Baltic Dry Index. 3882 -40
LIR Gold Target by 2019: $3,000.
“What's Germany going to ban next? Rainy days, harsh words, the Macarena?”
Bank of America Merrill Lynch
Something is seriously wrong in Euroland. Stay long gold and silver and I think add more. In an unexpected move that reeks of pre-emptive preparation for a coming change in Euroland membership or a debt restructuring, Germany has moved to prevent investors from profiting from the likely downward valuation of German banks and insurers, all large holders of Euroland debt likely to be restructured or of countries likely candidates to be kicked out of the European Monetary Union. Someone high up in Germany expects all this to happen before April 2011. Given the lack of consultation and panicky way it was implemented, someone high up in Germany must think it might happen next week! Euros anyone?
Below, Bloomberg covers the German blitz on London and New York.
“We do not have to visit a madhouse to find disordered minds; our planet is the mental institution of the universe.”
Goethe.
Germany Bans Naked Short-Selling, Swaps Speculation
May 19 (Bloomberg) -- Germany prohibited naked short- selling and speculation on European government bonds with credit-default swaps in an effort to calm the region’s financial markets, sparking investor anxiety about increasing regulation.
The ban, which took effect at midnight and lasts until March 31, 2011, also applies to the shares of 10 banks and insurers, German financial regulator BaFin said yesterday in a statement. The step was needed because of “exceptional volatility” in euro-area bonds, BaFin said.
-----Stocks fell, Treasuries soared and the euro extended its decline as the announcement, made after European markets closed, caught traders by surprise.
“It represents an escalation of regulatory risk for the investing community,” said Keith Wirtz, who oversees $18 billion as chief investment officer at Fifth Third Asset Management Inc. in Cincinnati. “The German action suggests the drama in Europe continues to unfold and escalate.”
Allianz, Deutsche Bank
Allianz SE, Deutsche Bank AG, Commerzbank AG, Deutsche Boerse AG, Deutsche Postbank AG, Muenchener Rueckversicherungs AG, Hannover Rueckversicherungs AG, Generali Deutschland Holding AG, MLP AG and Aareal Bank AG are covered by the short-selling ban, according to BaFin’s statement.
-----BaFin didn’t provide details on how it will enforce the ban or whether it would extend to trades outside Germany. Most credit-default swap trading takes place in New York and London.
http://www.bloomberg.com/apps/news?pid=20601100&sid=anRnRGUN9XK0
Swaps Soar on Germany’s ‘Act of Desperation’: Credit Markets
May 19 (Bloomberg) -- Credit-default swaps soared on German Chancellor Angela Merkel’s move to ban speculation on European government bonds with the contracts, sparking concern among investors about increasing government regulation.
The Markit CDX North America Investment Grade Index Series 14 climbed 12.17 basis points to a mid-price of 120.67 basis points in New York, according to Markit Group Ltd. The increase in the index, which typically rises as investor confidence deteriorates, was the second-largest since March 2009.
Merkel’s coalition is increasing market regulation as German lawmakers prepare to debate a bill authorizing a $1 trillion bailout to backstop the euro. The unexpected ban, done independently of the European Union, came after the rescue package failed to stop the 16-nation common currency from weakening to a four-year low and as banks became increasingly reluctant to lend to one another.
“The market sees an inadequate policy such as this as an act of desperation and a refusal to address the fundamental problems at hand,” said Brian Yelvington, head of fixed-income strategy at Knight Libertas LLC in Greenwich, Connecticut.
Prohibiting speculation in the contracts, used to hedge against losses on corporate debt and bet on creditworthiness, may cause trading in swaps tied to Europe government bonds to freeze up, said Tim Backshall, the chief strategist at Credit Derivatives Research LLC in Walnut Creek, California. Trading limits may increase borrowing costs or limit the flow of capital, he said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ajxxDiFsQuto&pos=2
Next the take on the German action in London. With German panic like this, can the next Lehman be very far delayed?
"There are two times in a man's life when he should not speculate: when he can't afford it and when he can."
Mark Twain.
Market chaos warning after German ban on shorting
Traders are predicting chaos on the world's second-largest government bond market after the German authorities on Tuesday announced a ban on all naked short-selling in European public debt, as well as shares in the country's 10 largest financial institutions.
By Harry Wilson, Financial Services Correspondent Published: 9:04PM BST 18 May 2010
The unprecedented step saw the euro sink to a four-year low after Germany said that from midnight shorting of credit default swaps of any European government would be banned. The prohibition is an attempt to counter speculators that Berlin believes are trying to destabilise the region's sovereign bond market.
Traders greeted the move by BaFin, the German regulator, with a mixture of anger and astonishment. One bond trader said he expected Wednesday's trading session to be one of the most volatile in living memory: "It will be complete chaos, I really don't know what the Germans think they are doing."
One immediate effect was that the cost of insuring European government debt fell as markets were hit by a so-called "short squeeze" where investors with short positions are forced to offload their holdings and buy the bonds, causing the price to increase.
This is certain to please the German authorities, who have waged an increasingly hostile war of words with supposed speculators.
BaFin said the ban was being introduced due to "extraordinary volatility in debt securities issued by eurozone countries".
In a statement, it said short-selling had led to excessive price movements "which could have led to significant disadvantages for financial markets and have threatened the stability of the entire financial system". However, traders said that the measures, which will also prohibit the naked short-selling of shares in major German financial institutions, such as Allianz. Commerzbank, and Deutsche Bank, could lead to an immediate backlash from investors around the world.
They added that the ban was likely to be effectively unenforceable. It will not stop traders from shorting the bonds and shares using other European markets.
"Without the two-way flow the German market is likely to become utterly dysfunctional," said one London-based bond trader. "Nobody ever thought they'd do this in a million years and it raises the long-term question of who is now going to want to buy their debt."
Germany, like other European governments, must raise hundreds of billions of euros by selling new bonds, but banning short-selling could jeopardise demand.
Analysts at Bank of America Merrill Lynch summed up the mood with a note titled What's Germany going to ban next? Rainy days, harsh words, the Macarena?
In other EU news, the UK’s discredited last UK government was playing fast and loose with the finances. Is Britain the next Greece?
"Too bad ninety percent of the politicians give the other ten percent a bad reputation."
Henry Kissinger.
Labour overruled civil servants’ objections to final spending plans
Civil servants lodged a series of objections to spending plans by ministers, including Lord Mandelson, in the final months of the Labour government, it has been disclosed.
By Christopher Hope, Whitehall Editor Published: 10:26PM BST 18 May 2010
Official figures showed that mandarins were objecting to decisions made by ministers at a rate of nearly one a month as Labour headed for defeat in the election.
Labour ministers have been accused of pursuing a “scorched earth policy” by leaving behind billions of pounds of spending commitments for the coalition Government.
Jonathan Baume, the leader of the First Division Association, which represents senior civil servants, said the objections showed “there was some unhappiness about spending decisions”.
Figures disclosed by the Treasury last night showed that ministers overruled civil servants on spending plans on at least four occasions since the start of 2010.
Advice from officials was ignored on a further nine occasions in 2009. This compared with just five occasions in the previous three years. Three quarters of these objections were on the grounds of value for money.
Lord Mandelson’s spending decisions were challenged on five occasions in 2009, including a loan to a quango in the West Midlands and £10 million for a sports complex in Leeds.
Other objections over value for money included the £300 million car scrappage scheme and support for dairy farmers.
The spending decisions are now likely to be investigated by MPs on the public accounts committee.
We end for the day’s shortened LIR update with Dolce Vita news from Athens. Break out the ouzo, take the day off, the party’s back on again, it seems.
EU Says EU14.5 Billion Loan Tranche Has Been Sent to Greece
May 18 (Bloomberg) -- The European Union said it transferred the first installment of emergency loans to Greece, one day before 8.5 billion euros ($10.6 billion) of bonds come due.
The EU’s first payment of 14.5 billion euros was sent today, EU spokesman Amadeu Altafaj said by telephone in Brussels.
The International Monetary Fund, which is participating in the bailout, made its initial contribution of 5.5 billion euros last week. The loans will cover the nation’s financing needs for May and June, a Greek official said yesterday.
http://www.bloomberg.com/apps/news?pid=20601087&sid=acv_1u_QqiZ4
At the Comex silver depositories Tuesday, final figures were: Registered 53.64 Moz, Eligible 64.48 Moz, Total 118.12 Moz.
Day 10 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
+++++
Crooks & Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today it’s back to the unlovable great vampire squids again. While the bailed out Goldmanites are making money faster than God and the Fed can create it, they only lost money “on 11 days in the last 12 months,” their hapless clients, lost money of 7 out of their last 9 “top” trading recommendations! “God’s work” begins and stays firmly at home apparently. Even so, banging up their marks 7 times out of 9 takes considerable skill of a sort. A monkey tossing darts would likely have a better success ratio and comes considerably cheaper. Was Ebenezer Squid’s prop desk taking the other side of the trades? John Paulson, perhaps?
If it wasn’t for bad news, Goldie wouldn’t have any news at all.
Anonymous client.
Goldman Sachs Hands Clients Losses in ‘Top Trades’
May 19 (Bloomberg) -- Goldman Sachs Group Inc. racked up trading profits for itself every day last quarter. Clients who followed the firm’s investment advice fared far worse.
Seven of the investment bank’s nine “recommended top trades for 2010” have been money losers for investors who followed the New York-based firm’s advice, according to data compiled by Bloomberg from a Goldman Sachs research note sent yesterday. Clients who followed the tips lost 14 percent buying the Polish zloty versus the Japanese yen, 9.4 percent buying Chinese stocks in Hong Kong and 9.8 percent trading the British pound against the New Zealand dollar.
The struggles for analysts at Goldman, which is fighting a fraud lawsuit from U.S. regulators who accuse the company of misleading investors in a mortgage-linked security, show the difficulty of predicting market movements as widening budget deficits, a fragile global economic recovery and tighter financial regulations increase volatility. Stock and currency fluctuations rose to the highest in a year this month as Europe pledged about $1 trillion to stop a debt crisis in the region.
-----On April 1, Goldman Sachs added a ninth “top” trade, telling clients to buy Chinese stocks listed in Hong Kong and predicting the Hang Seng China Enterprises Index would rise 19 percent to 15,000.
Tough Analysis
Since then, the gauge has slid 9.4 percent to 11,426.18. The Shanghai Composite index has entered a bear market, losing about 21 percent this year. That’s the third biggest decline in the world after Greece and Cyprus. The decline accelerated this month on concern Greece, Spain and Portugal will struggle to finance their budget deficits and dismantle the euro.
The Chinese stock recommendation was made by a group led by Dominic Wilson, a senior Goldman Sachs economist in New York. Wilson cited inexpensive valuations and “robust” economic growth. He also said investors have already factored in the risk of higher interest rates in China.
Wilson wasn’t available to comment because he was out of the office traveling, according to an e-mail.
-----Goldman Sachs makes more money from trading than any other Wall Street firm. In the first quarter, the bank’s $7.39 billion in revenue from trading fixed-income, currencies and commodities dwarfed the $5.52 billion made by its closest rival, Charlotte, North Carolina-based Bank of America Corp. In equities, Goldman Sachs’s $2.35 billion in revenue was about 50 percent higher than its nearest competitor.
Cohn told investors at a May 11 conference in New York that the firm lost money on only 11 days in the last 12 months. He said that uncanny streak of success refutes suspicions that the bank depends on proprietary bets with its own money.
“It is implausible that a proprietary-driven business model could be right 96 percent of the time,” Cohn said. Instead, he said the “simple answer” is that the firm makes money by capturing bid-offer spreads when acting as an intermediary for client trades.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aF5tV7uvY0FU
Below, BP’s boss, probably alarmed by the LIR headline yesterday, tries to downplay the oil spill in the Gulf of Mexico. The impact will be “very, very, modest,” he says. BP’s unwise “God’s work” moment I suspect. There are now probably many better oil companies to want to own, especially with the price of crude oil now back down below $70.
"Drawing on my fine command of language, I said nothing."
Robert Benchley.
Gulf of Mexico oil spill: BP insists oil spill impact 'very modest'
Tony Hayward, the chief executive of BP, has sought to calm US fears about deepwater drilling by claiming the environmental impact of its giant oil spill in the Gulf of Mexico will be "very, very modest".
By Rowena Mason Published: 8:16PM BST 18 May 2010
However, his comments came as Ken Salazar, the US Interior Secretary, launched a renewed attack on BP and its rivals for reacting with "ire" at the prospect of tighter safety procedures.
Mr Hayward's reassurances also coincided with the discovery of tar balls from the the spill off Florida for the first time. Experts fear that currents could be directing a slick the size of Luxembourg towards US coastal areas.
BP said on Tuesday it had managed to contain around 40pc of the flow from its leaking well by piping oil to the surface. The well started gushing 5,000 barrels per day of oil into the ocean when the Deepwater Horizon rig operated by contractor Transocean sank three weeks ago – killing 11 men.
President Obama's administration maintained its pressure on BP last night by castigating the oil industry for resisting safety measures.
"In the past 16 months, our efforts at reform have been characterised as impediments and roadblocks to the development of our domestic oil and gas resources," Mr Salazar said.
Separately, a group of energy producers on Tuesday filed a lawsuit against BP and Goldman Sachs. It alleges they conspired to defraud the plaintiffs of money for commodities delivered just before the bankruptcy of energy trader SemGroup in 2008 – an allegation strongly denied by the defendants.
"Rarely have so many people been so wrong about so much."
Richard M. Nixon.
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.
+++++
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.
+++++
Sunspots – A 22 year colder world? (From 2004?)
Spotless Days May 18
Current Stretch:10 days
2010 total: 31 days (22%)
2009 total: 260 days (71%)
Since 2004: 800 days
Typical Solar Min: 485 days
The long minimum seems to have ended, or has it?
No comments:
Post a Comment