Baltic Dry Index. 2893 -127
LIR Gold Target by 2019: $3,000.
I find that the further I go back, the better things were, whether they happened or not.
Mark Twain.
Another day, another fall in the Baltic Dry Index. Exactly what it means I don’t know, but it isn’t likely to be a plus for our future prosperity. I suspect that it’s a sign that China’s great restocking boom has ended or been put on hold. That China will/has join(ed) Europe in a period of austerity. If I’m right, that just leaves America and BP spending money like drunken sailors. I doubt that either can continue their open ended spending binge for very much longer. As the rest of the world adopts austerity and stealth devaluation, I suspect that the US economy is about to fly into a vacuum. Stay long precious metals. Bad things happen in H2 10 right after the World Cup ends. “Turbo tax Timmy,” and “Helicopter Ben Bernanke” now look like they will be the last of the big spenders, unable to stop until after this November’s US mid-term election. Absent another flash crash caused by the High Frequency Trading great vampire squids, my money’s on a coming market crash in the traditional autumn great crash season.
With the BP misadventure well covered in the media today, we will pass on the story for now. After today’s coming BP spectacle in the Washington Coliseum, tomorrow should do fine to return the gaff prone dynamic duo of Hayward and Svanberg, Laurel and Hardy do Washington. I suspect that all the “small people” of the GOM will tune in and curse and yell. By the end, quite a few might be in the market for a new TV.
"My formula for success is rise early, work late and strike oil."
John Paul Getty.
We open today with Europe’s 27 EU leaders meeting in conclave in Brussels. Nothing good ever comes out of Brussels let alone when they meet to “fix” things. This time round, the rumor mill has it that Spain is in the midst of a massive EU/IMF rescue plan. Below, The Telegraph covers the on again, off again bailout for the Spanish way of life. So will it be rescue day for Spain today? Manana as they say in Spain.
"Anyone who lives within their means suffers from a lack of imagination."
Oscar Wilde.
Spanish debt wilts amid €250bn rescue plan confusion
European debt markets remain under high stress on persistent reports that Spain is in secret talks with EU officials and the International Monetary Fund for a support package of up to €250bn (£208bn), the largest rescue in history
By Ambrose Evans-Pritchard Published: 8:15PM BST 16 Jun 2010
The spreads on 10-year Spanish bonds jumped to a post-EMU high of 224 basis points above German Bunds as traders brace for a crucial auction by Madrid on Thursday. The relentless rise in bond yields replicates the pattern seen in Greece at the onset of crisis. Spain must raise €25bn of debt in a cluster of auctions in July.
"We're in a dangerous and stressful situation," said Gary Jenkins, a credit expert at Evolution Securities. "Spain is a big enough borrower to wipe out the EU's rescue fund."
Elena Salgado, Spain's finance minister, reacted angrily to a report in the Spanish daily El Economista claiming that the support plans are well advanced.
"It has been denied by the Spanish government, by the European Commission, and by the IMF. How much more can we deny it?" she said.
The story refuses to die, however. Three German newspapers have run similar stories over recent days, citing German sources. The markets are convinced that some form of contingency planning is underway.
"In our view there is absolutely no doubt that a backstop facility for Spain will be put in place should stress in the system remain," said Silvio Peruzzo, an economist at RBS,
El Economista said officials from the EU, the IMF, and the US Treasury had been discussing a credit line of €200bn to €250bn, dwarfing the €110bn package for Greece. Dominique Strauss-Kahn, the IMF's managing director, reportedly called a secret meeting of the IMF's Board of Directors to tackle the crisis.
The loan terms would be softer than the draconian budget cuts imposed on Greece, with the lion's share of the money coming from eurozone states under their €750bn shield.
Mr Peruzzo said the facility was likely to resemble the IMF's Flexible Credit Line devised for Poland and Mexico. This is a "precautionary" credit for healthy borrowers facing a "cash crunch". The funds can be drawn at any time, without strings attached.
Mr Jenkins said it is unclear how the EU would finance a full rescue for Spain. Under the Greek formula, the EU-IMF ratio of aid is 8:3, implying an EU share of around €180bn – with a risk that the sums will escalate. The number of eurozone states available to fund the package is shrinking.
"The issue here is political risk. If they keep bailing out countries, it will mean printing money: that is not going to go down well in Germany," he said.
Below, London’s Indie suggests that Spain is the new Lehman. Stay long gold and silver in case they’re right.
Sean O'Grady: If Greece was Northern Rock, Spain is Lehman Brothers
Thursday, 17 June 2010
Unlike the football result, Spain's financial fiasco was entirely predictable. Though her problems are not as deep-seated as those in Greece, they are more dangerous simply because the Spanish economy is so much larger than that of Greece – about five times larger, in fact. It is the sort of difference, to draw an uncomfortable analogy, between Northern Rock and Lehman Brothers.
The first was serious indeed, and a precursor of worse to come, but it did not shake the world; Lehman Brothers was globally systemic, just as Spain is. Spain's economy is five times the size of Greece's; she is too big for Germany and France to save, and threatens the euro's survival. But, to borrow a phrase, Spain is also too big to fail.
The short-term problem is that investors are unwilling to lend to Spain – the Spanish government, Spanish banks and Spanish companies are finding it difficult to raise funds. Without those funds, they cannot go on. It is a credit crunch, based, as in Greece before it, on a rising tide of scepticism about Spain's ability to meet her obligations as they fall due. The banks, in particular, need liquid funds to carry on their normal business of lending. If they cannot rely on those, then they will fail, with disastrous consequences for the Spanish, European and world economies.
----But why don't the markets believe that the Spanish government will reduce its deficit and get its house in order? Again, as in the Greek case, there is political and union resistance – strikes, protests, parliament votes. Added to that are Spain's unusually powerful autonomous regions, responsible for much public spending. Madrid claims that they are signed up to prudence, but some doubt it.
The longer term obstacle is Spain's notoriously restrictive and inflexible labour market. It has contributed to a youth unemployment rate of 30 per cent-plus (though some of that is also down to some slipping out of the tax system and into the black economy, a traditional Spanish defence mechanism in a downturn).
Like Britain, Spain relied on an unsustainable property bubble to sustain growth, as the unfinished apartment blocks and idle cranes littering Madrid and the Costas testify. Spain borrowed heavily from abroad, but did not invest the money wisely. Foreign investors wonder if Spain can grow her way out of her problems under the weight of government debt, a creaking banking system, a woefully unreformed economy difficult to control from the centre, and membership of a single currency that prevents devaluation and export-led recovery (as may yet happen in the UK).
Spain isn't Greece; it could be worse than that.
Below, the European flight to safety in German bonds. It’s only a matter of time before all of Club Med restructures.
German Government Bonds Rise as Stocks Fall Before Debt Sales
June 17 (Bloomberg) -- German government bonds rose as falling stock markets stoked demand for the safest assets before a sale of Spanish debt that will test the market’s appetite for securities from so-called peripheral euro-region nations.
The bund yield fell from near the highest level in two weeks. Spain plans to sell as much as 3.5 billion euros ($4.3 billion) of 10- and 30-year bonds today after the yield premium on Spanish debt over bunds almost doubled over the last month and reached a euro-era record. The Stoxx Europe 600 Index fell 0.3 percent, its first decline in seven trading days. France is also selling bonds today.
Bunds may “move clearly higher if the Spanish auctions show signs of stress,” WestLB AG strategists including John Davies in London wrote in a research report today. “Given the continued negative headlines regarding the Spanish banking sector, Spanish bonds continue to trade under pressure.”
http://www.bloomberg.com/apps/news?pid=20601100&sid=aVHsZViO2CNA
We end for today with the EU starting to worry about its rare earth elements and heavy rare earths shortages. My thanks to LIR reader Ian in Toronto for sending a link to the article below along. For now, China still supplies much of the world with many of the vital minerals, but China has several times now signaled that soon their rising domestic needs will make this impossible. Adding to their supply problems, much of their mining took place in small scale fashion that was disastrous for the local environment. China is in the process of closing down such mining and attempting to remediate the damage. For now, the global slowdown has given the west a bit of a break. Time to scour the TSE and ASE listings for suitable long term investment candidates.
June 16, 2010, 3:03 pm
Europe Sounds Alarm on Minerals Shortage
By JAMES KANTERThe European Union is facing shortages of 14 critical raw materials needed for mobile phones and emerging technologies like solar panels and synthetic fuels, according to a study by the European Commission to be released on Thursday.
The commission is ringing the alarm bell on raw materials as China again plans to tighten its control over its rare earth minerals by allowing just a handful of state companies to oversee the mining of the scarce elements that are vital to some of the world’s greenest technologies.
Of 41 minerals and metals it analyzed, the commission identified these 14 as short in supply: antimony, beryllium, cobalt, fluorspar, gallium, germanium, graphite, indium, magnesium, niobium, platinum group metals, rare earths, tantalum and tungsten.
The study found that a crucial factor behind the shortages was that production of the materials was concentrated in just four countries: Brazil, China, Congo and Russia.
The study emphasized that the markets for such materials could be highly volatile because “rapid diffusion of new technologies can drastically change the demand” for critical raw materials.
Demand for gallium for use in emerging technologies could be 603 tons by 2030 compared with total current production of 152 tons, the study said. Demand for neodymium, a rare earth found in China, could be 27,900 tons by 2030 compared with current production of 16,800 tons.
To tackle the problem, the commission proposed that the European Union improve its recycling policies, develop products that require fewer raw materials and encourage research on finding substitutes.
But the commission attributed the shortages to trade, taxation and investment policies in emerging economies that were aimed at reserving their resource bases for their exclusive use.
http://green.blogs.nytimes.com/2010/06/16/europe-sounds-alarm-on-minerals-shortage/
At the Comex silver depositories Wednesday, final figures were: Registered 52.45 Moz, Eligible 67.11 Moz, Total 119.58 Moz.
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Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today a subject we’ve touched on many times before. In the great Greenspan real estate bubble that was sliced and diced into a zillion “triple-A” mortgage backed securities that were peddled by an avaricious Wall Street to widows, orphans, and brain dead European banksters and pension fund managers, in the rush to securitize and offload the risk to the unsuspecting marks, so many corners were cut it’s getting increasingly impossible to foreclose on the defaulting mortgages. In keeping with this whole sorry saga, now fraud is surfacing as lenders start to fabricate the evidence of valid ownership. Below, American Banker updates us on the latest developments. Triple-A CDOs from the Fed’s stash anyone? Me neither.
Sometimes too much to drink is barely enough.
Mark Twain.
Challenges to Foreclosure Docs Reach a Fever Pitch
American Banker | Wednesday, June 16, 2010
The backlash is intensifying against banks and mortgage servicers that try to foreclose on homes without all their ducks in a row.
Because the notes were often sold and resold during the boom years, many financial companies lost track of the documents. Now, legal officials are accusing companies of forging the documents needed to reclaim the properties.
On Monday, the Florida Attorney General's Office said it was investigating the use of "bogus assignment" documents by Lender Processing Services Inc. and its former parent, Fidelity National Financial Inc. And last week a state judge in Florida ordered a hearing to determine whether M&T Bank Corp. should be charged with fraud after it changed the assignment of a mortgage note for one borrower three separate times.
"Mortgage assignments are being created out of whole cloth just for the purposes of showing a transfer from one entity to another," said James Kowalski Jr., an attorney in Jacksonville, Fla., who represents the borrower in the M&T case.
"Banks got away from very basic banking rules because they securitized millions of loans and moved them so quickly," Kowalski said.
In many cases, Kowalski said, it has become impossible to establish when a mortgage was sold, and to whom, so the servicers are trying to recreate the paperwork, right down to the stamps that financial companies use to verify when a note has changed hands.
Some mortgage processors are "simply ordering stamps from stamp makers," he said, and are "using those as proof of mortgage assignments after the fact."
Such alleged practices are now generating ire from the bench.
In the foreclosure case filed by M&T in February 2009, the bank initially claimed it lost the underlying mortgage note, and then later claimed the mortgage was owned by First National Bank of Nevada, which the Federal Deposit Insurance Corp. shut down in 2008, before the foreclosure had been started.
M&T then claimed Wells Fargo & Co. owned the note, "contradicting all of its previous claims," according to Circuit Court Judge J. Michael Traynor, who ordered the evidentiary hearing last week into whether M&T perpetrated a fraud on the court.
"The court has been misled by the plaintiff from the beginning," Judge Traynor said in his order, which also dismissed M&T's foreclosure action with prejudice.
------In a notice on its website, the Florida attorney general said it is examining whether Docx, an Alpharetta, Ga., unit of Lender Processing Services, forged documents so foreclosures could be processed more quickly.
"These documents are used in court cases as 'real' documents of assignment and presented to the court as so, when it actually appears that they are fabricated in order to meet the demands of the institution that does not, in fact, have the necessary documentation to foreclose according to law," the notice said.
Docx is the largest lien release processor in the United States working on behalf of banks and mortgage lenders.
------"This is systemic," said April Charney, a senior staff attorney at Jacksonville Area Legal Aid and a member of the Florida Supreme Court's foreclosure task force.
"Banks can't show ownership for many of these securitized loans," Charney continued. "I call them empty-sack trusts, because in the rush to securitize, the originating lender failed to check the paper trial and now they can't collect."
In Florida, Georgia, Maryland and other states where the foreclosure process must be handled through the courts, hundreds of borrowers have challenged lenders' rights to take their homes. Some judges have invalidated mortgages, giving properties back to borrowers while lenders appeal.
In February, the Florida state Supreme Court set a new standard stipulating that before foreclosing, a lender had to verify it had all the proper documents. Lenders that cannot produce such papers can be fined for perjury, the court said.
http://www.americanbanker.com/issues/175_114/foreclosure-challenges-1020961-1.html
Former mortgage boss Lee Farkas accused of intent to defraud US Treasury
Lee Farkas, the man who once ran America's largest non-depository mortgage lender, has been accused of masterminding a $1.9bn (£1.3bn) mortgage fraud that in part targeted the US government's $700bn bail-out fund
By James Quinn Published: 6:00AM BST 17 Jun 2010
Lee Farkas, the former chairman of now bankrupt mortgage house Taylor, Bean & Whitaker (TBW) was charged with 16 separate counts of securities and bank fraud over the alleged scheme, in part designed to "scam" the Treasury's $700bn Troubled Assets Relief Programme (TARP.)
Mr Farkas, who allegedly ran the scheme in the seven years to 2009, is accused of misappropriating more than $1bn, according to civil and criminal writs filed by the Securities and Exchange Commission (SEC) and the US Department of Justice.
Lanny Breuer, assistant Attorney General, said Mr Farkas participated in a "massive" fraud which was "stunning in its scale."
The SEC accused Mr Farkas of allegedly selling more than $1.5bn of "fabricated or impaired" mortgage loans to Alabama based Colonial Bank, having told Colonial that they were "quality, liquid assets."
In addition, he is accused of being the mastermind behind "a bogus equity investment" of $300m that caused Colonial to misrepresent its balance sheet to the Treasury when it applied for TARP funding. However, the SEC charge stresses that "Farkas and co-conspirators never obtained any TARP funds."
A spokesman for Mr Farkas could not be reached for comment.
People of privilege will always risk their complete destruction rather than surrender any material part of their advantage.
J. K. Galbraith.
The monthly Coppock Indicators finished May:
DJIA: +276 UP. NASDAQ: +499 UP. SP500: +304 UP. The great Bull market goes on with the all three continuing higher in positive numbers, but is now under serious pressure.
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 June 15
Current Stretch:1 days
2010 total: 34 days (20%)
2009 total: 260 days (71%)
Since 2004: 802 days
Typical Solar Min: 485 days
The long minimum seems to have ended, or has it?
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