To me 2014 looks like a year of the next 'financial crisis'.Even though globally stock markets are not showing signs of any such catastrophe. There are various things which make me think this way:
1)The Russia-Ukraine crisis: The global financial markets are ignoring such a big geo-political risk, due to the fact the governments(the US Govt. and the Russian Govt.) don't want people to be scared(this is my personal opinion).Everything is put under the carpet by saying, we will find a diplomatic solution to the crisis which i think is less likely. The only good thing until now is there is no use of arms, even though it appears Russia would be ready if god forbid anything happens. They have armoured vehicles, armed men across the entire Ukranian Border and on the crimean peninsula.
I may be completely wrong but i feel even the White House is somehow responsible for this escalation of situation. Just going back a few years in history, Osama Bin Laden is a product of the U.S. spy agencies. With the help of the CIA and the U.S. Armed Forces intelligence services, he began to organize in the early 1980s and network to raise money and to recruit fighters for the Afghan mujahidins that were fighting the Soviets. He did this from the city of Peshawar in Pakistan, bordering Afghanistan.
One might be wondering how i got Osama Bin Laden in the Russia Ukraine crisis but what i feel is that somehow the Govt. of United States of America has got to do with the situation that is today. 'Terrorist'word is also developed by them and now they could create or should i say they have already created the word 'pro-russian supporters'. Just imagine 'pro-russian' supporters without any insignia on their uniforms annexed crimea from ukraine and the white house or for that matter the entire west couldn't do anything about it. Mr. President Obama was criticised for not doing anything, but many also praised him for solving the escalation through the diplomatic route. The US secretary of state has N number of times met his Russian counter part to de escalate the situation but not even on a single occasion anything productive has been achieved.
The Russian Govt. doesn't agree that the 'pro-russian supporters' are their army personnel, while the west believes they are from the russian army.If the Kremlin is saying they are not russians why didn't ukraine's govt. gun them down earlier?
Even though everyone believes the referendum which took place in crimea was illegal but no one could do anything.The referendum took place and russia annexed crimea in a matter of days, even though ethnic crimean tatars boycotted to vote.
At the same time, the focus of meaningful economic sanctions has increasingly honed in on energy—and for good reason. More than 90 percent of Russian gas exports and 80 percent of its oil sales go to Europe. (Overall, energy sales generate more than half of the revenues needed to meet the Kremlin’s budget.) Further, fully half of the natural gas sold to Europe is transported through Ukraine. While European gas demand in total is projected to remain flat for the rest of the decade and perhaps longer, supplies from other sources (Norway, Algeria, Netherlands) are in decline. Consequently, Russia expects European and especially eastern and central European dependency to increase even as Russia looks east to Asia for additional markets in China, Korea and Japan as well as into the Pacific Liquefied Natural Gas (LNG) market.
Ironically the seeds of Europe’s current dependency grew out of an effort to diversify energy imports in the wake of the energy crises of the 1970s. Construction of pipeline infrastructure linking Soviet supplies to European markets seemed like a win-win for both parties. The breakup of the Soviet Union nearly a decade later, however, produced noticeable tensions with former Soviet states, now situated in key transit areas.
To some, the stark reversal in America’s energy fortunes—spawned by the dramatic resurgence in U.S. production as a consequence of the shale gas and tight oil revolutions provides the perfect foil for limiting Russian ambitions. The crisis in Ukraine has reinvigorated the debate in Washington over the Keystone XL pipeline, the accelerated permitting of LNG export facilities, and spurred calls for lifting the ban on crude oil exports to a beleaguered Europe. While the rhetorical flourish associated with the linkage is politically intoxicating, the underlying facts bear scrutiny.
For starters, while the acceleration of U.S. energy exports would add incremental barrels and gas volumes to the international markets(a good thing for consumers everywhere), the volume and timing of their availability—outside of supplies from the Strategic Petroleum Reserve (SPR)—would not be available in time to have an immediate impact on the current crisis. The first available LNG export shipment from the United States will not be ready until late 2015 or the spring of 2016 at the earliest and these volumes are already contractually committed.
On the oil side of the ledger, since Russia is one of the largest oil producers in the world - with exports averaging 7 million barrels a day, incremental U.S. production or even a sizeable Strategic Petroleum Reserve (SPR) release (the current maximum drawdown rate is about 4 million barrels per day for the first 90 days and declining thereafter) would not be adequate to replace or offset Russian barrels lost as the result of potential sanctions. Consequently, in the absence of Russian barrels, world oil prices would undoubtedly spike—causing economic pain for the United States and its sanctions partners.
More importantly, however, is the impact more onerous sanctions will have on the relationship between the United States, the EU and Russia going forward. We can certainly opt to boycott this summer’s Group of Eight meeting in Sochi and limit Russia’s participation in other global fora, but to what end? Russia will remain a permanent member of the UN Security Council and an uneasy partner in multilateral efforts to promote constructive resolutions to at least two other important international crises - the ongoing strife in Syria( http://www.examiner.com/article/hacked-e-mails-reveal-washington-approved-plan-to-stage-syria-chemical-attack) and resolution of the nuclear standoff with Iran. And further to that point, the removal of Russian oil from global markets could actually work to undermine the sanctions on Iranian oil sales.
All i know is everything in the world works on money and if europe does move away from russia it will be a winning situation for the US. President Obama made very clear that Europe had to resolve its energy crisis itself that means Europe would have to produce its own gas. I believe if the Europeans had their own gas reserves they would have explored/used until now. I don't think the Europeans have enough natural gas reserves but i read somewhere they had shale gas reserves and exploration of shale gas is very difficult and expensive.And only US and CANADA have a significant shale gas production capabilities.Is this a co incidence or a well made plan by the White house so that EU is dependent upon them for gas in the future. North America has been the leader in developing and producing shale gas.
2) Japan Set to Raise the Sales Tax for First Time in 17 Years:
Next week will be one for the history books in Japan with the government gearing up to raise the sales tax for the first time in 17 years. The last time a politician in Japan dared to raise taxes was in April 1997 and the consequences were severe. It kicked off a long period of recession that later turned into stagnation and deflation. In the month that taxes were raised, the Nikkei and USD/JPY increased in value but the following month, there was a nasty 13% correction in USD/JPY. The rally in the Nikkei extended a bit further but peaked in June and fell 28% over the next 6 months. The increase has been years in the making and Abe’s administration is confident that the times are different and households are better equipped to withstand the rise because of the reduction in income taxes over the past few years and the opportunity to adjust their spending plans accordingly. Abe also feels that consumers understand that these difficult decisions are being made to build a sound foundation for Japan’s future, which he hopes will boost confidence.
However what is similar is that like now, the strength of the economy gave the Japanese government the confidence to raise taxes in 1997 – unfortunately that was not enough to prevent a recession. The sales-tax increase is the biggest risk for Japan’s economy this year. To understand how USD/JPY and the Nikkei could react to this year’s rise, we took a look at how Japanese assets performed in 1997. In the months leading up to the 1997 tax increase, the economy grew rapidly with Q4 GDP growth in 1996 hitting a high of 6.1%. Growth remained strong in the first quarter of Q1, with GDP rising 3%. In the quarter of the increase, the economy contracted by 3.8%. Leading up to the tax hike, the Nikkei fell but rallied strongly in the 3 months after taxes were raised. It was not until August of that year did stocks begin their long-term decline. The sell-off in USD/JPY on the other hand was sharp but short-lived. The currency pair plunged 13% between April and June but recovered strongly for the rest of the year.
3) Emerging Markets Political risk:
Political risks in emerging markets are on the rise, with investors growing fearful of the potential fallout on business from this year’s packed election calendar in the developing world.
All of the so-called Fragile Five countries – India, Indonesia, Turkey, South Africa and Brazil – hold elections in coming months, along with Hungary, widely seen as the weak link in emerging Europe.
The risks were highlighted earlier this month by a Thai general election that was disrupted by protesters. This is delaying the formation of a new government and putting key spending and borrowing decisions on hold.
4) Expensive Breakfast in 2014:
Prices are rising for a range of food staples, from meat and pork to fruits and vegetables, squeezing consumers still struggling with modest wage gains.
Food prices rose 0.4% in February, the most since September 2011, the Bureau of Labor Statistics said Tuesday. Beef and veal shoppers were socked with some of the biggest increases, as prices jumped 4% from January.
Overall inflation remained tame, as falling gasoline and other energy costs offset the food price increases. The consumer price index ticked up just 0.1% from January and 1.1% in the past year.
Droughts, unusually cold winter weather, rising exports and a virus outbreak in the hog population are among the causes of food inflation, which is expected to accelerate in 2014. The Agriculture Department expects grocery store prices to increase as much as 3.5% in 2014, up from 0.9% last year. Among the foods most affected:
Beef. The average retail cost of fresh beef last month was $5.28 a pound, up from $5.04 in January and the highest on records dating to 1987, according to the Agriculture Department and Sterling Marketing. Midwest ranchers thinned their cattle herds after droughts in 2011 and 2012 shrank pastures, says Sterling owner John Nalivka.
Other factors include small ranchers that shut down during and after the 2007-09 recession. There are now about 88 million head of cattle in the U.S., the smallest herd since 1951. Thus far, retailers have absorbed the bulk of a 22% beef price increase the past year, but Nalivka expects retailers to pass more costs to consumers this year.
Pork. Retail pork prices rose 6.8% in the past year to an average $3.73 a pound in February as beef shoppers turned to cheaper pork options. But a virus outbreak since last April has killed about 6 million pigs, reducing the national herd by nearly 10%, estimates Steve Meyer, president of Paragon Economics. He expects the smaller inventory to boost per-pound prices to $4 by summer.
Poultry. More expensive beef and pork have prompted some shoppers to buy chicken and turkey. Poultry prices increased 4.7% last year, the Agriculture Department says.
Milk. The average price of a gallon of milk was $3.56 last month, up from $3.46 in October. The main reason: a surge in exports to China and other Asian nations, says Knox Jones of consulting firm Advanced Economic Solutions. Retailers have been hit by a 36% wholesale price increase since December, and Jones says per-gallon retail prices could rise another 25 cents to 50 cents this year.
Fruits and vegetables. Unusually cold weather in California and a "citrus greening" disease in Florida have damaged citrus crops. Orange prices increased 3.4% last month, and strawberry prices are up 12% vs. a year ago. Analyst Michael Swanson says prices for other fruits and vegetables could spike this year, depending on the damage caused by California's drought.
Breakfast Beverages:Breakfast beverages such as coffee and orange juice have had some of the sharpest increases in recent months, gaining nearly 50 percent since fall. Drought conditions in Brazil have been reducing coffee and orange juice; Brazil is the world's largest producer of both oranges and coffee.
Wheat: Wheat gained amid concerns about dry weather in the Midwest affecting this year's crop and fears that the Ukrainian crisis could restrict exports from Eastern Europe.Ukraine, Russia and kazakstan combined produce nearly world's 50% of wheat.
Oats:Oats jumped as logistical issues prevented movement of the grain from Canadian farms to American consumers.
Wild fish: According to the UN's Food and Agricultural department, the price of wild-caught fish has come close to doubling between 1990 and last year, although the price of farmed fish hasn’t gone up nearly as much.The Economist blames overfishing for the fact that the amount of wild fish caught has barely budged in more than two decades, even as global demand for fish slyrockets. With more demand and limited supply, experts say there’s only one place for prices to go, and that’s up.
Palm Oil and Sugar : The FAO also reported a jump in price for sugar and palm oil -- both key ingredients in boxed cereals.
5)Last but not the least striking resemblance of Dow Jones Industrial Average chart of 2013-2014 with Dow Jones Industrial Average chart of 1928-1929(great economic depression) :
6) Dow Jones Industrial Average is a perfect sell as per Elliot wave with expanding triangle:
My targets are not at all humble for DOW JONES.Will be a buyer only at 6000 levels on Dow.
