.
The company says the cuts are in response to “evolving market trends.”
4b . J.C. Penney to cut 2,000 jobs, close 33 stores
Struggling department-store operator J.C. Penney announced it will cut 2,000 jobs and close 33 stores as it tries to get back on the path to profitability.
The news raises concerns that Penney’s holiday season sales were not what the company hoped for and that the chain needs to do even more to recover from a turnaround plan that has had disastrous results.
4c. Ford to lay off more than 900 workers
About half of the 1,886 workers at Ford Motor Co.’s Ohio Assembly Plant will be laid off as part of restructuring at the plant, said a Ford spokeswoman. Spokeswoman Kristina Adamski released an email statement on the layoffs after Avon Mayor Greg Zilka confirmed that he had spoken with Ford officials, who Read More… The post Ford to lay off more than 900 workers appeared first on Chronicle-Telegram
5. You know it is bad when the welfare state of New Jersey cannot even support gambling. I guess those EBT reductions have had an impact.
Atlantic Club casino shuts its doors
The Atlantic Club Casino Hotel closed early Monday, a victim of the casino saturation taking place in the Northeast.
About 1,600 people lost their jobs at 12:01 a.m. as the 33-year-old casino shut its doors. Tearful employees embraced one another and exchanged goodbyes.
Cocktail server Ursula Moralski, who had worked at the casino since the day it opened, said its struggles were evident.
6. And the best for last: another bailout to be borne by the taxpayers.
Bailing Out Health Insurers and Helping Obamacare
Robert Laszewski—a prominent consultant to health insurance companies—recently wrote in a remarkably candid blog post that, while Obamacare is almost certain to cause insurance costs to skyrocket even higher than it already has, “insurers won’t be losing a lot of sleep over it.” How can this be? Because insurance companies won’t bear the cost of their own losses—at least not more than about a quarter of them. The other three-quarters will be borne by American taxpayers.
