Who Blundered?

Baltic Dry Index. 3009 +11

LIR Gold Target by 2019: $3,000.


''If you fly into the ash and your engines stop, you crash.''
Peter Purcell, of the Natural Environment Research Council. 16/4/10.
Or maybe they don’t stop.

We open this morning with more on the great European blunder of the new century. While tens of thousands of travelers are still struggling to return to where they were used to calling home, and airlines across Europe are demanding financial help from the national governments in dealing with the costs of this fiasco, Ryan Air even going so far as to state it will not comply with EU law on compensation for stranded passengers, it now turns out that the whole Icelandic ash scare was largely illusory and mostly a figment of some computer program operated in Exeter England by the Volcanic Ash Advisory Centre, part of the increasingly discredited UK Met Office that last year forecast the Barbecue Summer that wasn’t, and routinely promotes the idea of man made global warming in its publications and computer modeling research. Garbage in gets garbage out as they say. Below, Der Spiegel covers the wrong sort of volcano, the wrong sort of ash.

“It was the last wish of the Icelandic economy that its ashes be spread over Europe.” Anon.

Test Flight Provides Plume DataHow Dangerous Is the Volcanic Ash?
By Holger Dambeck 04/21/2010
A flight by the German Aerospace Center on Monday measured the ash plume over Germany and found that the particle concentration was no higher than that of sand clouds from the Sahara desert that sometimes reach Europe. But it is still unclear what kind of effect Eyjafjalljökull's ash particles could have on jet engines.

How high is the concentration of dust particles from the Icelandic volcano? The German Aerospace Center (DLR) released the figures on Tuesday from the measurement flight that took off from its research center at Oberpfaffenhofen, Bavaria, on Monday. The plane flew over Leipzig, Hamburg and Cologne at an altitude of mostly 8 kilometers (5 miles), in order to measure the aerosol concentration with the plane's LIDAR (Light Detection and Ranging) system, according to the report, which SPIEGEL ONLINE has seen. Air samples were also examined.

"The ash clouds were recognizable as a brown layer," the DLR experts wrote in the report. The particles in the clouds of ash had a diameter of more than 3 micrometers, which would not usually be found in an unpolluted troposphere (0-8 kilometers altitude.)

The concentration of big volcanic ash particles would be comparable to the sand dust clouds from the Sahara that sometimes reach Germany. The measurements above Leipzig in eastern Germany at an altitude of 4 kilometers found a concentration of 60 micrograms per cubic meter of air.

-----The highest particle concentration was measured at the so-called atmospheric boundary layer, at an altitude of a maximum of 3 kilometers. However, this is primarily dust from exhaust fumes. The DLR team was unable to observe any ash clouds above the 3-kilometer level in Hamburg, northern Germany. The volcanic ash had obviously already disappeared there.
What the report does not answer, is whether or not the volcanic ash that was found poses a risk to aircraft engines. The German Transport Ministry wants to continue the measurements with more flights.

The danger volcanic ash can pose was shown in the case of a Boeing 747 jumbo jet operated by Dutch airline KLM back in 1989. The aircraft flew overnight above an ash cloud caused by the Mount Redoubt volcano in Alaska. The front panel and exterior shell of the plane were sandblasted and the engines failed. Luckily the pilots were able to get two of the engines to restart and executed an emergency landing.

However, this kind of scenario is highly unlikely to be caused by the current ash cloud above Europe. Test flights carried out by Lufthansa and Air Berlin caused no damage to the aircraft, the airlines say. The ash seems to have spread across a large area -- and the low concentration would cause few problems.

There is another important difference from the Alaska volcano: the chemical composition of the ash itself. The particles from Mount Redoubt contained more silicate than the dust emerging from the Icelandic glacial volcano Eyjafjallajökull.

The higher the level of silicate in the dust, the lower the melting temperature of the small, sharp-edged particles, says Carsten Münker, a volcanologist at the University of Cologne. The silicate level depends on the location of the volcano. In subduction zones, where continental plates converge -- such as in the Andes in South America, Mount St. Helens in the United States or Pinatubo in the Philippines -- the level is particularly high, around 60-65 percent. The volcanic ash in these areas consists of andesite, which has a melting temperature of less than 1,000 degrees Celsius (1,832 degrees Fahrenheit.)

Like Sandpaper

Higher temperatures than that are usually reached in the turbines of modern jet engines during flight, meaning the ash will melt when it enters the turbine. "This then forms a fine molten film of andesite," Münker explains. This settles on the engine's blades and can clog the turbine's cooling air ducts. In 1989 this almost led to the crash of the KLM jumbo jet.

However, the ash from Eyjafjallajökull is not made up of andesite but of basalt, which has a silicate level of only 50 percent. Basalt volcanic dust only melts at 1,200 degrees Celsius. Temperatures of this level are only usually reached during take-off, when the engines are working at maximum thrust. It is for this reason that basalt ash shouldn't melt in the turbines.
http://www.spiegel.de/international/germany/0,1518,690341,00.html#ref=nlint

I suspect we are going to hear a lot more of requests for taxpayer cash for Europe’s airlines, after all, it’s only fiat money after all, and we bailed out banksters and car makers, why not the candlestick makers and airlines. Ryan Air makes the case that they sell tickets for £27 and can’t be expected to cover the cost of putting up stranded passengers nor feeding them, which all sounds reasonable enough. Except they chose to operate this particular business model under EU laws that that require them to cover those costs. They chose not to insure against the possibility that, however rare, a massive travel dislocation event might occur. They even chose not to minimize their loss by buying in insurance after the event had started, expensive though that might have been. Why should Europe’s heavily taxed (Greeks excepted,), long suffering taxpayers be expected to cover Ryan Air’s flawed business model, and wrong decision not to buy in some insurance? And if following the law becomes optional, there’s a whole lot of laws I want to pass on.

Next the SEC considers action against US banks copying Lehman’s Repo 105 fraud. My only thought, what’s to consider? It’s wrong, and supposedly already against US law if done to deliberately mislead, as if there could be any other reason to do it. The next Lehman is still out there lurching towards certain death. Read Professor Black’s testimony on Lehman, posted on the new blogsite on the page “Intraday News”. "Public Policy Issues Raised by the Report of the
Lehman Bankruptcy Examiner"
http://londonirvinereport.blogspot.com/p/intraday-news.html

APRIL 21, 2010
Debt 'Masking' Under Fire
SEC Considers New Rules to Deter Banks From Dressing Up Books; Ghost of Lehman
The Securities and Exchange Commission is considering new rules that would prevent financial firms from masking the risks they take by temporarily lowering their debt levels before quarterly reports to the public are due.

SEC Chairwoman Mary Schapiro's disclosure, at a hearing of the House Committee on Financial Services, came two weeks after The Wall Street Journal reported that 18 large banks had consistently lowered one type of debt at the end of each of the past five quarters, reducing it on average by 42% from quarterly peaks.

That practice, if done intentionally to deceive, already violates SEC guidelines, an official said. But now, the SEC is weighing requiring stricter disclosure and a clearer rationale from firms about their quarter-end borrowing activities. The agency may also extend these rules to all companies, not just banks.

Excessive borrowing by banks is widely considered to be one of the causes of the financial crisis, leading to bank runs in 2008 on firms including Bear Stearns Cos. and Lehman Brothers. Since then, banks have grown more sensitive about showing high levels of debt and risk, worried that their stocks and credit ratings could be punished.

Tuesday's hearing focused on a recent report by a bankruptcy examiner that found that Lehman Brothers, through transactions the firm dubbed "Repo 105s," had hidden its true debt levels before its collapse by treating certain loans as sales, thus reducing its end-of-quarter debt levels.
Rep. Gregory W. Meeks (D., N.Y.) asked Ms. Schapiro about The Journal's findings regarding banks' end-of-quarter debt reductions. "It appears investment banks are temporarily lowering risk when they have to report results, [then] they're leveraging up with additional risk right after," Mr. Meeks said. "So my question is: Is that still being tolerated today by regulators, especially in light of what took place with reference to Lehman?"

Ms. Schapiro said the commission is gathering detailed information from large banks, "so that we don't just have them dress up the balance sheet for quarter end and then have dramatic increases during the course of the quarter."

She added: "We are considering whether...we need new rules to prevent sort of the masking of debt or liquidity at quarter end, as we saw Lehman do with the Repo 105 transaction."
http://online.wsj.com/article/SB10001424052748703763904575196334069503298.html?mod=WSJ_hps_MIDDLETopStories

We end for the day with Greece, where a new round of strikes is underway. A sort of Great Britain with sun, for after the general election, I fear. Stay long precious metals for the coming Greek default.

Greek Workers to Strike Today as Papandreou Faces Bond Rout
April 22 (Bloomberg) -- Greek civil servants will strike today in their fourth national walkout this year as surging bond yields put pressure on the government to activate a European Union bailout and accept more spending cuts.

The strike will shutter hospital and schools and also affect ministries and government offices, according to an e- mailed statement from Athens-based ADEDY, the umbrella group for more than 500,000 state workers. It will hold a rally in central Athens at 11 a.m. local time.

Greek Prime Minister George Papandreou is under fire from voters who say his austerity measures have gone too far and from investors who argue that further action is needed to cut the EU’s largest budget deficit. As Greece meets EU and International Monetary Fund officials to agree on the conditions tied to any loan, the extra yield investors demand to hold Greek debt over German bonds has surged to a record 522 basis points.

“Papandreou is caught between a rock and a hard place,” said Jacques Cailloux, chief European Economist at Royal Bank of Scotland Group Plc. “The market has zero confidence in what the Greeks are saying, and any further austerity measures pushed for by the IMF could be the ones that break the camel’s back if they are deemed unfair by the population. He doesn’t have any option though.”

Today’s strike isn’t expected to affect public transport or air traffic, after air-traffic controllers postponed a planned walkout to clear a backlog of flights caused by the spread of volcanic ash from Iceland across Europe.

Belt-Tightening

Greek officials yesterday began talks on activating a 45 billion-euro ($60 billion) emergency aid package, with 9 out of 10 people surveyed in an opinion poll in Eleftheros Typos expecting the IMF to insist on more belt-tightening measures.

The main opposition party, the center-right New Democracy, said Papandreou is responsible for driving the country into the IMF’s arms. Dimitris Papadimoulis, a lawmaker for the Syriza left coalition group, said in parliament yesterday the IMF’s involvement hangs “like a cloud of volcanic ash over Greeks.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=auoUeDqdr0rY&pos=5

At this point it is too early to tell what went wrong in the Gulf of Mexico at the Deepwater Horizon drilling rig, and the story is well covered in the mainstream media, but it is an energy story with big implications, and we will be following further developments with great interest. Our thoughts and prayers go out to the families of those involved.

At the Comex silver depositories Wednesday, final figures were: Registered 50.20 Moz, Eligible 65.20 Moz, Total 115.40 Moz.

+++++

Crooks & Scoundrels Corner.

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

“First Iceland goes bankrupt, then it manages to set itself on fire. This has insurance scam written all over it.” Anon.

Today, the winner is Germany, “Vee hauf vays ov vinning zee Vorld Kup!” Below, Professor Tolan goes for best of two. Nutty professors, it seems, aren’t just a specialty of California. Below that, the great vampire squid goes all patriotic.

“Patriotism is the last refuge of a scoundrel.”

Samuel Johnson.

Germany will win World Cup, science professor calculates
A university professor has developed a mathematical formula which, he claims, shows Germany will win the 2010 World Cup in South Africa this June.
Published: 1:46PM BST 21 Apr 2010

Germany face Australia, Serbia and Ghana in Group D, but Prof Metin Tolan, a physics professor at the University of Dortmund, is convinced German captain Michael Ballack will be lifting the World Cup following the final on July 11.

The scientist has written a formula based on trigonometry which analyses all Germany's results from previous World Cups and predicts a winner for this year's tournament.
Having won the World Cup three times, in 1954, 1974 and 1990, Germany's average finishing place at previous tournaments is 3.7 and Prof Tolan says his formula shows this will be Germany's year to lift the trophy.

"It is very simple, all my calculations prove this," he told Germany magazine "Zeit Wissen".

"The last time we won the World Cup was back in 1990 and there have been four tournaments since," explained Tolan.

"The average finishing place of the Germany team is 3.7 and the German team wins the title every fourth or fifth World Cup.

"Nobody can beat us this year and you can already put the champagne on ice."

Prof Tolan already predicted Germany would win the last World Cup, which they hosted in 2006, but unfortunately for his theory, the home nation was beaten by eventual winners Italy in the semi-finals.

"My formula gave the winner for the following World Cup, this is why it works this time for sure," he explained undeterred after Jurgen Klinsmann's side beat Portugal 3-1 to finish third at the last World Cup.

But Prof Tolan's equations could also help Germany's arch-rivals England, who were dumped out of the last World Cup after being beaten on penalties by Portugal, as Fabio Capello's side have a history of struggling with spot-kicks.

"The weakest kicker should take the first penalty, then the second-weakest and so on," he said.
"Then you have the greatest chance of scoring as many goals as possible." http://www.telegraph.co.uk/sport/football/world-cup-2010/7614446/Germany-will-win-World-Cup-science-professor-calculates.html

Blankfein fights back on SEC case
By Henny Sender in New York and Stephanie Kirchgaessner in Washington Published: April 22 2010 00:42 Last updated: April 22 2010 00:42

Lloyd Blankfein on Wednesday attacked the Securities & Exchange Commission’s fraud charges in telephone calls to ¬clients as Goldman escalated its campaign to stem the damage to the firm’s reputation.

One person who received a call from the Goldman chief said he was told the regulator’s case against the bank was politically motivated and would ultimately “hurt America”.

Mr Blankfein mounted the campaign to bolster the confidence of its business partners in the wake of the SEC charges that the bank had sold investors a security designed to fail.

In the conversations with private equity executives and others, Mr Blankfein left clients with the impression that he was eager to fight the charges in court. The SEC has requested a jury trial.
“He was very aggressive,” said one person called by Mr Blankfein on Wednesday. “He feels that the government is out to kill them, that they are under attack and the whole thing is totally political.” Mr Blankfein said the SEC action “hurts America”, this person said.

Mr Blankfein did not initiate talk about the politics or timing of the SEC charge, announced on Friday. A person familiar with the matter said: “Clients brought up the politics . . . and there was a discussion around the context of what happened.”

Mr Blankfein’s charm offensive with clients came as it emerged that Fabrice Tourre, the Goldman employee also named in the SEC case, would appear with him next week before a US Senate panel investigating Wall Street’s role in the financial crisis.

Mr Blankfein said a female staffer at ACA, the manager of the security, new that Paulson & Co intended to bet against the transaction, according to a person that was called. This goes against the SEC charges that Goldman failed to disclose that Paulson was taking the opposite side of the deal. Paulson’s short position yielded it a profit of about $1bn while investors who bought into the security lost $1bn, the SEC complaint says.

Goldman this week bolstered its legal team by hiring Greg Craig, a former counsel to the Obama White House. Though Mr Blankfein did not indicate on the calls whether he was considering settling the suit, some clients close to Goldman say they believe it is gearing up for a fight. “They will likely fight aggressively and hope to win clean,” the person said. http://www.ft.com/cms/s/0/a62b8a5c-4d9b-11df-9560-00144feab49a.html

"I want us to do even more to encourage the risk takers"

Gordon Brown. 2004.

“Prime Minister Gordon Brown called yesterday for the Financial Services Authority to start an inquiry, saying he was “shocked” at the “moral bankruptcy” indicated in the suit.”

Gordon Brown. 2010.

Why A UK Hung Parliament is Likely. Stay long precious Metals.
http://www.ukpollingreport.co.uk/blog/