Baltic Dry Index. 2406 -41
LIR Gold Target by 2019: $3,000.
The monthly Coppock Indicators finished June:
DJIA: +269 Down. NASDAQ: +460 Down. SP500: +290 Down. The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. Given the weakening BDI, and the ECRI leading indicators signalling recession ahead, it is probably safer to assume that the great stock market bounce has ended and that we are entering a new bear market, or alternately, resuming the old one after a bear market rally.
Below, more disturbing news yesterday from China. Anything the west can do, we can do too says China, including slowing the economy. Bunker time has arrived, I think. Let the great vampire squids pick each other’s pocket, this is no time to be involved in an arriving summer market of strife.
China manufacturing PMI shows growth cooling in June
June 30, 2010, 11:01 p.m. EDT
HONG KONG (MarketWatch) -- China's manufacturing activity grew at a more muted pace in June, falling below economist's expectations and marking its second consecutive month of slowing.
The China Federation of Logistics & Purchasing said its purchasing managers' index fell to 52.1, compared to 53.9 in May. The result missed a 53.1 consensus forecast in a Reuters poll of economists, but managed to stay above the 50 mark separating expansion from contraction.
The National Bureau of Statistics said the fall was due to policy tightening at home and a weakening global recovery, saying the outlook for Chinese exports was grim due to the European debt crisis and Beijing's ending of some export tax rebates, according to comments reported by Reuters.
http://www.marketwatch.com/story/china-manufacturing-pmi-shows-growth-cooling-2010-06-30
Below, MarketWatch lifts the lid on the faltering US Economy. A summer like 1987 seems to lie ahead, complete with high frequency trading programs, the 21st century version of 1987s portfolio insurance reckless casino gambling products. Except this time round, the real economy is on central banks life support, with interest rates already virtually at zero, and the banks officially allowed to mark worthless assets to the fantasy model. This time round there is an ocean of excess manufacturing capacity virtually everywhere but especially in China, while the arrival of” the next Lehman,” is virtually guaranteed to end the failing fiat dollar reserve standard as we know it. Stay long precious metals.
"It is inherently extraordinarily difficult to know whether an asset's price is in line with its fundamental value. It's not obvious to me in any case that there's any large misalignments currently in the U.S. financial system."
Dr. Bernanke. November 16, 2009
The three biggest lies about the economy
Commentary: The truth about jobs, the market and U.S. socialism
June 29, 2010, 12:01 a.m. EDT
BOSTON (MarketWatch) -- The counter-revolution is underway.
The G-20 calls for members to slash their budget deficits. The U.S. Senate ices further aid for the unemployed. The head of the Business Roundtable slams President Obama for undermining American capitalism. Wall Street succeeds in watering down reform.
Depending on your politics, you'll love this or hate it.
But there's just one problem.
We're still living in a fantasyland. Most people have no idea what's really going on in the economy. They're living on spin, myths and downright lies. And if we don't know the facts, how can we make intelligent decisions?
Here are the three biggest economic myths -- the things everything thinks they know about the economy that just ain't so.
Myth 1: Unemployment is below 10%
What nonsense that is. The official jobless rate, at 9.7%, is a fiction and should be treated as such. It doesn't even count lots of unemployed people. The so-called "underemployment" or U-6 rate is an improvement: For example it counts discouraged job seekers, and those forced to work part-time because they can't get a full-time job.
That rate right now is 16.6%, just below its recent high and twice the level it was a few years ago
And even that may not tell the full story. Many people have simply dropped out of the labor force statistics.
Myth 2: The markets are panicking about the deficit
To hear the G-20 tell it, the U.S. and other top countries had better slash those budget deficits before the world comes to an end.
And maybe the markets should be panicking about the deficits.
But they're not. It's that simple.
If they were, the interest rate on government bonds would be skyrocketing. That's what happens with risky debt: Lenders demand higher and higher interest payments to compensate them for the dangers.
But the rates on U.S. bonds have been plummeting recently. The yield on the 30-year Treasury bond down to just 4%. By historic standards that's chickenfeed. Panicked? The bond markets are practically snoring.
They aren't seeing inflation either. On the contrary, they're saying it will average just 2.3% a year over the next three decades. That's the gap between the interest rates on inflation-protected Treasury bonds and the rates on the regular bonds. By any modern standard the forecast is low. Instead of worrying about inflation, some are starting to worry about something even more dangerous: deflation, or falling prices.
More.
http://www.marketwatch.com/story/the-three-biggest-lies-about-the-us-economy-2010-06-29?pagenumber=1
In European news, Moody’s tries to catch up with the Spanish reality of 2010. Later today, Spain attempts to sell certificates of guaranteed wealth confiscation. They might at least have tossed in an indulgence or two for the brain dead buyers of notes likely headed to eventual default, and not necessarily very far off in the future.
"The most puzzling development in politics during the last decade is the apparent determination of Western European leaders to re-create the Soviet Union in Western Europe."
Mikhail Gorbachev
Spain’s Aaa on Downgrade Review at Moody’s as Note Sale Nears
By Emma Ross-Thomas
July 1 (Bloomberg) -- Spain’s top credit ranking was placed on review for a possible downgrade by Moody’s Investors Service as the country prepares to sell as much 3.5 billion euros ($4.3 billion) of five-year notes today.
“Deteriorating” growth prospects and challenges in meeting fiscal targets mean Spain’s Aaa classification may be lowered by as much as two grades, Moody’s analysts including Senior Vice President Kristin Lindow in New York said yesterday in a statement. The review will be concluded within a three- month period, the ratings company said.
The moves came before today’s auction provides a test of investor sentiment toward the euro region’s fourth-largest economy and puts pressure on the Socialist government to deepen spending cuts as it starts drafting next year’s budget. Fitch Ratings and Standard & Poor’s already stripped Spain of their top ratings.
------In an interview with Bloomberg Television late yesterday in New York, Spain’s Deputy Finance Minister Jose Manuel Campa said he had a “different assessment” of his economy than Moody’s. “What I do think is unfortunate is that many of these downgrades come on the evaluation of long-term growth, but the timing tends to be linked to short-term volatility,” he said.
Prior to Moody’s decision, investors had expected strong demand at the five-year note auction on easing concerns about the region’s banks after lenders sought less cash than forecast at a European Central Bank tender. The extra yield demanded on Spanish debt rather than German equivalents fell to 198.4 basis points yesterday from 204.9 basis points. That compares with a euro-era high of 221 basis points on June 16.
http://noir.bloomberg.com/apps/news?pid=20601085&sid=aTGibVAKzem0
European Banks Aren’t ‘Out of the Woods Yet’ After ECB’s Tender
By Gavin Finch and Andrew MacAskill
July 1 (Bloomberg) -- European banks are still dependent on life-support from the region’s central bank even after asking it for less money than analysts estimated.
Greece’s Piraeus Bank SA and Spain’s Banco Santander SA were among bank stocks that rose after the European Central Bank said yesterday it lent firms 131.9 billion euros ($161 billion) for three months, less than the 200 billion euros analysts estimated.
The ECB, which didn’t disclose the identities of the 171 borrowers, is trying to wean the region’s lenders off the unprecedented support it provided in the wake of Lehman Brothers Holdings Inc.’s collapse in 2008. Financial firms have been wary of lending to each other after Europe’s sovereign debt crisis fueled concern that governments including Greece, Portugal and Spain may struggle to refinance their debts.
“We’re not out of the woods yet,” said Florian Esterer, who helps manage about $46 billion at Zurich-based Swisscanto Asset Management. “The cajas, the Greeks and maybe the Landesbanken have problems getting short-term refinancing. That is why the ECB is still providing funding.”
Germany’s state-owned lenders, or Landesbanken, are under scrutiny after posting more than $34 billion in losses and writedowns during the credit crisis. As many as 38 of Spain’s 45 savings banks, or cajas, are merging as regulators push them to cut costs and their reliance on wholesale funding.
http://noir.bloomberg.com/apps/news?pid=20601085&sid=aHFG9k.eQWpA
We end for today with an idea that’s at least 39 years too late. Time to close down the Fed. The Fed lost all legitimacy when it rolled over for corrupt politicians and went along with President Nixon’s insane great experiment of fiat currency, rather than stand up for honest money, and incidentally the US constitution, and insist instead on a dollar devaluation against gold back in 1971.
“With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”
Dr. Bernanke. November 2005.
Time to shut down the US Federal Reserve?
By Ambrose Evans-Pritchard Last updated: June 29th, 2010
Like a mad aunt, the Fed is slowly losing its marbles.
Kartik Athreya, senior economist for the Richmond Fed, has written a paper condemning economic bloggers as chronically stupid and a threat to public order.
Matters of economic policy should be reserved to a priesthood with the correct post-doctoral credentials, which would of course have excluded David Hume, Adam Smith, and arguably John Maynard Keynes (a mathematics graduate, with a tripos foray in moral sciences).
“Writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy.”
Don’t you just love that throw-away line “decent”? Dr Athreya hails from the University of Iowa.
“The response of the untrained to the crisis has been startling. The real issue is that there is an extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new. Moreover, there is a substantial likelihood that it will instead offer something incoherent or misleading.”
You couldn’t make it up, could you?
“Economics is hard. Really hard. You just won’t believe how vastly hugely mind-boggingly hard it is. I mean you may think doing the Sunday Times crossword is difficult, but that’s just peanuts to economics. And because it is so hard, people shouldn’t blithely go shooting their mouths off about it, and pretending like it’s so easy. In fact, we would all be better off if we just ignored these clowns.”
However, Dr Athreya’s assertions cannot be allowed to pass. The current generation of economists have led the world into a catastrophic cul de sac. And if they think we are safely on the road to recovery, they still fail to understand what they did.
Central banks were the ultimate authors of the credit crisis since it is they who set the price of credit too low, throwing the whole incentive structure of the capitalist system out of kilter, and more or less forcing banks to chase yield and engage in destructive behaviour.
They ran ever-lower real interests with each cycle, allowed asset bubbles to run unchecked (Ben Bernanke was the cheerleader of that particular folly), blamed Anglo-Saxon over-consumption on excess Asian savings (half true, but still the silliest cop-out of all time), and believed in the neanderthal doctrine of “inflation targeting”.
----- They allowed the M3 money supply to surge at double-digit rates (16pc in the US and 11pc in euroland), and are now allowing it to collapse (minus 5.5pc in the US over the last year). Have they all forgotten the Friedman-Schwartz lessons on the quantity theory of money? Yes, they have. Have they forgotten Irving Fisher’s “Debt Deflation causes of Great Depressions”? Yes, most of them have. And of course, they completely failed to see the 2007-2009 crisis coming, or to respond to it fast enough when it occurred.
The Fed has since made a hash of quantitative easing, largely due to Bernanke’s ideological infatuation with “creditism”. QE has been large enough to horrify everybody (especially the Chinese) by its sheer size – lifting the balance sheet to $2.4 trillion – but it has been carried out in such a way that it does not gain full traction. This is the worst of both worlds. So much geo-political capital wasted to such modest and distorting effect.
The error was for the Fed to buy the bonds from the banking system (and we all hate the banks, don’t we) rather than going straight to the non-bank private sector. How about purchasing a herd of Texas Longhorn cattle? That would do it. The inevitable result of this is a collapse of money velocity as banks allow their useless reserves to swell.
And now the Fed tells us all to shut up.
More.
No one in this world has ever lost money by underestimating the intelligence of the great masses of the plain people. Nor has anyone ever lost public office thereby.
H. L. Mencken
At the Comex silver depositories Wednesday, final figures were: Registered 49.41 Moz, Eligible 64.15 Moz, Total 113.56 Moz.
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Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Not exactly a crook today, just a British drunk left in charge with access to trading in the oil market. It about sums up all that is wrong with today’s casino, bankster economy. No one jailed. No one sued for disturbing the cost of millions of struggling pensioners heating their homes. No firm suspended for grossly inadequate internal systems controls. No lessons learned from the crash of Barings Bank, and the billions lost in Paris at Soc Gen. Why wasn’t anyone really held accountable at all. Who covered up or was grossly negligent at the UK’s poodle like FSA? In the 1960s and 70’s a drunk like this and his fellow directors would likely have been facing criminal charges. Nobody cares any more it seems, on fiat, there’s plenty more where that comes from.
Below that, welcome to modern France. While their economy buckles, and a cold war between Paris and Berlin has broken out, their national football team is a disgrace and doesn’t know the words to their own national anthem, French MPs are busy passing laws that make Frenchmen the laughing stock of Europe. Club Med Euros anyone?
A man may be a fool and not know it, but not if he is married.
H. L. Mencken.
How a broker spent $520m in a drunken stupor and moved the global oil price
PVM Oil Futures trader Steve Perkins bought 7m barrels of crude in late-night trading binge on his laptop, driving the oil price to an eight-month high.
By Rowena Mason, Energy Correspondent. Published: 5:45AM BST 30 Jun 2010
It's probably not uncommon for City traders to wonder how they burnt so much cash during a drunken night on the town.
But Steve Perkins was left with a bigger black hole in his memory than most when his employer rang one morning to ask what he'd done with $520m of the oil trading firm's money.
It was 7.45am on June 30 last year when the senior, longstanding broker for PVM Oil Futures was contacted by an admin clerk querying why he'd bought 7m barrels of crude in the middle of the night.
The 34-year old broker at first claimed he had spent the night trading alongside a client. But the story began to fall apart when he refused to put the customer in touch with his desk for official approval of the trades.
By 10am it emerged that Mr Perkins had single-handedly moved the global price of oil to an eight-month high during a "drunken blackout". Prices leapt by more than $1.50 a barrel in under half an hour at around 2am – the kind of sharp swing caused by events of geo-political significance. Ten times the usual volume of futures contracts changed hands in just one hour.
By the time PVM realised the trades were not authorised and swiftly began to unwind the positions, losses of exactly $9,763,252 had stacked up.
The amount was almost equal to PVM Oil Futures' entire annual revenue of $12m and caused a $7.6m loss last year - shared by the senior brokers who are its only shareholders.
It swiftly emerged that Mr Perkins had been relieved of his position at PVM, but details of the bizarre incident have only just been made public after a Financial Services Authority investigation.
According to the regulator, Mr Perkins first started trading irregularly the day before the enormous price spike. He had been drinking heavily over the weekend at a PVM golf event and was returning to a day off work.
As a broker, Mr Perkins was only allowed to place trades on behalf of his clients – not using any of PVM's own money. And records show that he placed a legitimate order for a client at 1.34pm through his broking desk by telephone. This was quickly followed by seven more orders with a value of $8m using PVM's cash.
Mr Perkins' trading stopped for a few hours, but in the early hours of the morning, he returned to the oil market via his laptop. He placed an incredible $520m in orders through ICE Futures Europe, where traders can buy or sell crude oil for future delivery and bet on whether prices will go up or down. The first trade was at 1.22am was at $71.40 per barrel and the last trade at $3.41am was at $73.05. During this period, Mr Perkins gradually edged up the price by bidding higher each time, until he was responsible for 69pc of the global market volume.
By 6.30am, the broker appeared to have realised what he'd done. He sent a text message to the managing director claiming an unwell relative meant he would not be coming in to work and started disposing of the oil futures. When PVM challenged his story, the broker confessed and later co-operated fully with the FSA inquiry.
Mr Perkins told investigators that he has "limited recollection" of the entire episode, claiming he had placed the trades during a drink-induced stupor.
Having admitted to an alcohol problem and received treatment, Mr Perkins was banned from trading for five years and hit with a £72,000 fine, reduced from £150,000 because of potential financial hardship.
Mr Perkins was not available for comment last night at his £340,000 home in Brentwood, Essex, and it is not known whether he has found alternative employment. The FSA will consider re-approving him as a broker after the ban, if he has recovered from his alcohol problem, but noted "Mr Perkins poses an extreme risk to the market when drunk". It added that there appeared to have been "no motive" for buying up the oil.
PVM did not return calls for comment.
The investigation also shows that he was able to trade huge volumes with very little cash up front and no position limit, exposing how it easy it was for a single British broker on a bender to cause chaos in the oil market.
Steve Perkins, the broker who traded $520m when drunk, to resume career in Switzerland
Steve Perkins, the oil trader banned by the UK financial regulator for illegally trading $520m in a drunken stupor, is about to resume his career as an energy broker in Switzerland.
Husbands can be jailed for insulting wives under new French law
Couples who insult each other over their physical appearance or make false accusations about infidelity face jail, under a new French law making "psychological violence" a criminal offence.
By Henry Samuel in Paris Published: 6:55PM BST 30 Jun 2010
The law – the first of its kind – means that partners who make such insults or threats of physical violence faces up to three years in prison and a €75,000 (£60,000) fine.
French magistrates have slammed the new legislation as "inapplicable", as they argue the definition of what constitutes an insult is too vague and verbal abuse too hard to prove.
Nadine Morano, the junior family minister, told the National Assembly that "we have introduced an important measure here, which recognises psychological violence, because it isn't just blows (that hurt), but also words."
Miss Morano said the primary abuse help line for French women got 90,000 calls a year, with 84 per cent concerning psychological violence.
But men now also have the right to report their wives verbal abuse in a domestic row.
It will apply to both married couples and cohabiting partners.
The bill, which has been unanimously approved by French MPs, defines mental violence as "repeated acts that could be constituted by words," including insults or repeated text messages that "degrade one's quality of life and cause a change to one's mental or physical state."
Miss Morano said witnesses could be called on to testify in such cases and doctors' certificates charting a patient's descent into nervous depression as a result of such insults could be used as evidence.
"The judge could (also) take into consideration letters, SMSs or repetitive messages, because one knows that psychological violence is made up of insults," she added.
The law will experiment with electronic ankle bracelets to keep psychological or physical abusers at bay.
French judges said they were "deeply sceptical" about the new legislation.
Men have a much better time of it than women. For one thing, they marry later; for another thing, they die earlier.
H. L. Mencken
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Sunspots – A 22 year colder world? (From 2004?)
Spotless Days June 30
Current Stretch:0 days
2010 total: 35 days (20%)
2009 total: 260 days (71%)
Since 2004: 803 days
Typical Solar Min: 485 days
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