Watch it Now: China Makes its Move in Ecuador

Dr. Moors was a guest on Chinese national television last night via a live satellite link. The topic was the increasing Chinese involvement in Ecuador

Long-time readers will recall that Kent has been advising on a refinery project in Ecuador for some time now. The Pacifico project, also known in country as Refineria
Project costs have swelled to about $13 billion with the government still saying that the 300,000 barrel per day complex will begin operations in 2017.
The real story, however, lies in the combination of interests surrounding the facility.
Kent explains what China is up to in the video below:

Why “Energy Rebalancing” Means Huge Profits This Year

by Dr. Kent Moors 

Marina and I have a little less than a week left on the island before we head back to the mainland. I hope our pipes haven’t frozen back in Pittsburgh!

As we head home to begin the New Year, there are several new wrinkles in the energy market that I have my eye on.
And as always, I’m looking for new ways to profit from them.
These new wrinkles revolve around what I call the “energy balance” – and its changing fast.
It involves big shifts in sourcing and systems that will combine with some major revisions in finance that will alter the landscape for investors.
It’s not about new energy breakthroughs or big oil discoveries. And it’s certainly not about entirely new structures.
Rather, it’s about the accelerating changes in elements you’re familiar with.
Think of it, if you will, as a “rebalancing” of what already exists.
It’s an unstoppable trend that promises to hand us huge profits…

The 2014 Plan: Leveraging a Gigantic Advantage

For us, of course, this “rebalancing” gives us a gigantic advantage: we identified this trend a long time ago. In fact, I’ve discussed it in these pages before.
At present, there are three overarching dimensions to these changes: the energy network itself, the geographical considerations, and the financial arrangements.
As as the market rebalances, it will require we change our investment strategy to profit from it -especially the with first two.
As for the third, we have just about single-handedly revised the approach to finance all by ourselves.
Today, however, I want to talk about the networking dimension.

Networking involves the entire sequence of energy (oil, natural gas, electricity) transmission from production, through gathering and transit, to refining, distribution and retail. This remains the upstream-midstream-downstream sequence that has become a mainstay of the energy sector.
In the case of operating companies, our target interests will consider the basins worked, the company’s focus, market cap and field size, along with the more or less traditional considerations of management style, balance sheet, and market position.
We will also see some interesting rebalancing in the refinery space, as those processors able to bridge the domestic market and rising oil product exports, as well as the conventional/unconventional sourcing mix, will have a substantial advantage.
And then there are the huge transport revisions that are on the way. We have talked about two of these primary developments before, but will be watching their progress with added interest this year.

Fundamental Changes = Big Opportunities

The first is the fundamental change in the worldwide balance occasioned by the rapid expansion of the liquefied natural gas (LNG) market.
This remains the single most significant revision globally to take place over the next decade. The rise of LNG exports from the U.S., fueled by the largess of shale and other unconventional gas sources, will be fundamental to this revolution.
On the other hand, there is another revision that may be just as significant in generating investor profits from the export trade.
I’m referring to crude oil, but with some new elements contributing to another change in the balance. I’m talking about oil exports.
In the future, we will see a concerted move to export oil in new directions – starting with transit from the U.S. For some time, exporting oil from the states has been considered a national security issue, making the trade very difficult.
In this case, two exceptions have been allowed: one permitting the export of heavy, lower quality crude from California (for which the argument can be made of an insufficient domestic demand); the other allowing certain tolling contracts.
Tolling is a process whereby raw materials are exported to be processed abroad with the finished product then imported back in. The justification for this allowance has been the concern over maintaining sufficient domestic stock of oil products, especially diesel. That concern has now abated with the advent of significant reserves of tight oil (“shale” oil actually being only one category of such unconventional sourcing).
None of this would have been considered possible only a few years ago. Being dependent on imported oil, American policy makers were understandably dismissive about allowing the export of finished products from U.S. refineries.
But not any longer…
As is the case with natural gas and LNG, there is now ample local supply. That opens up the market for rising oil product exports.
As a result, I suspect that tolling will rise again – owing to the limitations on overall U.S. refinery capacity – but will increasingly service a jump in the exports of those products. The cost differential in utilizing foreign processing facilities makes this approach quite profitable.

The Big (And Profitable) Global Changes Ahead

Then there is the expanded use of the completed East Siberia-Pacific Ocean (ESPO) pipeline in Russia.
An earlier spur from ESPO has for several years moved oil south to China. But the new impact of the pipeline on wider Asian demand will become far more pronounced.
ESPO export oil will become a new benchmark crude rate, a major development for all of Asia. As this develops, the ESPO benchmark will replace London’s Brent as the standard for trade in wide portions of that market.
This is what makes this so significant. End users in Asia have paid a premium over what it costs to buy the same quality oil for delivery to Europe. ESPO will undercut that tradeoff and provide a genuine boost to Asian economic development. ESPO oil has a lower sulfur content as well meaning it is “sweeter” than Saudi export. That is another big advantage for Asia.
Other export changes will come from a number of geographic market-specific revisions. Western Europe will be importing more LNG as nations like Germany also phase in a wider usage of renewables.
These LNG imports will add pressure on the pricing points for long-term pipelined gas contracts, while improving prospects for investments in the expanded liquefied trade.
What’s more, a matter I have addressed before and had meetings about over the last several weeks, has begun to change how people view oil and gas sourcing in the Caribbean.
It involves the emergence of China as a major conduit of energy funding in South America and the rapidly accelerating networking of production, refining, and transport throughout northern South America and the Caribbean basin.
The combination rising Chinese influence and an existing system called “Petrocaribe” will produce some major changes that will impact North American markets. 

Thomas Edison's secret war with the Federal Reserve decades back has led to a new currency rising up today. It threatens the dollar, EURO, Pound, and the entire international monetary system. But it's also making everyday Americans rich. A Silicon Valley venture capital veteran investigates this exciting phenomenon.

End Of America : Fed is Dying

America’s path from fiscal improbity to political impasse 
ONCE a stalwart of good governance, America looks like a rodeo clown. If the House and Senate cannot agree to continue funding for discretionary spending by midnight on September 30th, the federal government will experience one of its periodic shutdowns. There have been 10 such episodes since 1981, the date of the first one under the current budget-making rules, so a brief hiatus in government functions need not be frightening. Some non-essential services would be suspended and inconvenience caused—in addition to sending the US Treasury market into mild gyrations. Far worse is the idea that Congress might fail to authorise the raising of the debt ceiling in mid-October. Republicans in Congress have a shopping list of demands in exchange for allowing this; the president has said he will not negotiate. If America were in real danger of missing a debt payment it is likely that President Obama would find some constitutional justification for ignoring Congress rather than set off a financial meltdown.
Read full article here
Further Reading

Government Shutdown Begins As Deadlocked Congress Flails

Warren Buffett on Gold vs. Hommel on Gold!

Warren Buffet explained why he does not see the value in gold in his annual report from 2011.
http://www.berkshirehathaway.com/letters/2011ltr.pdf
 
http://ivanhoff.com/2013/04/15/warren-buffett-on-gold/
 
It was republished by ivanhoff, and came to my attention last week, which gave me this occasion to respond.   Here I go.

Buffett:
The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century.

Hommel:
Buffett is claiming that Gold's value exists only because other people will buy it.  True.  True of all assets.  And this is exactly why gold is a good thing, because of all things, gold is most likely to be valuable in more places to more people than nearly any other item that you can consider, precisely because it is money.  But Buffett presents this as a bad thing, calling gold "unproductive".  Well, let's see, how is gold productive?  It can go up in value, just like stocks or bonds or housing, or any other asset.  People recognize that gold has value not because it gains value, but because it does not decay or rot or go bad.  Food makes a horrible form of money, partly because it goes bad.  One of the longest lasting kinds of food is the wheat kernel, which can last up to twenty years.  Gold lasts 6000 years, with no decay.

Buffett:
This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further.  Owners are not inspired by what the asset itself can produce – it will remain lifeless forever – but rather by the belief that others will desire it even more avidly in the future.

Hommel:  True, gold buyers do not buy gold for what gold will produce, but most of my gold buyers are buying gold because they do believe it will go up in value, because they do believe that others will see what they can see, that gold is special, and cannot be printed to excess like paper money is being created to excess these days.  Gold buyers buy gold also because they recognize that gold does not decay, because it has a very high value for the weight and density which makes it portable, and because it can be hidden.

Buffett:  The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.

Hommel:  True, gold is not procreative.  But this does not mean that gold cannot go up in value.  Gold does have a use.  The use is as a store of value.  The use is to communicate value over time.  Gold has three primary uses: as a store of value, as a unit of account, and as a medium of exchange.  These days, it is not used much as a medium of exchange, because no government on earth is issuing gold as circulating currency, but because all nations issue paper money.  This is making gold an excellent store of value, because gold is increasing in value more than all the paper money being continually printed.  The key use of gold in our times is not only in that it holds value, but gains value.  This is because the new supply of gold is far less than demand.  The world prints nearly $5 to $10 trillion worth of paper money per year, which is $5,000 to $10,000 billion.  In contrast, the world mines about 83 million ounces of new gold, at $1334/oz, is worth only a mere $111 billion.  Clearly, there will be more and more buyers of gold in the near and far future.

Buffett:  What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while.

Hommel:  Gold buyers are derided as "fearful" by Buffett.  And he notes this has recently been correct.  But also wise.  He could have written, "The ranks of the wise will grow".  Perhaps more apt.

Buffett:  Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: “What the wise man does in the beginning, the fool does in the end.”

Hommel:  True, bubbles happened in stocks and houses.  And probably still are in a bubble.  Is gold in a bubble?  When less than $100 billion is being mined each year?  I think not.  His buddy Bill Gates could buy half the world's annual gold production, and would probably become a lot more wealthy if he tried.  I say tried, because there is no way he would succeed, because his stock is not liquid enough to sell that much, and the gold market is too tight to buy half the gold market without pushing the gold price up, too.  My point is that the gold market boom is still in the beginning stages. 

Buffett:  Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.

Hommel:  Today, one to two years later, gold prices are down to $1335.  Buffet was right for one year out of a thirteen year bull market in gold.  Buffett will likely be wrong next year.  But 170,000 metric tonnes at $1335/oz. is x 32,151 oz/tonne is $7.3 trillion today. 
The tiny size of the cube of gold in pile A also explains why gold is valuable.  It contains a lot of value in a small space, making it very portable.  Some people wonder why gold should be any different than copper or any other metal, asserting that the other metals could be used just as easily as silver and gold.  Really?  Well, I have a 33 kilo block of copper that cost about $300, about the same as a ten oz. bar of silver.  Which would you rather carry to the grocery store?  Also, the copper has a spread on it to buy and sell of over 50%.  Or, would you prefer a quarter oz. of gold for about $330?

Buffett:  Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

Hommel:  Can you imagine an investor with $7.3 trillion to begin with?  There are no investors who are worth so much, are there Mr. Buffett?  Besides, even if there were, there is no evidence that the entire world supply of gold is being all offered at the current asking price for gold.  The vast majority of gold does not trade each year.  World annual mine supply ads only about 1.5% to the pile per year.  Well, let's calculate it.  http://www.goldsheetlinks.com/production2.htm  170,000 tonnes in existing stock.  World annual production about 2600 tonnes.  1.529%.  Yup, still the same after all these years.
But Buffett's point is that he cannot imagine any investor buying the gold instead of the farmland and oil companies.  But let's compare more clearly, $40 billion x 16  Exxon Mobils is $640 billion, plus the $200 billion from crops, which means the oil companies and land produce about $840 billion.  Well, how much does the pile of the world's gold produce?  Gold is likely to exceed $1900 in the next year or two, from $1336 today.  As it does, the pile of gold will go up from $7.3 trillion to $10.4 trillion.  Now let's compare shall we?  $640 billion gain in the oil companies, and $3.1 trillion, or $3100 billion in the gold pile.   I think I've made my point, but let me go further.  In actual fact, 16 Exxon Mobils don't exist.  It's a pure fantasy choice, as in, "not real".  The gold is real.  That makes the gold choice not only several times better, but infinitely better, doesn't it?

Buffett:  Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion.  Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices.

Hommel:  As we have seen, the existing annual production of gold is now $111 billion, and being purchased not by "frightened individuals, or speculators", but by "wise investors," and even central banks now!  And again, with $5000 to $10,000 billion dollars worth of currency being printed world wide, I think the new gold will have plenty of ready buyers for decades to come.  In fact, Gold is acting not only as a value preserver, but value gainer, for those investors who don't want be robbed by governments.

Buffett:  A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.

Hommel:  I'd wager that a century from now, none of the world's currencies today will have any value at all, but the gold still will.  Gold is not a choice between oil and gold, it's a choice between paper money and gold.  No investor will ever go out and buy 100 barrels of oil at $103/barrel to store on his lawn, to preserve $10,000 worth of paper money value, because the oil is extraordinarily inconvenient, and expensive to store and ship for the relative value.  But anyone can buy 7 gold eagles that will fit into the palm of your hand for $10,000, which takes up about 1/10th of the space as a stack of 100 of the $100 bills.

Buffett: Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.

Hommel:  In contrast, I'm supremely confident that the world's pile of gold will increase in value far faster than oil.  The reason is that gold has been money for about 6000 years of human history, and mankind has only been using oil for about 160 years or so.  Furthermore, the world's bankers began attacking gold as money about that far back, so the world has never had a good historical gold to oil ratio in place during a time when the world used gold as money!  Therefore, we have to use intuition to determine a proper value for gold as compared to oil, assuming the world returned to using gold as money, and it probably will.  I would supsect that the world's gold production should be valued more than the world's oil production, because the world'd gold production must be spend on more than "just oil".  As it is, oil is no more than 5-10% of the world's economy, but let's assume oil were as much as 50%.  Well, then, the world's gold production would be worth about twice as much as world oil production, because people would need some gold left over to buy everything else.  That would assume a value for gold as follows:
World annual oil production is about 90 million barrels per day.
x 365 days/year x $100/barrel =
That's about $3.3 trillion per year in dollar value, of oil production.
If world gold production of 83.5 million oz. were worth $6.6 trillion per year, that divides out to $79,000 per oz. for gold!
Oh yes, in the last five years, gold and silver have solidly outperformed Birkshire Hathaway stock.
http://finance.yahoo.com/q/bc?t=5y&s=BRK-A&l=on&z=l&q=l&c=slv%2C+gld&ql=1
And I suppose gold and silver have significantly outperformed BRK in the last 13 years.
https://www.google.com/#q=brk.b
Since the year 2000, BRK.B has gone from $40 to $114, an increase of 2.85 times.
Since the year 2000, Gold has gone from $255 to $1314, an increase of 5.1 times.



I strongly advise you to take possession of real gold and silver, at anywhere near today's prices, while you still can.   The fundamentals indicate rising prices for decades to come, and a major price spike can happen at any time.

Please note our new shorter hours, I'm working in each shop every other day.

JH MINT in Grass Valley
Open 11AM to 4PM Pacific Time, Monday, Wednesday, Friday.
Closed Tuesday, Thursday, weekends and bank holidays.  (Also Closed from Dec. 25th to Jan 1st)
13241 Grass Valley Ave
Grass Valley, CA 95945
 (530) 273-8175 
www.jhmint.com

Greece: A Gathering Storm Threatens Europe and America

Greece: A Gathering Storm Threatens Europe and America

By Elliott Wave International/the Socionomics Institute

The similarities between Greece and pre-WWII Germany are striking.

• Nazi salutes.
• Praise for Adolf Hitler.
• Swastika-like banners.

Now, before you write off this warning as a run-of-the-mill, Nazi-name-dropping scare tactic, consider this recent report from the Socionomics Institute, a U.S.-based think tank that studies global trends in social mood. Here's an excerpt from the Institute's February publication of The Socionomist.

A rising political party known as Golden Dawn is resurrecting such practices, all hallmarks of Hitler's Third Reich, in modern-day Greece, which has suffered a dramatic, five-year stock market decline.
From 1927 to 1932, Germany suffered a disastrous stock market decline, falling 73% over five years. Six million people were unemployed, and the government was weak. Germany suffered outside financial pressure in the form of reparations required by the Versailles Treaty and consequences of its involvement in World War I.
Adolf Hitler argued that the German government betrayed its people by signing the Versailles Treaty. He promised that if he were elected, the nation would stop paying the reparations. The position appealed to the German people's anger and helped the Nazi leader become chancellor in January 1933.
Modern-day Greece has experienced an even larger five-year decline than 1920s-1930s Germany did, falling 88% since 2007, and the country has suffered a debt crisis. As a condition for bailouts aimed at helping Greece recover, the European Union has imposed tough austerity measures. The Greek government has implemented the measures. Meanwhile, the deepening negative social mood has fueled protests against them.
Nikos Zydakis, editor of the daily newspaper Kathimerini, says Greece is in an economic depression like that experienced by Germany in the 1930s. More than 90% of Greek households have experienced income reductions, with the average drop 38%. Unemployment in Greece now stands at a record 26.8% and is nearly 60% among Greece's young adults. In November the Greek Parliament imposed tax hikes and spending cuts demanded by creditors. Supermarket sales in the country declined by 500 million euros ($669 million) last year, and people are burning wood because the price of electricity has risen and taxes on heating oil have increased.

"History doesn't repeat itself, but it does rhyme," goes an old saying attributed to American author Mark Twain. And new research from the Socionomics Institute sees a disturbing pattern of rhymes between modern-day Greece and pre-WWII Germany.
To be sure, market and political developments in Greece will have a significant impact on the future of Europe, the Americas and beyond.

---

The Socionomics Institute is an independent research firm devoted to the study of social mood and social action. As a partner to the world's largest market forecasting firm, Elliott Wave International, the Institute puts the most important developing social trends around the world into context with Robert Prechter's socionomic theory, which posits that social mood drives social action (not the other way around). Read the rest the Institute's new February report to learn more about the developing threats out of Greece. The full report is available for free as part of a special promotion run by the Institute with EWI. Follow this link to read the full February issue of The Socionomist (a $19 value) - for free.

This Country's Banks Could Offer Europe's "Best Place to Hide" from the Euro Crisis

Nordic banks may offer investors the best protection against a recapitalization wave that threatens to dilute the share values of Europe's lenders, said UBS AG. (UBSN)

"It is a very attractive place for European investors to hide from the ongoing eurozone problems," Nick Davey, a London-based analyst at UBS, said in an interview.

Scandinavian banks, including Nordea Bank AB (NDA) and DnB NOR ASA (DNBNOR), have negligible holdings of bonds sold by Europe's most indebted nations and are better capitalized than most of their European peers. Nordea Chief Executive Officer Christian Clausen said this week his bank has no plans to sell shares. At the same time, Nordic governments have some of Europe's smallest budget deficits. Norway has the biggest budget surplus of any AAA rated nation, offering an extra layer of protection to investors.

Shares in DnB NOR rose 3.2 percent to trade at 62.95 kroner as of 10:59 a.m. in Oslo, outperforming the 46-member Bloomberg index of European financials, which gained 1.9 percent. Nordea rose as much as 1.8 percent, before trading 0.6 percent higher in Stockholm.

In Norway, "the banking industry has a good solvency position, satisfactory profitability and low loan losses," the head of the country's financial regulator, Morten Baltzersen, said in an interview. "These factors provide a good starting point to meet potential challenges."

'No Immediate Need'

Swedish Finance Minister Anders Borg said Oct. 18 he sees "no immediate need" for the country's banks to raise their capital buffers.

The European Union may require banks in the region to increase core capital ratios to 9 percent of their risk-weighted assets, according to a person with knowledge of the plans. The deadline for meeting the increased capital levels may be the middle of next year, German Finance Minister Wolfgang Schaeuble told a closed parliamentary committee this week, according to two lawmakers who attended the meeting. That's almost seven years ahead of the target set by the Basel Committee on Banking Supervision.

Nordea, the biggest Nordic lender, had a core Tier 1 capital ratio – a measure of financial strength – of 9.2 percent in the third quarter. DnB NOR had a capital adequacy ratio of 11.7 percent at the end of the second quarter, the most recent reported figures show.

Sidestepping EU

Nordea passed the European Banking Authority's July stress tests with a 9.5 percent capital ratio, almost twice the minimum requirement of 5 percent. DnB NOR passed with a 9 percent ratio. Another round of exams would help European leaders identify capital needs.

Sweden's lenders need to maintain higher capital levels than their foreign peers because the country's bank industry is four times the size of the economy, Financial markets Minister Peter Norman said in Stockholm today.

The country is also ready to sidestep European Union efforts to impose caps on capital buffers beyond minimum ratios set by the Basel Committee on Banking Supervision, said Lars Frisell, chief economist at the Financial Supervisory Authority.

Sweden "will of course use pillar 2," which focuses on risk management, to enforce higher capital requirements for its banks if the country is unable to do so under pillar 1, Frisell, who is also a member of the Basel Committee, said at an event in Stockholm today.

Tapping Debt Markets

Nordic banks are among the few in Europe still able to tap wholesale funding markets. Two Swedish lenders issued senior unsecured notes last week; SEB AB sold 750 million euros ($1.03 billion) in floating rate notes due in 2013, while Svenska Handelsbanken AB (SHBA) sold 1.25 billion euros in notes due in 2021.

"That sends a pretty clear message to the market: we are amongst the few funding safe havens still left standing in the European banking index," Davey said.

Besides Nordic lenders, Germany's Deutsche Bank AG and Commerzbank AG (CBK) have sold unsecured debt since September, as have London-based HSBC Holdings Plc (HSBA) and Rabobank International of the Netherlands.

Banks in Norway and Sweden "have very little that they need to demonstrate in this round of stress tests," Davey said. "Capital ratios already have extremely thick buffers above this required hurdle rate and they simply don't have a lot of exposure to volatility to sovereign debt prices."

Raising Capital

Europe's banks may need to raise 150 billion euros ($205 billion) to 230 billion euros to meet additional capital requirements, Kian Abouhossein, a JPMorgan Chase & Co. analyst in London, wrote in an Oct. 1 note.

The EBA estimates Europe's banks need to an additional 70 billion euros to 90 billion euros in capital, the Financial Times reported yesterday, citing people familiar with the talks.

Nordea has "no direct exposure" to bonds sold by Portugal, Italy, Ireland, Greece or Spain, it said on Oct. 19. Norway's six largest banks hold less than 1.3 percent of their managed capital in assets from those countries, the financial regulator said in June.

Norway, which channels most of its oil income into a $530 billion sovereign-wealth fund, has been shielded from the worst of the euro area's debt crisis, helping keep unemployment below 3 percent, Europe's lowest rate. This has allowed banks such as DnB NOR, the country's biggest, to benefit from lower risk premiums than the rest of Europe, the Financial Supervisory Authority said last month.

No Crisis

"The Norwegian banking industry is clearly not in a state of crisis," Baltzersen said.

Lenders including Deutsche Bank AG (DBK) have said they oppose recapitalization because it would dilute existing shareholders without addressing the risk of sovereign debt defaults. BNP Paribas SA and other banks have said they can meet increased capital requirements without cash injections.

Concerns over a potential default by Greece and contagion in other debt-ridden nations have pushed the 46-member Bloomberg Europe Banks and Financial Services Index down 31 percent this year. DnB has lost 23 percent and Nordea has dropped 24 percent.

Norwegian banks' "situation is quite solid, especially in relative terms compared to an average European bank," Oeystein Olsen, the governor of the central bank of Norway, said in an interview this week.

"The further down the road we get the more the Norwegian sovereign wealth looks like an attractive backdrop in which to operate," Davey said.

To contact the reporter on this story: Josiane Kremer in Oslo at jkremer4@bloomberg.net.

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net.

Gold's Schizophrenia: Pulled Apart By Commodity And Safe Haven Status

Agustino Fontevecchia

www.forbes.com

Gold appears to have entered a new phase, acting as a hybrid, sometimes sympathizing with risk assets and other times acting like a safe haven, UBS' Edel Tully explains. While this makes it incredibly difficult to trade the yellow metal, the gold strategist remains bullish.

After falling about $20 on Tuesday in response to a stronger dollar, gold recovered its footing on Tuesday, hitting $1,693.90 an ounce, its highest level in two weeks. By 1:25 PM in New York, the yellow metal had given up some of those gains and was trading up $19.50 or 1.17% to $1,679.20 an ounce.

Gold's relentless climb, when any and all headlines seemed to fuel the precious metal's bull run, came to an end after peaking above $1,920 an ounce last August, falling almost 20% in a few weeks to bottom out around $1,562.

Still, the yellow metal remains up about 20% this year and most analysts remain bullish. It's as hard to explain gold's skyrocketing rise as it is its precipitous fall; UBS strategist Edel Tully notes gold is now behaving like a hybrid, acting as commodity or safe haven as investors try to find balance amid opposing forces.

Tully had said she expects gold to hit $1,920 in a month and $2,100 in three months, but recognizes gold's safe haven't status isn't keeping it afloat anymore. "Trading the yellow metal [has become] very challenging, as while one can have a view on an event such as US payrolls for example, deciphering how gold reacts has become a lot more difficult. And while buyers are nimbly returning, it is no surprise that there is caution given the struggle for conviction."

Regardless, gold will continue to react to macroeconomic news, particularly in Europe. While the yellow metal barely flinched in reaction to Slovakia's failure to ratify the EFSF (markets appear to factor in a positive vote sometime this week), the Merkel-Sarkozy "comprehensive package" could be setting investors up for a big disappointment, Tully says. "And considering how gold has been behaving recently, market reaction to euro-negative developments will not be as straightforward as it has been historically."

Gold miners have been an alternative to holding physical gold, either via an ETF or through the physical metal. Miners continue to under perform bullion, though, with the Market Vectors Gold Miners ETF flat in the last three months compared with a 5% gain for the GLD gold ETF. Barrick Gold, GoldCorp, and Freeport McMoran are among some of the underperformers within the mining group.

Q4 Commodity Outlook: Tricky Road Ahead as Dollar Strengthens

Commodity markets will continue to be driven by worries about the potential impact of a slowing global economy. A solution to the sovereign debt crisis has still not been found and with governments running out of fresh ideas this has caused tremendous stress on the financial system. Cyclical commodities like energy and base metals have suffered as a consequence while safe haven flows and adverse weather have been the main reasons for gains across precious metals and agricultural commodities.

We believe that renewed dollar strength during September will continue into the last quarter and this could potentially have a dampening effect on the performance of commodities, ensuring a relative flat 2011 performance of the major commodity indices.

Energy: The dramatic spike in oil prices earlier this year has been a major reason for the surprise slowdown in economic activity witnessed during the past six months. The price of Brent crude, which has taken on the role as a global benchmark for a majority of global transactions, has so far averaged 111 dollars in 2011, well above the averages for the previous three years. Despite not reaching the record levels seen in 2008 it has nevertheless already spent more days above 100 dollars during 2011, thereby squeezing private consumption.

Increased demand drove prices higher in 2008 while this time supply disruptions and constraints have been the culprit for higher prices. Libyan oil production will be limited for months while supply disruptions from Nigeria, Syria and the North Sea have ensured higher prices compared with WTI crude which has stayed at depressed levels over the summer.

All of the growth in oil demand is now stemming from Emerging Market (EM) economies and in order to determine future price movements the economic well-being of these economies will be the decider. We expect the price of Brent crude to remain range bound for the remainder of the year between 100 and 120 with an end of year target of 105 dollars.

Precious metals: The rally in gold, which has now lasted for more than 10 years and has returned nearly 21 percent annually, is undoubtedly the world’s most powerful trend. Investors and central banks have all been competing for the yellow metal over the past two years as the global financial crisis has triggered an exodus out of other asset classes into “safer assets”, such as gold and silver.

During the third quarter record high prices led to increased volatility which dented some of the lustre for gold as it became increasingly difficult to trade. As a result we saw investors pulling out of long positions, both in ETFs and futures during August and September and we began to see 100 to 200+ dollar corrections. The super trend however remains firmly intact and only a move below 1,500 could spoil the party for investors holding close to 3,000 metric tonnes through various investment vehicles. We believe that gold may have another push to the upside reaching the magical 2,000 dollar level in early 2012 before a period of consolidation sets in.
Continued volatility could trigger additional margin increases on the major futures exchanges and force some investors to scale back positions even further. We see gold trading in a 1,650 to 1,950 range with an end of year target of 1,900. Silver has gone from being a driver to a follower of gold since the April price collapse. Given the weakened outlook for industrial metals we see silver potentially weakening further relative to gold with the value of one ounce of gold going from 50 to 55 ounces of silver.

Agriculture: Despite record planted acreage this crop year poor weather and reduced quality has led to a reduced U.S. production of corn and soybeans. This has caused a strong rally of the two over the summer in order to force demand rationing through higher prices. This rationing now seems to have begun having an impact on both feed demand and export. On this basis we believe that the prices of soybeans and corn have already peaked and could settle into 13 to 14 and 6 to 7 dollar ranges respectively for the remainder, also given our forecast for a stronger dollar which could dampen exports even further.

Market Preview - 11 October 2011

Forex Overnight: EUR trading weaker against USD
The EUR has weakened against the USD, this morning, ahead of Slovakia’s final vote on the enlarged European Financial Stability Facility later in the day. Reports suggest that Slovakia’s ruling coalition was unable to end a dispute over participation in the euro-area bailout fund. The GBP has lost ground against the USD, this morning, ahead of a report, scheduled for release later today, which is expected to show that the U.K. industrial production declined in August. At 6 am, the EUR and the GBP have declined 0.1 percent and 0.3 percent against the USD, to trade at $1.3632 and $1.5618, respectively.
The JPY is trading 0.1 percent higher against the EUR, while it has edged marginally higher against the USD, ahead of the release of the minutes of the Federal Reserve’s (Fed) September meeting, later today.

UK Stocks: Likely to open in negative territory
The FTSE 100 is likely to open 6 to 8 points in the red.
Key economic indicators scheduled for release today include Industrial & Manufacturing Production, NIESR Gross Domestic Product Estimate and DCLG U.K. House Prices.
N Brown Group, Edinburgh Dragon Trust, Epistem Holdings and Fusion IP are scheduled to report their results later today.
Royal Dutch Shell has announced force majeure on its exports of Nigerian Forcados crude, following a leak on the Trans Forcados pipeline.
In an interview with the Financial Times, Steve Bertamini, the Head of retail and SME banking at Standard Chartered, has criticised western regulators for using the wrong mechanisms to handle the financial crisis.
Ian Cheshire, the CEO of Kingfisher, has forecast a “broadly flat” retail market in the U.K. for 2012, and added that it would be “more robust” in France.

Asia: Trading in the green
Asian markets are trading in positive territory this morning, amid continued optimism that European leaders would be able to stem the region’s debt crisis.
In Japan, markets are trading higher, with Sumitomo Mitsui Financial and Mitsubishi UFJ Financial Group trading up, amid renewed optimism over the prospectus of a solution to the European debt crisis. Toyota Motor has jumped, after it reported a rise in Chinese sales in September. Nidec Corporation has soared, after it announced an increase in its share buyback plan. At 6 am, the Nikkei 225 is trading 2.1 percent higher, at 8,787.5.
In China, Industrial & Commercial Bank of China, China Construction Bank Corporation, Bank of China and Agricultural Bank of China have added value, after state-run Central Huijin Investment bought shares in these banks. In South Korea, Shinhan Financial Group and KB Financial Group Inc have risen, amid optimism that the Eurozone debt crisis will be resolved. Shinsegae Company and Hyundai Department Store have gained, after South Korean wholesale inflation in September eased. In Hong Kong, markets are trading in positive territory, following China’s support for banking stocks.

US Stocks: Futures trading in the red
At 6 am, S&P 500 futures are trading 3.1 points weaker.
NFIB Small Business Optimism and IBD/TIPP Economic Optimism are the key economic indicators scheduled for release today. Investors also await the release of minutes of the Fed’s 20 September 2011 FOMC Meeting.
Alcoa, WD 40 Co, Synergetics USA, Century BanCorp, and Joe’s Jeans are scheduled to announce their results later today.
Felcor Lodging Trust, the top gainer in after hours trading session yesterday, soared 7.0 percent. Standard Pacific, Amylin Pharmaceuticals and Sotheby’s featured amongst the other major gainers, advancing 5.6 percent, 3.9 percent and 3.9 percent, respectively. Mistras Group advanced 3.3 percent, after its first quarter results surpassed market expectations. Sally Beauty Holdings declined 4.3 percent, after it announced a secondary offering of 15.0 million shares of common stock. Amongst the other key laggards, GNC Holdings, La-Z-Boy and CME Group plunged 9.8 percent, 9.3 percent and 4.6 percent, respectively.
Yesterday, the S&P 500 index surged 3.4 percent, after German and French leaders pledged to present a comprehensive plan to tackle the Eurozone debt crisis and recapitalise European banks. Denbury Resources, the top gainer on the S&P 500 index, rallied 9.6 percent. Record breaking pre-orders for iPhone 4S helped Apple to climb 5.1 percent. Higher metal prices led Alpha Natural Resources, Cliffs Natural Resources and Freeport-McMoRan Copper & Gold to surge 8.9 percent, 8.6 percent and 5.9 percent, respectively. Banking sector stocks, Citigroup, Morgan Stanley, Wells Fargo & Co and Bank of America Corporation soared 7.6 percent, 7.4 percent, 6.5 percent and 6.4 percent, respectively, as risk appetite amongst investors increased. Micron Technology jumped 4.2 percent, after a broker upgraded its rating on the stock to “Buy” from “Hold”. Sprint Nextel Corporation plunged 7.9 percent, after a broker downgraded its rating on the stock to “Neutral” from “Buy”. Netflix declined 4.8 percent, even as it abandoned plans to breakup its DVD-by-mail and online streaming services.

European Stocks: Expected to open marginally higher
The DAX and CAC are expected to open 7 to 8 points and 3 points, firmer, respectively.
No major economic indicators are scheduled for release today.
Givaudan SA, Banco Espanol De Credito SA, Vilmorin & Cie SA and CropEnergies AG are scheduled to report their results later today.
Roche Holding AG has indicated that a small early-stage study has revealed that its experimental drug showed promise in the treatment of Alzheimer’s disease.
Louis Gallois, the CEO of EADS, has stated that the company has not been affected by the difficulties French banks are facing in securing dollar financing.
Reuters has reported that the European Commission would not include over-the-counter derivatives in its review of Deutsche Boerse AG’s planned takeover of NYSE Euronext.

Macro Update
Japan's current account surplus drops
Japan's current account surplus has dropped 64.3 percent Y-o-Y to ¥407.5 billion in August, and sharply lower from the ¥990.2 billion surplus in July.
UK retail sales increase
On a monthly basis, overall retail sales in the U.K., as measured by the British Retail Consortium, have climbed 2.5 percent in September, compared to a 1.5 percent rise in August.
Optimistic on stimulus impact, says Miles
Bank of England policy maker, David Miles, has stated that there are “good reasons” to think that the Central Bank’s expansion of stimulus will aid economic recovery.
ECB backs bond guarantee option
The European Central Bank (ECB) has indicated that it favours government guarantees rather than the Central Bank’s money market operations to strengthen European bailout fund.
Greece pledges to keep creditor promises
The Greek Finance Minister, Evangelos Venizelos, has stated that the Greek government will keep promises to international creditors on pension and wage cuts.
European leaders postpone summit
European leaders have pushed back a debt crisis summit from October 18 to October 23, amid opposition to the German Chancellor, Angela Merkel’s drive for deeper-than-planned write-downs of Greek bonds.

The "End of America" is Beginning in California

One of the more controversial aspects of Porter's "End of America" thesis is his prediction that – as the financial crisis deepens – many government services people have come to rely on will stop. The government simply won't collect enough tax revenue to pay the pensions, benefits, and salaries of government employees. States and municipalities will declare bankruptcy. Huge cutbacks will take place. Riots and protests (like those going on in New York City and Greece right now) will become commonplace.

This is a problem that runs through the system at all levels: local, state, and federal. It's going to cripple the government's ability to pick up garbage, police communities, and fight fires.

We're in this situation because public employees – and a good portion of the public they serve – have discovered that they can vote themselves the Treasury. Rather than viewing the government as an entity that should set and enforce rules and protect the public in times of war, many people see it as a gravy train.

As Michael Lewis writes in his latest article for Vanity Fair, the gravy train is crashing in California. Lewis, who in our opinion is the best financial journalist in the world, recently traveled to California to investigate the state's financial crisis.

He notes that in the city of Vallejo (which is next to San Francisco), you can park anywhere you like. There aren't any meter maids around to write tickets. Police and fire departments have been cut in half. The city declared bankruptcy in 2008. The pay and benefits of "public safety" workers consumes 80% of its budget. The city's finances have been crushed because too many promises were made for too many years.

This story is playing out in many California cities… and others across America. It's playing out in the private sector as well. Lewis notes his thoughts while talking to Vallejo city manager, Phil Batchelor…

... as he talked about the bankrupting of Vallejo, I realized that I had heard this story before, or a private-sector version of it. The people who had power in the society, and were charged with saving it from itself, had instead bled the society to death. The problem with police officers and firefighters isn't a public-sector problem; it isn't a problem with government; it's a problem with the entire society. It's what happened on Wall Street in the run-up to the subprime crisis. It's a problem of people taking what they can, just because they can, without regard to the larger social consequences.

It's not just a coincidence that the debts of cities and states spun out of control at the same time as the debts of individual Americans. Alone in a dark room with a pile of money, Americans knew exactly what they wanted to do, from the top of the society to the bottom. They'd been conditioned to grab as much as they could, without thinking about the long-term consequences. Afterward, the people on Wall Street would privately bemoan the low morals of the American people who walked away from their subprime loans, and the American people would express outrage at the Wall Street people who paid themselves a fortune to design the bad loans.

Lewis' article also contains an interesting section on former California Governor Arnold Schwarzenegger, who he interviewed for the piece. It details the suffocating bureaucracy and incredible power of special interest groups that control California... and prevent any meaningful change from taking place.

The story of Vallejo, the section on Schwarzenegger, and the story of a fat pheasant named Henry all make for a great article. It's long... So you might want to print it off and save it for weekend reading. Right now, the article is free on Vanity Fair's website. You can read it here.

More on the "End of America":

You can watch the two-part video interview below:

Click here to watch Part 1

Click here to watch Part 2 

 

Hedge Funds Reduced Exposure Ahead of Big Rally

Hedge funds and large investors continued to reduce their long exposure to commodity futures and options last week. The data compiled 3 October showed a  4.2 percent reduction to 920,000 lots, the lowest level since July 2010.

This also helps to explain the strength of the rally that followed as funds scrambled to rebuild positions. The rally that began Wednesday was the biggest three-day rally of the year and was helped by increased efforts in Europe to deal with the debt crisis and signs that the U.S. economy may avoid recession.

The energy sector saw an increase in net longs of 20 percent primarily helped by a sharp reduction in the Natural Gas short position. The WTI crude position meanwhile continued to be scaled back, moving below 200,000 lots just ahead of the rally which began last Wednesday when U.S. inventories showed a much bigger draw than expected.

Exposure to the grains sector was cut by 2 percent to 242,000 lots, the lowest level since July 2010 and much below the 2011 peak of 890,000 lots back in February. The “World agriculture supply and demand estimates” report will be released this Wednesday and any signs of tightening could attract new buying given the sharp reduction of long positions over the last month.

The metal sector was flat on the week with a small increase in gold longs - the first in four weeks - being off-set by another increase in short copper positions.

The soft sector also saw a reduction in speculative longs as positions in sugar and coffee were reduced while the cocoa short position increased further. 

Background information: The Commitments of Traders is a report issued by the Commodity Futures Trading Commission every Friday with data from the previous Tuesday. It comprises the holdings of participants in various U.S. futures markets split into "commercial" and "non commercial" holdings. The non commercial or speculative holding are typically institutional investors such as hedge funds and CTAs. Analysts and investors follow changes in these positions because such transactions can reflect an expectation of a change in prices.

If It Looks Like a Bear ... Is This a Bear Market or What ?

On Tuesday, when the Standard & Poor's 500-stock index sank below 1100, market pundits were champing at the bit to declare that a bear market had officially begun. They had to eat their words before they could say them, as the market promptly jumped up by more than 5% by week's end.

Those who think they can predict bear markets, and anyone foolish enough to listen to them, might be humbler and wiser if they realized that the term "bear market" has been in flux for a century. Investors who rely on labels like "bear market" to guide their decisions are clinging to conventions with no real meaning.

There is no such thing as an "official" bear market. For convenience, based on a rough consensus among analysts, The Wall Street Journal and others define it as a 20% decline from a closing high to a closing low on the Dow or the S&P 500.

But that definition is surprisingly new.

The term "bear," for someone who profits when stocks fall, dates to the early 1700s. "To sell the bear's skin before one has caught the bear" was an early description of a short seller, who borrows shares and then sells them, hoping to buy them back at a lower price. "Bear market" originated from the same metaphor, but the term was "seldom used" before the 1880s, says lexicographer Barry Popik.

The book "The ABC of Wall Street," by S.A. Nelson, published in 1900, didn't include "bear market" in its glossary. William C. Moore's 1921 book "Wall Street: Its Mysteries Revealed, Its Secrets Exposed" defined "bear market" only as "one in which selling preponderates and prices decline."

From the 1920s through the 1940s, the Journal regularly described even a 4% decline in a single day's trading as a "bear market."

Until at least the 1940s, many analysts believed a bear market occurred whenever the three major Dow averages—the industrials, the railroads and the utilities—all hit new lows.

In his book "Bear Markets: How to Survive and Make Money in Them," published in 1964, investment adviser Harry D. Schultz listed "all probable bear markets" up to that point in the 20th century. Of the 17 he identified, four fell less than 20%: 1923 (nearly 19% in seven months), 1926 (17% over two months), 1953 (14% over nine months) and 1960 (18% in 10 months). Mr. Schultz also counted the 1934 decline, when the Dow lost 24% over nine months, but noted that it was "rarely included among bear markets" by other experts.

In 1990, an article in the Journal noted that "Investment pros usually define a bear market as a fall in stock prices that lasts at least two months and drags down prices at least 20%." More recently, the Journal has dropped the "at least two months" part. (That makes the 23% drop in the Dow on Oct. 19, 1987 a "crash" rather than a bear market.)

In short, the definition of "bear market" is a chameleon. But that ever-changing nature reflects what happens in the real world. Depending on when you start counting, stocks are always in either a bull or a bear market. Oddly, in fact, they are often in both at once. Over the five years ending Sept. 30, for example, U.S. stocks have lost an annual average of 1.2%, and they fell 13.9% in the third quarter of 2011; those are bear markets in spirit, regardless of the 20% metric. Over the past 20 years, however, U.S. stocks have gained an annual average of 7.6%—a bullish rate of return that still doesn't feel quite like a bull market.

Slapping the "bear" label onto a market that is down 20% makes it feel more predictable and controllable. But that's an illusion; anything can happen. Stocks could keep on dropping until they lose 89%, as they did from 1929 to 1932, or they could change course instantly and go straight up. The declaration of a bear market tells us a little about the past, nothing about the future.

What you can know is that declining markets are good—not bad—for savers who have the luxury of steadily accumulating stocks at depressed prices, so long as they have the guts to hang on. They should rejoice over bear markets.

Conversely, a falling market is bad for retirees, who face the necessity of having to wring cash out of continually shrinking portfolios. They should fear bear markets.

But in either case, you should stick to your plan instead of scrambling to change your strategy just because an index crossed some arbitrary numerical threshold.

 
— intelligentinvestor@wsj.com; twitter.com/jasonzweigwsj

The Bank of Japan Leaves its Monetary Policy Steady in October

The Bank of Japan released today its decision about interest rates, where the Japanese monetary policy makers have decided to keep the rates unchanged in one of the government's efforts to give more supports for the economic recovery. 

Mr. Shirakawa, governor of the Bank of Japan and his board, left the benchmark interest rate to "virtually zero" a range of 0.0% to 0.10%, after the meeting of the bank, while this decision came compatible with anticipations which noted that. 

On the other hand, the leaders of BOJ decided to leave the amount of asset-purchase fund at 15 trillion yen along with keeping the credit-loan program unchanged at 35 trillion yen to encourage the banks lending. 

Moreover, the Bank of Japan noted that the economic recover bas returned to normal level and now is picking up amid the sluggish global economy, while the economy is facing a downward pressure as the European financial crisis beside the sluggish US economy. 

Japanese economy success to start the recovery phase this quarter as the industry sector continued to introduce more cheerful signs these days after manufacturers restored their production cycle after the massive quake that hit the nation during the first quarter of this year. 

Meanwhile, Japanese companies have restored their facilities that damaged by the March 11 quake, while Toyota Motor Co. is one of the world's biggest carmakers and it's the Japan's first largest automakers, reported that the domestic demand for vehicle sales has advanced by 1.7% in September, which is the first increase in 13 months. 

On the other hand, Japanese economy witnessed a first drop for its retail trade in three months as Japan's economy is in a critical phase these days amid the current events that threaten the global economic growth along with the yen's appreciation crisis that is a concern to major Japanese companies, adding that Japanese economic growth needs time and more stimuli to rebound. 

Further, the ECB leaders would reintroduce purchases of covered bonds and yearlong loans for banks to support markets rattled by the region’s sovereign-debt crisis and they announced that EU plans to coordinate recapitalization of European banks, reducing European debt crisis concern. 

On the contrary, Goldman Sachs Group Inc. cut its forecast for Japan’s growth to 2.1% from 2.5% in the fiscal year starting April 2012 and to 0.1% from 0.2% for this fiscal year, due to a slowdown in global expansion.

Greece Reportedly Fails to Meet Targets, Sends Stocks Plummeting

A sea of red in the stock markets this morning after reports Greece once again failed to live up to its financial targets reporting a budget deficit of 8.5 percent against 7.5 percent targeted. Data-wise we have a bunch of PMI Manufacturing releases today with the US ISM Manufacturing high on the agenda. The week culminates with Nonfarm Payrolls on Friday and before that, on Thursday, Trichet will preside over his last ECB monthly rate meeting and press conference.

Greece fails to meet targets: It should come as a surprise to no-one and yet markets are tanking on the news that Greece has failed - again - to live up to its financial targets. While we should not let Greece off the hook entirely, we have stated repeatedly that the current framework is not workable. You cannot go the austerity route and reduce debts totalling 1.5 times your GDP without a severe recession, or shall we say depression. Instead, Greece (while bringing its government spending under control, of course) should be allowed to default and start afresh. But that will not happen as long as the European banking sector have not been sufficiently shielded from such actions. The current plan is a bank bailout, not a bailout of Greece, and causes suffering because the Eurozone leaders will not allow their banks, the lenders - those who made the bad investments - take the hit. It is capitalism without losers and it does not work, they are just as much part of a functioning market economy as are winners.

ISM Manufacturing to keep expanding... just: the national PMI Manufacturing for US is expected to show a slight increase in manufacturing in September with a reading of 50.3. Unlike several of the regional surveys the ISM Manufacturing Index held up surprisingly well in August with a 50.6 print. Nevertheless several regional surveys have continued to show declines in September (though smaller than those in August) and the New Orders component of the August ISM Manufacturing report was below 50 for the second month in a row. As we have noted before though the secular decline in manufacturing in the US implies that GDP will not necessarily decline just because ISM Manufacturing is below 50.