Graft disguised as civil service employment in Greece

There is an interesting article on Greece's "efforts" to reduce its civil service "work" force over the past few years in the New York Times today.

http://www.nytimes.com/2013/06/12/world/europe/greece.html?smid=pl-share

The state used to employ about 1/3 of the country's "workers," but this number has shrunk to about 1/4. Further reductions have become somewhat intractable, with even "temporary" "workers" getting court injunctions that prevent their discharge.

It doesn't bother me that some people don't work; work is over-rated and the value of leisure is not appreciated as much as it should be. On the other hand, I don't believe someone else should pay for my leisure. Unless, of course, there are volunteers. . . Anyone?

More holders of physical gold and fewer of gold ETFs

Even as China yesterday approved the listing of gold ETF's domestically, investors are increasingly interested in owning physical gold directly. Deutsche Bank has just opened a vault in Singapore, where JP Morgan and the the Singapore Mercantile Exchange have one, and Morgan is reopening its New York vault and Baclays's is opening a new one in London. (see article below.) Gold is moving from the more speculative ETFs to longer term holders.

Lincoln

From the FT: 

"Deutsche opens Singapore gold vault for wealthy investors

By Josh Noble in Hong Kong 

"Deutsche Bank has become the latest bank to tap the growing appetite for precious metals vaults, opening a safe deposit in Singapore capable of holding up to 200 tonnes of gold to meet storage demand in Asia.

"The opening of the vault comes as banks seek to tap into rising demand from wealthy investors for direct access to physical bullion rather than holding exchange traded funds, futures and options on the metal.

"Over the past two years, JPMorgan has reopened an old vault in Manhattan and built a facility in Singapore. Barclays, meanwhile, opened a precious metals vault in London late last year.

"Mark Smallwood, Deutsche’s head of wealth management in Asia, said investors globally were now paying closer attention to where their gold was stored, and that the new facility would help meet the changing demands of Asian investors.

'“Until now, our private clients have traded and invested in significant amounts of gold through the London spot market and exchange traded funds,” said Mr Smallwood. “There is a growing recognition among investors that they might want to have at least part of their allocation in physical bars.”
"
"Deutsche’s decision to locate its new vault in Singapore is a boost for the city-state’s efforts to become the regional centre for gold trading. Last year Singapore removed sales tax on gold investment in an effort to boost its role in the market.

"Many Asian investors have used the recent falls in the spot price to load up on the precious metal. Fevered retail buying in April left many banks, jewellers and even the Hong Kong gold exchange without enough stock to meet demand.

"Deutsche Bank expected to see strong demand from wealthy clients looking to use physical gold as collateral for other trading activity, added Mr Small-wood.

'“Asian clients like to make all their assets work very hard for them. Even though they may be holding gold for a potential catastrophic event, they recognise that it might not happen tomorrow,” Mr Small-wood said.

"The new facility will be located in the Singapore Freeport, already home to storage facilities run by auction house Christie’s and wine investment manager Stamford Cellars.

"Other banks, such as JPMorgan, already have gold vaults in Singapore, which are largely focused on institutional clients. . . "
.

The US banks are awash with liquidity but aren't making loans

. . . or is it that borrowers won't borrow?

The remarkable and unprecedented since 1987 slump continues. (The only thing approaching normal is commercial and industrial lending.) At the same time, banks are maintaining $1.9 trillion in excess reserves at the FED.

Two graphs below:

Will the Fed succeed in engineering a 1970's investment environment?

I think that this is what the Fed is aiming for. It wold reduce the US federal debt burden to a manageable level. Below is a comment from Frank Holmes essay today on what worked then. (Remember, these are nominal numbers; inflation averaged over 8%/annum during the decade. Thus, the real value of the initial stock of government debt was reduced by over 50%; sorry, bondholders.)

"A Rerun of That ‘70s Show?

Looking ahead, if the economy starts to experience runaway inflation, history shows it makes sense to hold real assets. A decade ago, Investment Advisers Stephen Leeb and Donna Leeb wrote a very informative book on how to profit from the “Turbulent Post-Technology Market Boom.” The book, Defying the Market, discussed how to protect against deflationary and inflationary scares, comparing investment ideas that were likely novel to many people in their day, including energy, food, gold, and small-cap stocks.

Will Commodity Investors See
a Rerun of That ’70s Show?

	Nominal Annualized Returns
Gold/Silver	33.10%
Gold Stocks	28.00%
Oil	26.40%
Oil stocks	14.20%
Equity REITs	12.10%
Commodities	11.00%
Real Estate	10.10%
S&P 500 Index	8.40%
CPI	8.10%
T-Bills	6.80%
Government Bonds	3.90%
Source: Defying the Market, Stephen Leeb and Donna Leeb, Leeb Investment Advisors

One table listed the performance of these investments during an earlier era when Americans faced high inflation—the 1970s.

In that decade, gold, silver and oil outperformed many other areas of the market. Gold stocks rose 28 percent on an annualized basis and oil companies grew 14 percent. The S&P 500 Index, on the other hand, grew 8.4 percent on a nominal basis. After factoring in sky-high inflation of 8.10 percent, gold and oil still added significant real returns. The real return of the overall stock market, on the other hand, was nearly zero.

“Stocks leveraged to growth, such as the oils and oil drillers, did splendidly. But the big-cap stocks [i.e. the general market] … were complete duds,” wrote the Leebs."

The shift to equities from bonds is underway in Japan

Japan’s public pension fund, the world’s biggest manager of retirement savings, said it will reduce its holdings of local bonds and buy more shares.  The bond allocation is being reduced to 60% from 67%.

http://www.businessweek.com/news/2013-06-07/japan-s-pension-fund-cutting-local-bond-holdings-to-buy-equities

I suspect that the equity markets have further to go, at least until central banks start tightening.

Asians taking US jobs!

And it's not just Asians in Asia; it's also Asians in the USA. Is this a 5th column? Women, also, show some troubling signs of over-achievement. Lincoln

From today's US Bureau of Labor Statistics press release:

"Among the major worker groups, the unemployment rate for adult women (6.7 percent) declined in April, while the rates for adult men (7.1 percent), teenagers (24.1 percent), whites (6.7 percent), blacks (13.2 percent), and Hispanics (9.0 percent) showed little or no change. The jobless rate for Asians was 5.1 percent (not seasonally adjusted), little changed from a year earlier. (See tables A-1, A-2, and A-3.)

Puzzling failure of household sector in OECD to reduce debt after crisis

Only households in Germany and Japan are less indebted than in 2000. (see attached) This is interesting in light of Martin Feldstein's comments on NPR yesterday, when he pointed out that the household savings rate is now below 3% in the US and so consumption will consequently be very constrained in the next few years.

A small increase in interest may, in the absence of inflation should that be the case, trigger a shift from consumption to saving.