Smart money rotating out of stocks…or insider trading, who knows

I read this on the positively named Economic collapse blog and written by Michael Snyder. It appears that as the media reinforces the narrative that everything is ok, just look at the stock market it’s the place to go to maximise returns, the big investors are rotating out while your average person has been conned into returning. They will be wiped out when the markets correct, my advice get out of the markets now as much as I’d like to short! The article in full:

If wonderful times are ahead for U.S. financial markets, then why is so much of the smart money heading for the exits? Does it make sense for insiders to be getting out of stocks and real estate if prices are just going to continue to go up? The Dow is up about 17 percent so far this year, and it just keeps setting new record high after new record high. U.S. home prices have risen about 11 percent from a year ago, and some analysts are projecting that we are on the verge of a brand new housing boom. Why would the smart money want to leave the party when it is just getting started? Well, of course the truth is that the “smart money” is regarded as being smart because they usually make better decisions than other people do. And right now the smart money is screaming that it is time to get out of the markets. For example, the SentimenTrader Smart/Dumb Money Index is now the lowest that it has been in more than two years. The smart money is busy selling even as the dumb money is busy buying. So precisely what does the smart money expect to happen? Are they anticipating a market “correction” or something bigger than that?

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Those are very good questions. Unfortunately, the smart money rarely divulges their secrets, so we can only watch what they do. And right now a lot of insiders are making some very interesting moves.

For example, George Soros has been dumping almost all of his financial stocks. The following is from a recent article by Becket Adams…

Everyone’s favorite billionaire investor is back in the spotlight, and this time he has a few people wondering what he’s up to. George Soros has dumped his position with several major banks including JPMorgan Chase, Capitol One, SunTrust, and Morgan Stanley. He has reduced his exposure to Citigroup and decreased his stake in AIG by two-thirds.

In fact, Soros’ financial stock holdings are down by roughly 80 percent, a massive drop from his position just three months ago, according to SNL Financial.

So exactly what is going on?

Why is Soros doing this?

Well, there is certainly a lot to criticize when it comes to Soros, but you can’t really blame him if he is just taking his profits and running. Financial stocks have been on a tremendous run and that run is going to end at some point. Smart investors lock in their profits while they still can.

And without a doubt, stocks have become completely divorced from economic reality in recent months. For example, there is usually a very close relationship between corporate earnings and stock prices. But as CNBC recently reported, that relationship has totally broken down lately…

That trend disrupted a formerly symbiotic relationship between earnings and stock prices and is indicating that the bluechip average is in for a substantial pullback, according to Tom Kee, who runs the StockTradersDaily investor web site.

“They’ve been moving in tandem since 2009, until recently. Earnings per share for the Dow Jones industrial average have flatlined and the price has taken off,” Kee said. “There is something happening here that defines a bubble.”

At some point there will be a correction. If the relationship between earnings and stock prices was where it should be, the Dow would be around 13,500 right now. That would be a fall of nearly 2,000 points from where it is at the moment.

And we appear to be entering a time when revenues at many corporate giants are actually declining. As I noted in a previous article, corporate revenues are falling at Wal-Mart, Proctor and Gamble, Starbucks, AT&T, Safeway, American Express and IBM.

Of course a stock market “correction” can turn into a crash very easily. Financial markets in Japan are already crashing, and many fear that the escalating problems in the third largest economy on the planet will soon spill over into Europe and North America.

And things in Europe just continue to get steadily worse. In fact, the New York Times is reporting that the European Central Bank is warning that the risk of a “renewed banking crisis” in Europe is rising…

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The European Central Bank warned on Wednesday that the euro zone’s slumping economy and a surge in problem loans were raising the risk of a renewed banking crisis, even as overall stress in the region’s financial markets had receded.

In a sober assessment of the state of the zone’s financial system, the E.C.B. said that a prolonged recession had made it harder for many borrowers to repay their loans, burdening banks that had still not finished repairing the damage caused by the 2008 financial crisis.

And there are many financial analysts out there that are warning that their cyclical indicators have peaked and that we are on the verge of a fresh global downturn…

“We see building evidence of a cyclical downturn,” said Fredrik Nerbrand, HSBC’s global asset guru. “We find it highly troubling that the eurozone is still marred in a recession at the same time as our cyclical indicators appear to have peaked.”

In the United States, a lot of the smart money has also decided that it is time to bail out of the housing market before this latest housing bubble bursts. The following is one example of this phenomenon that was discussed in a recent Businessweek article…

Hedge fund manager Bruce Rose was among the first investors to coax institutional money into the mom and pop business of single-family home rentals, raising $450 million last year from Oaktree Capital Group LLC.

Now, with house prices climbing at the fastest pace in seven years and investors swamping the rental market, Rose says it no longer makes sense to be a buyer.

“We just don’t see the returns there that are adequate to incentivize us to continue to invest,” Rose, 55, chief executive officer of Carrington Holding Co. LLC, said in an interview at his Aliso Viejo, California office. “There’s a lot of — bluntly — stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.”

So what does all of this mean?

Is there a reason why the smart money is suddenly getting out of stocks and real estate?

It could just be that the insiders are simply responding to market dynamics and that many of them are just seeking to lock in their profits.

Or it could be something much more than that.

What do you think?

Why are so many insiders heading for the exits right now?

War by Proxy…Syria, UK and Russia

From an article in the FT after Russia’s first shipment of S300 anti-air rockets and the deaths of American and British citizens, it seems as if the situation in Syria is escalating behind the scenes. The ‘war by proxy’ is growing in intensity as the UK will ship arms to some of the rebel factions in Syria this summer. Don’t worry we’ll be giving these weapons to the good rebels, don’t think so. These weapons and ammo will go to the better fighters, the hard line jihadists such as Jabhat al Nusra (aligned with Al Qaeda) and the Farouq brigade. The rebels are a mish mash of different groups but rebels were caught in Turkey with a 2 kilo Sarin nerve gas canister but apparently it is Assads forces using them. The pretext of this war reminds me of Iraq, any excuse to invade.

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The US, the land of the free led by a fascist patsy, had secretly undertaken significant lobbying efforts of EU member states to get the EU arms embargo amended and this week, Britain and France forced through that deal opening the door for the supply of weapons. I’m truly saddened by the UKs involvement and supporting terrorists in Syria but Russia has waded in again as MiG aircraft makers on Friday said that it planned to sign a new agreement to ship at least 10 fighter jets to Syria. This war has been going on for 2 years and the more nations that interfere, the longer it goes on and the casualties pile up.


Britain’s Foreign Office insists that no final decision on whether to arm the rebels has yet been made. But a senior UK diplomat told the Financial Times that Britain could be in a position to arm the rebels this summer if, as many expect, the planned peace conference in Geneva fails to make headway.

“The precise timing has not yet been finalised and no decision has yet been taken. But we are likely to be … shipping arms to the rebels by August,” the official said. “What I expect is that over the next two or three months western powers will move low-grade arms supplies in bulk to the rebels. The rebels need ammunition, and a lot of it, just to keep fighting.”

Syrian rebel sources are also saying they are expecting the first new arms supplies to come from Britain as early as this summer.

Russia’s MiG aircraft maker said on Friday that it planned to sign a new agreement to ship at least 10 fighter jets to Syria, a move that comes amid international criticism of earlier Russian weapons deals with the Assad regime

Russia has said it is only providing Assad with weapons intended to protect Syria from a foreign invasion, such as air defence missile systems.

Syria now is Russia’s last remaining ally in the Middle East and hosts the only naval base Moscow has outside the former Soviet Union.

European Youth Unemployment, it’s not a pretty picture!

The PIGS nations have all now smashed through the Maginot Line of 40% youth unemployment with Italy finally catching up (Italy 40.5%, Portugal 42.5%, Spain 58.2%, and Greece 62.5%). What is more concerning is that not only are these rates extremely high but they are accelerating, seeing their rates rising faster in recent months.

Europe’s youth unemployment rate continues to climb higher (24.4%) having not fallen for 2 years. Spain is the ‘winner’, of sorts, with 41 consecutive months without a drop in youth unemployment. With welfare benefits running dry, Sweden and Switzerland temperaments already running high, the climate this summer could quite easily get alot hotter, escalating into full scale social unrest.

Ireland, the silver lining, has seen its youth unemployment rate drop for 10 of the last 11 months and has dropped to a ‘respectable’ 26.6%, the lowest since July 2010. The issue with Irelands figures is that they have high instances of emigration when things start to turn for the worst, as well as the FAS employment courses that take youth unemployment numbers down further. Things could be alot worse.

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GMO’s now in the UK food chain

Currently there are no commercial growing of Genetically Modified (GM) crops in the United Kingdom, only an experimental trial of GM Wheat which started in 2012, but now the Prime Minister’s personal scientific adviser. Sir Mark Walport and others are pushing an agenda to allow GM crops from Biotech firms such as Monsanto to be grown for commercial use.

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Sir Mark Walport; the man David Cameron trusts with your health said it was his ‘job to advise on the science and it is then the politician’s job to decide how to use that … The final decision is a political decision’.

His comments – in his first public speech in the job – are the latest indication that the GM lobby is rapidly gaining influence after years of public hostility.

– Let farms grow GM food, says PM’s personal scientific adviser: Top adviser backs calls to relax rules on crops

“My job is to provide the best, most accurate scientific advice,” he said. “The job of the civil service is classically sometimes portrayed as telling truth to power, and there’s no doubt that is my job.”

– Case for GM crops is becoming ‘stronger’, says chief scientist

This is just ridiculous, the GM companies have not fully tested their products and have not had them independently tested. Companies like Monsanto and Syngenta AG have lobbied the US political system and have not had to carry out extensive research to ensure that their products are safe.

A new study in France has found genetically modified maize to have devastating effects on the health of lab rats — which could indicate risks for other biological creatures, including humans. For two years, these rats were fed a diet of 33% genetically modified corn developed by Monsanto. The results are horrific. The rats “developed tumours the size of ping-pong balls, liver damage and digestive problems” according to the study.

– French GMO Research Finds Monsanto Corn Causes Cancer: America Should Pay Attention

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Over the past 8 weeks 6 supermarkets; Tesco, Asda, Sainsbury’s, Morrison’s, Marks & Spencer and Co-operative ended bans on farm suppliers giving GM Soya and Maize to animals producing meat, milk and eggs, this includes free range animals. Waitrose still requires non-GM feed for poultry, eggs and lamb.

The supermarket giants said suppliers had told them that non-GM feed for poultry is now too difficult and too expensive to obtain. There are also concerns that there is a risk non-GM and GM animal feed could become mixed up, making it more difficult to police the UK food chain.

This is a lie, Brazil has the capability to separate feed and can do so.

– M&S, Co-op and Sainsbury’s say chickens will be fed on GM soya

Not only are these GM products dangerous to our health but they are wiping out bee colonies. Russia is furious with the US as it backs GM, even under mounting evidence, as seen in this article.

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Our political masters are motivated by profit not safety, its time to stand up and boycott these products and let our so called masters know that we are awake and they will be held to account.

Radioactive Cesium Recorded at 10 Spots in Pacific Ocean After Fukushima

The mainstream media seems to have forgotten the Fukushima disaster as it continues to spew forth radioactive material into the Pacific Ocean. The nuclear plant was not fixed, not by a long shot and now it is silently polluting the Pacific Ocean with little international outcry. This is just ludicrous, why is there no international pressure on Japan to completely seal the system? If they can’t the people have a right to know! If you want to see how the radioactivity will contaminate the Pacific, please click here for a 10 year time lapse…it’s worrying. People of the world have a right to know that their oceans and food systems are being infected!

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From Common dreams.org:

Radioactive cesium from the Fukushima plant was found at 10 points in the Pacific Ocean, including a location as far as 1300 miles from the plant, less than a year after Fukushima nuclear disaster began, scientists revealed on Tuesday.

The Japan Times and Kyodo News reported that the findings were announced by researchers with the Japan Agency for Marine Earth Science and Technology at the Japan Geoscience Union meeting.

At each of the 10 points, located between Japan’s Hokkaido island and Guam, cesium 134 and cesium 137 were detected in the plankton and seawater samples taken by the scientists between January and February 2012, the news agencies report.

The researchers found the highest density of cesium in seawater around latitude 36 to 40 degrees north, while plankton with the highest concentrations of cesium were found around 25 degrees north and 150 degrees east.

“Plankton are thought to play a key role in the dispersion of the cesium because they are eaten by bigger fish. We want to study further what is influencing the accumulation of radioactive cesium,” The Japan Times reports Minoru Kitamura, a marine ecologist and senior researcher at the Japan Agency for Marine Earth Science and Technology, as saying.

The high levels cesium found in the plankton around 25 degrees north presented a “concern,” Kitamura added, saying, “we don’t know why the level got high around that area.”

Britain is a lab rat for George Osborne’s austerity programme experiment

This article is from the Guardian by Larry Elliot and confirms what I have been saying for years, austerity does not work and shifts the blame from the perpetrators to the victims. Article in full:

What do you think about George Osborne’s austerity programme? No, I am not trying to be funny. When the chancellor says he is tackling Britain’s large budget deficit through a mix of spending cuts and tax increases are you more or less likely to go out and spend money?

The answer to this question appears obvious to most people. Austerity makes consumers and businesses more cautious. It leads to less spending in the economy and throws deficit reduction programmes off track.

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That, though is not what Osborne thinks. It is not what the European Central Bank thinks. It is not what the Tea party in the United States thinks. It is not what most mainstream economists think. What they all believe is that any pledge by governments to cut spending imparts a warm glow to those toiling away in the private sector. Confidence blossoms because individuals and businesses expect healthier public finances to result in lower taxes. Businesses will invest and this will lead to higher consumer spending.

Conversely, any attempt by governments to spend their way out of a slump is worse than useless. Perfectly rational economic agents understand that higher public borrowing today means higher taxes tomorrow, and they will prepare for that dread day by reining in investment and spending. The economy will shrink rather than grow.

Let me guess what you are thinking? You are thinking that this sounds like complete mumbo jumbo and bears no relation to the real world. You think that expansionary fiscal contraction – the economic idea used to justify austerity – is a contradiction in terms. You think that there is not one shred of evidence to support the idea that government belt-tightening in a deep slump does anything other than to make that slump deeper and longer.

And you would be absolutely right. There is no evidence – and never has been – that austerity works in the fashion promised by those who support it so vehemently. Britain – used as a laboratory rat in order to prove that expansionary fiscal contraction works – is proof of that, as are the examples of Ireland, Greece and Portugal.

The UK experiment began three years ago when the coalition came to power. The timing could hardly have been better for the new breed of expansionary fiscal contractionists at the Treasury. The deficit was at a peacetime record, the economy appeared to be on the turn and, as an excellent new book by Mark Blyth* shows, it was the time when the brief one-year dalliance with Keynesian economics had just hit the buffers.

What happened was this. In the winter of 2008-09, following the collapse of Lehman Brothers, the world economy contracted at a rate not seen since the early 1930s. Governments decided this was not the time to sit back and do nothing: they got together and co-ordinated the biggest expansion of monetary and fiscal policy on record. The Americans, the Chinese, the British, all cut interest rates and announced stimulus packages. Even the fiscally conservative Germans joined the party.

The unprecedented intervention by central banks and finance ministries prevented a second great depression, but the healing process had only just begun by early 2010. At that point, the narrative changed. As Blyth correctly points out in Austerity: The History of a Dangerous Idea, the crisis began with the banks and it was only when states moved in to re-capitalise institutions that were on the brink of bankruptcy that a private sector debt crisis became a sovereign debt crisis. With the sole exception of Greece, the financial problems faced by western governments did not stem from the profligacy of the state but were the result of taxpayers picking up the tab to bail out the banks.

But this view was quickly challenged. Within months, as Blyth says, it was re-christened a sovereign debt crisis by political and financial elites. Why? In part, it stemmed from the ingrained belief that markets are infallible and governments can never do any good. In part, it stemmed from a genuine – if misguided belief – that government debt levels would explode to unacceptable levels unless austerity was introduced. In part, it was a way to ensure that the people who were actually responsible could shift the burden of clearing up the mess onto those who were quite blameless.

Those determined to push back against the Keynesian experiment came armed with economic evidence. The Italian economist Alberto Alesina made the case for expansionary fiscal contraction when he presented a paper to EU finance ministers in April 2010, citing examples of countries – such as Ireland in the late 1980s – where the approach was supposed to have worked. Jean-Claude Trichet, then president of the European Central Bank, was impressed. So was Osborne, who drew on Alesina’s work in his emergency budget of 2010.

Blyth’s book traces austerity back to its roots in the works of John Locke, David Hume and Adam Smith, but is particularly impressive in the section that takes apart claims that the last 30 years have provided examples of expansionary fiscal contraction working. Alesina’s version of what happened in Ireland in 1987-9 is that an austerity minded government delivered growth by cutting welfare, taxes and the public sector wage bill, with the fiscal tightening offset by a devaluation of the punt. This explanation, however, fails to mention that Ireland’s biggest export market is Britain, which at the time was going through the wild excesses of Nigel Lawson’s ill-fated boom.

And so it goes on. Blyth has plenty of examples – Britain in the 1920s, for example – where austerity failed. He finds none – not even the recent case of Latvia – where it does what it says on the tin.

IMF economists have done a good job in challenging the claims of the expansionary fiscal contraction brigade. The fund found that the notion that spending cuts are less harmful to growth than tax increases – one of the chancellor’s key claims – only holds true if central banks can compensate for the contraction with reductions in interest rates. When official borrowing costs are just above zero that is not possible. The IMF also says spending cuts are more painful when every country is retrenching at the same time, as now.

In short, it believes that austerity isn’t working. It believes the US has recovered more quickly than the eurozone because of Washington’s belief that growth leads to deficit reduction rather than the other way round. It says Britain’s economic recovery is feeble and wants Osborne to boost spending on public infrastructure in order to offset the £10bn of tax increases and spending cuts he has lined up for 2013-14. So ask yourself one final question. If Osborne borrowed £5bn-£6bn to build houses and fix potholes would that be a good or bad idea? Most of us, I would suggest, would take the former view, which is why austerity has failed and why the economic thinking that underpins it is bunk.

Japan’s Issues explained in 1 infographic

As Japan continues to walk down the path of QE to destruction, the below infographic shows clearly why more debt and ‘money printing’ is not the solution but part of the problem. When bond yields (interest rates) increase, Japan will have to create more money to monetize more debt or default but not before hyperinflation rears its head. That will have a catastrophic effect on the world economy but it is a path the Japanese are aimlessly walking down courtesy of terrible policy choice and corrupt politicians.

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