Thursday 12 June 2014

May You Live In Interesting Times.



Baltic Dry Index. 973 -31

LIR Gold Target in 2019: $30,000.  Revised due to QE programs.

"My daughter called me from school one day, and said, 'Dad, what's a financial crisis?' And, without trying to be funny, I said, 'This type of thing happens every five to seven years.'"

Jamie Dimon. CEO JP Morgan. 2011.

So you really want to boycott Russian oil over a botched American coup in the Ukraine, intended to slice and dice up Belarus and Russia. Hold off on that slicing and dicing for now. The results of the inept Bush-Blair regime change in Iraq continue on a decade later. A fine time for US policy to suddenly dump the Saudis. A fine time for U-turn Dave and his one term, weak coalition government to be reducing Her Majesty’s Army to a mere 82,000, and retiring most of the Royal Navy.

Below, the rolling disaster in the 21 century Middle East. If America has no sensible policy regarding future oil supply, the UK and Europe better come up with one fast. So far we’ve managed to knockout oil supplies from Libya, Iraq and Iran, with Russia oil next on the Washington wish list.  With allies and “leadership” like this, who needs enemies.  Time to fill up the car to the max once again.

Iraq at risk of civil war as al-Qaeda-led uprising pushes to within striking distance of Baghdad

Fears of collapse of Iraqi state reignites debate over sacrifices made by Britain to topple Saddam Hussein

By Colin Freeman, Peter Dominiczak and Ben Farmer 9:27PM BST 11 Jun 2014
Iraq is facing a return to its darkest days of civil war after al-Qaeda-linked militants seized a vast swathe of the country’s northern region in a lightning advance which took them to within striking distance of Baghdad.

A day after snatching control of the northern city of Mosul, fighters were on Wednesday night within 60 miles of the Iraqi capital, encountering little resistance from government troops.

En route they seized major towns, oil refineries and military bases and embarked on an orgy of kidnappings and executions, forcing an exodus of more than half a million people across the north.

The extraordinary developments reignited the political debate about the decision to invade Iraq in 2003 alongside America, a conflict which cost the lives of 179 British Service personnel and cost at least £9 billion.

----By Wednesday afternoon, the militants were reported to have reached the holy city of Samarra, 60 miles north of Baghdad. It is feared they will try to reignite Iraq’s sectarian civil war by destroying a revered Shia shrine. An al-Qaeda bomb attack on the same shrine in 2006 sparked a two year sectarian conflict that killed an estimated 30,000 Iraqis.
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ISIL Extends Gains in Iraq, Takes Turk Diplomats Hostage

By Donna Abu-Nasr and Mahmoud Habboush Jun 12, 2014 3:53 AM GMT
---- After seizing Mosul, Iraq’s second-biggest city, fighters from the Islamic State in Iraq and the Levant moved yesterday into Saddam’s hometown of Tikrit, about 80 miles (130 kilometers) north of Baghdad, Noureddin Qablan, vice chairman of the Nineveh provincial council, said by phone. In Mosul, ISIL took dozens of people hostage at the Turkish consulate, as hundreds of thousands of residents fled the city.

The U.S. has yet to respond to a request from Iraq made last month to mount air attacks against militant training camps in western Iraq, according to two American officials who asked not to be identified discussing internal deliberations. One of the officials said President Barack Obama is reluctant to revisit a war that he opposed and repeatedly has declared over.

The surge in violence across northern and central Iraq, three years after U.S. troops withdrew, has raised the prospect of a return to sectarian civil war in OPEC’s second-biggest oil producer. Prime Minister Nouri al-Maliki’s Shiite-led government is struggling to retain control of Sunni-majority regions, and his army collapsed in the face of the Islamist advance.
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Iraq oil shock could kill world economic recovery, experts warn

As violence threatens Iraq's oil industry, experts fear crude at $130 per barrel would damage the global economy

Open warfare between the government and rebels in Iraq would pose a threat to the global economic recovery should oil production from the war-torn Middle East state suffer a serious disruption, analysts have warned.

Brent oil prices climbed as high as $110.25 (£65.59) on Wednesday amid concerns that 3.5m barrels per day of Iraqi exports could be knocked out of the market by the violence that has seen al-Qaeda forces seize control of Mosul, Tikrit and Samarra.

"The worst case scenario is that we see production from Iraq slip down to levels in the last Gulf war, then oil could spike $20 a barrel very quickly," Ole Hansen, vice-president and head of commodity strategy at Saxo Bank told The Telegraph. 
---- Iraq's oil minister, Abdul Kareem Luaibi, who was attending a gathering of the 12-member Organisation of Petroleum Exporting Countries (Opec) in Vienna on Wednesday, tried to ease concerns by stressing that most of the country's crude was pumped from fields in the Shia-Muslim dominated South, where export facilities are "very, very safe". 

Despite the deteriorating political situation in Iraq, where government forces have been seen fleeing from the Sunni-Muslim al-Qaeda insurgents, Opec decided to leave its production quotas unchanged. The cartel limits the output of its members to 30m barrels per day (bpd) of crude, roughly a third of the world's supply.

---- In a note to Bloomberg, Helima Croft, Barclays' head of North American commodities research, said: “The shocking escalation in violence in Iraq raises the prospect of potential output losses. It comes as other key producers, like Libya, have also seen exports 'evaporate' amid rising unrest."

Helped by investment from international oil companies such as Royal Dutch Shell, BP and Lukoil, Iraq has increased its importance in the world oil market since recovering from the 2003 war.

The opening of the giant West Qurna-2 oilfield near Basra in March would allow Iraq to pump 4m bpd by the end of the year. Already the second-largest producer in Opec after Saudi Arabia, according to Reuters, Iraq has pumped an average of 3.5m bpd since the beginning of the year.
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As for the Ukraine itself, the next Russian shoe seems about ready to drop. Germany and continental Europe better have deep pockets. America’s botched coup let Russia off the hook of propping up the Ukraine. America just moved that burden onto the continental’s backs. In return the Europeans get a minority interest in America’s Chocolate King, who now runs the western part of Ukraine in partnership with neo-Nazis and anti-Semite parties. Whoever thought up this policy in Washington, needs to be put back in the asylum.

Ukraine Rejects Gas Offer as Talks End Without Deal

By Ewa Krukowska, Elena Mazneva and Volodymyr Verbyany Jun 11, 2014 6:07 PM GMT
Ukraine rejected a Russian proposal for the price of future natural-gas deliveries as European Union-brokered talks in Brussels ended without an agreement.

Russia offered to supply gas for about 20 percent below the current price, a level Ukraine said was still more than it’s willing to pay, EU Energy Commissioner Guenther Oettinger said at a press conference after the three-way meeting. Russia’s energy minister said the country also wants $1.95 billion for past fuel supplies before June 16 or it may cut shipments.

“In the next 48 hours we’ll try to make progress, not waste time,” Oettinger said. “Monday is quite a way off so there’s still a good opportunity.”

The EU, dependent on Russian gas piped through Ukraine for about 15 percent of its supplies, is trying to broker a deal to maintain shipments amid a dispute over payments for the fuel. In Ukraine, government forces and rebels claiming allegiance to Russia continue to clash in the east of the country.

Oettinger is optimistic an agreement can be reached to end the gas price dispute in the next few days, he said at the press conference.

---- Russia proposed a “compromise” package, supplying Ukraine with fuel for $385 per 1,000 cubic meters, $100 below the current price, Novak said. That discount is similar to what Russia granted Ukraine from 2010 until April this year, he said.

Russia may guarantee the discount from April through the next 12 months, if Ukraine is ready to settle its debts, according to Novak.

Ukraine should first pay $1.45 billion for the last two months of 2013 and an additional $500 million as part of the debt for gas received in April and May, Novak said. If there is no payment by the morning of June 16, Ukraine will only get fuel it pays for upfront, at the current price, he said.
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Next, confirmation that the Fed’s balance sheet is never going to be scaled down. Our new lawless age gets more lawless with each passing month.  Don’t worry, this time it’s different with LBOs. Russia, China, India and Latin America, re-incentivised to move to replace the fiat dollar reserve standard, hopefully before the Fed’s final bubble spectacularly explodes.

“The term ‘too big to fail’ must be excised from our vocabulary.”

Jamie Dimon.

Fed Prepares to Maintain Record Balance Sheet for Years

By Craig Torres and Matthew Boesler Jun 11, 2014 10:34 PM GMT
Federal Reserve officials, concerned that selling bonds from their $4.3 trillion portfolio could crush the U.S. recovery, are preparing to keep their balance sheet close to record levels for years.

Central bankers are stepping back from a three-year-old strategy for an exit from the unprecedented easing they deployed to battle the worst recession since the Great Depression. Minutes of their last meeting in April made no mention of asset sales.

Officials worry that such sales would spark an abrupt increase in long-term interest rates, making it more expensive for consumers to buy goods on credit and companies to invest, according to James Bullard, president of the Federal Reserve Bank of St. Louis.

----The Fed is testing new tools that would allow it to keep a large balance sheet even after it raises short-term interest rates, a step policy makers anticipate taking next year. They would use these tools to drain excess reserves temporarily from the banking system.

“It is pretty clear they are anticipating operating in a situation with a lot of reserves and a high balance sheet for a long time,” said former Fed governor Laurence Meyer, a co-founder of Macroeconomic Advisers LLC, a St. Louis-based forecasting firm.

---- “The whole situation has created a lot of uncertainty,” said Karl Haeling, head of strategic debt distribution at Landesbank Baden-Wuerttemberg in New York. “The Fed is increasingly stepping into what had been a private-sector function.”

The Fed’s asset purchases have expanded its balance sheet to 25 percent of gross domestic product from 6 percent at the start of 2007. Central banks from Japan to the U.K. also will have to develop strategies for operating with large portfolios. For example, the Bank of England’s is 24 percent of GDP, up from about 6 percent in 2007.

Fed officials led by Chair Janet Yellen, who meet June 17-18, anticipate raising their benchmark federal funds rate next year for the first time since 2006. They will release new forecasts for the economy and the outlook for the benchmark after next week’s meeting.
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This $1 Trillion M&A Quarter Is “Different”: What Turnip Truck Did Bloomberg Reporter McCracken Ride To Wall Street!

by David Stockman • June 11, 2014
If Bloomberg weren’t shilling for the Fed/Wall Street bubble economy— then Reuters, the WSJ and countless others would pick up the slack. But the article below by Bloomberg’s Jeffrey McCracken needs no pointers from Rupert Murdoch’s Cool-Aid drinkers.

Noting that we have at last gotten back to a trillion dollar global M&A quarter and have thereby reached the peak financial engineering insanity of Q3 2007, McCracken spends the bulk of the article quoting a Wall Street M&A dealster explaining why “this time is different”.

Exactly which turnip truck did McCracken ride down to Wall Street? Of course, this time is different. Its always different!

Here’s the line from McCracken’s M&A peddler. It amounts to the proposition that last time it got out of hand because the mountains of cheap debt were used to fund going private transaction—that is, LBO’s.  
This time, by contrast, corporate America is not bothering to claim “hidden” value which can only be unlocked under private ownership. They are going to do it directly by investing in “compelling”  growth plans that have a “strategic foundation” in their own public enterprises.
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In Asian news, with Uncle Sam mired in the Ukraine and about to revisit the deserts of Mesopotamia, China’s holding something of a Naval regatta in the South China Sea.

Vietnam Says China Sent Six Warships to Rig in Disputed Seas

By Bloomberg News Jun 11, 2014 9:32 AM GMT
Vietnam said China again shifted an oil rig it has placed in disputed waters, with six warships guarding the structure as the two communist countries continue their South China Sea stand-off.

The rig was moved for a third time and remains off Vietnam’s coast in an area claimed by both countries, the official Vietnam News reported, citing information from the Vietnam Fisheries Surveillance Department. There are now six Chinese warships, 38 coast guard vessels, 13 cargo ships and 19 tugboats protecting it, the paper said.

China called the claim “extremely wrong” and said it hasn’t sent military ships to the area. Government ships were dispatched to safeguard security in the face of disruption to its drilling work by armed Vietnamese vessels, Foreign Ministry spokeswoman Hua Chunying said at a briefing in Beijing

The tit-for-tat accusations between China and Vietnam about the positioning of the oil rig and of collisions between their vessels in the area comes at a time of heightened territorial tensions across the South China Sea. China, which claims a large part of the waters under a 1940s-era map, has stepped up its assertions to both the Paracel Islands off Vietnam’s coast and the more southerly Spratly Islands.
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We end for the day with the land of the sinking sun. Not content with Tepco making a large part of Japan toxic for thousands of years to come, along with a large part of the Pacific Ocean, thanks to insane Keynesianism and beggar thye neighbour Abenomics, Japan’s fiat currency is going to be toxic for decades to come. Stay the war China, no need to attack, Japan’s doing a magnificent job of attacking itself. Stay long fully paid up gold and silver. Japan’s yen looks like being the first major fiat currency to fail.

Japan to keep printing money for years to come, so learn to enjoy it

The Bank of Japan will have to mop up the entire issuance of public debt for years to come, covering the budget deficit with printed money

There are no one-way bets in global finance, but Japan's stock market comes close. The authorities are about to funnel large sums into Japanese stocks openly and deliberately under the next phase of Abenomics, both by regulatory fiat and by purchasing the Nikkei index directly with printed money.

Prime minister Shinzo Abe is unshackling the world's biggest stash of savings, the $1.3 trillion Government Pension Investment Fund (GPIF). Officials say the ceiling on equity holdings will rise from 12pc to around 20pc as soon as August, opening the way for a $100bn buying blitz.

Fund managers are suddenly in a race to get there first. Japan Post Bank - where Mrs Watanabe dutifully places the family money, confiscated from her Salaryman each month before he can spend it - is itching to rotate more of its $2 trillion holdings into equities before inflation pummels the bond market. So is Japan Post Insurance, no minnow either at $850bn.

Mr Abe's move comes sooner than expected and amounts to a market shock, though nobody should be shocked anymore as he keeps doubling down on the world's most radical economic experiment.

The Nikkei index stalled in December after rising almost 100pc since September 2012, even though the Bank of Japan (BoJ) is still showering the economy with money, buying $75bn of bonds each month. The BoJ's balance sheet will reach 70pc of GDP by March 2015, three times the US Federal Reserve's.

The index is down 7pc this year to 15,000, chiefly because foreigners have taken profits and pulled out $140bn, causing some to write off Abenomics as a flop. Japan's trust banks are picking up the baton. They added a record $2.5bn last week, some of it on behalf of the GPIF itself as it adapts to the new order. "We think the Nikkei will get to 18,000 by October," said Genzo Kimura, from SuMi Trust Fund.

The Bank of Japan is helping it along, buying exchange traded funds based on the Nikkei and Topix indices. "They purchase whenever the market falls, usually by about $200m each time," he said.
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Japan Lodges ‘Strong’ Protest Over China Fighter Jet Encounter

By Isabel Reynolds and Takashi Hirokawa Jun 12, 2014 6:05 AM GMT
The Japanese government lodged a “strong” protest with China after a pair of its fighter jets flew within tens of meters of Japanese surveillance planes in the East China Sea, the second incident in less than a month.

Vice Foreign Minister Akitaka Saiki today summoned Chinese Ambassador Cheng Yonghua to lodge the protest in Tokyo, the ministry said in a statement on its website. Two Su-27 fighters came as near as 30 meters to one Japanese plane and 45 meters to another over international waters between 11 a.m. and midday yesterday, the Defense Ministry said on its website.

The close encounters follow a near miss on May 24 amid tensions between China and Japan over disputed territory. Ships and planes from the countries have tailed one another around the East China Sea islands known as Senkaku in Japanese and Diaoyu in Chinese since Japan bought three of them from a private owner in 2012. Prime Minister Shinzo Abe has not held a summit with China since taking office in 2012.

“Beijing sees that Japan’s China policy has seriously regressed and the ball is in Japan’s court,” said Liu Jiangyong, professor of international relations at Tsinghua University in Beijing. “The overall tension is likely to continue to linger and the two countries have reached a crossroads.”
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We are living in interesting times, as the old Chinese curse supposedly goes, just don’t let on to our central banksters preoccupied with blowing stock market bubbles. The way things are going, crash season may come early in 2014.

"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."

Antony C. Sutton

At the Comex silver depositories Wednesday final figures were: Registered 57.06 Moz, Eligible 119.40 Moz, Total 176.46 Moz.  

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.

Today, it’s the Russians. No not old Vlad the Crimea stealer v tag-team USA owned Ukraine. Today it’s those other Russians, the tourists with plenty of cash, propping up northern Italy. What part of “he who pays the piper calls the tune,” don’t Italian beggars get? If you let in barbarians, be prepared for barbarian manners. Just don’t behave like English teachers on the Costa del Sol.

Nobody should pin their hopes on a miracle.

Vladimir Putin.

Rude Russians told how to behave by long suffering Italians

Italians tell rich Russians how to avoid being boorish and rude when they descend on Tuscany's smart resorts for the summer

By Nick Squires, Rome 2:20PM BST 10 Jun 2014
As the summer tourist season approaches, Italians have a message for their rich Russian visitors - you may be minted, but you have no manners.

Big-spending Russians have proved a lifeline for the Italian tourist sector during the last few years of economic recession but they are often perceived as brash, boorish and rude.

Now a hotel owner in Tuscany - the Russians' favourite destination - has produced a TV commercial which aims to educate wealthy Muscovites and other Russian visitors about the finer points of Italian etiquette.

Salvatore Madonna runs luxury hotels in Forte dei Marmi, an upmarket resort on the Tuscan coast which caters to Russians with menus written in Cyrillic and plentiful designer outlets, and has been nicknamed “Moscow-on-Sea”.

The three-minute advertisement advises Russians to “smile more”, to say thank you more often and to be more pleasant in their dealings with waiters and hotel staff.

They are told that ordering a cappuccino after lunch is an unforgivable faux pas – in Italy the frothy coffee is seen as an exclusively morning drink.

Italians instead would order an espresso or a caffe macchiato - an espresso with a dash of milk.

Nor should red wine be ordered with fish – for seafood, it has to be white wine every time. Cashed-up Russians are also warned that it is vulgar to choose the most expensive wine on the list.

The advert, which will be shown on TV in Russia and on Russian social media networks, features Ljudmila Radcenko, a Russian model who lives in Italy.

“The first rule when you enter a hotel is to say hello, smile, and to look the person in the eye.

“In Russia we're maybe not really used to doing that,” she says, speaking in Italian but with Russian sub-titles on the screen.

Even showy Italians baulk at Russian women wearing barely-there, sequinned bikinis and swim costumes.

“Russian women who love to wear high heels and tiny bikinis should perhaps avoid those,” she says.

“When you leave the hotel, it's nice to be communicative, to express your satisfaction for the service, to smile and say thank you,” Ms Radcenko concludes in her advice to her compatriots.

Mr Madonna, the head of a luxury hotel group called Soft Living Places, says he hopes the short film will help “better integrate” Russian tourists to Italy.

Teaching uncouth Russians how to behave in a more civil way should not be construed as Italian arrogance, he said, but a way of gently shepherding tourists towards more culturally acceptable behaviour.

“It is mortifying for the people who dedicate so much time and attention to preparing dishes when they are asked to serve them all at the same time, as the Russians often do,” Mr Madonna said.
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The Russian people have their own cultural code, their own tradition.

Vladimir Putin.

The monthly Coppock Indicators finished May

DJIA: +181 Down. NASDAQ: +340 Down. SP500: +246 Down.  Crisis? What crisis?

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