Baltic Dry Index. 2280 -71
LIR Gold Target by 2019: $3,000.
"Let me give you my vision: A man's right to work as he will, to spend what he earns, to own property, to have the state as servant and not as master. These are the British inheritance. They are the essence of a free country, and on that freedom all of our other freedoms depend."
Margaret Thatcher.
We open today, with America on holiday celebrating their escape from the tyrant mad King George the third. Yesterday, “Dr Doom” aka Professor Roubini, surprisingly suggested that despite all the European austerity packages he doesn’t think Euroland will double dip back into recession. Who am I to disagree, but for once I do. If the Eurozone’s countries actually implement their announced austerity packages, not a good assumption in a continent serially challenged with telling the truth, I think that the Euroland economy will begin entering negative territory early next year, however, if industrial unrest and social strife intervene to collapse some of the EMU national austerity programs, all bets are off as the resulting turmoil might achieve that result by somewhere in the 4th quarter of this year. Below, “the Prof” on the Eurozone currency block.
Roubini Sees Euro Zone '10 Growth "Closer to Zero"
Published: Sunday, 4 Jul 2010 | 1:01 PM ET
Euro zone growth in 2010 could be "closer to zero" after a volatile second quarter threatens to dash previous estimates of 1 percent, U.S. economist Nouriel Roubini said on Sunday.
The currency bloc does not face a double-dip recession, however, despite deteriorating financial-market confidence over economic growth in an age of fiscal austerity, Roubini told a
conference in Aix-en-Provence.
"Given the shocks of the last few month s... by year-end, euro zone growth could be closer to zero percent," said Roubini, who has been nicknamed "Doctor Doom" for his pessimistic forecasts.
He said his previous estimate of 1 percent was similar to forecasts by the European Central Bank and the International Monetary Fund.
The past three months' stock-market correction, rising credit spreads and a jittery inter-bank lending market suggested there were serious concerns over economic growth at a global level, said Roubini.
Growth in the U.S. economy could slow in the second half of this year to 1.5 percent from 3 percent in the first, he said.
"For the global economy, by year-end, the picture is not a very nice one," said Roubini.
http://www.cnbc.com/id/38033254
Also in Provence France yesterday, the ECB’s top man now belatedly clambering on Berlin’s austerity bandwagon. Below, he great Atlantic split rolls on. As in 1971, when America suddenly unilaterally imposed the fiat currency dollar reserve standard on the world, a great monetary experiment is just getting underway. How it all ends nobody knows. Stay long precious metals. My guess is that we end up in less than a decade back on a modified precious metals settlement standard.
Trichet Urges EU Governments to Tame Deficits to Boost Growth
July 4 (Bloomberg) -- European Central Bank President Jean- Claude Trichet pressed governments to trim their budget deficits, saying such action would boost economic growth by improving confidence of consumers and investors.
“We are in a period where we have to manage budgets very tightly,” Trichet told journalists in Aix-en-Provence, France. “I have no problem with austerity, rigor. I call this good budgetary management.”
The comments reinforce plans set out by Group of 20 leaders last month in Toronto, where the countries representing 85 percent of the world economy responded to plans by European governments to tackle the region’s sovereign debt crisis by slashing budget deficits.
Advanced G-20 economies pledged June 27 to halve deficits by 2013 and start to stabilize their debt-to-output ratios by 2016. While President Barack Obama is pushing his counterparts to focus on spurring growth, leaders in the U.K. Germany, Spain and Italy are already tightening spending to bolster investor confidence.
Economists at Goldman Sachs Inc. and BNP Paribas SA have trimmed their growth forecasts, partly in response to the spending cuts and tax increases already announced. Trichet said today that deficit reduction won’t choke growth and a failure to stem budget gaps would be equally risky for the recovery.
“Confidence is key for growth, and if you cannot have confidence in the sustainability of the fiscal policies then you have no growth because you have no confidence,” he said. “The two things are complimentary.”
Trichet urged European governments to boost growth through structural changes and to publish results of stress tests on banks as part of their efforts to boost confidence in the financial system.
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=at22UMsQnbIQ
But not everyone agrees with Dr. Dom. With the US economy also faltering, and China increasingly suffering from a government ordered credit slowdown, rising labour unrest and an uncomfortable domestic inflation rate that’s starting to look like it’s gotten away from the authorities, Dr. Doom for once be may be way too optimistic. Below, The Telegraph covers the world on the edge of the descent into economic anarchy.
With the US trapped in depression, this really is starting to feel like 1932
The US workforce shrank by 652,000 in June, one of the sharpest contractions ever. The rate of hourly earnings fell 0.1pc. Wages are flirting with deflation.
By Ambrose Evans-Pritchard Published: 9:33PM BST 04 Jul 2010
"The economy is still in the gravitational pull of the Great Recession," said Robert Reich, former US labour secretary. "All the booster rockets for getting us beyond it are failing."
"Home sales are down. Retail sales are down. Factory orders in May suffered their biggest tumble since March of last year. So what are we doing about it? Less than nothing," he said.
California is tightening faster than Greece. State workers have seen a 14pc fall in earnings this year due to forced furloughs. Governor Arnold Schwarzenegger is cutting pay for 200,000 state workers to the minimum wage of $7.25 an hour to cover his $19bn (£15bn) deficit.
Can Illinois be far behind? The state has a deficit of $12bn and is $5bn in arrears to schools, nursing homes, child care centres, and prisons.
----- Roughly a million Americans have dropped out of the jobs market altogether over the past two months. That is the only reason why the headline unemployment rate is not exploding to a post-war high.
Let us be honest. The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP.
The share of the US working-age population with jobs in June actually fell from 58.7pc to 58.5pc. This is the real stress indicator. The ratio was 63pc three years ago. Eight million jobs have been lost.
The average time needed to find a job has risen to a record 35.2 weeks. Nothing like this has been seen before in the post-war era. Jeff Weniger, of Harris Private Bank, said this compares with a peak of 21.2 weeks in the Volcker recession of the early 1980s.
"Legions of individuals have been left with stale skills, and little prospect of finding meaningful work, and benefits that are being exhausted. By our math the crop of people who are unemployed but not receiving a check amounts to 9.2m."
Republicans on Capitol Hill are filibustering a bill to extend the dole for up to 1.2m jobless facing an imminent cut-off. Dean Heller from Vermont called them "hobos". This really is starting to feel like 1932.
Washington's fiscal stimulus is draining away. It peaked in the first quarter, yet even then the economy eked out a growth rate of just 2.7pc. This compares with 5.1pc, 9.3pc, 8.1pc and 8.5pc in the four quarters coming off recession in the early 1980s.
The housing market is already crumbling as government props are pulled away. The expiry of homebuyers' tax credit led to a 30pc fall in the number of buyers signing contracts in May. "It is cataclysmic," said David Bloom from HSBC.
Federal tax rises are automatically baked into the pie. The Congressional Budget Office said fiscal policy will swing from
a net +2pc of GDP to -2pc by late 2011. The states and counties may have to cut as much as $180bn.
Investors are starting to chew over the awful possibility that America's recovery will stall just as Asia hits the buffers. China's manufacturing index has been falling since January, with a downward lurch in June to 50.4, just above the break-even line of 50. Momentum seems to be flagging everywhere, whether in Australian building permits, Turkish exports, or Japanese industrial output.
On Friday, Jacques Cailloux from RBS put out a "double-dip alert" for Europe. "The risk is rising fast. Absent an effect policy intervention to tackle the debt crisis on the periphery over coming months, the European economy will double dip in 2011," he said.
Elsewhere in China news, the global economy is suffering from a drop in Chinese coal prices. “China right now looks to be more bearish than bullish,” Richard Morse, who leads coal-market research at Stanford University at Stanford, California, said in an interview. Who am I to disagree? I think that China has been largely a bubble, that’s now slipped away from central control. 2011 looks to me to be the year that it all goes very wrong. Stay long precious metals. Fiat money is on its last legs.
Coal Discount Narrows in China, May Cut Imports: Energy Markets
July 5 (Bloomberg) -- China, which became a net coal importer in 2009, may cut overseas purchases after the discount on shipments from South Africa compared with domestic supplies narrowed 47 percent in a year.
The world’s fastest-growing economy bought 126 million tons from overseas last year as demand from steelmakers and power producers soared, according to Chinese customs data. Now, power use is declining and the government has imposed price caps on local mines. China may require fewer shipments, threatening this year’s 33 percent jump in spot prices at the port of Qinhuangdao.
The discount on coal from South Africa’s Richards Bay, the world’s second-biggest exporting harbor, and Chinese supplies has narrowed to $19 a ton before shipping costs are taken into account, government data show. That compares with $36 a ton less than a year ago.
“China right now looks to be more bearish than bullish,” Richard Morse, who leads coal-market research at Stanford University at Stanford, California, said in an interview. “Lower domestic prices are bearish for imports.”
The spot price for coal at Qinhuangdao, China’s biggest port for the fuel, was $111.48 a ton as of June 28, compared with $83.79 a year earlier, according to the China Coal Transport and Distribution Association. Prices averaged $109.26 a ton in 2009. Coal at Richards Bay was $91.51 on June 25, compared with an average of $73.10 last year, according to an index compiled by IHS McCloskey.
Shipping Rates
A slide in imports is likely to hurt producers in South Africa, Colombia, the U.S. and Canada, which boosted sales of thermal and steelmaking coal to Asia just as the global recession curbed demand elsewhere. The four countries accounted for 11 percent of China’s supplies in the five months through May, compared with 3.7 percent in 2009.
Benchmark European coal derivatives fell the most in more than a week on July 2, with prices for delivery to Amsterdam, Rotterdam or Antwerp with settlement next year falling 2.2 percent to $99 a ton. Prices at Australia’s Newcastle, the world’s largest export harbor for the fuel, dropped 3.1 percent to $97.31 in the week to June 25.
The slowdown in China’s imports may also deepen the slump in shipping rates. The Baltic Dry Index, a gauge of commodity- transport prices, fell for a 26th day on July 2, extending its longest slide since August 2005, data from the Baltic Exchange in London showed.
http://noir.bloomberg.com/apps/news?pid=20601103&sid=aytAqg91sd5c
In UK economic news, pessimism is rising. Below Bloomberg on the latest developments among leading CFOs. Coming next for the UK economy, I believe, a union lead fight against the coalition government’s austerity plans. Coalition governments are not known for winning such fights, and I suspect we are about to get a repeat of P.M. Heath v the miners 1972 & 1974, rather than P.M. Thatcher v the miners 1984-1985. If Greece falls off the austerity wagon and restructures its debt as is highly probable, the rest of the world economy will only notice a few ripples. If the UK falls off the wagon, which I think all too likely at some point next year, the rest of the world will notice some rogue waves. Sadly the US isn’t even of the wagon to fall off, when the US defaults all the world gets hit with a tsunami.
"Good Conservatives always pay their bills. And on time. Not like the Socialists who run up other people's bills."
Margaret Thatcher.
U.K. Finance Chiefs’ Optimism at 12-Month Low, Deloitte Says
July 5 (Bloomberg) -- Confidence among chief financial officers at major U.K. companies fell for a second quarter to a 12-month low on concern the economy will return to recession amid the government’s budget squeeze, a survey by Deloitte LLP found.
The balance of CFOs reporting greater optimism dropped to 24 percent from 40 percent in the previous quarter, London-based Deloitte Touche Tohmatsu said in an e-mailed statement today. Finance chiefs see a 38 percent chance of a double-dip recession, up from 33 percent in the first three months of 2010. Even so, sentiment about the availability of credit rose to its highest since Deloitte began its survey in 2007.
“The latest CFO survey paints a picture of concern about growth coupled with improvements in the corporate credit and liquidity environment,” Deloitte Chief Economist Ian Stewart said in the statement.
Prime Minister David Cameron’s government trimmed its economic growth forecast for 2010 to 1.2 percent in last month’s budget as it proposed spending cuts and tax increases totaling 113 billion pounds ($172 billion) to slash a record deficit. The government is demanding that state-owned banks boost credit to businesses.
Deloitte surveyed 125 CFOs, including 32 from companies in the benchmark FTSE 100 Index, between June 11 and June 25.
http://noir.bloomberg.com/apps/news?pid=20601085&sid=avxk4Kq_Hb30
In US economic news, bailed out General Motors, is now well on the way to becoming China dependent. "As goes General Motors, so goes the nation,” goes the old US saying, unfortunately in 2010, no one is quite sure which nation that is any more.
GM's Auto Sales in China Top US for First Time
Published: Friday, 2 Jul 2010 | 7:30 AM ET
General Motors' first-half sales in China, the world's biggest auto market, exceeded sales in its home U.S. market for the first time, according to data released on Friday.
GM's China auto sales jumped 48.5 percent to 1.21 million units in January through June, compared with the 1.08 million light vehicles it delivered in the U.S. over the same period, company data showed.
China overtook the U.S. as the world's top auto market in 2009, helped by government incentives and a 4 trillion yuan ($590 billion) economic stimulus package.
GM's June China auto sales rose 23.2 percent to 176,486 units.
Sales of Shanghai GM, the Detroit automaker's flagship car venture with SAIC Motor, came to 71,782 units, up 18.9 percent on a year earlier.
Sales of Wuling brand mini vehicles made at its three-way tie-up in south China rose 19.7 percent to 99,115 units.
Toyota, a relative latecomer to China, sold 362,000 cars in the country in the first six months, up 27 percent.
Its June sales climbed a more modest 8 percent to 61,000 cars, after labor disputes at a parts supplier interrupted production.
http://www.cnbc.com/id/38053642
"I think we've been through a period where too many people have been given to understand that if they have a problem, it's the government's job to cope with it. 'I have a problem, I'll get a grant.' 'I'm homeless, the government must house me.' They're casting their problem on society. And you know, there is no such thing as society. There are individual men and women, and there are families. And no government can do anything except through people, and people must look to themselves first. It's our duty to look after ourselves and then, also, to look after our neighbour. People have got the entitlements too much in mind, without the obligations. There's no such thing as entitlement, unless someone has first met an obligation."
Margaret Thatcher.
At the Comex silver depositories Friday, final figures were: Registered 50.93 Moz, Eligible 63.37 Moz, Total 114.31 Moz.
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Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
No crooks today, just the UK’s bent politicians in the unelectable Liberal Party getting their pound of flesh, attempting to govern via the backdoor of changing the voting system rather than win in the traditional British election way of getting the most votes. The LIR will be campaigning for keeping the present UK voting system, rather than the continental voting system that results in continuous weak coalition governments, like Belgium, Holland, Italy and Portugal and even in countries like Israel. Who wants to see continuous corrupt backroom deals for power between failed political leaders, or squalid deals involving racist fanatic’s in government?
“We see an even more far-reaching attack launched by the New Labour government and its left-wing allies on the foundations of our Constitution. One part of this program of rationalizing change, significantly, is the extension of that judicial review which is causing so much trouble here. Another is the attempt to replace our traditional first-past-the-post electoral system by those who would prefer to have horse-trading politicians choose governments, rather than leave that choice to voters."
Margaret Thatcher.
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 signaling 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.
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 July 04
Current Stretch:0 days
2010 total: 35 days (19%)
2009 total: 260 days (71%)
Since 2004: 803 days
Typical Solar Min: 485 days
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