“Unfortunately Familiar.”

Baltic Dry Index. 4156 -53

LIR Gold Target by 2019: $3,000.

There can be few fields of human endeavour in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.

J K Galbraith

For more on the “unfortunately familiar,” scroll down to the “Starr” of our Crooks section. We open this morning with discouraging news from the Gulf of Mexico. Despite encouraging early spin that all was “going to plan,” after a day of pumping mud into the oil and gas gushing BOP, BP’s top kill might not be working. Below the NY Times covers yesterday’s developments. Below that, the Houston Chronicle on other developments yesterday.

BP Resumes Work to Plug Oil Leak After Facing Setback

By CLIFFORD KRAUSS and JOHN M. BRODER Published: May 27, 2010

HOUSTON — BP on Thursday night restarted its most ambitious effort yet to plug the oil leak in the Gulf of Mexico, trying to revive hopes that it might cap the well with a “top kill” technique that involved pumping heavy drilling liquids to counteract the pressure of the gushing oil.

BP officials, who along with government officials created the impression early in the day that the strategy was working, disclosed later that they had stopped pumping the night before when engineers saw that too much of the drilling fluid was escaping along with the oil.

It was the latest setback in the effort to shut off the leaking oil, which federal officials said was pouring into the gulf at a far higher rate than original estimates suggested.

If the new estimates are accurate, the spill would be far bigger than the Exxon Valdez disaster in 1989 and the worst in United States history.

President Obama, who planned to visit the gulf on Friday, ordered a suspension of virtually all current and new offshore oil drilling activity pending a comprehensive safety review, acknowledging that oversight until now had been seriously deficient.

-----In the morning, federal officials expressed optimism that all was going well. “The top kill procedure is going as planned, and it is moving along as everyone had hoped,” Adm. Thad W. Allen of the Coast Guard, the leader of the government effort, told CNN.

And Robert Dudley, BP’s managing director, said on the “Today” program on NBC that the top kill “was moving the way we want it to.”

It was not until late afternoon that BP acknowledged that the operation was not succeeding and that pumping had halted at 11 p.m. Wednesday.

After the resumption, Doug Suttles, BP’s chief operating officer for exploration and production, struggled to offer guidance on whether the latest effort was likely to succeed.

“It’s quite a roller-coaster,” Mr. Suttles said. “It’s difficult to be optimistic or pessimistic. We have not stopped the flow.”

http://www.nytimes.com/2010/05/28/us/28spill.html?hp

Sea life concerns prompt BP dispersants cutback

By MATTHEW TRESAUGUE HOUSTON CHRONICLE May 27, 2010, 7:16PM

BP has scaled back the use of chemical dispersants to combat the massive spill in the Gulf of Mexico amid concerns over the long-term effects on sea life, officials said Thursday.

EPA Administrator Lisa Jackson told a House panel that the oil giant has reduced daily use of dispersants to 12,000 gallons from 70,000 gallons at the urging of the agency.

BP, which is responsible for the cleanup, has used more than 850,000 gallons of dispersants in an attempt to break up the oil before it reaches Louisiana's fragile coast — a tactic that Jackson described as the lesser of two evils.

“It's a tough trade-off,” she told the House Subcommittee on Energy and Environment.

The manufacturer of the dispersant, called Corexit 9500, did not dispute the characterization but said the product is effective and safe.

“You wouldn't put dispersants in the Gulf unless it's necessary,” Erik Frywald, president and CEO of Nalco, which makes the dispersants, said in an interview Thursday. “What we're hearing from the experts is that they're working and helping.”

Frywald said Corexit 9500 consists of six chemicals that are in everyday products, such as skin creams and shower cleaners, and should not be a risk to aquatic life, especially in the vast waters of the Gulf.

BP, however, has used an unprecedented amount of the chemicals to combat the spill, raising concerns among some government officials and environmental groups.

In a letter to BP last week, the EPA gave the company three days to find less toxic and more effective dispersant than Corexit 9500.

Federal officials later acknowledged that alternatives are not available in sufficient quantities.

http://www.chron.com/disp/story.mpl/business/deepwaterhorizon/7025745.html

New offshore drilling limited

Obama orders rigs to stop work on about 30 exploratory wells

By JENNIFER A. DLOUHY HOUSTON CHRONICLE May 28, 2010, 12:12AM

WASHINGTON — Describing the massive oil spill in the Gulf of Mexico as a wake-up call, President Barack Obama on Thursday banned new drilling in deep coastal waters and ordered floating rigs to stop work on some 30 exploratory wells.

He also blocked planned drilling in Arctic waters this summer and canceled long-planned sales of leases in the western Gulf of Mexico and a tract 50 miles off Virginia's coast. At the same time, Obama lifted a ban on new drilling in shallow waters, where generally less than 500 feet separate the seabed and surface.

“I continue to believe that domestic oil production is important, but I also believe that we can't do this stuff if we don't have confidence that we can prevent crises like this from happening again,” the president said during a White House news conference. “It's going to take some time for the experts to make those determinations.”

Obama said the delays would let an independent commission review what went wrong with the Deepwater Horizon rig. The pause also will give federal regulators a chance to implement new safeguards, including stiffened well control practices, the recertification of critical safety devices known as blowout preventers, and expanded training programs for rig workers.

Interior Secretary Ken Salazar advanced the new restrictions after a 30-day review of industry practices.

“We essentially will not allow any more deep-water drilling until we can ensure we are doing it in the safest way possible,” Salazar said. “And we believe we can do it safer.”

The administration's ban on approving new deep-water drilling permits for at least six months and the suspension of deepwater exploration do not affect the 4,515 shallow-water and the 591 deepwater Gulf wells now producing oil and gas. But industry leaders and advocates warned that lengthy drilling delays could lead to job losses and price hikes for gasoline.

-----Roughly a third of the nation's domestically produced oil comes from the Gulf, and much of that — about 70 percent in 2007 — is from operations in more than 1,000 feet of water.

Salazar said exploratory wells being drilled would be directed to stop operations as soon as it is safely possible.

The suspension will mean roughly 30 floating drilling rigs — typically leased for hundreds of thousands of dollars a day — will be idled indefinitely.

The suspensions will affect energy company contracts with drilling suppliers and other vessels involved in the operations.

http://www.chron.com/disp/story.mpl/business/deepwaterhorizon/7026038.html

In European news, “budget consolidation” is the name of the game , according to Der Spiegel. Below, Der Spiegel on Europe’s directly opposite economic plan to that of America. Europe seems to have lost sight of our new world operating on fiat currency. Below that, Spain finally starts to clean up its banks. But which Spanish banks will go under as they try?

European Austerity the First Step to Recovery

By Michael Kröger and Bahador Saberi 05/27/2010

Austerity programs are all the rage in Europe. Several countries have pledged to slash spending by billions in a frantic effort to balance budgets and save the euro. Economists say that it might work -- and that the US should take notice.

The good news came from Frankfurt on Wednesday: Germany's central bank, the Bundesbank, estimates that the country's budget deficit will not be quite as gaping as the government had feared. With the economy recovering more quickly than expected, the 2010 deficit will only be roughly 5 percent of gross domestic product, the Bundesbank wrote in its monthly report. In January, the government of Chancellor Angela Merkel had forecast a deficit of 5.5 percent.

Still, the report encouraged the government not to ease up on its efforts to cut spending. "Given the high deficit and rapidly climbing debt, potentially positive (economic) developments should not be seen as providing budgetary flexibility, but should be used to further consolidate," the report warned. It is the same message that is being heard in capitals across Europe these days.

Italy is the most recent example. On Tuesday evening, Prime Minister Silvio Berlusconi announced an austerity package worth €24 billion -- a savings plan that came as a surprise to many. The measures include cuts in civil servant salaries, pared down regional and municipal spending as well as tax increases. "The state has to cost less, that's the main point," said Berlusconi not long after his cabinet adopted the measures.

It seems to be a message that many in Europe have adopted as their own in recent weeks. Countries in the euro zone finally seem to be pulling together. Everywhere, the goal is the same: budget consolidation.

Spain has even gone so far as to further tighten a package of austerity measures it previously introduced. In 2010 and 2011, Madrid wants to spend €15 billion less than first planned, a sum which represents 1.5 percent of the country's gross domestic product. Like Italy's savings package, Spain plans public sector salary cuts, a pension freeze and cuts in public spending. Value-added tax is to rise as well.

The Greek austerity program is even more extreme. Under the stewardship of the European Union and the International Monetary Fund, Athens has pushed through a package of measures worth some €30 billion by 2014 -- equivalent to 13 percent of the country's GDP.

Is Europe back on track? Will the euro zone succeed in regaining its strength? Financial markets are still skeptical -- as are ordinary Germans. According to a survey carried out for Stern magazine, more than three-quarters of Germans are concerned that public debt will get out of control. Some 59 percent fear that politicians will not be able to deal with the current fiscal problems.

But in the light of the efforts of the past few weeks, many experts are beginning to feel a sense of optimism. "The crisis has forced Europe to act together, and the countries have actually managed to find a common position within a short space of time," explains Roland Döhrn of the Rhine-Westphalia Institute for Economic Research (RWI) in Essen

----"The message has been heard: Deep cuts are now necessary," says Josef Kaesmeier, chief economist of the private bank Merck Finck. Even if Spain or Greece were to slip into recession due to drastic austerity measures, there is no alternative to their course of action, Kaesmeier says.

The economist sees much bigger problems outside the euro zone. "I'm worried about what's happening in the UK and the US," he says. "The Americans say: The dollar is the global currency, and we'll happily keep on printing money. Instead of cutting spending, they are simply passing one economic stimulus package after the other."

Eugen Keller, a foreign currency strategist at Metzler Bank, also sees the US as being the "epicenter of the crisis." For the past 20 years, he says, the world's largest economy has lived beyond its means. "That's not going to end well," he says. He argues that respectable businessmen in the current situation would tighten their belts and fix their balance sheets. "But that isn't happening in Washington," Keller says. The financial expert also believes the situation in Europe has eased in recent weeks.

http://www.spiegel.de/international/business/0,1518,697030,00.html#ref=nlint

Spain orders banks to come clean on debts to restore shattered faith

The Bank of Spain has ordered the country's lenders to face up to bad debts and set aside reserves of up to 30pc on property holdings in a bid to restore global confidence in the Spanish financial system after weeks of investor flight.

By Ambrose Evans-Pritchard Published: 9:08PM BST 27 May 2010

The new rules target the savings banks or cajas that account for the lion's share of the €445bn (£377bn) of property debt accumulated during the credit boom, when real interest rates were negative.

The authorities acted after severe strains in the inter-bank market had begun to raise questions about the ability of Spanish lenders to access routine funds from global peers. Deutsche Bank said Spanish lenders need to refinance €125bn by late 2011. "Liquidity is our main area of concern. Savings banks are in a very weak and risky position," it said.

Even the strongest banks – Santander and BBVA – are paying a stiff premium over Libor. The Wall Street Journal reports that BBVA has been unable to roll over €1bn in commercial paper. This has raised fears of a chain reaction through Europe's banks due to the nexus of loans. Data from the Bank for International Settlements show that European banks – led by German lenders, in some trouble themselves – have $851bn (£584bn) in exposure to Spain, as well as $240bn to Portugal and $189bn to Greece.

No Spanish bank has raised money on the capital markets for a month. They are relying on the European Central Bank's lifeline. ECB funding has reached €89bn, the highest level since the Lehman Brothers crisis.

The new rules will force lenders to write down bad debts within a year instead of stretching out the pain for up to six years. They must set aside reserves on €60bn of foreclosed property still sitting on their books at face value, using a rising scale of up to 30pc. Santander and BBVA have already done this.

"Spanish accounting was completely out of line with the rest of Europe," said Hans Redeker, currency chief at BNP Paribas. "It had reached a point where investors no longer believed in Spanish balance sheets because equity ratios are distorted by overvalued holdings of real estate. This move was absolutely the right thing to do. You can't camouflage bad debts any longer. Those days are over," he said.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7773427/Spain-orders-banks-to-come-clean-on-debts-to-restore-shattered-faith.html

Stay long precious metals. Bad money drives out good. Until the US alters its policy of flooding the world in fiat dollars, the chaotic fiat currency regime will just continue getting more chaotic. The end of fiat currency is the ultimate in economic distress and collapse. Sadly, that is still where we are headed, lead by an out of control delusional, spendthrift Washington.

"Indeed the temporary breaks in the market which preceded the crash were a serious trial for those who had declined fantasy. Early in 1928, in June, in December, and in February and March of 1929 it seemed that the end had come. On various of these occasions the [New York] Times happily reported the return to reality. And then the market took flight again. Only a durable sense of doom could survive such discouragement. The time was coming when the optimists would reap a rich harvest of discredit. But is has long since been forgotten that for many months those who resisted reassurance were similarly, if less permanently discredited.”

J.K. Galbraith. The Great Crash: 1929.

At the Comex silver depositories Thursday, final figures were: Registered 52.58 Moz, Eligible 65.94 Moz, Total 118.52 Moz.

Day 19 of Hitler’s attack in the west that almost brought down western civilization. Dunkirk evacuation day 2.

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.

We end for the week, and month of May, back with yet another alleged Madoff wanabe. Step forward today’s “Star” of the Crooks section, Mr. Kenneth I. Starr, money manager to, what else, the “stars,” or perhaps that should be Starrs. Below the NY Times takes up coverage of the interesting case. Of course, everyone is innocent until some court says they’re not, just like deficits don’t matter until suddenly they do, still the NYT’s writers rise to the occasion including the sharp eyed agents spotting his shoes poking out from under a closet door. One almost feels sympathy for poor Mr. Star, having had to spend all his time fawning over “socialites, financiers, philanthropists, A-list actors and Hall of Fame athletes.” Only in Manhattan, as they say. “Starr had an M.O. that has become unfortunately familiar in recent times,” Preet Bharara, the United States attorney in Manhattan, said at a news conference on Thursday. “He used his access to famous and powerful clients to burnish an image of trustworthiness, inducing them to entrust him with management and control of their financial affairs.”

Adviser to Stars Named in Fraud

By NELSON D. SCHWARTZ and JAMES BARRON Published: May 27, 2010

He was the moneyman to the stars, entrusted with managing fortunes for the likes of Wesley Snipes, Sylvester Stallone and Annie Leibovitz.

But when they arrested him on Thursday, federal prosecutors described him as something else: a mini-Madoff who diverted $30 million of his clients’ money to buy himself a sprawling Upper East Side condo complete with an indoor swimming pool and a 1,500-square-foot garden.

Much like Bernard L. Madoff, who is serving a 150-year sentence for bilking tens of billions of dollars from his closely knit network of clients, prosecutors say, Kenneth I. Starr of Manhattan cultivated business at charity events and lavish parties, bridging the worlds of New York and Hollywood to build a star-studded client list of socialites, financiers, philanthropists, A-list actors and Hall of Fame athletes.

Mr. Starr, who is not related to the special prosecutor who investigated former President Bill Clinton, is said to have made access to his company seem exclusive, much as Mr. Madoff did.

“Starr had an M.O. that has become unfortunately familiar in recent times,” Preet Bharara, the United States attorney in Manhattan, said at a news conference on Thursday. “He used his access to famous and powerful clients to burnish an image of trustworthiness, inducing them to entrust him with management and control of their financial affairs.”

A criminal complaint unsealed on Thursday in federal court in Manhattan listed charges of fraud and money laundering, in what prosecutors describe as a scheme that also touched Andrew J. Stein, a former City Council president, assemblyman and Manhattan borough president who left politics in 1994.

Mr. Stein was also arrested in connection with the case and charged with lying to tax authorities and the federal government.

The complaint against Mr. Starr says that Mr. Stein used about $1.6 million from a company created through Mr. Starr to cover “extravagant personal expenses,” including hundreds of thousands of dollars in credit card bills.

However, prosecutors say that Mr. Stein, who gained a reputation as a corruption fighter while in office, was unaware of Mr. Starr’s fraud.

Lawyers for Mr. Starr and Mr. Stein did not respond to requests for comment.

The complaint did not name any victims of the suspected fraud, but it described some, including “an actress” and “an elderly heiress.”

The heiress named as a victim in the complaint is Rachel Lambert Mellon, 99, the widow of Paul Mellon, and a philanthropist, according to her lawyer Alexander Forger. Mr. Starr is accused of using $5.75 million of Mrs. Mellon’s money to help buy his condo.

“She was shocked by the disclosure that Mr. Starr has been accused of criminal activity, she has known him for many years and has trusted him, and committed to him the authority to manage her investments,” Mr. Forger said.

When Mr. Starr, 66, was arrested Thursday morning, he was found hiding in a closet, betrayed when agents spotted his shoes under the door.

According to the complaint, Mr. Starr sometimes raised money for dubious investments. In other cases, he simply diverted the money for his own personal use.

The complaint said Mr. Starr solicited money for investments that he said were safe, then channeled the money to either himself, his wife, his son or Mr. Stein and other associates, or put it into investments they controlled. These listed associates included “a former national official of a major political party” as well as “a partner in a prominent national law firm.”

An affidavit filed by an I.R.S. agent also indicated that Mr. Stein served as a “placement agent,” directing prospective clients to Mr. Starr.

One victim, an actress identified as Client 2 who was a close friend and client for more than a decade, first became concerned late last year when she noticed that her assets had mysteriously dropped with no explanation from Mr. Starr and that $1 million had been wired to an associate of Mr. Starr’s.

After the actress pressed Mr. Starr for months, the $1 million was returned — but Mr. Starr took that money from other accounts, including a former executive at a talent agency and his wife, the complaint said.

http://www.nytimes.com/2010/05/28/business/28sec.html?hp

Another weekend and a holiday weekend in America and Britain. The summer of 2010 begins. On the blog we continue with the fall of France 1940 and “miracle of Dunkirk.” God intervened, and eventually Hitler’s criminal Germany was defeated, though only at the price of leaving half Europe under murderous Godless communism for 45 years. In the aftermath of WW2, the dollar reserve standard was born, linked to gold to keep US politicians and dollar managers honest. That barely lasted until August 15, 1971, when the dollar’s link to gold was ended by a panicked President Nixon. Now we have reached the end game of fiat currency. The benefits were long ago partied away. Our new decade will not be like any other, as a great currency reform ultimately gets imposed. Time for now, to put such thoughts away, and to enjoy God’s holiday weekend. Check with the blog across the weekend. The next LIR email will be Tuesday. Have a great weekend everyone. Let’s hope BP manage to cap the errant oil well before then. Below, a hint of what soon enough comes next.

For example, in 1882, when inflation raged, he was asked the reason that Delmonco's Restaurant raised its price of a Delmonico Steak (a sirloin steak) from $0.75 to $1.00.  He said, "I can't help it.  The other day I had one of my cooks cut up four short loins to see precisely what they would make in beef, porterhouse and rib steaks, filets and Chateuabriands;  and after the most careful computations, allowing even for the trimmings given to the servants and the bones used for making soup, I found the entire yield was $46.50, while the cost to me was $40.75.  Considering the butter used on the steaks, the rent and other expenses, that meant a decided loss to the establishment."

Charles Constant Delmonico. The Great Inflation of ’82.

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. But how much Bull is enough?

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