Baltic Dry Index. 3352 -02
LIR Gold Target by 2019: $3,000.
“When a new source of taxation is found it never means, in practice, that the old source is abandoned. It merely means that the politicians have two ways of milking the taxpayer where they had one before.”H. L. Mencken.
We open with a bombshell from Chancellor Merkel. The German government anticipates Euro-zone defaults ahead. Stay long precious metals and head for the exit on Euros, UK Pounds too, given that the polls still show a hung Parliament the most likely outcome in the UK. Below, Bloomberg covers Chancellor Merkel’s double barreled blast into the Euro-zone’s feet.
"A weak currency arises from a weak economy, which in turn is the result of a weak government."
Gordon Brown. 1992.
Merkel’s Coalition Calls for EU ‘Orderly’ Defaults
May 4 (Bloomberg) -- German Chancellor Angela Merkel’s coalition stepped up calls for allowing the “orderly” default of euro-region member states burdened with debt to avoid a repeat of the Greek fiscal crisis.
Floor leaders of the three coalition parties agreed in Berlin today to put a resolution to parliament alongside the bill on Greek aid calling for the European Union to revise rules for the euro to put pressure on countries that run deficits.
Merkel, who faces elections in Germany’s most populous state on May 9, is seeking to shift focus from the Greek bailout to drawing lessons from the euro’s biggest crisis. An “orderly insolvency” process would ensure that creditors participate in any future rescue, she said on ARD television yesterday.
“We want to move from crisis management to crisis prevention,” Birgit Homburger, the parliamentary head of Merkel’s Free Democratic coalition partner, told reporters after the coalition leaders’ meeting. “We have to do everything we can to ensure we never get into such a situation again.”
Merkel is seeking to have both houses of parliament approve Germany’s share of the 110 billion-euro ($143 billion) Greek bailout on May 7, the same day she heads to Brussels for a meeting of government leaders of the 16 euro nations to assess “lessons to be learned” from the crisis.
----- European stocks erased their gains for the year today and the euro slid to a one-year low against the dollar amid concern the government debt crisis is spreading.
Spanish Prime Minister Jose Luis Rodriguez Zapatero told reporters in Brussels that speculation of a bailout for Spain is “complete madness.” Standard & Poor’s last week cut Spain’s credit rating by one level to AA, lowered Portugal by two steps to A- and cut Greece’s to the junk level of BB+.
The resolution being drafted by German lawmakers will call for stronger EU rights to inspect member countries’ budgets and sanctions such as a suspension of EU voting rights for countries that breach deficit rules, Volker Kauder, the floor leader of Merkel’s Christian Democrats, told reporters today.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQdqR8poZMoo&pos=9
Next, if you thought bailing out Greece was hard just wait until we have to do Portugal, Spain and Italy with a weakened German government in power. Below, Der Spiegel on next weekend’s cliffhanger election in Germany.
'Knife-Edge' State Election Could Curb Merkel's Power
By SPIEGEL Staff 05/04/2010An election on May 9 in Germany's most populous state, North Rhine-Westphalia, could transform the country's political landscape and weaken Chancellor Angela Merkel, whose conservative Christian Democrats have been hit by revelations of funding irregularities.
Chancellor Angela Merkel's government has effectively been on hold for months pending a regional election on Sunday, May 9, in Germany's most populous state, North Rhine-Westphalia.
Major domestic reforms of healthcare, the tax system and energy policy have been shelved because Merkel's conservative Christian Democrats and their coalition allies, the pro-business Free Democrats, have been at pains to avoid spoiling their chances of remaining in power in this key western state of 17 million inhabitants, home to the industrial Ruhr region.
In their jockeying for votes, the two parties have been trying to score points off each other. Their inactivity and persistent in-fighting in Berlin could end up losing them the election, which would rob Merkel of her center-right majority in the Bundesrat, Germany's upper legislative chamber. That means she would need opposition approval for any major policies. If North Rhine-Westphalia (NRW) doesn't go Merkel's way on Sunday, she will be considerably less powerful.
---- Opinion polls indicate a neck-and-neck race between the center-right coalition of governor Jürgen Rüttgers, who has been beset by series of minor but damaging scandals in recent months, and the center-left camp of Social Democrats (SPD) and Greens. But the vote could lead to a variety of alternative coalitions including a tie-up between Rüttgers' Christian Democratic Union (CDU) and the Greens, or an alliance between the SPD, Greens and Left Party.
http://www.spiegel.de/international/germany/0,1518,692985,00.html#ref=nlint
Toss in a weakened UK government in a hung Parliament, a temporary Parliament limping along to a second election and shunning hard choices, and the EU looks to be on the threshold of serious trouble. A summer of discontent and escalating crisis looks to be at hand. Yesterday stock markets finally took notice. Two years of escapism is probably ending.
Global shares tumble on Greece debt fears
Global stock markets tumbled on growing fears that a rescue package for Greece might not be enough to prevent a debt crisis from spreading in Europe.
Published: 6:35AM BST 05 May 2010Asian markets mirrored heavy falls in the United States and Europe, extending the biggest fall in global shares in three months.
It came at Greece was paralysed by a nationwide general strike on Wednesday - the first major test of the socialist government's resolve to push through unprecedented austerity cuts needed to avert a fiscal meltdown.
The euro continued to weaken against the dollar in Asian trading, hitting $1.2958, as investors doubted whether €110bn (£95bn) of loans from the European Union and the International Monetary Fund could stop contagion to other vulnerable countries such as Spain and Portugal.
Investors are worried that these countries may need even larger debt bailouts.
Hong Kong's Hang Seng fell 2pc, while China's benchmark index in Shanghai dropped 2.1pc. Australia skidded 1.9pc, Indonesia slid 1.5pc and Singapore sank 1.2pc. Markets in Japan, South Korea and Thailand were closed for holidays.
Earlier, Wall Street's Dow Jones index fell 2pc, dropping beneath the critical 11,000 point mark to close at 10.927.
The falls were even sharper in Europe, where Madrid's key stock market index was down 5.4pc, Lisbon's down 4.2pc, Paris's CAC fell 3.6pc, London's FTSE 100 skidded 2.6pc and shares in Frankfurt gave up 2.6pc.
The falls, which could continue today, more than reversed the rallies on Monday after the eurozone leaders and IMF confirmed their bail-out of the Greek economy.
They are a sign, according to analysts, of more deep-seated concerns about peripheral eurozone economies.
Investors continued to shun Greece, Portugal and Spain, pushing yields on these countries' bonds higher. The renewed flight to quality boosted German bonds.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7680475/Global-shares-tumbles-on-Greece-debt-fears.html
Not that things are much better on the other side of the Atlantic. Below, the “Sage of Omaha,” “Defender of the Faith of Goldman” proffers his wisdom on bailing out the increasingly bankrupt States. “Just say no” isn’t viable, he says. Stay long precious metals, I sense another US Federal bailout coming on. Don’t worry, it’s only fiat dollars after all. There’s plenty more where they come from, just don’t tell the Chinese or any of the other US bond buyers. In the final days of fiat money, expect things to get even weirder yet, as ever more desperate measures legal and illegal get tried.
"The government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."
Ronald Reagan.
Buffett Says GM Rescue May Mean U.S. Can’t Say No to States
May 5 (Bloomberg) -- Warren Buffett, chairman of Berkshire Hathaway Inc., said the U.S. would probably feel compelled to rescue a state facing default after the government committed $700 billion to bail out financial firms and automakers.“It would be hard in the end for the federal government to turn away a state having extreme financial difficulty when they’ve gone to General Motors and other entities and saved them,” Buffett, 79, told shareholders in Omaha, Nebraska, at the company’s May 1 annual meeting. “I don’t know how you would tell a state you’re going to stiff-arm them with all the bailouts of corporations.”
States’ personal income-tax revenue fell 7.1 percent in January and February from the same period in 2009, and there is a risk the slide will extend into this quarter, the Nelson A. Rockefeller Institute of Government said in a report last month. A 9.7 unemployment rate and a slump in property prices have cut into local governments’ ability to raise funds.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aJSl3AUpSk9A
In China news, China sees the future in oil. Well, cleaner oil anyway to meet China’s soaring domestic demand for oil products. Our respite from “Peak Oil” due to the G-7 global recession, will soon be coming to an end.
“The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”
Thomas Sowell. American Economist.
PetroChina Starts Expansion of Ningxia Oil Refinery
May 5 (Bloomberg) -- PetroChina Co., the country’s biggest oil producer, started construction to more than triple the capacity of its Ningxia refinery at a cost of 7.4 billion yuan ($1.1 billion) as fuel demand in northwestern China rises.
The plant’s capacity will be increased to 5 million metric tons per year, or 100,000 barrels per day, under an engineering, procurement and construction contract signed April 29, parent China National Petroleum Corp. said on its Web site today. The refinery can process about 1.5 million tons of crude per year currently, according to a refinery unit in September.
China’s state-owned refiners are expanding plants to meet rising fuel demand in the world’s fastest-growing major economy. Industrial production climbed 18 percent in March as the economy grew at the fastest pace in almost three years in the first quarter. China refined a record 34.6 million tons of crude oil in December, according to official data.
Ningxia’s expansion comes under one of the government’s key projects to improve fuel quality, China National said.
China, the world’s second-biggest energy user, is upgrading plants and boosting consumption of cleaner-burning fuel such as natural gas to reduce pollution.
Fuel demand in Ningxia, western Inner Mongolia and northern Shaanxi in northwestern China may rise to 8.04 million tons by 2015, from an estimated 5.37 million tons this year, the environmental research unit of Ningxia refinery said in a report posted on its Web site in September last year.
The expansion will be able to increase supply of “high- quality oil products” by 2.9 million tons annually, it said. PetroChina will shut the existing 1.5 million ton-a-year plant in Ningxia once the new 5 million ton-a-year refinery starts, the refinery’s research unit said.
http://www.bloomberg.com/apps/news?pid=20601089&sid=aLroB7Ir9eqE
We end for the day with more on BP’s Deepwater disaster. Below Rigzone takes up the latest. Gas under pressure of 40-50,000 lbs per square inch, blew out 5,000 feet of seawater in the riser in a matter of seconds! The firsthand account below is well worth clicking on the link for the full article. With deep water drilling now under a cloud, and perhaps already exceeding the limits of existing technology, we won’t know until we fully understand what went so badly wrong on the Deepwater Horizon rig, our world is ever more dangerously dependent on supply from unstable regions of the world. Unfortunately, other events have removed Peak Oil from the public agenda.
Deepwater Horizon: A Firsthand Account
by Mark Levin Show Tuesday, May 04, 2010On Friday, April 30th 2010, an anonymous caller contacted the Mark Levin Show to clarify the events that preceded the Deepwater Horizon tragedy. Rigzone has transcribed this broadcast for your convenience. To hear the actual radio broadcast please visit http://www.marklevinshow.com/Article.asp?id=1790422&spid=32364.
-----Mark: OK, go ahead.
James: We had set the bottom cement plug for the inner casing string, which was the production liner for the well, and had set what's called a seal assembly on the top of the well. At that point, the BOP stack that he was talking about, the blow out preventer was tested. I don't know the results of that test; however, it must have passed because at that point they elected to displace the risers -- the marine riser from the vessel to the sea floor. They displaced the mud out of the riser preparing to unlatch from the well two days later and they displaced it with sea water. When they concluded the BOP stack test and the inner liner, they concluded everything was good.
Mark: Let me slow you down, let me slow you down. So they do all these tests to make sure the infrastructure can handle what's about to happen, right?
James: Correct, we're testing the negative pressure and positive pressure of the well, the casing and the actual marine riser.
Mark: OK, I'm with you. Go ahead……
------James: Well obviously, the gas blew the sea water out of the riser, once it displaced all of the sea water, the gas began to spill out on the deck and up through the center of the rig floor. The rig, you have to imagine a rectangle, about 400 feet by 300 feet, with the derrick and the rig floor sitting directly in the center.
As this gas is now heavier than air, it starts to settle in different places. From that point, something ignited the gas, which would have caused the first major explosion.
Mark: Now, what might ignite the gas, do you know?.......
Continued.
http://www.rigzone.com/news/article.asp?a_id=92765
BP Spuds Relief Well for Oil Spill
Rigzone staff Tuesday, May 04, 2010BP announced Tuesday that work has begun to drill a relief well to intercept and isolate the oil well that is spilling oil in the US Gulf of Mexico. The GSF Development Driller II drillship is drilling this second relief well. Another drillship, GSF Development Driller III, spudded the first relief well at 3 p.m. Central Daylight Time on Sunday.
The British supermajor plans for the new well in 5,000 feet of water -- to intercept the existing, leaking well at approximately 13,000 feet below the seabed and permanently seal it. The new drill site is located approximately one-half mile on the seabed from the leaking well in Mississippi Canyon block 252. According to BP, drilling should take approximately three months
http://www.rigzone.com/news/article.asp?a_id=92524
At the Comex silver depositories Tuesday, final figures were: Registered 50.73 Moz, Eligible 64.21 Moz, Total 114.94 Moz.
Dunkirk & the Battle of France – Day by day 70 years on.
http://londonirvinereport.blogspot.com/p/dunkirk-battle-of-france.html
"Politics is too serious a matter to be left to the politicians."
Charles De Gaulle.
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Crooks & Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, what if Ebenezer Squid ruled the world. My thanks to reader Pete for sending it along. Fabulous!
"I want us to do even more to encourage the risk takers"
Gordon Brown. 2004.
Below, the WSJ speculates that old Ebenezer Squid himself might be about to get tossed under the bus, as the other great vampire squids desperately try to get out from public scrutiny. Paranoia in God’s money temple on Broad Street has shifted up a gear. Was Ebenezer just caught playing “let’s make a deal?” Who can you trust, who’s wearing a wire, whose phones are tapped and by whom? What about the limo? How can you seriously game the clients for humongous bonus bucks in an atmosphere like this.
MAY 5, 2010
What-Ifs for Goldman Sachs
Behind Stiff Upper Lip, Some Executives, Alumni Consider Life After Blankfein
Some executives and powerful alumni of Goldman Sachs Group Inc. are talking about whether Chief Executive Lloyd C. Blankfein can survive the legal and public-relations storm swirling around the company, according to people familiar with the situation.The conversations being held among some partners, managing directors and other current and former executives are informal, and there appear to be no plans for a management shake-up. The various hypothetical scenarios include whether Mr. Blankfein should resign, whether there should be a broader house-cleaning of top Goldman management or whether to separate the chairman and CEO posts now held by Mr. Blankfein.
In one possibility being discussed, Henry Paulson, who stepped down as Goldman's chief executive in 2006 to become Treasury secretary, would take the chairman job, these people said. But one person familiar with Mr. Paulson's thinking said he would never return to Goldman. Goldman declined to comment on the internal conversations.
On the surface, Mr. Blankfein's support remains unwavering as the New York company battles a federal criminal investigation and last month's civil-fraud lawsuit filed by the Securities and Exchange Commission. Less than a week after the suit was filed, Mr. Blankfein got a standing ovation at a meeting of Goldman executives, according to people who were there.
Nevertheless, the open discussions inside Goldman about life after Mr. Blankfein show that the firm is being rattled by the turmoil. In addition, several large Goldman shareholders said they support keeping Mr. Blankfein and President Gary D. Cohn in their current jobs. That endorsement could disappear, though, if the company suffers another "self-inflicted wound" that sinks its stock price, said one large investor.
Some executives and powerful alumni of Goldman Sachs Group Inc. are talking about whether Chief Executive Lloyd C. Blankfein can survive the legal and public-relations storm swirling around the company, according to people familiar with the situation.
The conversations being held among some partners, managing directors and other current and former executives are informal, and there appear to be no plans for a management shake-up. The various hypothetical scenarios include whether Mr. Blankfein should resign, whether there should be a broader house-cleaning of top Goldman management or whether to separate the chairman and CEO posts now held by Mr. Blankfein.
In one possibility being discussed, Henry Paulson, who stepped down as Goldman's chief executive in 2006 to become Treasury secretary, would take the chairman job, these people said. But one person familiar with Mr. Paulson's thinking said he would never return to Goldman. Goldman declined to comment on the internal conversations.
On the surface, Mr. Blankfein's support remains unwavering as the New York company battles a federal criminal investigation and last month's civil-fraud lawsuit filed by the Securities and Exchange Commission. Less than a week after the suit was filed, Mr. Blankfein got a standing ovation at a meeting of Goldman executives, according to people who were there.
Nevertheless, the open discussions inside Goldman about life after Mr. Blankfein show that the firm is being rattled by the turmoil. In addition, several large Goldman shareholders said they support keeping Mr. Blankfein and President Gary D. Cohn in their current jobs. That endorsement could disappear, though, if the company suffers another "self-inflicted wound" that sinks its stock price, said one large investor.
http://online.wsj.com/article/SB10001424052748704866204575224671749435044.html?mod=mktw
"Above all, I would teach him to tell the truth. Truth-telling, I have found, is the key to responsible citizenship. The thousands of bankers I have seen in 40 years of law enforcement have had one thing in common: every single one was a liar."
With apologies to J. Edgar Hoover.
Why A UK Hung Parliament is likely. Stay long precious Metals.
http://www.ukpollingreport.co.uk/blog/
"Reading out the figures in a shrill, rapid voice, Gordon Brown proved to them in detail that they had more oats, more hay, more turnips than they had had in Blair’s day, that they worked shorter hours, that their drinking water was of better quality, that they lived longer, that a larger proportion of their young ones survived infancy, and that they had more straw in their stalls and suffered less from fleas."
With Apologies to George Orwell and Animal Farm.
The monthly Coppock Indicators finished April:
DJIA: +245 UP. NASDAQ: +448 UP. SP500: +276 UP. The great Bull market goes on with the all three continuing higher in positive numbers.
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Help the LIR fight Banksterism, the EU, and for sound money.
If you can, help the LIR stay around and make a difference. Please make a donation at the PayPal link on the website or better still become a sponsor for what looks like an exciting 2010. Capitalism not banksterism. Many thanks to all who have helped.
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Sunspots – A 22 year colder world? (From 2004?)
Spotless Days May 4
Current Stretch:0 days
2010 total: 21 days (17%)
2009 total: 260 days (71%) Since 2004: 791 days
Typical Solar Min: 485 days
http://www.spaceweather.com/
The long minimum seems to have ended, or has it?
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