Baltic Dry Index. 1840 -62 (Down 56% since May 26.)
LIR Gold Target by 2019: $3,000.
"We will have a world government whether you like it or not. The only question is whether that government will be achieved by conquest or consent."
James Paul Warburg. Testimony before the U.S. Senate on February 17, 1950.
For more on the Fed’s new casino scroll down to Crooks’ Corner. We open this morning pointing out the obvious, the Baltic Dry Index has fallen 56% from its May 26 high of 4200, and is now less than 3 times its post Lehman crash low of a then mind numbing mere 663. I have no idea what nuanced message the BDI is signaling, but I do know that its waving red flags like a banshee, firing distress rockets faster than the Titanic, and ringing bells and sounding klaxons loud enough to wake the dead. For me it is time to be 100% out of stocks and probably worth buying a few deep-out-of-the-money put options on year end.
Below, China says it’s going to stay the course on what passes for austerity for one sixth of mankind. Stay long precious metals. If China stays the course, the west’s double dip will generate masses of Professor Krugman advocated, Greenspan style, monetization.
China reiterates policy-tightening bias on property sector
July 13, 2010, 12:23 a.m. EDT
HONG KONG (MarketWatch) -- Chinese government ministries signaled late Monday there would be no backtracking from the course of policy tightening in the near future, according to reports, dashing hopes that some of the measures rolled out in mid-April to cool the housing sector would be relaxed.
China Banking Regulatory Commission and the state-owned Assets Supervision and Administration Commission reportedly reiterated their resolve in pushing ahead with tightening measures and other policies designed to curb speculation.
The Ministry of Housing and Urban-Rural Development also said the government would not make any significant adjustments to its tightening policies.
"Many analysts are underestimating China's determination in curbing property prices," said Bank of America-Merrill Lynch analysts in research note Tuesday.
Data released the Statistics Bureau on Monday showed Chinese house prices edged lower in June from the preceding month, marking the first month-on-month decline since February 2009, suggesting cooling steps did have some effect.
http://www.marketwatch.com/story/china-reiterates-policy-tightening-bias-2010-07-13
In European news, tiny Slovakia just poked “Herman Who” and Jean-Claude Junker (who?) in the eye and gave them a follow up “Glasgow kiss.” In the democratic way that the EU operates, the Slovaks are about to get called into Brussels to get the rules explained again. Well rule number one for small EU countries anyway, “do what we say and no one will get hurt.” An amazing Slovak groveling U-turn can be expected before the end on the month. I mean, really, just who does Ms Radicova think that she is, Angela Merkel?
JULY 13, 2010
Slovakia Resists EU in Aid Talks
BRUSSELS—The new Slovak government remains opposed to a rescue package for Greece, Prime Minister Iveta Radicova said Monday, after a meeting with European Union Council President Herman van Rompuy.
"The position of our minister of finance and also my personal and our political party [position] is as it was before, that we really do not agree," Ms. Radicova said when asked about her view of the Slovak contribution to aid for Greece.
She also said she would need to further discuss with her cabinet and Parliament the EU's plans for a permanent Financial Stability Facility as an emergency support mechanism for member states in financial trouble.
The Financial Stability Facility, which was supposed to become active July 1, is awaiting Slovakia's approval. Slovakia is supposed to contribute €4.4 billion ($5.56 billion) to the facility, backed by euro-zone member states.
Asked later about Ms. Radicova's comments, Jean-Claude Juncker, the prime minister of Luxembourg and head of the euro group of finance ministers, said he had talked to Slovak Finance Minister Ivan Miklos and expected the new government to follow through on the previous administration's commitments.
"We made it clear in today's discussion that our expectation was that the Slovak government will sign the framework agreement and will take on board all the commitments which have been taken by the previous Slovak government," he said after a meeting of euro-zone finance ministers.
----Ms. Radicova said it was a sign of the level of importance of the issue that she was spending her first working day in office in Brussels discussing it with European officials. But she said any decision wouldn't be hers alone.
"The government and Cabinet will meet on Wednesday and I will open the question, but if I have [a] result it's not only on my decision, it's the decision of my colleagues in the government and my coalition partners," she said.
Ms. Radicova leads a coalition of center-right parties that won parliamentary elections in June, campaigning on pledges to cut spending and oppose big-ticket, euro-zone bailout projects.
In other European news, the big man of France fought back last night. “I am not a crook,” he said with unintended irony, adding the hilarious “that it [France] had got into "bad habits" regarding ministerial perks and should follow the lead of "Anglo-Saxon" countries in this regard.” Presumably he had something other in mind than cheating on expense claims, padding the payroll with wives and family, traipsing off around the world with the family on all expense paid sightseeing vacations, aka fact finding missions, subsidizing the members bars and restaurants and getting too drunk to attend late night votes in the Mother of Parliaments, plus operating the most generous pension plan in the country while giving themselves enormous exit bonuses when irate voters tell them to get lost at general elections. For the record, I believe him, Mr Sarkozy is an honorable man.
Never believe anything in politics until it has been officially denied.
Otto Von Bismarck.
Nicolas Sarkozy suggests cash allegations plot to undermine him
Nicolas Sarkozy has intimated allegations he had "picked up envelopes" of illegal cash donations, as well as rumours he and his wife were both having affairs, were part of a plot to undermine him
By Henry Samuel in Paris Published: 6:30AM BST 13 Jul 2010
The embattled president came out fighting last night, blasting as a "disgrace" allegations that he had "picked up envelopes" of illegal cash donations from the country's richest woman.
"Can you imagine, during a dinner, in front of other table guests, leaving with money?" he asked in a live prime time television appearance to wrest national attention away from the most damaging scandal of his presidency and onto key reforms.
The French President was referring to allegations that he might have received cash from Liliane Bettencourt, the 87-year old heiress to the L'Oréal cosmetics empire made by her former accountant.
He said the claims were as baseless as the "lies" published three months ago that he and his wife Carla Bruni-Sarkozy and intimated that they were part of a plot to undermine him as he sought to push through a controversial pension reform to raise the official retirement age from 60 to 62.
"Now with the pension reform, I am described as someone who for the past 20 years, went to Mrs Bettencourt's home to pick up envelopes. It's a disgrace," he said during the hour-long interview on state channel France 2.
He also stood by his labour minister, Eric Woerth, following allegations he took 150,000 euros (£125,000) of cash from Mrs Bettencourt to fund the President's UMP party during his 2007 electoral campaign.
But he said that he would set up a cross-party commission of inquiry to see whether there had been any conflict of interest in Mr Woerth's ministerial duties and his post as UMP party treasurer and fund-raiser and added he had "advised" Mr Woerth to give up his party treasurer position.
Mr Sarkozy said that France was "not a corrupt country" and that party and election financing had been cleaned up. But he admitted that it had got into "bad habits" regarding ministerial perks and should follow the lead of "Anglo-Saxon" countries in this regard.
We close today with good news for banksters. Well European banksters anyway. Remember all those American “triple-A” securities we couldn’t understand but bought anyway from their London spivs back in the go-go-all-gone decade, well good news, put them back in the accounts at face value and keep taking the public’s money on deposit. Who needs real reserves when we’re all operating on fiat currency. It’s only token money after all, a mere mind over matter construct of money. We don’t mind and we’ll construct money out of whatever we say is money, for that matter.
I can resist anything except temptation.
Oscar Wilde.
European Banks Poised to Win Reprieve in Basel on Capital Rules
July 13 (Bloomberg) -- European banks, rattled by investor uncertainty about their ability to withstand a sovereign-debt crisis, are poised to win a reprieve in Basel, Switzerland, this week as regulators from 27 countries shape new capital rules.
A push to water down stringent standards proposed last year by the Basel Committee on Banking Supervision, and to allow more time to implement them, is led by France and Germany, according to bankers, regulators and lobbyists involved in the talks. Representatives from the U.S. and the U.K., who have sought to rein in risk-taking, are willing to compromise on how capital is defined to reach an agreement at a committee meeting that begins tomorrow, the people said.
Another concession may involve granting transition periods of up to 10 years to ease concerns of some member countries that their banks and economies won’t be able to bear the burden of tougher capital requirements until a recovery takes hold. As a result, the amount of capital European banks will be forced to raise in the next two years won’t be as much as investors fear.
“Politicians in France and Germany are worried about the impact of the rules on their economies,” said Chris Bates, a regulatory lawyer at Clifford Chance LLP in London. “Basel has managed to bring diverging banking systems and economies together. It’s more than just a capital regime. It’s a showcase of global cooperation. So the U.S. and the U.K. cannot let it break down.”
G-20 Request
The 36-year-old Basel committee, a body of central bankers and regulators that sets capital standards for banks worldwide, was asked by the Group of 20 nations to draft new rules after the worst financial crisis in 70 years caused lenders to write off $1.8 trillion. G-20 leaders urged the committee to improve the quantity and quality of bank capital, strengthen liquidity requirements and discourage excessive leverage. They set a deadline of December for making the rules and originally gave countries until the end of 2012 to implement them.
Three months ago, European leaders and finance ministers, including those from Germany and France, were as adamant as their American and British counterparts in pushing back against banks’ objections to proposed rules that UBS AG estimated could force banks to raise $375 billion of capital, according to the regulators and bankers, who asked not to be identified because they weren’t authorized to speak. Fifty-five percent of that would have to be raised by European banks, UBS said.
Then Greece’s debt woes unnerved investors, making European leaders more receptive to what the banks were saying, according to the people.
http://noir.bloomberg.com/apps/news?pid=20601087&sid=ayS1LW35dtRo&pos=1
U.S. Economy Grinds To Halt As Nation Realizes Money Just A Symbolic, Mutually Shared Illusion
February 16, 2010 ISSUE 46•07
WASHINGTON—The U.S. economy ceased to function this week after unexpected existential remarks by Federal Reserve chairman Ben Bernanke shocked Americans into realizing that money is, in fact, just a meaningless and intangible social construct.
What began as a routine report before the Senate Finance Committee Tuesday ended with Bernanke passionately disavowing the entire concept of currency, and negating in an instant the very foundation of the world's largest economy.
"Though raising interest rates is unlikely at the moment, the Fed will of course act appropriately if we…if we…" said Bernanke, who then paused for a moment, looked down at his prepared statement, and shook his head in utter disbelief. "You know what? It doesn't matter. None of this—this so-called 'money'—really matters at all."
"It's just an illusion," a wide-eyed Bernanke added as he removed bills from his wallet and slowly spread them out before him. "Just look at it: Meaningless pieces of paper with numbers printed on them. Worthless."
According to witnesses, Finance Committee members sat in thunderstruck silence for several moments until Sen. Orrin Hatch (R-UT) finally shouted out, "Oh my God, he's right. It's all a mirage. All of it—the money, our whole economy—it's all a lie!"
Screams then filled the Senate Chamber as lawmakers and members of the press ran for the exits, leaving in their wake aisles littered with the remains of torn currency.
As news of the nation's collectively held delusion spread, the economy ground to a halt, with dumbfounded citizens everywhere walking out on their jobs as they contemplated the little green drawings of buildings and dead white men they once used to measure their adequacy and importance as human beings.
At the New York Stock Exchange, Wednesday morning's opening bell echoed across a silent floor as the few traders who arrived for work out of habit looked up blankly at the meaningless scrolling numbers on the flashing screens above……
http://www.theonion.com/articles/us-economy-grinds-to-halt-as-nation-realizes-money,2912/
"If the financial system goes down, our business is going down and, trust me, yours and everyone else's is going down, too."
Lloyd Blankfein. CEO Goldman Sachs. November 8, 2009
At the Comex silver depositories Monday, final figures were: Registered 52.32 Moz, Eligible 60.46 Moz, Total 112.78 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, back to the great vampire squids again. Below, ZeroHedge does an excellent job in highlighting all that is wrong with today’s casino US stock markets. Forget all that was taught in the text books about stocks being one step removed long term investments in capital and management of companies engaged in commerce and trade. With 73% of US stock trading now comprised merely of Ebenezer Squids high frequency trading geeks desperately gaming the other HFT geeks operating in the same US stocks trading pool. Front running the “flash” order stream, which is now made up of mostly other “bot programs” designed to trigger the HFT programs watching the “flash” order stream. Once triggered, all the great squids programs then kick in a self reinforcing feedback loop.
"The secret of life is honesty and fair dealing. If you can fake that, you've got it made."
Groucho Marx
Scientific Proof That High Frequency Trading Induces Adverse Changes In Market Microstructure And Dynamics, And Puts Market Fairness Under Question
Up until recently, any debate between proponents and opponents of High Frequency Trading would typically be represented by heated debates of high conviction on either side, with discussions rapidly deteriorating into ad hominem attacks and the producer screaming 'cut to commercial' to prevent fistfights. Luckily, all this is about to change. In a research paper by Reginald Smith of the Bouchet Franklin Institute in Rochester titled "Is high-frequency trading inducing changes in market microstructure and dynamics?" the author finds that he "can clearly demonstrate that HFT is having an increasingly large impact on the microstructure of equity trading dynamics. Traded value, and by extension trading volume, fluctuations are starting to show self-similarity at increasingly shorter timescales. Values which were once only present on the orders of several hours or days are now commonplace in the timescale of seconds or minutes. It is important that the trading algorithms of HFT traders, as well as those who seek to understand, improve, or regulate HFT realize that the overall structure of trading is influenced in a measurable manner by HFT and that Gaussian noise models of short term trading volume fluctuations likely are increasingly inapplicable."
----- Given the complex nature of HFT trades and the frequent opacity of firm trading strategies, it is difficult to pinpoint exactly what about HFT causes a higher correlation structure. One answer could be that HFT is the only type of trading that can exhibit trades that are reactive and exhibit feedback effects on short timescales that traditional trading generates over longer timescales.
---- Unfortunately, as the paper requires slightly more than first grade comprehension and math skills, it will never be read by anyone at the SEC, or those in Congress, who are pretending to be conducting Financial Regulation Reform, when the items described in this paper are precisely the things that any reform should be addressing.
And while we again urge everyone to read the full paper, below we present the section of the paper that does a terrific job in explaining the arrival of HFT, its development over the ages, and its parasitic role in market structure.
Is it any wonder that a US stock can be trading at $40 one minute and at 1 cent the next, or that by priming the NYSE “flash” order stream near the close, the NY Fed can trigger a 900 point reversal from down to up by the close. Given that stock prices are a component of the many Confidence Indexes that attempt to predict the future health of the US economy some months ahead, a self reinforcing ludicrous bot-trading feedback loop, is now routinely used by the NY Fed’s fix-its and manipulators, to dress up the future health of the US economy. When the Fed’s promised fantasy land never arrives, stocks experience another falling elevator like plunge, almost certainly triggered by one of the squids bot programs trying to game the others, perhaps backed up by a leak here and there and the internet rumor mill, before the NY Fed has to hit the re-set button again by dressing up the flash order stream again, possibly the next day, probably with a nod and a wink to their favorite Squids, in return for a telephone number paying job for life, once they exit the great offices of state. It doesn’t take a genius to see where this all ends. One day one of the Squids gets to wipe out most of the others while the others get recapitalized by new magic money from the Fed. The BDI may have fallen 56% in six weeks, but stock markets rally 5 to 6 percent in a week. Rent seeking is “God’s work,” and the only game in town for Wall Street squids.
“Overheard at Goldman Sachs”:
“We assume that you know what you’re doing,
In this ill-advised trade you’re pursuing,
But the opposite bet
That we place on your debt
May eventually hasten your ruin.”
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