ANOTHER CHINA VIEW

The turmoil in China continues. The recent trade data caught many off guard, coming in as it did at six year lows. The recent announcement it would be closing many steel plants, up to 60% in one area by 2020. The fate of the yuan. Will they try one last ditch effort to muddle through or let it fall are both concerns. The recent crackdown on businesses to prevent the ongoing flight of capital is another, proving that capital flight, notwithstanding what many so-called pundits claimed was overstated, is a growing problem.

It may indeed have slowed, but as a story earlier today from Business Insider shows necessity and invention are still alive and doing quite well. Last year according to some reports around $700 billion to $1 trillion fled the country.

Capital has been flowing out of China at unprecedented rate over the past six months. Amidst concerns about the economy and the potential for further weakness in the Chinese renminbi, many investors are running for the exits.

With regulators closely monitoring cross boarder flows, heightening the risk of more stringent capital controls being put in place, investors have become increasingly inventive when it comes to getting money out of China.

Take the practice of fake invoicing, for example. 

Based on recent anomalies between Chinese and Hong Kong trade figures, it appears many investors are now trying to get their capital out through non-traditional means, overstating the value of imported goods from Hong Kong to circumvent Chinese capital controls.

It’s the exact opposite scenario to what was seen in past years where firms in Hong Kong were overstating the value of imported goods from China in order to get capital in there, avoiding capital controls in an attempt to speculate on further strengthening in the renminbi.

Just two of the problems China face is the slowdown of growth and market turmoil. Like we always say volatility is a two-way street. It can be your friend or your nemesis. Volatility always brings out the financial vultures. Unless there's some kind of dramatic change, the Chinese government can expect more of the same.

businessinsider.com/fake-trade-invoicing-in-china-is-back-this-time

theepochtimes.com/n3/1986351-the-good-the-bad-and-the-ugly-scenarios-for-china's-economy

OVERNIGHT

Chinese shares took a hit overnight as falling commodity prices and an announcement that a northern China official made about pending steel plant closures in what would be a consolidation move. Weak copper, nickel and oil prices added to investor concerns.

The Shanghai Composite index at one point was down nearly 3% threatening to end the session down after six straight days of gains. The WSJ reported:

Shares of Chinese steel producers plunged after the official news agency Xinhua reported that the governor of Hebei, a northern Chinese province near Beijing, said the province will aim to close 60% of its steel factories by 2020.

That report sparked selling of steel-related stocks. Shanghai Hualian Mining was down 7.6%, and Shandong Jinling Mining was down 8.5%.

Hong Kong’s Hang Seng Index fell 0.6%, hit by weakness in shares of oil producers.

Elsewhere in the Asia region, stocks were mostly down as investors shied away from risk amid a slump in commodities and oil prices.

Japan’s Nikkei Stock Average lost 1.3% and Korea’s Kospi was down nearly 0.2%. Australia’s S&P/ASX 200 rose about 0.7%.

There are also lingering concerns about upcoming central bank meetings this week, particularly the ECB. Oil prices came under pressure Tuesday in the U.S. as it dropped 3.7% closing at $36.44. There's a conflict between as doubts grow that major producers can actually pull off an output freeze and news that U.S. production is expected to decline next year.

China's February trade performance that came out yesterday has also caused some skittishness among investors after export figures hit six lows. That was far worse than expected.

NORTH VERSUS SOUTH

It never changes, north versus south.

San Franciscans look down their long PC noses at their southern neighbor, Los Angeles. In the European Union it's always been the snooty north against the less well-off south. Brussels versus Greece could draw a fair-sized UFC crowd. In fact, maybe that's is what's needed and will eventually come about. There's a nearly global north-south water struggle many are unaware of going on also.

In Magic Mario Draghi's stumbling, bumbling attempt to right the rudderless Good Ship European Union, the southerners will once again feel the squeeze is on. Banks there are already hurting to use a kinder, more gentle depiction. Negative interest rates will simply pour more water on the heads of the already drowning.

Banks make much of their money on the spread in interest rates, no different in its way than carry trades in currencies. Borrow money at a lower rate in one currency and invest it at a higher rate in another currency, hoping the spreads remains steady as it goes.

A narrower spread hurts depositors but it may even hurt banks more. And that's what those southern European banks need, more pain and more "we told you so" And then there's the almost ignored problem of fixed versus variable mortgage rates. In the north their mostly fixed, in the south variable.

This can have a big impact on mortgage rates as banks with variables on their books yield less income the lower rates float. Since margin rules or covenants on these loans can't be changed, the squeeze gets tighter. As noted in one scribe today, at least one southern bank there is now paying its mortgage holders for the privilege of holding their mortgages.

It's game in America seemingly growing more popular by the moment as banks pony up funds to the
Fed for holding their reserves. Just the obverse is true with fixed rate mortgages. Banks holding them worry about rising rates.They also don't like a lot of inflation. Up to a point zero rates are a lenders paradise; you're constantly paying them back with an appreciating currency. Inflation favors the borrower.

What much of this is about is unintended consequences bureaucrats and regulators never seem to see before they dictate our futures. As public confidence in these institutions that in essence are answerable to no one fades, disgruntlement will grow. It's a healthy disgruntlement, not what MSM shills would have you believe.

Nearly all change has an element of disgruntlement to it. Appreciation for personal and local sovereignty will also grow. And like any good spellbinding mystery the outcome become clear. China's elite know and fear this the most. They are not alone.

You're on your own.

OVERNIGHT

Upcoming central bank meetings ruled overnight trading as investors took some profitts uncertain about what will come out of those meetings.

Like closing positions ahead of a long 3-day weekend, you don't want to give back hardgotten gains following a decent rally. The thought of negative interest rates unsettles many market participants as concerns about them grow.

Reuters reported: Asian shares fell on Tuesday as investors took profits after a month-long rally and investors grew wary of the market's near-term prospects ahead of major central bank meetings.

Led by China, MSCI's broadest index of Asia-Pacific shares outside Japan fell more than a percent. Japan's Nikkei and South Korea's KOSPI fell more than a percent each.

"We have seen a big move in markets in a very short period of time and investors are calling time ahead of the ECB and the Fed meetings in the coming days," said Kay Van-Petersen, global macro strategist at Saxo Bank in Singapore.

The European Central Bank is widely expected to ease at Thursday's policy review, but there is a lot of uncertainty about how far it would go. Meanwhile, ahead of a U.S. Federal Reserve policy meeting, fed fund futures were barely pricing in one more hike this year.

Meanwhile, Chinese shares fell particularly those in the property sector as rumors the government might attempt to tone down speculation in the nation's high-end property markets. The market was also effected by weaker export and import numbers.

PINCHING YOUR POKE

What happens in a place doesn't despite a popular Las Vegas ad a few years ago always stay there.

If you're concerned about your future and your inexorable slide toward retirement, assuming you get one, you might want to pay more attention to what's going on in Europe and those incessant promises politicians are always waving in front of voters, especially in this election year.

The story line says it all: "Europe Faces Pension Pinch." The headline writer of this tale should get an award for understatement. Pinch is to soft as tsunami is to storm. And that's what European governments face, a huge shortfall storm that will soon being playing in a neighborhood near you.

Here's a brief paragraph that summarizes the sad tale.

State-funded pensions are at the heart of Europe’s social-welfare model, insulating people from extreme poverty in old age. Most European countries have set aside almost nothing to pay these benefits, simply funding them each year out of tax revenue. Now, European countries face a demographic tsunami, in the form of a growing mismatch between low birthrates and high longevity, for which few are prepared.

Europe’s population of pensioners, already the largest in the world, continues to grow. Looking at Europeans 65 or older who aren’t working, there are 42 for every 100 workers, and this will rise to 65 per 100 by 2060, the European Union’s data agency says. By comparison, the U.S. has 24 nonworking people 65 or over per 100 workers, says the Bureau of Labor Statistics, which doesn’t have a projection for 2060.

Don't let those numbers fool you, 42 per 100 versus 24 per 100. There's no comfort there because government figures are like tout sheets at the race track. You never get what you pay for. This is a crisis. A similar situation faces retirees in the U.S. See state funded retirement plans like Illinois, for example.

The state is broke, but the one thing bureaucrats and Chicago mayor Rahm Emanuel understand is snoozing bears. Death certificates require a signature.

And later this week the European Central Bank will most likely pour some more petrol to the already blazing debt flames with more negative interest rate moves. Martin Wolf should be smiling about then. Negative interest rates in less stuffy circles is just another form of kick the can, the antithesis anything that vaguely looms well for your retirement future.

As the chasm in the future between the young and the elderly grows wider and more hostile, you can thank your bureaucrats and politicians. Meanwhile, with the rise of robots taking more and more jobs, will employers face higher taxes to cover the shortfall? The revenue has to come from somewhere.

Confiscating your retirement, some might call pinching your poke. Either way it'll hardly when it happen feel very soft.

Then I ducked my head, and the lights went out, and two guns blazed in the dark,

And a woman screamed, and the lights went up, and two men lay stiff and stark.

Pitched on his head, and pumped full of lead, was Dangerous Dan McGrew,

While the man from the creeks lay clutched to the breast of the lady that's known as Lou.

These are the simple facts of the case, and I guess I ought to know.

They say that the stranger was crazed with "hooch," and I'm not denying it's so.

I'm not so wise as the lawyer guys, but strictly between us two —

The woman that kissed him and — pinched his poke — was the lady that's known as Lou.

RATTLED CAGES

Concerns over The Donald as he is known in some New York quarters continue to grow.

Here are two stories from the Internet today about Republican presidential candidate Donald Trump as he continues to rattle lots of cages especially since his Super Tuesday performance. This is after all an election year and politics and markets particularly with the increasing government inference and rise of regulations investors need to keep their eyes on their pocketbooks as they will no doubt take a hit whoever the victor is.

Going from what many thought was just a clown show to what is now perceived even by his detractors as a serious candidate this indeed will be an interesting and exciting run to offset what's been doled out in the boring past.

Football season may be over with March Madness soon to follow, but what could turn out to be a spellbinding run to November awaits. If the race is even close, you can expect the newspapers lining the bottom of those cages to get changed a lot more often. 

Hollywood eat your boring heart out.

businessinsider.com/r-foreign-diplomats-voicing-alarm-to-us-officials-about-trump-2016

marketwatch.com/story/democrats-start-to-worry-about-trumps-appeal-2016-03-07

IRON ORE RALLY A SURPRISE

The price of iron ore jumped overnight, making its largest one day move in history, according to Business Insider. That pushes the metal up nearly 67% since hitting a low last December. Though it could be just another fluke related to upcoming meetings in China since sudden spikes have happened before it came unexpected and continued a recent upward move in prices.

That iron has been in terrible straights for a long time owing to the global recession is hardly news.

The iron ore market made history on Monday, recording its largest one-day increase on record.

According to Metal Bulletin, the spot price for benchmark 62% fines rose by $9.99, or 18.6% to $63.74 a tonne, the highest level seen since June 15 last year.

Whether in percentage or dollar terms, it was the largest increase ever recorded going back to when spot pricing was first introduced in mid-2008. From the all time low of $38.30 a tonne struck on December 11 last year, the benchmark price has now risen by 66.4% businessinsider.com/iron-ore-biggest-ever-one-day-gain-chart-2016-3? 

OVERNIGHT

It was all about goals it seems as investors viewed the stock market Monday in China by pushing it higher after officials over the weekend announced their economic goals, the WSJ reported, setting a lower target for this year than that of 2015. The lower number apparently didn't bother investors.

During the NPC, China’s annual legislative session, officials set goals for the economy to grow 6.5% to 7% this year, lower than the “around 7%” target set in 2015. Investors’ expectations of greater government spending on public projects helped send shares of industrial goods producers—growth drivers of the “old economy”—in China and Hong Kong higher Monday. Beijing is trying at the same time to support companies catering to the middle class as it moves from an investment-led economy to one more driven by consumption. These so-called “new economy” firms include those in the technology, pharmaceuticals and clean energy sectors.

China is expected Monday to report the level of foreign-currency reserves it held in February. The figure illustrates how quickly China burned through its reserves to curb the amount of money leaving the country amid recent worries of yuan depreciation.

The Shanghai Composite Index was last up 0.8%, led by gains in shares of basic materials producers. The smaller Shenzhen Composite Index climbed 2.3%. Markets elsewhere in Asia were mixed. Hong Kong’s Hang Seng Index turned up 0.2%, Korea’s Kospi was up 0.3% and Australia’s S&P/ASX 200 was up 1.1%. Japan’s Nikkei Stock Average was down 0.5%.

Gold was at $1260.40 an ounce and Brent trading just above $39 a barrel.

DIETARY FLATULENCE

There is no end to what the climate change freaks will go to push their end point--you and me are the problem. So some day soon you and me won't be the problem.

The staunch, cunning villains of the past, oil and gas, also known in the underground world of science as hydrocarbons, have apparently lost their number one ranking on the most hated list.

It's now what you and I eat, our diets. The first thought is you wonder how long and how much energy it took for this crowd to think this up. The second thing is villains are necessary for any agenda. Time does that. Like bakery items, issues and certain villains become stale. So new ones must be conjured up to keep agendas alive.

It 's sorta like the recent news report by one of Trump's ex-wife who claimed that he kept a copy of Hitler's speeches on his nightstand. Well, another guy also reportedly kept a copy of the Furor's speeches close at hand went by the name General George S. Patten. Huh! Wonder what the common thread was there?

But let's return to dietary problems and their effect on the environment. Here's a piece from a known left-of-center news outlet, Business Insider. No surprises here. We like to read as many sides as possible. And somewhere in the middle we might hopefully find what Diogenes was looking for with his lantern--not an honest man but an honest report.

We will keep looking. Meanwhile, here's a link. Decide for yourself. Look for beef to soon join the $100 bill. It's most likely why money laundering and terrorism is currently such a problem. It's not flatulence anymore. Or is it?

businessinsider.com/ways-your-diet-could-be-harming-the-environment-2016-2

THE CHINA PLOY

If you follow what's going on in China you might think it, like other heavily centralized control states, is alone in clamping down on those who criticize government. You'd be wrong.

It's a growing concern for governments wide and narrow. Just last week at the G20 meeting Chinese officials pledged not to let their currency, the yuan, fall. In street jargon, devaluation. If wide spread enough it goes by another name, beggar thy neighbor or currency war. Lowering interest rates, especially if you sup at the export trough for you economic sustenance as China has for years, is just one way to do it. There are plenty of others, including the once unusual but now widely accepted ploy of creating negative interest rates. Lowering bank reserve requirements is another.

Governments always at these away-from-home meetings claim they're going to line up with such and such cause only to the local thing when their return home.They also claim they're not going to devaluate their currency just before they do. See Soros and the British pound. Or more recently Kyle Bass and others and the yuan

As shares sank, the government pulled out all the stops from closing trading to allowing traders to auction their homes for collateral to making leverage easier. But here's the most troubling one, cracking down on negative news and it purveyors to, as a Barron's article recently noted, "...media re-education edicts, censoring negative views on the growth outlook, and demonizing those who dare to go off-script."

To those of us in the semi-free country called The Land of the Free and The Home of the Brave, this might seem unconscionable. But have no fear; it here just in a more subtle form for now. The on-going gouge called a presidential primary is just one example. The upcoming confiscation of the $100 is another. The constant MSM drumbeat against gold is another.

This government largess in Street jargon is called the China put. We've for years had our own from Greenspan to Bernanke to Yellen. Truth is we're famous for exporting financial ploys and products. And as Barron's obliquely notes, here's another one we set the bar for: the Chinese government just gave domestic banks the green light to issue $8 billion of securities "backed by proceeds from non performing loans."

A more recent form here rolled out by big banks is lowering lending standards for home buyers with spottier credit histories or none at all to circumvent certain recent regulations on such loans.

It's all in the packaging.