Baltic Dry Index. 1942 +41
LIR Gold Target by 2019: $3,000.
"It's strange that men should take up crime when there are so many legal ways to be dishonest. “
Al Capone
We open today with China’s riposte to Mrs Clinton’s slap at China in last week’s regional security conference in Hanoi. A clash of navies lies ahead if both parties hold their present course. But it’s hard to see how either can now back down without losing prestige and face. Presumably the US military see some advantage in pressing the issue now rather than later. Presumably the US State Department sees the chance to form some sort of local strategic alliance to contain China and force them out of the South China Sea. As the world’s largest debtor to creditor China, the US is now stomping on eggshells. Stay long precious metals. Is China really going to finance the US Navy and Airforce against itself?
If they want peace, nations should avoid the pin-pricks that precede cannonshots.
Napoleon.
China Says Its South Sea Claims Are ‘Indisputable’
July 30 (Bloomberg) -- China declared its “indisputable sovereignty” over the South China Sea and held naval drills in the waters, pushing back against a U.S. role in resolving disputes in one of the world’s busiest shipping lanes.
“China has indisputable sovereignty of the South Sea and China has sufficient historical and legal backing” to underpin its claims, Geng Yansheng, a Ministry of Defense spokesman, told reporters at a military compound outside Beijing today. It opposes efforts to “internationalize” the issue and will resolve differences through “friendly negotiation,” he said.
U.S. Secretary of State Hillary Clinton last week called the sovereignty issue “a leading diplomatic priority.” Chinese Foreign Minister Yang Jiechi subsequently called her comments “virtually an attack on China” and said U.S. involvement “can only make matters worse and more difficult to solve.”
The Chinese government considers the entire South China Sea as its own, dismissing claims from Southeast Asian countries to islands such as the Spratlys, and is building an ocean-going fleet to project power beyond its borders. China told Exxon Mobil Corp. and BP Plc to halt exploration in areas that Vietnam considers part of its territory, according to U.S. government agencies.
China’s military recently held a large-scale naval exercise in the sea using “real weaponry,” Geng said. The exercise, involving warships from three naval fleets, included missile launches at long-range targets and practicing against jet fighters, the state-run China Daily reported today.
North Korea
The exercises coincided with joint U.S.-South Korea naval drills earlier this week in the Sea of Japan designed to deter North Korea. Further drills are planned in the Yellow Sea, off China’s eastern coast, and South Korea plans to hold an anti- submarine drill there next week, Yonhap reported today, citing army spokesman Lee Bung-woo.
“China opposes any planes or warships that engage in activities that will compromise China’s security either in the Yellow Sea or other seas near China,” Geng said today.
http://noir.bloomberg.com/apps/news?pid=20601087&sid=adTydiYviZU8&pos=8
In other US news, the President of the St Louis Fed wants BOE style quantitative easing to prevent US deflation. The death of fiat currency as we know it gets closer by the day.
"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."
President F.D. Roosevelt, 1933
U.S. close to Japan-style deflation, Bullard says
Expanding purchases of Treasury securities best defense if needed
July 29, 2010, 2:45 p.m. EDT
WASHINGTON (MarketWatch) -- The U.S. is in danger of being pushed into the same price-shrinking economy that has been termed the "lost decade" in Japan, a voting member of the Federal Reserve said Thursday.
"The U.S. is closer to a Japanese-style outcome today than at any time in recent history," said James Bullard, the president of the St. Louis Federal Reserve Bank, in a research paper.
Bullard stressed that the Japan-style deflation was not a done deal. It would take more negative shocks to tip inflation lower.
But the St. Louis Fed president spoke of the risks with more clarity than is customary from Fed officials.
"Bullard touched upon the third rail of economics, that the U.S. is in the vicinity of Japan with respect to the recovery," said Dan Greenhaus, chief economic strategist at Miller Tabak.
In his paper, Bullard argued that the best policy option for the Fed to counter the deflation threat is to buy more Treasurys.
He said the Bank of England's recent policy to buy gilts, or British government bonds, has served to push inflation expectations higher.
The Bank of England has purchased 200 billion pounds, or over $300 billion, of assets, and overwhelmingly those purchases have been gilts. The Fed has purchased over $1.4 trillion in housing-related assets. It bought $300 billion in Treasurys in a program completed last fall.
Bullard argued against another policy option, namely lengthening its existing promise to keep rates low for an extended period.
To respond to the deflation threat with a revised promise to keep rates "low for longer" may be counterproductive because it might simply encourage permanent low interest rates, he said.
http://www.marketwatch.com/story/bullard-says-us-close-to-japan-style-deflation-2010-07-29
In corporate news, and rare metals news, Molycorp’s IPO was less than stellar. China mines and exports most of the rare metals the world consumes, about 95% is the usual figure cited. A one country monopoly that Saudi Arabia can only dream about. Another complication for Mrs Clinton to think about.
Cleantech IPOs still fail to impress as Molycorp misses its goal
July 29, 2010 Camille Ricketts
With the exception of Tesla Motors’ blockbuster public sale last month, clean technology IPOs have been disappointing this year. And the trend continues today with Molycorp Minerals, miner of many of the rare metals used in green technologies, debuting at $13.25 a share — down from the anticipated range of $15 to $17.
All told, the Greenwood, Colo. company raised $394 million, pricing its shares at $14. The stock has performed weakly since this morning, dipping as low as $12.
While it’s not exactly a traditional green technology company, Molycorp does provide the raw materials for advanced batteries (for plug-in vehicles, primarily), wind turbines, and energy-efficient light bulbs. More and more demand for its products is coming from the sector, which means its success relies largely on the shaky and uncertain growth of other green technologies.
This may be a major reason its IPO followed in the footsteps of similar sales by biofuel maker Codexis and solar cell maker Jinko Solar, both of which sold for less and raised less on the public markets than expected. Cylindrical solar module maker Solyndra couldn’t even get its IPO out the door.
Investors just don’t seem to be hot on cleantech stocks. There’s a lot of risk involved in green plays, and returns sometimes don’t come for years.
Molycorp, in particular, is in a sticky spot. The company plans to use the money raised in the offering to jumpstart its mine in Mountain Pass, Calif. that has been defunct since 2002, when radioactive waste from the site contaminated a local lake. The project is more vital than ever, considering China’s growing dominance in the rare earth elements market (it owns 95 percent of global production), and Molycorp’s dependence on its own operations in China.
Molycorp Slumps 8.2% on 1st Day After Rare-Earth IPO
July 29, 2010, 4:16 PM EDT
July 29 (Bloomberg) -- Molycorp Inc., owner of the world’s largest non-Chinese deposit of rare-earth metals, declined in its first day of trading after chopping the size of its initial public offering by 18 percent.
Shares of the Greenwood Village, Colorado-based company lost 8.2 percent to $12.85 in U.S. composite trading. Molycorp sold 28.13 million shares at $14 each after its underwriters failed to attract enough buyers at $15 to $17 apiece, according to Bloomberg data. The mining company’s owners purchased about 8.9 percent of the shares available in the IPO.
Molycorp will use the $394 million in IPO proceeds to fund plans to restart operations at a mine that holds deposits of rare-earth metals used to make magnets for everything from smart bombs to hybrid cars. The producer, which hasn’t made a profit since acquiring the site two years ago, will compete with Chinese companies that currently supply 97 percent of the metals globally, according to its regulatory filing.
“It seems like a lot of money to ask,” said Robert Auer, a manager at Indianapolis-based SBAuer Funds LLC, which oversees about $200 million. “It’s a bet on something so unknown, and in this market where there’s fierce competition for dollars, there may be better buys.”
Morgan Stanley and JPMorgan Chase & Co. in New York led the company’s offering, while Molycorp turned to Jones Day in Cleveland for legal advice.
http://www.businessweek.com/news/2010-07-29/molycorp-slumps-8-2-on-1st-day-after-rare-earth-ipo.html
We end the week with a Canadian corporate success story. Long time readers of the LIR know that I have liked SEMAFO from the first time I read up about its involvement in West Africa almost a decade ago. With the Quebecer’s can-do attitude, they opened up much of North America, readily available mining expertise, and the added benefit of speaking French, the local language of business in the region, successfully developing their gold mines never seemed an issue to me. It also seemed to me that the price of gold had nowhere to go but up. From the mid 90s G-7 governments were pursuing policies all too likely to ruin their currencies. Sadly they still are. Below, Canada’s Financial Post covers a company I still like and expect even more great things from ahead. Best of all, SEMAFO is a mining company with a conscience that besides providing employment in a region that desperately needs employment, works to improve the quality of life in the region too.
The benefactor turns a profit
Peter Koven, Financial Post · Thursday, Jul. 29, 2010
Benoit La Salle built his gold mining powerhouse in the least likely of ways: Through a charitable foundation.
Mr. La Salle, 55, is the chief executive of Montreal-based SEMAFO Inc., a leading mining company in francophone West Africa that leverages the skilled workforce and mining culture of francophone Quebec. But as recently as the early 1990s, he was a self-employed chartered accountant and did not give a second thought to the gold industry.
"I knew nothing about it at all," he says today with a laugh.
The turning point that would change his life came in 1994. He was doing some pro bono work for a charity called Plan that was focused on developing countries, and ended up travelling to West Africa as a francophone spokesperson.
He met with a number of high-level government officials while he was there, including Burkina Faso President Blaise Compaore (who still holds the office today). Mr. Compaore asked Mr. La Salle if he could return to Burkina with a team of people from Canada to study how to develop the country's gold industry.
At the time, there was almost zero activity by foreign mining companies in West Africa. That dated back to the 1950s and 1960s, when those countries were still under French or British colonial rule, and little exploration was being done.
Mr. La Salle saw an opportunity. He soon returned to West Africa with a small team of experts, who starting looking over the land with the best gold potential.
In 1995, he and geologist Jack Gunter obtained permits for some of the most promising land in West Africa through a public shell company. It was renamed SEMAFO, an acronym that stands for Societe d'exploitation miniere d'Afrique de l'Ouest (or West African Mining Company).
Benoit La Salle built his gold mining powerhouse in the least likely of ways: Through a charitable foundation.
Mr. La Salle, 55, is the chief executive of Montreal-based SEMAFO Inc., a leading mining company in francophone West Africa that leverages the skilled workforce and mining culture of francophone Quebec. But as recently as the early 1990s, he was a self-employed chartered accountant and did not give a second thought to the gold industry.
"I knew nothing about it at all," he says today with a laugh.
The turning point that would change his life came in 1994. He was doing some pro bono work for a charity called Plan that was focused on developing countries, and ended up travelling to West Africa as a francophone spokesperson.
He met with a number of high-level government officials while he was there, including Burkina Faso President Blaise Compaore (who still holds the office today). Mr. Compaore asked Mr. La Salle if he could return to Burkina with a team of people from Canada to study how to develop the country's gold industry.
At the time, there was almost zero activity by foreign mining companies in West Africa. That dated back to the 1950s and 1960s, when those countries were still under French or British colonial rule, and little exploration was being done.
Mr. La Salle saw an opportunity. He soon returned to West Africa with a small team of experts, who starting looking over the land with the best gold potential.
In 1995, he and geologist Jack Gunter obtained permits for some of the most promising land in West Africa through a public shell company. It was renamed SEMAFO, an acronym that stands for Societe d'exploitation miniere d'Afrique de l'Ouest (or West African Mining Company).
Read more: http://www.financialpost.com/benefactor+turns+profit/3335177/story.html#ixzz0v8qNum9C
SEMAFO: Corporate Social Responsibility Remains Top Priority
Fondation SEMAFO: Making an Important Difference in West Africa
----During the past year, initiatives in our West African host countries included:
• Construction of 5 schools
• Construction of a health centre
• Establishment of 2 school lunch programs benefitting more than 600 children
• Donation of medical supplies, educational material, clothing, house wares, miscellaneous items
(shipment of 2,600 boxes)
• Donation of agricultural equipment and irrigation systems
• Provided the village of Bossey Bangou, Niger with access to electricity
• Installation and repair of fresh water wells
• Provided financial and moral support to flood victims in Burkina Faso and Niger
• Provided support and guidance in the establishment of shea butter soap manufacturing project
http://www.semafo.com/pdf/Foundation-Update-Apr-2010.pdf
At the Comex silver depositories Thursday, final figures were: Registered 51.98 Moz, Eligible 58.24 Moz, Total 110.23 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, the NY Times covers the scandal of the Gulf of Mexico. No not BP, bad though their blowout was, The Times covers the scandal of how America looked away and turned the Gulf into a sort of toxic backyard cesspit. Below that, Time Magazine says where’s the oil disaster? Was BP the target of a great vampire squid plot?
Why did I take up stealing? To live better, to own things I couldn't afford, to acquire this good taste that you now enjoy and which I should be very reluctant to give up.
Cary Grant. To Catch A Thief.
Gulf of Mexico Has Long Been a Sink of Pollution
By CAMPBELL ROBERTSON Published: July 29, 2010
-----The BP oil spill has sent millions of barrels gushing into the Gulf of Mexico, focusing international attention on America’s third coast and prompting questions about whether it will ever fully recover from the spill.
Now that the oil on the surface appears to be dissipating, the notion of a recovery from the spill, repeated by politicians, strikes some here as short-sighted. The gulf had been suffering for decades before the explosion of the Deepwater Horizon rig on April 20.
“There’s a tremendous amount of outrage with the oil spill, and rightfully so,” said Felicia Coleman, director of Florida State University’s Coastal and Marine Laboratory. “But where’s the outrage at the thousands and millions of little cuts we’ve made on a daily basis?”
The gulf is one of the most diverse ecosystems in the hemisphere, a stopping point for migratory birds from South America to the Arctic, home to abundant wildlife and natural resources.
But like no other American body of water, the gulf bears the environmental consequences of the country’s economic pursuits and appetites, including oil and corn.
There are around 4,000 offshore oil and gas platforms and tens of thousands of miles of pipeline in the central and western Gulf of Mexico, where 90 percent of the country’s offshore drilling takes place.
At least half a million barrels of oil and drilling fluids had been spilled offshore before the gusher that began after the April 20 explosion, according to government records.
Much more than that has been spilled from pipelines, vessel traffic and wells in state waters — including hundreds of spills in Louisiana alone — records show, some of it since April 20.
Runoff and waste from cornfields, sewage plants, golf courses and oil-stained parking lots drain into the Mississippi River from vast swaths of the United States, and then flow down to the gulf, creating a zone of lifeless water the size of Lake Ontario just off the coast of Louisiana.
The gulf’s floor is littered with bombs, chemical weapons and other ordnance dumped in the middle of last century, even in areas busy with drilling, and miles outside of designated dumping zones, according to experts who work on deepwater hazard surveys.
The likelihood of an accident is low, experts said, but they added that federal hazard mitigation requirements are not strong enough to guarantee the safety of drillers working in the gulf.
Even the coast itself — overdeveloped, strip-mined and battered by storms — is falling apart. The wildlife-rich coastal wetlands of Louisiana, sliced up and drastically engineered for oil and gas exploration, shipping and flood control, have lost an area larger than Delaware since 1930.
----All along the coast, people speak of a lack of regulatory commitment and investment in scientific research on the gulf by state and federal lawmakers.
They note, for example, that over the last decade, the Environmental Protection Agency’s financing for the Chesapeake Bay Program, a regional and federal partnership, was nearly five times the amount for a similar Gulf of Mexico program, and a Great Lakes program was given more than four times as much.
More.
http://www.nytimes.com/2010/07/30/us/30gulf.html?_r=1&hp
The BP Spill: Has the Damage Been Exaggerated?
By Michael Grunwald / Port Fourchon, La. Thursday, Jul. 29, 2010
-----The Deepwater Horizon explosion was an awful tragedy for the 11 workers who died on the rig, and it's no leak; it's the biggest oil spill in U.S. history. It's also inflicting serious economic and psychological damage on coastal communities that depend on tourism, fishing and drilling. But so far — while it's important to acknowledge that the long-term potential danger is simply unknowable for an underwater event that took place just three months ago — it does not seem to be inflicting severe environmental damage. "The impacts have been much, much less than everyone feared," says geochemist Jacqueline Michel, a federal contractor who is coordinating shoreline assessments in Louisiana.
More.
Read more: http://www.time.com/time/nation/article/0,8599,2007202,00.html#ixzz0v9EziDz7
We do not err because truth is difficult to see. It is visible at a glance. We err because this is more comfortable.
Alexander Solzhenitsyn
We end for the weekend with Australia. As national costumes go, Australia’s Sheila’s really dress up for their Bruce. Have a great weekend everyone.
Miss Australia's national costume is a 'travesty'
An outlandish outfit designed to represent Australia at the Miss Universe beauty contest has been branded "a national joke" and "a travesty".
Published: 10:48AM BST 29 Jul 2010
The costume, which will be worn by Jesinta Campbell at the competition in Las Vegas next month, features high-heeled Ugg boots, a brown one piece swimming costume hand-painted by an Aboriginal artist and a lamb's wool shrug. The ensemble is topped off by a voluminous flamenco-inspired rainbow skirt.
While Miss Campbell, 18, has said that she thinks the costume is "incredible", the pastiche of styles has failed to win many fans in Australia, and has been called eye-catching, but for all the wrong reasons.
Melbourne's Herald Sun newspaper said the costume was "a national joke" and members of the fashion industry have agreed.
A man may be a tough, concentrated, successful money-maker and never contribute to his country anything more than a horrible example
Robert Menzies. Australian Prime Minister
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.
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