Baltic Dry Index. 3929 +15
LIR Gold Target by 2019: $3,000.
"Gold bears the confidence of the world's millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history. There is no reason to believe it will lose the confidence of people in the future."
Oakley R. Bramble
We open with the NY Times on yet another housing bubble underway in overbuilt Las Vegas. Chalk up another unintended consequence of fiat money and all the bailouts. In their ever more desperate attempts to prop up the fiat money dollar reserve standard, new money pours into the failed system to replace all the wealth that was lost due to the fraud and greed of the great vampire squids, but the Fed in this case, has no control over it once it leaves the Fed, and bailout subsidies distort the now pretzel shaped economy. That this ends badly goes without saying. Is wealth destruction via fiat currency great or what? Below that, guess what bailed out Wall Street bankers do with all their taxpayer provided bonus cash. They swap fiat dollars fast for anything that they think might hold its long term value better.
"The first requisite of a sound monetary system is that it put the least possible power over the quantity or quality of money in the hands of the politicians."
Henry Hazlitt
Building Is Booming in a City of Empty Houses
By DAVID STREITFELD Published: May 15, 2010
-----Home prices in Las Vegas are down by 60 percent from 2006 in one of the steepest descents in modern times. There are 9,517 spanking new houses sitting empty. An additional 5,600 homes were repossessed by lenders in the first three months of this year and could soon be for sale.
Yet builders here are putting up 1,100 homes, and they are frantically buying lots for even more.
Las Vegas is trying to recover by building what it does not need. It is an unlikely pattern being repeated in many of the areas where the housing crash was most severe.
“There’s a surprising rebound in the hardest-hit markets,” said Brad Hunter, chief economist with the consultant Metrostudy. “People are buying again.” From the recession’s lows, construction has nearly doubled in Las Vegas, Phoenix and Tucson. It is up 74 percent in inland Southern California and soaring in Florida.
Some of the demand is coming from families that are getting shut out of the bidding for foreclosures by syndicates that pay in cash, and some is from investors who are back on the prowl.
Land and labor costs have fallen significantly, so the newest homes are competitively priced. Some of the boom-era homes, meanwhile, are in developments that feel like ghost towns. And many Americans will always believe the latest model of something is their only option, an attitude builders are doing their utmost to reinforce.
------Brent Anderson, a marketing executive with another Southwest builder, Meritage Homes, said it bought 713 lots in stricken Arizona last year, and was on the verge of starting construction in a new Phoenix community called Lyon’s Gate.
“We’re building them because we’re selling them,” Mr. Anderson said. “Our customers wouldn’t care if there were 50 homes in an established neighborhood of 1980 or 1990 vintage, all foreclosed, empty and for sale at $10,000 less. They want new. And what are we going to do, let someone else build it?”
All of this goes contrary to the conventional wisdom, which suggests an improved market for builders is years away. Nationwide, new home sales at the beginning of this year plunged to a level below any recorded since 1963, when the figures were first officially tabulated.
Simply put, the country already has too many houses, the legacy of wide-scale overbuilding during the boom. The Census Bureau says there are two million vacant homes for sale, about double the historical level. Fewer new households, moreover, are being formed as families double up for economic reasons, putting a further brake on demand.
More.
http://www.nytimes.com/2010/05/16/business/16builder.html
Fed Causes Art Auction Binge
Submitted by Econophile on 05/15/2010
I know where all those Wall Street bonuses went: contemporary art. The latest auctions from Christie's, Sotheby's, and Phillips de Pury were for the most part blockbuster sales where the works of living and dead Contemporary artists reached new highs.
These art auction houses exceeded all of their estimates on sales this week. Tuesday night Christie's sold a mind altering $231.9 million. On Wednesday evening Sotheby's brought in $190 million at their auction. Then Thursday night, Phillips de Pury, the most interesting auction, brought in $37.9 million. Each house exceeded their pre-auction sales estimates.
Let me digress a minute on the economics here.
If bankers like Goldman Sachs, JP Morgan, Citigroup, and Bank of America have a full quarter of "perfect" trading days, then the huge profits generated find their way into the pockets of those who achieved this investing miracle. But, as readers of The Daily Capitalist know, this was no miracle. It was a gift from the Fed to these bankers.
The Fed has created the opportunity of the new decade, a sure thing carry trade. Borrow money from the Fed at next to zero interest rate cost, and reinvest in bonds elsewhere and make a killing. Don't get me wrong; I am sure this is not as easy as it sounds. But ... I mean is there some super-secret high-powered trading formula that has achieved these returns? I don't think so.
For every buyer, as we well know, there is a seller. The crash fell on some harder than others:
The Phillips' sale was a court ordered sale of the collection of CNET co-founder, Halsey Minor. Minor found himself owing $21.6 million delinquent loan to ML Private Finance L.L.C., an affiliate of Bank of America’s Merrill Lynch. While the sale grossed $37.9 million, there were other collections included in the sale, so it's hard to know from the article if Mr. Minor's creditors were paid. I'll guess that they were.
http://www.zerohedge.com/article/fed-causes-art-auction-binge
Below, Merrill’s ex-chief economist who called it right 2004-2008, ignored by the great squids in command who managed to bankrupt the firm ignoring his advice, now thinks that gold is the asset to own. Amazingly, just like me he thinks gold is headed to about $3,000 per troy ounce. Wisely, unlike me, he doesn’t give a date when this will happen by. Both of us are talking in terms of 2010 dollars. If the central bankers lead by the Fed, decide to lira-ize the fiat dollar in a giant hyper-inflation, the nominal actual figure will be far higher.
"We are in a world of irredeemable paper money - a state of affairs unprecedented in history."
John Exter
Rosenberg: ‘Gold is now in a bubble? Not a chance’
Posted by Paul Murphy on May 14 18:40
This is Dave’s moment, and the the Gluskin Sheff man let fly on Friday – proclaiming the enduring attraction of gold, tearing into spurious retail sales figures in the US and declaring the primary trendline now to be global deflation.
But let’s concentrate on gold, something of a hot topic on FT Alphaville (with charts!)
Rosenberg is fixated with the idea that the yellow metal is increasingly being viewed as a currency in its own right. With fiat currencies being hammered in every direction and even the ECB now engaged in debt monetisation, he’s comforted by the fact that in the case of gold most of that which exists is already above ground: production peaked a decade ago.
In other words, investors have more faith in what the shape and direction of the supply curve for bullion looks like relative to individual country money supply growth. This is why deflation is good for gold — the reflationary efforts provide a big boost. Even without the interventionist efforts to monetize the debts, as long as policy rates are near-zero, gold leasing rates will do likewise.
While FDR fixed the dollar price of gold in the 1930s, we know that bullion doubled in Sterling terms during that deflationary cycle. Gold is a hedge against instability of all kinds — don’t think for a second that deflation does not engender instability whether it be financial, economic or political. To be sure, gold is also a hedge against inflation — but that is going to come much, much later and will be the icing on the cake.
Rosenberg concedes that the metal might be a little over-bought right now, but he’s saying ‘buy on the dips,’ since gold is in a secular bull market that might well take the price to $3,000 or more.
Below, it’s only a pause in Europe, not a fix. The EU’s “Shock and Awe” rescue lasted barely a week before the market started calling its bluff. With media reports that Sarkozy forced Merkel into a U-turn with a threat to take France out of the monetary union, the atmosphere in the currency union is poisonous. France seems to be dictating to German taxpayers how much money they must come up with to support Club Med’s lifestyle. An explosive situation unlikely to be contained for long.
Forget the wolf pack – the ongoing euro crisis was caused by EMU
Jean-Claude Trichet tells us the world faced a second Lehman crash in the days and hours before EU leaders launched their €720bn (£612bn) defence fund. If the European Central Bank’s president is correct, we are in trouble. The EU-IMF package is already unravelling. What will the West do for its next trick?
By Ambrose Evans-Pritchard Published: 5:37PM BST 16 May 2010
Mr Trichet was ash-white at the Brussels summit a week ago. He distributed charts of credit stress to every eurozone leader. By the time he had finished his hair-raising discourse, everybody round the table finally understood what they faced.
“The markets had ceased to function,” he told Der Spiegel. “There is still a risk of contagion. It can happen extremely fast, sometimes within hours.”
The spreads on Greek, Iberian, and Irish bonds have, of course, dropped since the ECB stepped in with direct purchases. But the euro rally fizzled fast, to be followed by a fresh plunge to a 18-month low of $1.24 against the dollar. European bank stocks have buckled again. Spain’s IBEX index fell 6.6pc in capitulation fever on Friday.
Geneva professor Charles Wyplosz said EU leaders made the error of overselling up their “shock and awe” package before establishing any political mechanism to mobilise such sums. “The fund is an empty shell,” he wrote at Vox EU. “Worse still, crucial principles have been sacrificed for the sake of unconvincing announcements.”
Brussels was unwise to talk of smashing the “wolf pack” speculators and defeat the “worldwide organised attack” on the eurozone. As Napoleon said, if you set out to take Vienna, take Vienna. Besides, the language of the EU priesthood – ex-ECB board member Tomasso Padoa-Schioppa talks of the advancing battalions of the “anti-euro army” – frightens Chinese and Mid-East investors needed to soak up EU debt. These metaphors are a mental flight from the issue at hand, which is that vast imbalances – masked by EMU, indeed made possible only by EMU – have been decorked by the Greek crisis and now pose a danger to the entire world.
One can only guess what Mr Trichet meant when he said we are living through “the most difficult situation since the Second World War, and perhaps the First”. Is this worse than Credit Anstalt in the summer of 1931, the event that brought down central Europe’s banking system and tipped Europe into depression?
Or was Mr Trichet alluding to something else after witnessing the Brussels tantrum by President Nicolas Sarkozy? According to El Pais, Mr Sarkozy threatened to pull France out of the euro and break the Franco-German axis at the heart of the EU project unless Germany capitulated. To utter such threats is to bring them about. You cannot treat Germany in that fashion.
Chancellor Angela Merkel has put the best face on a deal that has so damaged her leadership. “If the euro fails, then Europe fails and the idea of European unity fails,” she said. Too late, I think. The German nation is moving on. I was struck by a piece in the Frankfurter Allgemeine proposing a new “hard currency” made up of Germany, Austria, Benelux, Finland, the Czech Republic, and Poland, but without France. The piece entitled The Alternative says deflation policies may push Greece to the brink of “civil war” and concludes that Europe would better off if it abandoned the attempt to hold together two incompatible halves. “It can be done,” the piece says.
"When paper money systems begin to crack at the seams, the run to gold could be explosive."
Harry Browne
At the Comex silver depositories Friday, final figures were: Registered 51.77 Moz, Eligible 64.57 Moz, Total 116.34 Moz.
Day 8 of Hitler’s attack in the west that almost brought down western civilization. We continue our daily update on the “Dunkirk” page.
Dunkirk & the Battle of France – Day by day 70 years on.
http://londonirvinereport.blogspot.com/p/dunkirk-battle-of-france.html
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Crooks & Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
“We'll have 50,000 barrels of mud on hand to kill this well. It's far more than necessary, but we always like to have backup.”
Today, more on the Deepwater oil rig disaster that seems little closer to being capped today than on day one. Sadly the quote above from the Houston Chronicle, wasn’t in effect when the misjudgment occurred on April 20. More and more it looks to me like everything depends on the two relief wells being drilled and that everything else is for PR damage control and to hide as much of the oil slick as possible. We open with BP claiming limited success. Below that, 27 days on and counting, what is the truth anymore?
Some good news from the depths
4-inch tube successfully threaded into pipeline, begins syphoning oil
By JENNIFER LATSON HOUSTON CHRONICLE May 16, 2010, 10:08PM
Nearly a month into their quest to contain a gushing oil spill, BP officials had their first major success Sunday, when robots threaded a thin tube into a broken pipeline almost a mile underwater.
The 4-inch tube was expected to work like a straw, sucking as much as 85 percent of the leaking oil into a tanker waiting on the surface. After a failed first attempt on Saturday, followed by a successful insertion that was subsequently dislodged, BP found that the third time was the charm.
“We're obviously pleased,” said BP spokesman John Crabtree. “It's progress.”
But officials stopped short of celebrating the occasion, which came after a series of stinging defeats in the battle to plug the gusher. Early efforts were stymied by the unpredictable gas combinations and high-pressure, low-temperature conditions that caused equipment to clog with icelike crystals on the Gulf's floor.
Engineers used methanol and warm seawater to keep this pipe from meeting a similar fate, said BP Senior Executive Vice President Kent Wells, who spoke to reporters Sunday afternoon.
“We've learned from that, and so far it's working extremely well,” he said.
Wells said he did not know exactly how much of the leaking oil had been captured and siphoned by the tube as of Sunday afternoon, but said the plan was to start off slowly and work up to full capacity over the next few days.
-----The next step will be to plug the well completely, which engineers hope to accomplish within a week to 10 days using a method called a top kill, Wells said.
Workers will first try to pump heavy mud directly into the well using piping called a “choke and kill line.” If too much mud spews back out of the well instead of plunging deeper, engineers will then shoot debris into an opening at the top of the well.
“The whole purpose is to get the kill mud down,” said Wells. “We'll have 50,000 barrels of mud on hand to kill this well. It's far more than necessary, but we always like to have backup.”
Relief well halfway done
At the same time, drilling continues on a relief well, which is considered an almost-certain solution to the leak. Work is about halfway done on that effort, said Crabtree, but it could still take months to finish the job.
http://www.chron.com/disp/story.mpl/business/deepwaterhorizon/7006870.html
Oil spill: BP accused of using Gulf of Mexico as 'toxic testing-ground'
Louisiana officials have accused BP of turning the Gulf of Mexico into a toxic testing-ground after winning permission for experimental chemical methods of fighting the oil slick
By Jacqui Goddard, Miami Published: 3:11PM BST 15 May 2010
State officials are angry that federal regulators gave the company permission to try out new chemical techniques to break up and hold back the growing tide of oil.
Despite registering concerns about the potential implications for the environment, marine life and human health, Governor Bobby Jindal's administration was cut out of deliberations over the use of dispersants that break up the oil, as the Environmental Protection Agency granted BP permission to release large quantities underwater.
"We don't have any data or evidence behind the use of these chemicals in the water. We're now basically using one of the richest ecosysystems in the world as a laboratory," complained Alan Levine, the head of Louisiana's Department of Health and Hospitals.
Tony Hayward, BP's chief executive officer, told WAFB Channel 9 news station that the chemical has undergone "lots of testing" and is biodegradable. "We believe it's a very effective way of containing this spill until such time as we can eliminate the leak," he added.
But Robert Barham, the state's Secretary of the Department of Wildlife and Fisheries, stated that it has not been used at such depths before - BP's leak stems from a pipe one mile below the surface - and that its potential impact and consequences are unknown. This includes how it travels through the water over time.
"We're very disappointed in their approach," he said of BP and the EPA. "The federal procedures call for a consensus between federal authorities, the responsible party and the states involved. When we met and expressed our concerns, apparently they decided to go without us."
-----Meanwhile questions remained as to how much oil is really spilling into the sea, with a number of scientists and expert analysts stating that the official figure of approximately 5,000 barrels a day (210,000 gallons) is a gross underestimate. Some believe that it could be 10 times that figure, though none have been granted access to the site to take official readings and there has been scepticism over BP's claims not to know.
John Amos of Skytruth, an environmental monitoring group, said: "There are instruments and technologies available to measure this kind of flow on the sea floor."
He added: "On satellite imagery day in and day out we continue to see an oil slick that's several thousand square miles in size out there and the good news is that it hasn't made serious landfall yet. That may be partly down to the response but also down to wind and current conditions. There's an element of luck in there. But I'm not sure how much longer we can get lucky."
Scientists Find Giant Plumes of Oil Forming Under the Gulf
By JUSTIN GILLIS Published: May 15, 2010
Scientists are finding enormous oil plumes in the deep waters of the Gulf of Mexico, including one as large as 10 miles long, 3 miles wide and 300 feet thick in spots. The discovery is fresh evidence that the leak from the broken undersea well could be substantially worse than estimates that the government and BP have given.
“There’s a shocking amount of oil in the deep water, relative to what you see in the surface water,” said Samantha Joye, a researcher at the University of Georgia who is involved in one of the first scientific missions to gather details about what is happening in the gulf. “There’s a tremendous amount of oil in multiple layers, three or four or five layers deep in the water column.”
The plumes are depleting the oxygen dissolved in the gulf, worrying scientists, who fear that the oxygen level could eventually fall so low as to kill off much of the sea life near the plumes.
Dr. Joye said the oxygen had already dropped 30 percent near some of the plumes in the month that the broken oil well had been flowing. “If you keep those kinds of rates up, you could draw the oxygen down to very low levels that are dangerous to animals in a couple of months,” she said Saturday. “That is alarming.”
The plumes were discovered by scientists from several universities working aboard the research vessel Pelican, which sailed from Cocodrie, La., on May 3 and has gathered extensive samples and information about the disaster in the gulf.
Scientists studying video of the gushing oil well have tentatively calculated that it could be flowing at a rate of 25,000 to 80,000 barrels of oil a day. The latter figure would be 3.4 million gallons a day. But the government, working from satellite images of the ocean surface, has calculated a flow rate of only 5,000 barrels a day.
BP has resisted entreaties from scientists that they be allowed to use sophisticated instruments at the ocean floor that would give a far more accurate picture of how much oil is really gushing from the well.
“The answer is no to that,” a BP spokesman, Tom Mueller, said on Saturday. “We’re not going to take any extra efforts now to calculate flow there at this point. It’s not relevant to the response effort, and it might even detract from the response effort.”
The undersea plumes may go a long way toward explaining the discrepancy between the flow estimates, suggesting that much of the oil emerging from the well could be lingering far below the sea surface.
The scientists on the Pelican mission, which is backed by the National Oceanic and Atmospheric Administration, the federal agency that monitors the health of the oceans, are not certain why that would be. They say they suspect the heavy use of chemical dispersants, which BP has injected into the stream of oil emerging from the well, may have broken the oil up into droplets too small to rise rapidly.
http://www.nytimes.com/2010/05/16/us/16oil.html?hp
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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