China Calm Shattered: Probe Sparks Selloff in Stocks

  • Citic Securities leads losses after revealing investigation
  • Industrial profits drop 4.6% in October as slowdown deepens


  • China’s stocks tumbled the most since the depths of a $5 trillion plunge in August as some of the nation’s largest brokerages disclosed regulatory probes, industrial profits fell and two more companies said they’re struggling to repay bonds.

    The Shanghai Composite Index sank 5.5 percent, with a gauge of volatility surging from the lowest level since March. Citic Securities Co. and Guosen Securities Co. plunged by the daily limit in Shanghai after saying they were under investigation for alleged rule violations. Haitong Securities Co., whose shares were suspended from trading, is also being probed. Industrial profits slid 4.6 percent last month, data showed Friday, compared with a 0.1 percent drop in September.

The probe into the finance industry comes as the government widens an anti-corruption campaign and seeks to assign blame for the selloff earlier this year. Authorities are testing the strength of a nascent bull market by lifting a freeze on initial public offerings and scrapping a rule requiring brokerages to hold net-long positions, just as the earliest indicators for November signal a deterioration in economic growth. A Chinese fertilizer maker and a pig iron producer became the latest companies to flag debt troubles after at least six defaults this year.

Brokerages Plunge

“The sharp decline will raise questions whether the authorities’ confidence that we are seeing stability in the Chinese markets may be a tad premature,” said Bernard Aw, a strategist at IG Asia Pte. in Singapore. “The rally since the August collapse was not fundamentally supported. The removal of restrictions for large brokers to sell and the IPO resumptions may not have been announced at an opportune time.”

Friday’s losses pared the Shanghai Composite’s gain since its Aug. 26 low to 17 percent. The Hang Seng China Enterprises Index slid 2.5 percent in Hong Kong. The Hang Seng Index retreated 1.9 percent.

A gauge of financial shares on the CSI 300 slumped 5 percent. Citic Securities and Guosen Securities both dropped 10 percent. Haitong International Securities Group Ltd. slid 7.5 percent for the biggest decline since Aug. 24 in Hong Kong.

The finance crackdown has intensified in recent weeks and ensnared a prominent hedge-fund manager and a CSRC vice chairman. Citic Securities President Cheng Boming is among seven of the company’s executives named by Xinhua News Agency as being under investigation. Brokerage Guotai Junan International Holdings Ltd. said Monday it had lost contact with its chairman, spurring a 12 percent slump in the firm’s shares.

An industrial explosives maker will become the first IPO to be priced since the regulator lifted a five-month freeze on new share sales imposed during the height of the rout. Ten companies will market new shares next week. The final 28 IPOs under the existing online lottery system will probably tie up 3.4 trillion yuan ($532 billion), according to the median of six analyst estimates compiled by Bloomberg.



JB offshore.mp4  The First Rule Is Safety

$20 Oil If OPEC Doesn’t Act : Venezuela

  • Don’t Cry for Me Venezuela
  • It won’t be easy, you’ll think it strange
    When I try to explain how I feel
    That I still need your love after all that I’ve doneI had to let it happen, I had to change
    Couldn’t stay all my life down at heel
    Looking out of the window, staying out of the sun
  • OPEC member seeks `equilibrium price’ of $88 a barrel
  • Saudis, Qatar to consider proposal, Venezuelan minister says

Oil prices may drop to as low as the mid-$20s a barrel unless OPEC takes action to stabilize the market, Venezuelan Oil Minister Eulogio Del Pino said.

Venezuela is urging the Organization of Petroleum Exporting Countries to adopt an “equilibrium price” that covers the cost of new investment in production capacity, Del Pino told reporters Sunday in Tehran. Saudi Arabia and Qatar are considering his country’s proposal for an equilibrium price at $88 a barrel, he said.

OPEC ministers plan to meet on Dec. 4 to assess the producer group’s output policy amid a global supply glut that has pushed down crude prices by 44 percent in the last 12 months. OPEC supplies about 40 percent of the world’s production and has exceeded its official output ceiling of 30 million barrels a day for 17 months as it defends its share of the market. Benchmark Brent crude settled 48 cents higher at $44.66 a barrel in London on Friday.

“We cannot allow that the market continue controlling the price,” Del Pino said. “The principles of OPEC were to act on the price of the crude oil, and we need to go back to the principles of OPEC.”

OPEC ministers will meet informally on Dec. 3 in Vienna, a day before the group’s formal session, he said.

Commodity Collapse Has More to Go – ” long winter’ for prices lasting years

  • Morgan Stanley sees `long winter’ for prices lasting years

  • Open interest posts fourth straight monthly drop in September

Even with commodities mired in the worst slump in a generation, Goldman Sachs Group Inc., Morgan Stanley and Citigroup Inc. are warning bulls that prices may stay lower for years.

Crude oil and copper are unlikely to rebound because of excess supplies, Goldman predicts, and Morgan Stanley forecasts that weaker currencies in producing countries will encourage robust output of raw materials sold for dollars, even during bear markets. Citigroup says the sluggish world economy makes it “hard to argue” that most prices have already bottomed.

The Bloomberg Commodity Index on Sept. 30 capped its worst quarterly loss since the depths of the recession in 2008. The economy in China, the biggest consumer of grains, energy and metals, is expanding at the slowest pace in two decades just as producers struggle to ease surpluses. Alcoa Inc., once a symbol of American industrial might, plans to split itself in two, while Chesapeake Energy Corp. cut its workforce by 15 percent. Caterpillar Inc. may shed 10,000 jobs as demand slows for mining and energy equipment.


“It would take a brave soul to wade in with both feet into commodities,” Brian Barish, who helps oversee about $12.5 billion at Denver-based Cambiar Investors LLC. “There is far more capacity coming on than there is demand physically. And the only way that you fix the problem is to basically shut capacity in, and you do that by starving commodity producers for capital.”

Investors are already bailing.

Open interest in raw materials, which measures holdings of futures and options, fell for a fourth month in September, the longest streak since 2008, government data show. U.S. exchange-traded products tracking metals, energy and agriculture saw net withdrawals of $467.8 million for the month, according to data compiled by Bloomberg.

The Bloomberg Commodity Index, a measure of returns for 22 components, is poised for a fifth straight annual loss, the longest slide since the data begins in 1991. It’s a reversal from the previous decade, when booming growth across Asia fueled a synchronized surge in prices, dubbed the commodity super cycle. Farmers, miners and oil drillers expanded supplies, encouraged by prices that were at record highs in 2008. Now, that output is coming to the market just as global growth is slowing.

Over-investment in new supplies in the past decade and favorable growing conditions for crops caused gluts, Citigroup analysts led by Ed Morse, the global head of commodities research, said in a report Sept. 11. The bank is bearish on crude oil, aluminum, platinum, iron ore, cocoa and wheat in the next three to six months.

Investors need to brace for a “long winter,” with the commodities bear market predicted to last for many years and oil dropping to as low as $35 a barrel, said Ruchir Sharma, who helps manage $25 billion as the head of emerging markets at Morgan Stanley Investment Management in New York. Crude futures traded Tuesday at $46.19, down from about $90 a year earlier.

Goldman Sachs has an even dimmer outlook.

The odds are increasing that oil will slump near $20 because the market is more oversupplied than initially forecast, analysts led by Jeffrey Currie, the head of commodities research, said in a Sept. 11 report. Currie, in an interview days later, said prices could stay low for the next 15 years. The bank also forecasts that copper will remain in surplus through at least 2019 and fall 13 percent to $4,500 a metric ton by the end of next year.

Still, future production isn’t assured. Miners are already scaling back on spending, and extreme weather can cause surprise reductions in farm output.

Rice, one of only a handful of commodities to rise this year, gained 14 percent as a record-wet May in Texas and above-average temperatures in July in other growing states eroded U.S. yield prospects. Companies from Glencore Plc to Freeport-McMoran Inc. are cutting metal output, and Royal Dutch Shell Plc announced it would abandon its drilling campaign in U.S. Arctic waters after spending $7 billion.

“Once you get to a certain price, you’re going to lose a lot of the players,” said Karyn Cavanaugh, a senior market strategist at Windsor, Connecticut-based Voya Investment Management, which oversees $205 billion. “And at that point then, prices will go up.”

Even if demand rebounds, there are still a lot of excess inventories to work through.

U.S. crude-oil stockpiles remain almost 100 million barrels above the five-year average. Copper inventories tracked by the London Metal Exchange have more than doubled in the past 12 months, and the International Grains Council sees wheat reserves climbing to a record next year.

Investors are punishing producers. Glencore has lost about 60 percent in market value this year, and credit markets already view its debt as junk. Seven of the 10 worst performers in the Standard & Poor’s 500 Index this year are commodities-related businesses.

In the case of Caterpillar, the world’s most valuable machinery producer, share prices slumped 23 percent last quarter, as the company struggled to cope with the ripple effects of the slump in oil. The Peoria, Illinois-based company is cutting as much as 9 percent of its workforce through 2018 to lower costs.

“The global infrastructure and supply of commodities still needs to be re-balanced, and it will probably take a couple more years to resolve itself,” said Jack Bass, chief strategist for Jack A. Bass and Associates, Vancouver, Canada.

Read more abour protecting your assets at

The Bear Market Has Just Begun


Today the narrow-minded canyons of Wall Street are littered almost entirely of trend-following bulls and cheerleaders who don’t realize how little there is to actually cheer about. Stock values are far less attractive than they were on that day back in 2009 and this selloff has a lot longer to run. There are hordes of perma-bulls calling for a V-shaped recovery in stocks, even after multiple years of nary a downtick.

Here are six reasons why I believe the bear market in the major averages has only just begun:

1) Stocks are overvalued by almost every metric.One of my favorite metrics is the price-to-sales ratio, which shows stock prices in relation to the company’s revenue per share and omits the financial engineering associated with borrowing money to buy back shares for the purpose of boosting EPS growth. For the S&P 500 (INDEX: .SPX), this ratio is currently 1.7, which is far above the mean value of 1.4. The benchmark index is also near record high valuations when measured as a percentage of GDP and in relation to the replacement costs of its companies.


2) There is currently a lack of revenue and earnings growth for S&P 500 companies. Second-quarter earnings shrank 0.7 percent, while revenues declined by 3.4 percent from a year earlier, according to FactSet. The Q2 revenue contraction marks the first time the benchmark index’s revenue shrank two quarters in a row since 2009.

S&P 500
  • Virtually the entire global economy is either in, or teetering on, a recession. In 2009, China stepped further into a huge stimulus cycle that would eventually lead to the largest misallocation of capital in the history of the modern world. Empty cities don’t build themselves: They require enormous spurious demand of natural resources, which, in turn, leads to excess capacity from resource-producing countries such as Brazil, Australia, Russia, Canada, et al. Now those economies are in recession because China has become debt disabled and is painfully working down that misallocation of capital. And now Japan and the entire European Union appear poised to follow the same fate.

This is causing the rate of inflation to fall according to the Core PCE index. And the CRB Index, which is at the panic lows of early 2009, is corroborating the decreasing rate of inflation.


But the bulls on Wall Street would have you believe the cratering price of oil is a good thing because the “gas tax cut” will drive consumer spending – never mind the fact that energy prices are crashing due to crumbling global demand. Nevertheless, there will be no such boost to consumer spending from lower oil prices because consumers are being hurt by a lack of real income growth, huge health-care spending increases and soaring shelter costs.

4) U.S. manufacturing and GDP is headed south. The Dallas Fed’s manufacturing report showed its general activity index fell to -15.8 in August, from an already weak -4.6 reading in July. The oil-fracking industry had been one of the sole bright spots for the US economy since the Great Recession and has been the lead impetus of job creation. However, many Wall Street charlatans contend the United States is immune from deflation and a global slowdown and remain blindly optimistic about a strong second half.

Unfortunately, we are already two-thirds of the way into the third quarter and the Atlanta Fed is predicting GDP will grow at an unimpressive rate of 1.3 percent. Furthermore, the August ISM manufacturing index fell to 51.1, from 52.7, its weakest read in over two years. And while gross domestic product in the second quarter came in at a 3.7 percent annual rate, due in large part to a huge inventory build, gross domestic income increased at an annual rate of only 0.6 percent.

GDP tracks all expenditures on final goods and services produced in the United States and GDI tracks all income received by those who produced that output. These two metrics should be equal because every dollar spent on a good or service flows as income to a household, a firm, or the government. The two numbers will, at times, differ in practice due to measurement errors. However this is a fairly large measurement error and it leads one to wonder if that 0.6 percent GDI number should get a bit more attention.

5) Global trade is currently in freefall. Reuters reported that exports from South Korea dropped nearly 15 percent in August from a year earlier, with shipments to China, the United States and Europe all weaker. U.S. exports of goods and general merchandise are at the lowest level since September of 2011. The latest measurement of $370 billion is down from $408 billion, or -9.46 percent from Q4 2014. And CNBC reported this week that the volume of exports from the Port of Long Beach to China dropped by 10 percent YOY. The metastasizing global slowdown will only continue to exacerbate the plummeting value of U.S. trade.


6) The Fed is promising to no longer support the stock market. Back in 2009, our central bank was willing to provide all the wind for the market’s sail. And despite a lackluster 2 percent average annual GDP print since 2010, the stock market doubled in value on the back of zero interest rates and the Federal Reserve ‘s $3.7 trillion money-printing spree. Thus, for the past several years, there has been a huge disparity building between economic fundamentals and the value of stocks.

But now, the end of all monetary accommodations may soon occur, while markets have become massively over-leveraged and overvalued. The end of quantitative easing and a zero interest-rate policy will also coincide with slowing U.S. and global GDP, falling inflation and negative earnings growth. And the Fed will be raising rates and putting more upward pressure on the U.S. dollar while the manufacturing and export sectors are already rolling over.

I am glad Ms. Yellen and Co. appear to have finally assented to removing the safety net from underneath the stock market. Nevertheless, Wall Street may soon learn the baneful lesson that the artificial supports of QE and ZIRP were the only things preventing the unfolding of the greatest bear market in history.

Michael Pento produces the weekly podcast “The Mid-week Reality Check,” is the president and founder of Pento Portfolio Strategies and author of the book “The Coming Bond Market Collapse.”


Morgan Stanley Oil Warning: The Crash / Glut Continues

Morgan Stanley has been pretty pessimistic about oil prices in 2015,

drawing comparisons to the some of the worst oil slumps of the past three decades. The current downturn could even rival the iconic price crash of 1986, analysts had warned—but definitely no worse.

This week, a revision: It could be much worse

Until recently, confidence in a strong recovery for oil prices—and oil companies—had been pretty high, wrote analysts including Martijn Rats and Haythem Rashed, in a report to investors yesterday. That confidence was based on four premises, they said, and only three have proven true.

1. Demand will rise: Check 

In theory: The crash in prices that started a year ago should stimulate demand. Cheap oil means cheaper manufacturing, cheaper shipping, more summer road trips.

In practice: Despite a softening Chinese economy, global demand has indeed surged by about 1.6 million barrels a day over last year’s average, according to the report.

2. Spending on new oil will fall: Check 

In theory: Lower oil prices should force energy companies to cut spending on new oil supplies, and the cost of drilling and pumping should decline.

In practice: Sure enough, since October the number of rigs actively drilling for new oil around the world has declined by about 42 percent. More than 70,000 oil workers have lost their jobs globally, and in 2015 alone listed oil companies have cut about $129 billion in capital expenditures.

3. Stock prices remain low: Check 

In theory: While oil markets rebalance themselves, stock prices of oil companies should remain cheap, setting the stage for a strong rebound.

In practice: Yep. The oil majors are trading near 35-year lows, using two different methods of valuation.

4. Oil supply will drop: Uh-oh 

In theory: With strong demand for oil and less money for drilling and exploration, the global oil glut should diminish. Let the recovery commence.

In practice: The opposite has happened. While U.S. production has leveled off since June, OPEC has taken up the role of market spoiler.

OPEC Production Surges in 2015

Source: Morgan Stanley Research, Bloomberg

For now, Morgan Stanley is sticking with its original thesis that prices will improve, largely because OPEC doesn’t have much more spare capacity to fill and because oil stocks have already been hammered.

But another possibility is that the supply of new oil coming from outside the U.S. may continue to increase as sanctions against Iran dissolve and if the situation in Libya improves, the Morgan Stanley analysts said. U.S. production could also rise again. A recovery is less certain than it once was, and the slump could last for three years or more—”far worse than in 1986.”

“In that case,” they wrote, “there would be little in history that could be a guide” for what’s to come.

Park your oil profits offshore

Merkel will show Greece no mercy


It’s no secret that the biggest holder of Greek debt — which Greece is refusing to pay — is Germany.

But when you see how much exposure Germany has to Greek debt, you quickly realize just how motivated German Chancellor Angela Merkel is to prevent the Greeks from defaulting and to keep them in the eurozone.

She really, really needs to get Germany’s money back.

According to this table from Deutsche Bank, the Greeks owe Germany €87 billion (£62 billion, $96 billion).

That’s 20 billion more euros than the next biggest creditor, France.

Italy and Spain are heavily exposed too, but once you go further down the list the amounts quickly become smaller and more reasonable.

It’s all relative, of course: 400 million euros is doubtless a big deal in Cyprus.

But still, it’s no wonder that Merkel, the International Monetary Fund, and the European Union simply shrugged when the Greeks voted “no” to the bailout deal; Merkel has 87 billion reasons to ignore their wishes.

Here’s the table:

Greece debtDeutsche Bank

Now, before you become angry in solidarity with the Germans, there’s the twist at the end of the Deutsche Bank note. Even if Greece defaults and exits the eurozone, it won’t hurt these countries much.

In a note to clients, Deutsche Bank’s Abhishek Singhania and Jack Di Lizia write the debt has already been accounted for and nonpayment will therefore not be “financially burdensome”:

The assessment of major rating agencies is consistent with our analysis that although the economic loss due to a Greek sovereign default or an exit from the Eurozone could be large it is unlikely to prove to be financially burdensome because it is not likely to raise immediate funding needs in creditor countries and has already been largely accounted for in the debt statistics of these countries.

Also missing from the list are the obvious non-euro-using EU countries such as Britain, Denmark, and Sweden.

Suddenly, being a member of the EU but keeping your domestic currency looks like the most important economic decision these countries ever made.


Special I.R.S. Video of Top Agents Discussing Tax Havens


Money Managers Brace for Bond-Market Collapse




TCW Group Inc. is taking the possibility of a bond-market selloff seriously.

So seriously that the Los Angeles-based money manager, which oversees almost $140 billion of U.S. debt, has been accumulating more and more cash in its credit funds, with the proportion rising to the highest since the 2008 crisis.

“We never realize what the tipping point is until after it happens,” said Jack A. Bass,  head of trading for Jack A. Bass and Associates. “We’re as defensive as we’ve been since pre-crisis.”

Bass isn’t alone: Bond funds are holding about 8 percent of their assets as cash-like securities, the highest proportion since at least 1999, according to FTN Financial, citing Investment Company Institute data.

Cudzil’s reasoning is that the Federal Reserve is moving toward its first interest-rate increase since 2006, and the end of record monetary stimulus will rattle the herds of investors who poured cash into risky debt to try and get some yield.

The shift in policy comes amid a global backdrop that’s not exactly rosy. The Chinese economy is slowing, the outlook for developing nations has grown cloudy, and the tone of Greece’s bailout talks changes daily.

Distorted Markets

Of course, U.S. central bankers are aiming to gently wean markets and companies off zero interest-rate policies. In their ideal scenario, borrowing costs would rise slowly and steadily, debt investors would calmly absorb losses and corporate America would easily adjust to debt that’s a little less cheap amid an improving economy.

That outcome seems less and less likely to Cudzil, as volatility in the bond market climbs.

“If you distort markets for long periods of time and then you remove those distortions, you’re subject to unanticipated volatility,” said Cudzil, who traded high-yield bonds at Morgan Stanley and Deutsche Bank AG . He declined to specify the exact amount of cash he’s holding in the funds he runs.

Price swings will also likely be magnified by investors’ inability to quickly trade bonds, he said. New regulations have made it less profitable for banks to grease the wheels of markets that are traded over the counter and, as a result, they’re devoting fewer traders and money to the operations.

To boot, record-low yields have prompted investors to pile into the same types of risky investors — so it may be even more painful to get out with few potential buyers able to absorb mass selling.

“We think the market’s telling you to upgrade your portfolio,” Bass said. “Whether it happens tomorrow or in six months, do you want look silly before the market sells off or after?”

Contact Details:

Information must proceed action and that is why we offer a no cost / no obligation inquiry service if you are not already a client.

Email :      

or Call Jack direct at 604-858-3202 – Pacific Time 10:00 –4:;00 Monday to Friday

The main intention of our website is to provide objective and independent information that will help the potential investor to make his own decisions in an informed manner. To this effect we try to explain in a simple language the different processes and the most important figures involved in offshore business and to show the different alternatives that exist, evaluating their pros and cons. On the other hand we intend – in terms of offshore finance, bringing these products to the average citizen.

Do something to help yourself – contact Jack A. Bass now !