Ed’s Daily Notes for March 13th   24 comments

In case you hadn’t noticed, “Dr. Copper” (the commodity that doubles as an economic indicator) is not a happy camper:

Copper

But the world’s economy is just fine, right?

Bloomberg: N.Z. Raises Key Rate to Become First Developed Nation to Tighten

A sign of things to come?

New Zealand raised its key interest rate, the first developed nation to exit record-low borrowing costs this year, and said it plans to remove stimulus faster than previously forecast to contain inflation.

“It is necessary to raise interest rates toward a level at which they are no longer adding to demand,” Reserve Bank of New Zealand Governor Graeme Wheeler said in a statement in Wellington after increasing the official cash rate by a quarter percentage point to 2.75 percent, as forecast by all 15 economists in a Bloomberg News survey. The Kiwi gained after Wheeler said further increases are likely in coming months and the OCR may rise by a total of 125 basis points this year.

New Zealand’s economy is not much like the U.S., or even Europe for that matter, so it will be hard to draw any comparisons between them and us. However, it is clear the developed world’s central banks are getting itchy to raise rates.

Bloomberg: ETFs Get $41 Billion Erasing Stock Withdrawals on Economy

Retail investors hopping on the bubble at the wrong time? Check…

Investors who beat a path out of global equity markets earlier this year are stampeding back in.

More than $41 billion has returned to U.S. exchange-traded funds that own shares in the past four weeks, reversing withdrawals that swelled to as much as $40.2 billion last month, according to data compiled by Bloomberg. Cash has flowed back as the MSCI All-Country World Index rallied 5.8 percent from the four-month low it reached Feb. 4, when turmoil in emerging markets spurred speculation the global recovery would slow.

The reversal is the latest sign of confidence in a five-year bull market that has gained momentum amid 11 straight quarters of expansion in U.S. gross domestic product. The MSCI gauge this month reached its highest level since 2007 after investors blamed cold weather for U.S. retail sales and housing data that trailed economists’ forecasts while world leaders pledged to maintain accommodative policies to spur growth.

…About $1.5 billion was deposited to global equity ETFs on March 11, bringing the total inflows for the month to $15.3 billion, data compiled by Bloomberg show.

Fox News: NSA pretended to be Facebook to infect millions of computers

As part of its efforts to install malware on “millions” of computers worldwide, the National Security Agency impersonated Facebook to trick targets into downloading malicious code.

“In some cases the NSA has masqueraded as a fake Facebook server, using the social media site as a launching pad to infect a target’s computer and exfiltrate files from a hard drive,” reports The Intercept in its latest expose based on top-secret documents obtained by Edward Snowden.

“[The NSA] has sent out spam emails laced with the malware, which can be tailored to covertly record audio from a computer’s microphone and take snapshots with its webcam. The hacking systems have also enabled the NSA to launch cyberattacks by corrupting and disrupting file downloads or denying access to websites.”

The Facebook trick was called QUANTUMHAND by the NSA, and was initially tested on “about a dozen targets” before being launched on a larger scale in 2010, the documents show.

Remember kids, don’t open those emails from Facebook! It’s probably just the U.S. government spying on you…

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Posted March 13, 2014 by edmcgon in Economy, Market Analysis, News

24 responses to “Ed’s Daily Notes for March 13th

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  1. It still cracks me up that people think that Snowden was wrong to let the cat out of the bag. People have more of a problem being told that their government has balled up the constitution and put fire to it than with the fact that the government set fire to the constitution. Clearly nobody can believe that infecting citizens computers with malware and downloading information from their hard drives is ok or legal without a warrant. Infecting computers so that you can tap into mics and cameras in case they do something wrong in the future is not acceptable. It will be fun to watch the little back and forth between the CIA and the Senate. Hopefully the Senate doesn’t actually think the intelligence services do not tap, trace, bug, and otherwise spy on them. Then again, they may be arrogant enough to believe that they have control over the monster…

    • Agree 100%.

    • He is a traitor and should be punished accordingly.
      If folks didn’t realize the government was capable of spying on them then they are simply naive. Nothing that has been divulged thus far is surprising. Of course all of the folks complaining seem to have no issue with Google, Yahoo, Facebook, etc all doing the exact same thing with your internet data. In fact those companies are far more brazen but for some people it is the government that is the boogeyman.

      Robb

      • Robb,
        The big difference is that if you don’t want Google using your information, then don’t use Google. If you don’t want the NSA using your information, then don’t use the internet, a phone, or any other form of electronic communication.

        Also, there is the reason each of them is doing it: Google uses your information to provide you with advertising you are more likely to use. The NSA is using your information to find a reason to put you in jail. Of those two, which would you rather give your information voluntarily to? But never mind, because you have no choice with the NSA, unless you’re living off the grid…

      • Find a reason to put you in jail? Really? Where is the proof of that? That is simple fear mongering. The program was implemented to assist with the fight against terrorism. How many non-terrorism based arrests have been made based on data from this NSA program?

        If you truly are afraid of the NSA then you should look at your elected officials. Those on the various intelligence committees have been briefed on most if not all of these efforts and continue to allow them.

        As for Google you can’t escape them if you surf the internet. Every commercial website I have worked on the last 7 years includes a Google plugin for site statistics and Google can then track you (nice side bonus for Google).

        Robb

      • Robb,
        If the NSA gives a tip to any government agency (FBI, IRS, etc.) about criminal activity, they can then begin an investigation around that tip, without ever acknowledging in a court of law the basis for their investigation in the first place. This is no different than if they walked into your house while you were away, looking for something illegal, then coming back when you’re there with a search warrant. That’s ok with you?

        As for my elected officials, that is doubly a reason to be scared of the NSA!

        Darn that Google! Trying to advertise to me!

      • Show me the proof that the NSA is using this anti-terrorism effort to provide tips to FBI, IRS, etc on American citizens breaking the law. Just because you are afraid something might be happening doesn’t mean it actually is.
        Your attitude towards Google is funny given how paranoid you are of the US government which actually has checks and balances.

        Robb

      • The checks and balances of the U.S. government are a joke. When the CIA is spying on the Senate, all value of checks and balances go out the window.

        But you’re right. I should trust the NSA is doing the right thing with all their metadata, which is collected under the assumption that all Americans are guilty until proven innocent…

      • I have yet to see any evidence that the NSA assumes we are all guilty. That is simply a manifestation of your fears.

        Perhaps the fact that the CIA has been exposed for what they did with the Senate computers shows the effectiveness of those checks and balances.

        There really is no help for those that fear the government as much as you do. Does the government overstep its bounds? Sure we have countless examples of it. But in the end our government is of the people and for the people and has been a force of far more good than bad. Does that mean I think everything they are doing is hunky dory? Of course not but I have faith that in the end we will get it right. Where we is the American people and our government which is and has always been a partnership.

        Robb

      • Robb,
        The presence of a government program which collects my data, without a search warrant, assumes I must be guilty.

        Actually, fear of government is a healthy thing, which led the Founding Fathers to put so many limitations on government in the Constitution. The 2nd Amendment wasn’t added because the Founding Fathers liked guns, it was added because they didn’t trust the government. The 10th Amendment is a perfect example of “fear of government”.

      • It doesn’t actually assume anything about an individual.
        We will just have to agree to disagree.

        Robb

  2. Robb, the difference is this. Regardless of how innocent the NSA acts may be, the government is not allowed to enter my personal domain-house, car, computer, or person without probable cause. Period. There is no side stepping that they acted illegally. Intent or prosecutions do not matter. How would you feel if you came home and a cop had decided to pick your lock and search your house without a warrant? Not for any specific reason but thought maybe he would turn up some terrorist activities. Same thing. Just because you can’t see the invasion doesn’t mean it didn’t occur.

    As far as corporations are concerned, I don’t like them either, but I’m not discussing their actions. That’s just diversionary logic. Like a kid caught breaking the rules and justifying it by saying Billy did it too.

    • We will see if they have actually broken the law in any meaningful way. Just because you can present an argument that the law was broken doesn’t mean you or anyone else is correct. The law can be very nebulous at times. The Patriot Act did more to trample our rights than anything in the last 20 years yet I can remember those arguing against it being accused of helping the terrorists. Your blanket statement on what the government can and can’t do with regards to your personal domain is not correct. The Patriot Act allows law enforcement to search your home or business or email or telephone records without your consent or knowledge.

      As for the cop entering your house that is not analogous. Data mining doesn’t involve human interaction, the human interaction comes in after the mining is completed.

      Robb

      • Robb,
        The Patriot Act is in violation of the 4th Amendment, ergo it is illegal.

      • I must have missed where the Patriot act was declared unconstitutional in its entirety by the courts.
        Just because you believe something doesn’t mean you are right.

        Robb

      • And just because the government does it doesn’t make it legal. If the government has nothing to hide then allow a proper examination and allow the public to hear the truth and decide for itself.

        I don’t comprehend your assertion that if you don’t know that the government has invaded your privacy then it hasn’t been invaded. That’s justifying illegal wiretaps. If you don’t know they’re listening then it’s ok? How is it different by physical interaction?

      • Where did I say that if you don’t know the government has invaded your privacy that it hasn’t been invaded? I simply pointed out that to me your example was not an accurate comparison.

        It is unclear if any of the actions of the NSA are actually illegal. I wholeheartedly believe that the programs that Snowden exposed did assist in thwarting terrorist acts and capturing terrorists. However now that our enemies know how far our government was willing to go to stop them the effectiveness of those programs has diminished and most likely should be wound down.

        I realized when email started that all of my digital communication (email, texts, chat, VOIP calls) was going to be stored and potentially reviewed and have acted accordingly. The only limitations are on the cost of storage (now incredibly cheap) and the amount of computer processing power available. I never assumed that those communications would be private because of the man in the middle and the ability to store them.

        Robb

  3. Robb, I took the comment about human interaction to mean that unless they are physically searching your property that you didn’t consider it an invasion.

    I agree that you have to assume everything you do online is open. However, I still don’t believe the government has the right to data mine anything that isn’t publicly available. If they have to install malware to data mine that is the same as an unwarranted search. It is an illegal break-in to my computer. Searching metadata isn’t much different when they are tapping, presumably without warrant, into a commercial pathway to do so. If they want to search posts on a blog, website, etc, then go for it.

    Personally, I believe the terrorist threat is enormously overstated in this country. I’m not willing to give the government the benefit of the doubt as I do not believe that it is here to look out for the people’s interests. If the government wants me to trust it then perhaps it should start acting trustworthy. I think they are so wrapped up in spin, lies, twists, and covers that they don’t even know the truth anymore.

    • Here is a “funny” thing the average citizen that up for jury duty/gets on a jury, thinks that the purpose if for them to “do the fair and right thing”.
      That is not true.
      When they are asking you questions to determine whether you would be a “good pick” there are three people asking.
      1) Prosecutor.
      2) Defense lawyer.
      3) Judge.

      The first two make sense to most people and what their goals are, but what about the Judge?

      Want not be on the jury?
      Tell the judge that you will follow what you believe is right over his/her instructions, and you will be out the door.

      As far as the court system is concerned they want you to judge the law, not right or wrong.

      What has this to do with all the above?
      What you think really isn’t the point when you make a statement like “it is illegal”. It what the lawyers, judges and the rest of that system think.

      It is very possible for something to be legal and be very “wrong” at the same time.

      For instance Ed said “The Patriot Act is in violation of the 4th Amendment, ergo it is illegal.”

      BUZZ!

      Wrong. You are not the judge that decides what has violated the 4th Amendment, therefore the statement isn’t correct.

      People shouldn’t really confuse right and wrong with the law, they have very little to do with each other.
      Just look at the fact that most of the politicians are lawyers, and that certainly doesn’t make them “right”.

      Laws are rules that the people in power put in place to served what they want done.

      And even then laws are not the last part of the story.
      If you have a law on the books that no one will enforce, it might as well not be there.
      So passing a law doesn’t actually ensure any kind of action.

      And in fact someone can be convicted of a crime and some powerful person (governor, President, …) and say “you can go free” or “instead of 10 years I give you 1 month”.

      You notice that the penalty for stealing a billion dollars is usually less than stealing $101?

      • Chris,
        Valid point. Perhaps I should have said, “The Patriot Act is in violation of the 4th Amendment, ergo it is illogical for both laws to be enforced at the same time.”

  4. Ed,

    You mention here that copper is a good economic indicator. While proven correct many times over history I’d be inclined to say there are probably instances where its not been true. I have not done any research myself on the topic so what I’m saying here is complete opinion. but I’d be willing to think that maybe there is starting to be more supply come online lately which might reflect the downward price trajectory. Maybe someone here who follows FCX and Southern Copper had insights on current supply. Take with the fact that Chinese buyers have been warehousing a lot of the metal(the last couple years) as collateral and likely liquidating in the face of falling prices to cover loans it seems like a lot of the metal is not even being used for construction purposes which is all its really good for in the end. To me the falling prices will be a benefit for the economy. It will allow business and individuals to spend less on the metal and be a net plus to the economy. So while short term it might cause some headaches longer term it bodes well.

    • mdistas,
      As I’ve pointed out in several posts, China has a severe problem with bond debt default right now. Copper’s drop is most likely in response to that, as many Chinese debtors use warehouses of copper to obtain loans in their shadow banking system. Unfortunately, we don’t know the full impact this will have on China’s economy. How many businesses will be closed by this?

      By the way, I agree with you about the long-term impact of copper prices falling.

      • I think it’s also pertinent to ask is who is using the copper as loan collateral. If I’m a company what interest do I have spending my cash on a commodity just to take out a loan and inheriting additional financial structure risk. Now I don’t really follow China to much, but to me it would seem the only companies doing this would be construction and industrial companies. I don’t see the sandwhich chain buying copper just to get a loan for expansion. And if the companies do default how much real risk is there? I’d see a shakeout of Chinese firms as a good thing for the global environment. Short term will suck and likely be a buying opportunity if there is a rash of defaults. If anything if we could get half of the Chinese industrialists going out of business it’d probably be better for the US economy as companies here could better compete without their Chinese competition over producing and there would an overall more efficient use of capital worldwide. Either way what’s more important is for everyone to remember that copper is just one tool in the chest to indicate trends and the duration for which they’d last.

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