Baltic Dry Index. 3922 -07
LIR Gold Target by 2019: $3,000.
Each success only buys an admission ticket to a more difficult problem.
Henry Kissinger.
In BP’s continuing disaster news, a limited success was met with yet more concern for Florida’s Keys. Almost a month on from the Deepwater disaster, no one knows how much oil and gas is really spewing into the Gulf of Mexico, no one knows what effect the use of toxic dispersals at depth will have on where the oil eventually ends up, no one knows when the spill will eventually be stemmed. No one knows either, why the spill occurred, nor which companies error of judgment created it, though lurid claims are now common in the media.
Below, the Houston Chronicle updates on the latest concerns. My guess is that if the spilled oil actually hits the Keys and pollutes the Everglades and Atlantic Florida, BP’s shareholders can kiss the company goodbye. If the deep water use of dispersants has merely “hidden” the spilled oil in gigantic plumes, slowly making their way to the surface over many weeks or months, BP’s self insured costs might leave the company's profits working for non shareholders for years.
It is not a matter of what is true that counts, but a matter of what is perceived to be true.
Henry Kissinger.
Scientists worry current could carry oil to Keys
By JEFFREY COLLINS and MATT SEDENSKY Associated Press Writers © 2010 The Associated Press May 17, 2010, 10:30PM
ROBERT, La. — With BP finally gaining some control over the amount of oil spewing into the Gulf of Mexico, scientists are increasingly worried that huge plumes of crude already spilled could get caught in a current that would carry the mess all the way to the Florida Keys and beyond, damaging coral reefs and killing wildlife.
Scientists said the oil will move into the so-called loop current soon if it hasn't already, though they could not say exactly when or how much there would be. Once it is in the loop, it could take 10 days or longer to reach the Keys.
"It's only a question of when," said Peter Ortner, a University of Miami oceanographer.
The U.S. Coast Guard reported that 20 tar balls were found off Key West on Monday, but said a lab analysis would have to determine their origin. The Florida Park Service during a shoreline survey found the balls that were about 3-to-8 inches in diameter.
-----The loop current is a ribbon of warm water that begins in the Gulf of Mexico and wraps around Florida. Some scientists project the current will draw the crude through the Keys and then up Florida's Atlantic Coast, where the oil might avoid the beaches of Miami and Fort Lauderdale but could wash up around Palm Beach.
Many scientists expect the oil to get no farther north than Cape Canaveral, midway up the coast, before it is carried out to sea and becomes more and more diluted.
The pollution could endanger Florida's shoreline mangroves, seagrass beds and the third-longest barrier reef in the world, the 221-mile-long Florida Keys National Marine Sanctuary, which helps draw millions of snorkelers, fishermen and other tourists whose dollars are vital to the state's economy.
In other developments:
_ Chris Oynes, who oversees offshore drilling programs at the federal Minerals Management Service, will retire at the end of the month, becoming the Interior Department's first casualty of the disaster. Oynes has been criticized as too cozy with the oil industry.
_ The White House will establish a presidential commission to investigate the spill, according to an administration official speaking of condition of anonymity.
_ California Sen. Barbara Boxer and other Democrats are calling on the Justice Department to open a criminal investigation.
_ BP said it has spent $500 million on the spill so far.
_ The oil company said it will never again try to produce oil from the well, though it did not rule out drilling elsewhere in the reservoir. "The right thing to do is permanently plug this well, and that's what we will do," said Doug Suttles, BP chief operating officer.
William Hogarth, dean of the University of South Florida's College of Marine Science, said one computer model showed oil had already entered the loop current, while a second model showed the oil was three miles from it. Mike Sole, Florida's environmental protection secretary, said the edge could still be two to 18 miles away.
BP said it is having some success with a mile-long tube that is funneling a little more than 42,000 gallons of crude a day from the well into a tanker ship. That would be about a fifth of the 210,000 gallons the company estimated is gushing out each day, though scientists who have studied video of the leak say it could be much bigger.
http://www.chron.com/disp/story.mpl/ap/top/all/7009780.html
In European news, the U-turned now panicky ECB has become the preferred way of exiting Club Med debt. I wonder for how long this can last before restructuring becomes obvious to all? Not very long is my guess.
“Who do I call if I want to call Europe?”
Henry Kissinger.
Banks dump Greek debt on the ECB as eurozone flashes credit warnings
Foreign holders of Greek and Portuguese debt have seized on emergency intervention by the European Central Bank to exit their positions, leaving eurozone taxpayers exposed to the credit risk.
By Ambrose Evans-Pritchard, International Business Editor
Published: 6:57PM BST 17 May 2010
The Bank of New [York] Mellon said its custodial data showed a "sharp acceleration" of net sales of debt from the two countries after the ECB began purchasing €16.5bn of bonds from southern Europe and Ireland in bid to halt market panic. "It rather suggests that investors leapt at the opportunity to clear their balance sheets of intolerable risk," said Neil Mellor, the bank’s currency strategist. "This leaves the ECB itself in an unpleasant situation since it now faces a deterioration in its own balance sheet."
While ECB action has greatly reduced bond spreads on peripheral eurozone debt, it has not yet stabilized the broader markets. The euro fell to a four-year low of $1.2260 against the dollar in early trading. Jean-Claude Juncker, the head of the Eurogroup, said on Monday that this risks becoming disorderly. "I'm not worried as far as the current exchange rate is concerned: I'm worried as far as the rapidity of the fall is concerned."
Crucially, there are still serious strains in the interbank lending market. Hans Redeker, currency chief at BNP Paribas, said the LIBOR-OIS spread in Europe used to gauge credit stress is flashing danger signals, hovering near levels seen during the Lehman crisis.
The ECB’s strategy of draining liquidity to offset the stimulus from the bond purchases risks making matters worse. "They are using one-week deposits for sterilisation and the effects of this to make short-term funding more expensive. This will force banks to sell assets to shrink their balance sheet and risks causing a credit crunch," he said.
Mr Redeker said the ECB is pursuing a contractionary policy to assuage concerns in Germany that Club Med bond purchases will stoke inflation. "They have read the German press and it made their hair stand up on their necks. The reality is that a deflationary cycle is developing in Euroland and the ECB will eventually have to start quantitative easing," he said.
-----A report by RCB Capital Markets said German banks have yet to come clean on 75pc of their combined exposure to €45bn of Greek debt. The state-owned Hypo Re has revealed holdings of €7.8bn, equal to 243pc of its tangible equity. Commerzbanks’s subsidiary Eurohypo holds €3bn, or 77pc, of its tangible equity.
RBS said that some German banks may face risks if there is a voluntary debt restructuring by Greece, since this would not trigger debt insurance contracts on credit default swaps. This would leave them facing much larger debt write-downs than they bargained for.
Analysts say austerity measures across southern Europe are causing the euro to weaken further because they will dampen growth and may lead to protracted slumps, forcing the ECB to delay rate rises.
Italy is next in line for a fiscal squeeze, preparing €25bn of belt-tightening over the next two years. Leaks in the Italian media say Rome plans to freeze public sector wages, limit recruitment, and delay retirement.
Next, the other shoe falls in an increasingly dysfunctional Europe. I don’t know how long the ECB can keep all the balls juggling in the air, but I do know that it ends with them bouncing all over the floor. Can we make it as far as the traditional autumn crash season? I have my doubts. The first time German cash visits Greece and ends up holidaying in Switzerland, I suspect that German taxpayers will bring the whole thing crashing down. But can a leopard really change its spots? Will the Greeks really learn to love taxes and hard work?
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The question is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.'
Ludwig von Mises.
‘Lack of Trust’ Pummels Bank Lending in Europe: Credit Markets
May 17 (Bloomberg) -- Money markets are showing rising levels of mistrust between Europe’s banks on concern an almost $1 trillion bailout package won’t prevent a sovereign debt default that might trigger a breakup of the euro.
Royal Bank of Scotland Group Plc and Barclays Plc led financial firms punished by rising borrowing costs, British Bankers’ Association data show. The cost to hedge against losses on European bank bonds is 62 percent higher than a month ago. Investment-grade corporate debt sales in the region plummeted 88 percent last week to $1.2 billion from the previous period, according to data compiled by Bloomberg.
The rate banks say they charge each other for three-month loans in dollars rose to a nine-month high, even after a government-led rescue designed to prevent Greece from defaulting, and a new financial crisis. The euro fell to its weakest against the dollar since 2006.
Bank lending “conveys a lack of trust in the system,” said Robert Baur, chief global economist at Des Moines, Iowa- based Principal Global Investors, which manages $222 billion. “Banks are a little reluctant to lend overnight as they don’t know the full extent of what is on the bank balance sheets.”
----- Deutsche Bank AG Chief Executive Officer Josef Ackermann said Greece may not be able to repay its debt in full, and former Federal Reserve Chairman Paul Volcker said he’s concerned the euro area may break up. Sony Corp., the world’s second- largest maker of consumer electronics, said it may suffer a “significant impact” if Europe’s deficit spreads, while Chinese Premier Wen Jiabao said the foundations for a worldwide recovery aren’t “solid” as the sovereign-debt crisis deepens.
Commercial Paper
Concerns have spilled into the market for commercial paper, debt used by companies and banks for their short-term operating needs. Rates on 90-day paper are more than double the upper band of the federal funds rate, about twice the average in the five years before credit markets seized up in mid-2007.
“The list of banks able to tap the three-month market remains extremely limited with access spotty and expensive,” Joseph Abate, a money-market strategist at Barclays in New York, wrote in a May 14 note to clients.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aLtqFUvQegJo&pos=4
FT Alphaville has a pretty interesting coverage of the ECB’s predicament at the link below.
Sterilised and scandalised
Posted by Tracy Alloway on May 18 04:12
We end for today with a scandal that’s sure to grow and grow. Google’s BP moment, perhaps. So far, Google’s explanations on the outrageous conduct don’t hold water. After first keeping the illegal data snooping secret, Google now says it didn’t want to collect the data in the first place. So why did they, and which spook agency thought this was a great idea, and made them do it? Below, the FT covers what is likely to be a very expensive episode for Google. Who at Google authorised turning Google’s cars into WiFi spies on the general public? Was this illegality known at board level? How do we/they know that this illegal data hasn’t been copied or put to other use?
The illegal we do immediately. The unconstitutional takes a little longer.
Henry Kissinger.
Google set for probes on data harvesting
By Joseph Menn in San Francisco, Daniel Schäfer in Frankfurt and Tim Bradshaw in London
Published: May 17 2010 19:42 Last updated: May 17 2010 23:27
Authorities on both sides of the Atlantic on Monday moved towards investigating Google following the internet group’s disclosure that it had recorded communications sent over unsecured wireless networks in people’s homes.
Peter Schaar, the German commissioner for data protection, called for a “detailed probe” by independent authorities into the practice by Google.
He said the group’s explanation of the collection of data as an accident was “highly unusual”.
“One of the largest companies in the world, the market leader on the internet, simply disobeyed normal rules in the development and usage of software,” he said.
In the US, the Federal Trade Commission was expected to launch an inquiry as well, according to people who spoke to agency officials.
Privacy advocates said an inquiry could look at whether the collection of data breached rules on unauthorised access to computers and private communications.
“This may be one of the most massive surveillance incidents by a private corporation that has ever occurred”, said Marc Rotenberg, leader of the nonprofit Electronic Privacy Information Centre in Washington.
“It is unprecedented vacuuming of WiFi data by a private company. Can you imagine what would happen if a German corporation was sending cars through Washington sucking up all this information?”
-----Google said the project leaders ignored that the vehicles were also taking in snippets of activity on the WiFi networks.
“We didn’t want to collect this data in the first place and we would like to destroy it as soon as possible,” said Google’s spokesman Peter Barron.
The data in question had never been available to outsiders, the company said.
However, Google’s credibility has taken a hit, especially since it only recently disclosed that the cars, in circulation for years, had wireless capability.
The matter came to light during a separate tussle over the images on Street View, which supplements Google’s maps and satellite-view offerings.
Ilse Aigner, the German minister for consumer protection, said the new revelation “is alarming and yet another proof that privacy protection is still alien to Google”.
In the UK, the Information Commissioner’s Office said that Google appeared to have breached the data protection act.
http://www.ft.com/cms/s/2/254ff5b6-61e2-11df-998c-00144feab49a.html
At the Comex silver depositories Monday, final figures were: Registered 51.77 Moz, Eligible 64.06 Moz, Total 115.83 Moz.
Day 9 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.
Today, 23 years on from Black Monday 1987, the Journal says Wall Street program traders have learned nothing and that May 6ths bizarre stock market crash was almost identical to the “portfolio insurance” stock market crash of October 1987. When $40 stocks get driven lower to trade at a penny and all in less than 30 minutes, as happened on May 6th, something is clearly wrong in US stock markets. At the least, I think high frequency trading programs, illegal front running of client orders by great vampire squids in my book, should be banned and made permanently illegal.
"Liquidation sometimes is orderly, but more frequently degenerates into panic as the realization spreads that there is only so much money, not enough to enable everyone to sell out at the top."
Charles P. Kindleberger. Manias, Panics and Crashes.
MAY 17, 2010
How the 'Flash Crash' Echoed Black Monday
May 6 Selloff Had Parallels to 1987; Electronic Trading Magnified Selling Pressure This Time
Soon after the Black Monday crash of 1987, exchanges and regulators scrambled to enact new rules to prevent a repeat of the biggest stock market shock in 50 years. Even then, they worried they hadn't done enough.
"I simply cannot give you assurances that we have fixed the system," the chairman of the Securities and Exchange Commission at the time, David Ruder, told the Senate Agriculture Committee in early 1988.
After two decades of rule-changing and technological advancements, those comments seem haunting, especially as investigators of May 6's "flash crash" stumble upon echoes of the Black Monday meltdown.
Technological innovation has been widely touted as having made the market more efficient—and more resilient. Instead, the May 6 drop—while much smaller than the 1987 crash—showed that technology mainly served to speed up trading and magnify the market moves.
On May 6, "The velocity of the volatility was stunning, beyond anything I had ever seen, with the exception of October of 1987, when I was on the trading floor," said Ted Weisberg, president of Seaport Securities in New York.
"There's a strong parallel between the Black Monday crash and the flash crash," said Michael Wong, an analyst at Morningstar who tracks stock exchanges.
On Oct. 19, 1987, the Dow Jones Industrial Average tumbled more than 20%, and the swoon extended into the following day, before a rebound. Floor traders, working by telephone, dominated the action and computer-generated trading was still in its infancy. Dark pools and high-frequency trading were the stuff of science fiction. Trading reached 600 million shares, according to the SEC.
Fast forward to May 6, 2010: The worst part of the lightning descent lasted roughly 10 minutes and the decline hit 9.8% at its worst. Trades, many executed in milliseconds, reached 19 billion shares.
In both cases, troubles first appeared in the stock futures market, which precipitated a decline in the regular "cash" market. The two created a feedback loop, dragging both markets lower.
Perhaps the most concerning parallel was how professionals abandoned the market. In 1987, some human market-makers on the floor of the exchange stopped providing bids for certain stocks.
Two decades later, in a market dominated by technology, high-speed traders who often provide liquidity for the market, just switched off their computers. Other big players, including fast-trading hedge funds, also pulled out of the market, according to traders and exchange officials.
-----While portfolio insurance has long since gone by the wayside, a large number of traders still use futures to hedge against losses. The May 6 selloff appears to have been led by a wave of futures selling. Commodity Futures Trading Commission Chairman Gary Gensler, in congressional testimony a week ago, said trading between futures and stocks became "highly converged" in the May 6 decline. The plunge in futures caused stocks to fall, leading to even more selling of futures.
The link means that in times of stress, these two key parts of the market—stocks and futures—can have a self-reinforcing effect that can turn an average selloff into a crash.
Selling pressure on both days became so intense that any remaining buyers were overwhelmed, creating an "air pocket" in stocks and other securities that led to vertiginous drops.
Many market makers on Black Monday had exhausted their funds, while others were overwhelmed by the volatility. The NYSE later took steps to boost traders' capital.
Some of the key changes in the markets helped magnify the selling pressure on May 6, rather than helping cushion the market.
This time around, many investors rushing to sell unloaded exchange-traded funds, which didn't exist in the 1980s.
Heavy selling of ETFs spread losses to other parts of the stock market. ETFs linked to indexes such as the Russell Midcap index spiraled in value in the selloff; indeed, the value of many ETFs actually fell to pennies. About two-thirds of all securities that had canceled trades on May 6 were ETFs, according to IndexUniverse.com.
“"Today Americans would be outraged if U.N. troops entered Los Angeles to restore order; tomorrow they will be grateful! This is especially true if they were told there was an outside threat from beyond whether real or promulgated, that threatened our very existence. It is then that all peoples of the world will pledge with world leaders to deliver them from this evil. The one thing every man fears is the unknown. When presented with this scenario, individual rights will be willingly relinquished for the guarantee of their well being granted to them by their world government."
Henry Kissinger in an address to the Bilderberger meeting at Evian, France, May 21, 1992.
(in an address to the Bilderberger organization meeting at Evian, France, on May 21, 1991. As transcribed from a tape recording made by one of the Swiss delegates. )”
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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