Tuesday 31 August 2010

QE Returns.

Baltic Dry Index. 2712
LIR Gold Target by 2019: $3,000.
“The war has developed not necessarily to Japan's advantage.”
Emperor Hirohito, August 1945

Japan yesterday became the first of the G-7 to return to quantitative easing. Where a bold policy was needed to break the rise of the yen, the BOJ opted instead for a baby step policy, and so the yen rose and Japan’s stocks slumped. Once started QE is virtually impossible to stop. A bad policy with eventual ruination as its destination, if you’re going to use QE, the BOJ forgot the only rule that applies, “you might as well be hung for a sheep as a lamb”. With the yen rising and taxes high, “Panasonic Corp., the maker of Viera televisions, said Aug. 20 it will move part of its plasma display panel production to Shanghai.” I wonder how much of that decision was down to China restricting rare metals exports and ending them entirely in 2015. Plasma panels require phosphors with rare earth doping. (Red requires europium, new blue europium phosphor retains brightness ten times longer than previous blue phosphors, and green is generated by phosphor doped with terbium.) Unless the west comes up with alternate non Chinese based rare earths and metals sources, the technology manufacturing future looks to be Chinese.

“Japan is an important ally of ours. Japan and the United States of the western industrialized capacity, 60 percent of the GNP, two countries. That's a statement in and of itself.”
Vice President Dan Quayle.

Japan renews QE as recovery falters

Japan has launched a fresh monetary and fiscal boost to shore up its faltering recovery and stem the slide into deflation, becoming the first major country to inject further stimulus since the Great Recession ended.

By Ambrose Evans-Pritchard, International Business Editor Published: 8:20PM BST 30 Aug 2010

The Bank of Japan agreed at an emergency meeting to boost its special loan facility by ¥10 trillion to ¥30 trillion (£220.7bn). "We need to watch out more carefully for downside risks to Japan's economy," said Governor Masaaki Shirakawa, who cut off his trip to the Jackson Hole forum in the US.

"Several weak US figures came out, while the yen rose and stock prices fell. When we saw this, we decided that we need to take more precautions."

Premier Naoto Kan said Tokyo would tap into its reserve fund for a ¥920bn spending package on jobs and investment. "We want to take swift measures as the second pillar of stimulus to support easing by the bank," he said.

The sums are tiny, a sign of Mr Kan's limited room for manoeuvre as public debt reaches 225pc of GDP. Rating agencies are already circling ominously.

The economy stalled in the second quarter, growing just 0.1pc. Prices have fallen for the past 17 months. Core deflation is running at -1.1pc.

The Bank of Japan's move was too timid to stabilise exchange markets. The yen appreciated sharply to ¥84.6 against the dollar. It is once again closing in on a 15-year high.

---- Even so, it is the first central bank to start loosening again.

While the Bank of England has hinted at more quantitative easing, and the Fed is taking steps to avoid "passive tightening", neither has yet launched fresh QE


Japan Policy Tinkering Leaves ’Huge’ Risk to Growth

Aug. 31 (Bloomberg) -- Japan’s limited policy response yesterday to risks facing economic growth after a surge in the yen may leave the recovery dependent on overseas spending.

---- The measures won’t alter the outlook for growth, which is poised to slow in the second half, according to economists at Goldman Sachs Group Inc. and Sumitomo Mitsui Asset Management Co. Pressure on Japan’s currency to rise may also be sustained after the announcements prompted the yen to rise from its low of the day yesterday against the dollar.

----- The Nikkei 225 Stock Average tumbled 2.1 percent as investors shrugged off government reports today that showed the recovery remains intact even as it slows. Industrial production unexpectedly expanded 0.3 percent in July from June, when it declined 1.1 percent. Retail sales rose 0.7 percent from a month earlier as hotter-than-usual summer weather spurred shopping.

Japan’s recovery from its worst postwar recession has depended on exports, propelled by Asia, which now makes up a majority of overseas demand for the country’s products. That reliance is unlikely to change given limited prospects for domestic spending with a shrinking population and sustained deflation.

Gross domestic product growth will be more than halved in the final six months of this year, to an annual pace of about 1 percent from about 2.4 percent in January to June, according to Goldman Sachs.

Corporate Taxes

“There are huge downside risks” to the expansion, said Chiwoong Lee, a senior economist at Goldman Sachs in Tokyo. Rather than the “limited” action taken yesterday by policy makers, “what’s needed are measures that lead to innovative steps,” such as reductions in corporate tax rates for industries including technology, he said.

Tax rates for electronics companies in Japan are around 29 percent in Japan, compared with 6 percent in the U.S., Lee said.

Keidanren, Japan’s biggest business lobby, has called on the government to support investment by cutting corporate taxes. Without such a step, companies may plow their record cash holdings abroad rather than at home.

Nissan Motor Co., Japan’s third-largest automaker, began selling a Thai-made compact car in July to counter the rising yen. Panasonic Corp., the maker of Viera televisions, said Aug. 20 it will move part of its plasma display panel production to Shanghai.


In other Asian news, China’s gain is Europe’s loss. Well. It isn’t yet but it soon will be. With Russia’s oil production hitting its limits and set to decline from next year onwards, Russia will soon have the option of deciding who stays warm in the northern hemisphere winter. Washington’s colour revolution policy of encircling Russia and going in for the kill, backfired badly as it forced Russia and China into a defensive alliance. Western Europe will soon get to pay for the ill conceived and poorly executed colour revolutions in faraway places, but Russia’s backyard.

Russia opens China pipeline for Siberian oil

By Isabel Gorst in Moscow

Published: August 29 2010 18:00 Last updated: August 29 2010 18:00.

Vladimir Putin, the Russian prime minister, on Sunday opened a new pipeline to export east Siberian oil to China that will help Russia reorientate its oil trade towards the east.

The pipeline, running 67km from Skovorodino in east Siberia to China’s north-eastern frontier, is an offshoot of a new oil export route Russia is building to the Pacific Ocean, providing a strategic window on the fast-growing energy markets of Asia.

----Russia began exporting oil this year from a new export terminal on the Pacific Ocean built to serve fields in east Siberia, one of the world’s last untapped oil provinces. Some Kremlin-friendly oil companies have been granted tax breaks to speed development of east Siberian reserves and offset a decline in production in other regions.

Transneft, the Russian oil pipeline monopoly, completed the construction of a pipeline from Taishet in the Irkutsk region to Skovorodino last year, the first stretch of a planned 2,757km pipeline to the Pacific. On completion in 2012, the pipeline will be capable of carrying up to 1.6m barrels of oil a day, about one-third of Russia’s current exports.

----Russia accepted a $25bn (€19.6bn, £16bn) loan from China in exchange for future oil deliveries last year, cementing its energy-trading relations with the world’s fastest growing oil consumer. The deal entitles China to import 300,000 barrels a day of Russian oil for 20 years starting in 2011.

Transneft said last year that Russia would boost its daily oil production by 1m barrels to 11m b/d after 2012, providing enough oil for exports both ways.

But analysts have warned that Russian oil production, after rising to an all-time record of 10.2m b/d this month, will begin to fall next year as a decline accelerates at mature fields.


We end today with signs of global cooling arriving, perhaps?

China's largest saltwater lake grows after 50 years of shrinking

10:40, August 02, 2010

The surface area of China's largest saltwater lake had grown in size over the past five years amid increased rain and decreased evaporation, an expert from the Qinghai Provincial Center of Geomatics said Saturday.
The surface area of the Qinghai Lake had reached 4,249.3 square kilometers, 4.3 square kilometers more than in 2005, Wang Yuan, deputy director of the center, said.
"The year 2005 was a turning point. Before then, the lake's size was decreasing due to climate change and human activities," Wang said.
The government's environmental protection work had contributed to the increase in surface area, Wang said.
The lake's surface area shrunk more than 300 square kilometers beginning in the 1950s, according to the Qinghai Province Meteorological Sciences Academy.


At the Comex silver depositories Monday, final figures were: Registered 51.91 Moz, Eligible 58.85 Moz, Total 110.76 Moz.


Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

Today it’s the crooks and scoundrels in the Intergovernmental Panel on Climate Change again. The nutters who brought the world the scam of “carbon trading, carbon taxes, and carbon capture”, in the cause of fighting “man-made global warming for CO2”, now rebranded “climate change”, since the public got wise to the man-mad global warming scam, are found guilty of being economical with the truth, and more than a little self serving. Things were apparently so bad, it was the best the finest whitewash committee could come up with. No need to tell them about Qinghai Lake.

How about we refund your money, send you a new one at no charge, close the store and have the manager shot. Would that be satisfactory?

Chinese laundry sign.

IPCC 'must avoid playing politics'

The UN's climate change body has been told to stick to the science and avoid playing politics in a landmark review of how it operates

By Stephen Adams Published: 7:00AM BST 31 Aug 2010

A group of leading scientists from around the world said on Monday that the leaders of the UN's Intergovernmental Panel on Climate Change had left themselves open to the accusation that they had "gone beyond IPCC's remit".

In March the Amsterdam-based InterAcademy Council (IAC) was called in after a number of errors were found in the IPCC's landmark 2007 Fourth Assessment Report into man-made climate change.

Key among those was the unsubstantiated claim - based on an article in New Scientist magazine - that most of the Himalayas' glaciers would have melted by 2035.

Its inclusion gave ammunition to those sceptical about the climate change science, who dug for further evidence that the IPCC's report was flawed and the organisation biased.

On Monday the IAC announced its recommendations on how to strengthen the IPCC, saying it "needs fundamental reform" to convince an ever more sceptical public that its science was solid.

It did not call into question the main findings of the 2007 report, and said that overall its assessment process of the rate of, and risks from, climate chance had "been a success and served society well".

However, the IAC said: "IPCC’s slow and inadequate response to revelations of errors in the last assessment, as well as complaints that its leaders have gone beyond IPCC’s mandate to be 'policy relevant, not policy prescriptive' in their public comments, have made communications a critical issue."

Harold Shapiro, a Princeton University professor of economics, who chaired the IAC committee, noted that "controversies have erupted over the perceived impartiality of IPCC towards climate policy".

He said guidelines should be drawn up "on how to speak on the IPCC's behalf while staying within the the bounds of IPCC reports".

The report also recommended that a "rigorous conflict-of-interest policy" should be drawn up for senior IPCC leadership and authors of its reports. In the future no individual should chair the IPCC for more than one six-year term, it stated.

Additionally, "formal qualifications for the chair and all other Bureau members need to be developed", the IAC said.

While Prof Shapiro stipulated that the IAC's recommendations were "not in any way motivated by an evaluation of the current leadership of IPCC", many will see them as putting pressure on Dr Pachauri.

The Indian scientist, who started his career as a railway engineer, refused to resign following the Himalaya debacle.

He has also been dogged by questions over conflict of interest, which he has resolutely denied. He has been in the post since 2002 - he was awarded a new six-year term in 2008 - and he plans to remain until 2014.

The IAC also said the IPCC should tighten up on its use of so-called "gray literature" - that which has not been peer-reviewed.

Prof Shapiro said: "IPCC has guidelines for the use of such sources, but these guidelines are vague and have not always been followed."


Phew! So that’s alright then. Move along, nothing to see here. For a moment there we actually thought you might be conducting an impartial review.

“They have all the virtues I dislike and none of the vices I admire.”

With apologies to Winston Churchill.

The monthly Coppock Indicators finished July:

DJIA: +264 Down. NASDAQ: +427 Down. SP500: +275 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. July seems to have confirmed June’s reversal and end of the bull market.

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.


Sunspots – A 22 year colder world? (From 2004?)

Spotless Days Aug 30
Current Stretch:0 days

2010 total: 39 days (16%)
2009 total: 260 days (71%)
Since 2004: 807 days
Typical Solar Min: 485 days


Monday 30 August 2010

A China Clash Looms.

Baltic Dry Index. 2712 +09
LIR Gold Target by 2019: $3,000.

"No one believes more firmly than Comrade Napoleon that all animals are equal. He would be only too happy to let you make your decisions for yourselves. But sometimes you might make the wrong decisions, comrades, and then where should we be?"

George Orwell, Animal Farm.

While England, Wales and Northern Ireland party away today, on the last bank holiday of summer, leaving the dour, formerly Calvinist Scots to soldier on slaving away to save the nation from the criminal follies of the Bank of England’s cronies, a clash between the G-7 and G-9 China took a big step forward at the weekend. With the USA sliding back into recession again, if it ever left rather than it just being the figures fixed, and with Dr. Bernanke about to try a second dose of Zimbabwe’s medicine in the form of a another bout of quantitative easing, beating up on China has rarely looked more attractive to politicians in the G-7. Below, the NY Times and The Telegraph cover the developing story. With the traditional stock market crash season upon us, and 3 repeat Hindenburg Omen signals in US stocks in a week, what better than to blame China for all the troubles of the west. Stay long precious metals. The real trouble is the great Nixonian error of going on to a fiat money reserve currency. Since the banksters won’t address that problem until we all go broke in the west, another round of Voodoo economics is called for.

"If a window was broken or a drain was blocked up, someone was certain to say that Snowball had come in the night and done it, and when the key of the store-shed was lost, the whole farm was convinced that Snowball had thrown it down the well. Curiously enough, they went on believing this even after the mislaid key was found under a sack of meal."

George Orwell, Animal Farm.

China Fortifies State Businesses to Fuel Growth

By MICHAEL WINES Published: August 29, 2010

BEIJING — During its decades of rapid growth, China thrived by allowing once-suppressed private entrepreneurs to prosper, often at the expense of the old, inefficient state sector of the economy.

Now, whether in the coal-rich regions of Shanxi Province, the steel mills of the northern industrial heartland, or the airlines flying overhead, it is often China’s state-run companies that are on the march.

As the Chinese government has grown richer — and more worried about sustaining its high-octane growth — it has pumped public money into companies that it expects to upgrade the industrial base and employ more people. The beneficiaries are state-owned interests that many analysts had assumed would gradually wither away in the face of private-sector competition.

New data from the World Bank show that the proportion of industrial production by companies controlled by the Chinese state edged up last year, checking a slow but seemingly inevitable eclipse. Moreover, investment by state-controlled companies skyrocketed, driven by hundreds of billions of dollars of government spending and state bank lending to combat the global financial crisis.

They join a string of other signals that are fueling discussion among analysts about whether China, which calls itself socialist but is often thought of in the West as brutally capitalist, is in fact seeking to enhance government control over some parts of the economy.

The distinction may matter more today than it once did. China surpassed Japan to become the world’s second-largest economy this year, and its state-directed development model is enormously appealing to poor countries. Even in the West, many admire China’s ability to build a first-world infrastructure and transform its cities into showpieces.

Once eager to learn from the United States, China’s leaders during the financial crisis have reaffirmed their faith in their own more statist approach to economic management, in which private capitalism plays only a supporting role.

“The socialist system’s advantages,” Prime Minister Wen Jiabao said in a March address, “enable us to make decisions efficiently, organize effectively and concentrate resources to accomplish large undertakings.”

More. 3 pages.


Backlash over China curb on metal exports

China's draconian export curbs on rare earth minerals needed by the rest of the world for frontier technologies is escalating into a serious diplomatic and trade clash with the United States and other leading powers.

By Ambrose Evans-Pritchard Published: 9:52PM BST 29 Aug 2010

Japan's foreign minister Katsuya Okada issued what amounted to a formal protest at top-level meeting with Chinese officials in Beijing over the weekend, saying the sudden cut-off was "affecting the global production chain".

It is the latest sign of rising pressure after angry complaints by companies outside China that rely on this family of 17 metals for hybrid cars, mobile phones, superconductors, navigation, and a host of high-tech industries.

China's commerce minister Chen Deming said that Beijing would not back down over the export quotas. "Mass-extraction of rare earth will cause great damage to the environment, that's why China has tightened controls," he said, repeating the official line.

Beijing set off shockwaves in early July when it announced a 72pc reduction in rare earth exports over the second half of this year. The country has acquired a near monopoly, with 97pc of global output after under-cutting the rest of the world with Mongolian ores in the 1990s. The sudden cut-off since July has drastically restricted supplies to the rest of world.

The last US mine shut 14 years ago, discouraged by tough US environmental rules. The US General Accounting Office said China now has a "dominant position" with market power. "Rebuilding a US rare earth supply chain may take up to 15 years," it said.

Washington is examining claims that China's curbs breach World Trade Organisation rules by giving preferential access to Chinese companies. The US Trade Representative is collecting data from US firms to assess the basis for a legal challenge. There are strong suspicions that Beijing's aim is to force foreign companies to locate technology plants in China.

Baotou Steel High Tech Co said in February that it was building storage space for 200,000 tonnes of rare earth oxides. The company has since been told to stockpile metals by party bosses in Inner Mongolia. China Daily reports that Baotou and Jiangxi Copper are aligning their policies and now "virtually control" the market.

China claims it will need a growing proportion of these metals for its own industries, but US and Japanese officials say privately that Beijing's methods are not in keeping with the WTO ethos. Japan has already drafted a "Strategy For Enhancing Stable Supplies of Rare Metals" and has been stockpiling.

Rare earth metals are sprinkled in iPads, BlackBerrys, plasma TVs, lasers, wind turbines, hybrid engines, and smart bombs. They cannot easily be replaced, if at all. Neodymium enhances magnets at high heat, and cerium is used in catalytic converters.

Rare earth ores are not in fact rare, merely scattered and costly to extract. There are ample reserves in the US, Australia, Canada, Russia, and Greenland. A number of explorers are reopening mines but will not produce significant amounts until mid-decade.


Rare Metal blog. http://www.raremetalblog.com/

The superior man makes the difficulty to be overcome his first interest; success comes only later.


At the Comex silver depositories Friday, final figures were: Registered 51.91 Moz, Eligible 59.23 Moz, Total 111.14 Moz.


Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

No crooks today, although if the newspaper allegations against the Pakistan cricket team are accurate they would be a good candidate, instead two developing stories with the possibility to have a major impact as the week unfolds. Up first, hurricane Earl, an Atlantic strengthening hurricane with the potential to hit the east coast of the USA. For now, computer models suggest that it will swing northwards and probably miss landfall on the east coast of the USA.

Hurricane Earl Strengthens to Category Two; Threatens Leewards

Aug. 30 (Bloomberg) -- Hurricane Earl strengthened as it moved toward the northern Leeward Islands and is expected to become a “major” storm later today, the U.S. National Hurricane Center said.

Earl was upgraded to a Category 2 hurricane on the five- step Saffir-Simpson scale with maximum sustained winds of 100 miles (160 miles) per hour, the Miami-based center said in an advisory at 11 p.m. Miami time yesterday.

Hurricane warnings are in effect for Anguilla, Antigua, Barbuda, Montserrat, St. Barthelemy, St. Eustatius, St. Kitts and Nevis and St. Martin in the northern Leewards and the British Virgin Islands, the hurricane center said. A hurricane watch was issued for the U.S. Virgin Islands and Puerto Rico.

“Hurricane Earl will become a major hurricane over the next few days and will pose a serious threat to the East Coast as we approach Labor Day weekend,” said Jim Rouiller, energy meteorologist at Planalytics Inc. in Berwyn, Pennsylvania yesterday.

“The next few days will be critical because each day that passes this week without any true and sustained hook northward will result in threat levels dramatically increasing for a major hurricane strike to the East Coast,” he said.

Earl was moving west-northwest at 15 mph and is expected to continue in this direction for the next day or so, the center said.


Next, an Indonesian volcano coming back to life after 400 years. The expectation is for the danger to pass, but Indonesian volcanoes can have spectacular eruptions. Worryingly, the Toba caldera and super-volcano is located only about 50 miles away. Any sign of Toba returning to activity would be very big news indeed.

Thousands evacuated as Indonesian volcano erupts

By Karima Anjani in Jakarta Monday, 30 August 2010

Thousands of Indonesians were evacuated from the slopes of a volcano yesterday after it erupted for the first time in more than 400 years, spewing out lava and sending smoke and dust 1,500 metres into the air.

Mount Sinabung, in the north of the island of Sumatra, began erupting around midnight after rumbling for several days, prompting some villagers to panic before the mass evacuation got under way.

Indonesia is on the so-called Pacific Rim of Fire, an arc of volcanoes and geological fault lines triggering frequent earthquakes around the Pacific Basin. The eruption triggered the highest, red, volcano alert. Two people died, one from breathing problems and the other from a heart attack, and two suffered injuries in road accidents as lorries, ambulances and buses were mobilised in the rescue operation.

"This is the first time since 1600 that Sinabung has erupted and we have little knowledge in terms of its eruptive patterns," said Mr Surono, the head of Indonesia's vulcanology centre.

Authorities took at least 12,000 people from high-risk areas on the slopes of the 2,460-metre volcano to temporary shelters. Local television showed women and children wearing face masks in cramped tents.

The area around the volcano is largely agricultural.

"Since this is the first eruption we've had in Sinabung, we're anticipating residents will remain at the shelters for at least a week while waiting for further status alerts," said Priyadi Kardono, a spokesman at the national disaster management agency.


Toba’s cataclysmic eruption.


The monthly Coppock Indicators finished July:

DJIA: +264 Down. NASDAQ: +427 Down. SP500: +275 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. July seems to have confirmed June’s reversal and end of the bull market.

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.


Sunspots – A 22 year colder world? (From 2004?)

Spotless Days Aug 29
Current Stretch:0 days

2010 total: 39 days (16%)
2009 total: 260 days (71%)
Since 2004: 807 days
Typical Solar Min: 485 days


The long minimum seems to have ended or has it? I’m beginning to think our new Dalton Minimum of arriving global cooling, might turn out in fact to be a much longer more severe Maunder Minimum.

Saturday 28 August 2010

Weekend Update – August 28, 2010

Baltic Dry Index. 2712 - 44 on the week.

LIR Gold Target by 2019: $3,000.

"policy options are available to provide additional stimulus"

Ben Bernanke. August 27, 2010.

With the “good news” from Jackson Hole widely covered in the mainstream media, I will just confine myself to the following observation, once started on Quantitative Easing it’s practically impossible to stop. A few months back both the Fed and the BOE trumpeted that they had won the war, “mission accomplished” and that at some point ahead they were looking to unwind all the QE. It was lying nonsense then and as we now see, the Fed is about to initiate QE2 and what the WSJ calls “bolder moves”. Once started, there is no way back. QE will become a regular tool of both central banks, until eventually the USA and UK default or trigger currency revulsion and hyperinflation. Greenspan-Bernanke’s dismal past record of always opting for the wrong decision, is now about to catch up with the Bernanke Fed. If QE works, why is Zimbabwe not rich, and why not “boldly” have the Fed buy up a house or an apartment and car for everyone? We are “boldly” heading towards Reykjavik.

Next we’re doomed! The tall buildings index just got another recession signal. And this on the heels of back to back Hindenburg Signals!

The ability of the index to predict economic collapse is surprising. For example, the Panic of 1907 was presaged by the building of the Singer Building (completed in 1908) and the Metropolitan Life Building (completed in 1909). The skyscraper index also accurately predicted the Great Depression with the completion of 40 Wall Tower in 1929, the Chrysler Building in 1930, and the Empire State Building in 1931.

City council approves plans for new tower near Empire State Building

NBC New York August 25, 2010

The full City Council has approved plans to build a new skyscraper that will stand taller than the Empire State Building -- currently the highest tower in New York City.

The project, which gained council approval around 2:30 p.m. today [Aug. 25], is expected to create 7,000 jobs and will include $150 million in transportation infrastructure improvements.

Earlier today, both the Zoning and Franchising subcommittee and Land Use committee had already voted in favor of allowing construction of the 15 Penn Plaza project.

The Empire State Building's owner opposes the project. Anthony Malkin says the proposed 1,200-foot glass office tower will ruin the view from the renowned landmark and negatively alter the skyline.



We end for today with news from India. In just 5 weeks time the Commonwealth Games are heading for a fiasco.

Mosquitoes and Delays: India's Commonwealth Games Mess

The biggest international sporting spectacle ever to head for India is just five weeks away — and the Commonwealth Games are still mired in controversy, inefficiency, bureaucratic infighting and delays. Even the anthem — composed by double Oscar winner A.R. Rahman of "Jai Ho" fame — is late. At a press conference on Aug. 16 meant to unveil the song, Rahman sang one line and then said the song wasn't quite ready. "I still have to tweak some lyrics and do much more modification with the sound elements," he explained. A source in India's Sport Ministry, though, said the delay was due to a "lack of agreement over which minister should actually be given the honors" of introducing the song.

The games have much more serious problems. India has already spent at least $4.6 billion — nine times more than its December 2003 estimate of $500 million — to upgrade stadiums, refurbish roads and build power and water utilities. It spent another $2.7 billion on a new airport terminal. But the 12-day-long event, which will see athletes competing from the former British Commonwealth, has already been marred by allegations of corruption even before its start in New Delhi on Oct. 3.

The Indian government is in full damage-control mode. Trying to salvage the event, Prime Minister Manmohan Singh has formed a special group of ministers and assigned 10 senior bureaucrats to oversee the completion of various unfinished games projects. Sonia Gandhi, leader of the ruling Congress Party, said that those guilty of corruption would not be spared after the mega sports event is over. "The prestige of the nation is involved," she said.
Mother Nature has, indeed, played a part. New Delhi's monsoon usually hits in late July, which would have given games organizers a few weeks after the rains had subsided to finish construction. Instead, this year's late monsoon has kept the city a waterlogged mess through August. Roads in the Indian capital are collapsing, including some of the new ones laid out for the games. "Already more than 20 roads have caved in," says Ajay Chadha, special commissioner of police for traffic. "The number of cases of road collapse have increased manifold this year. And some roads which have no history of such incidents have also caved in after upgradation work was done on them for the Commonwealth Games."
Debris from the construction work has also choked New Delhi's main storm-water drains, which carry excess rainwater into the Yamuna River. For all the new bike lanes, bus stations and high-tech toilets that they have built, the planners apparently never intended to install a new drainage system or to upgrade the old one.

----Then there are the cost overruns. The $7.5 billion price tag for the 2010 Commonwealth Games is already the highest ever for the event (the 2006 games held in Melbourne may have cost close to $1 billion). But the costs include, according to documents provided to investigators by the organizing committee, $89 rolls of toilet paper, $61 soap dispensers, $125 first-aid kits and treadmills rented for 45 days at a cost of $23,080 each. And there is the problem of contracts.
Read more: http://www.time.com/time/world/article/0,8599,2013182,00.html#ixzz0xo43cVlC

Have a great weekend everyone.


Friday 27 August 2010

Fatally Flawed – The Next Lehman.

Baltic Dry Index. 2703 -70

LIR Gold Target by 2019: $3,000.

A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done.

Walter Bagehot. Lombard Street. 1873.

British banks are unsafe!!! So thinks a man who ought to know. Below the Telegraph covers the fatally flawed UK accounting rules. The next Lehman is out there and probably British.

The whole history of civilization is strewn with creeds and institutions which were invaluable at first, and deadly afterwards.

Walter Bagehot.

UK bank accounting rules 'fatally flawed', warns influential watchdog

The Government has been warned of a “regulatory fiasco” in which British banks have apparently adhered to flawed reporting standards for more than five years.

By Louise Armitstead Published: 6:00AM BST 26 Aug 2010

An influential watchdog has written to the Department of Business listing a catalogue of staggering regulatory errors that allegedly contributed to the collapse of several banks in 2008 – and still threatens the system today.

While reviewing the proposed expansion of the International Financial Reporting Standards for accounting, Tim Bush, a member of the “Urgent Issues Task Force” that scrutinises the work of the Accounting Standards Board (ASB), claims to have uncovered “fatal” and “dangerous” flaws in the system.

The City veteran has argued that applied to banks, the standards “produced false profits and overstated capital” which have “misled creditors, misled shareholders, the Bank of England, FSA and others”.

In a devastating assessment, Mr Bush alleges the regulations, and specifically the way they have been implemented in the UK and Ireland, have led to “mistakes [being made] of such severity that it is difficult to overstate”.

His letter, written on August 19 and sent to the BIS as well as the ASB and other accounting bodies, claims:

* The ASB has “not fully understood” the IFRS accounting standards and implemented them in a way that even contravenes the Companies Act. As a result, UK and Irish banks have wrongly relied on a different – and flawed – financial reporting system from the rest of Europe.

* The application distorted bank’s company accounts, giving “false assurances”, and hampered the directors and regulators from seeing the build-up of leverage and other risks.

* The system is still “causing direct business risk” in the banks and will do the same if applied to other companies too.

* The dangers are set to spread to small and medium-sized businesses under proposals to roll-out the accounting system further.

According to Mr Bush, who was formerly a fund manager at Hermes, the root of the “fatal flaw” lies in the adoption of the new IFRS accounting system to work alongside the Companies Act, whose rules had applied to financial reporting in Britain since 1879.

Although the IFRS system was introduced in the wake of the Enron scandal to combat accounting fraud, it has been widely criticised by accounting experts across Europe.

Mr Bush has argued that the standards preclude the principle of “prudence”, or the likelihood of money being repaid, disguising, for instance, a bad loan until it actually fails. But Mr Bush has claimed that while European banks applied the standard at group level, Britain’s ASB said that all bank units and subsidiaries should use the same measures, too.

The standards also applied to the Republic of Ireland, where the ASB is one of the last remaining British bodies to have any jurisdiction.

In his letter, Mr Bush wrote: “Although IFRS had been rolled out across the EU, the UK and Ireland implemented it so extensively that the impact was different. It has been a ‘double dose’ to the extent of being a deadly dose, by removing what had underpinned banking solvency for over 120 years.”

He said the system produced figures that hid instability in banks, so that directors and regulators of the banks could look at the audited figures and conclude that banks were not just solvent but had excess cash.

As for banks in the lead-up to the financial crisis: “They did not have the capital that they presented, and they were not going concerns. The true situation was that business models were loss-making and actually consuming capital.”

-----He said the system is still flawed and urged the Government to scrap plans to extend the standards. “In my view, the direction that the ASB took, and is still taking, is… causing direct business risk.”

He added: “The proposed further roll-out of full IFRS and the IFRS for SMEs has the same fundamental flaws as what has gone so badly wrong in the banks, a level of apparent compliance that undershoots what the law requires. It is difficult in the extreme to envisage Parliament knowingly assenting to a model of company accounts that dilutes the responsibilities of auditors at the same time as offering less for directors, creditors and the wider public interest.”


It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way

A Tale of Two Cities. Charles Dickens.

Normal service resumes on Monday. Check with the blog for the weekend update. Have a great weekend everyone.

Thursday 26 August 2010

Fire Up The Helicopters.

Baltic Dry Index. 2773 -88
LIR Gold Target by 2019: $3,000.

Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Ali Baba, 2002. Deflation: Making Sure "It" Doesn't Happen Here.

Yes it’s that time of year again when Ali Baba and the 40 thieves head off to Wyoming to compare how much they got away with in the year past, and the trade their latest ideas on how to rip of the rest of the world in the coming year. If only there were only 40 thieves. Bankster-in-Chief Ben Bernanke stars tomorrow, when according to the script the 4,000 thieves are waiting to hear when his helicopter drops resume over Wall Street. Things could turn very ugly fast, if the Big Man of the Fed goes off script. Shame about Main Street though, and all those pension funds stuffed to the gills with “triple-A” MBS. Below MarketWatch covers the air show. Stay long precious metals, but far away from where Ali Baba’s thieves can steal it.

Running to the window, he opened it, and put out his head.  No fog, no mist; clear, bright, jovial, stirring, cold; cold, piping for the blood to dance to; Golden sunlight; Heavenly sky; sweet fresh air; merry bells.  Oh, glorious.  Glorious!

"What's to-day?" cried Bernanke, calling downward to a distressed financier in bespoke clothes, who perhaps had loitered in to look about what might be asset stripped.

"Eh?" returned the Bilderberger, with all his might of wonder.

"What's to-day, my fine fellow?" said Bernanke.

"To-day?" replied the Wall Street fraudster.  "Why, Christmas Day."

With apologies to Charles Dickens.

Bernanke's helicopter could move to new altitude

Key Jackson Hole question: What more can, and will, the Fed do?

Aug. 25, 2010, 6:00 a.m. EDT

WASHINGTON (MarketWatch) -- In an all-out effort to get the economy moving again, Federal Reserve Chairman Ben Bernanke may be getting ready to take his money-creating helicopter to a new altitude.

Bernanke earned the moniker "Helicopter Ben" after the then-Fed governor referenced Milton Friedman's famed "helicopter drop" favorably in a 2002 speech outlining how the Fed could defeat deflation.

(Friedman had argued hypothetically that a central bank could drop currency from a helicopter to stimulate spending.)

Nearly eight years on from that speech, Alan Greenspan's successor is due Friday at 10 a.m. Eastern to deliver another vital keynote at the Kansas City Fed's annual symposium in Jackson Hole, Wyo., with the straightforward title, "The Economic Outlook and the Federal Reserve's Policy Response."

In many ways, Bernanke's tenure as head of the world's most important central bank has followed the playbook outlined in that 2002 speech -- that to combat deflation, or a sustained negative inflation rate, the Fed would first take nominal interest rates to virtually zero and then take extraordinary action, such as buying government bonds and mortgage-backed securities.

Interest rates have been set between zero and 0.25% since December 2008, and the Fed has purchased $1.4 trillion worth of mortgage and $300 billion worth of Treasury securities. In early August, the Federal Open Market Committee took a baby step toward further quantitative easing by deciding to hold the size of the Fed's balance sheet constant through reinvesting principal repayments from mortgage securities into Treasurys


In other US news, gloom follows gloom in the economy. If Ali Baba stays on script tomorrow, it’s Christmas bonus time early on Wall Street.

“Someday, we’ll look back on this, laugh nervously and change the subject.”

US economy: Sales of new homes down 12.4 per cent in July

By Stephen Foley</AUTHOR itxtvisited="1"> Thursday, 26 August 2010

A sharp drop in sales of new homes last month has confirmed the bleak picture of the US housing market, a day after existing home sales data also plunged to the lowest level since records began in the 1960s. Sales of single-family homes fell 12.4 per cent to an annualised rate of 276,000, from a downwardly-revised 315,000 in June.

Economists had forecast a rise to 333,000 but were braced for disappointment amid mounting evidence that the withdrawal of government tax credits to first-time buyers had stalled the recovery. The median price of a new house was down 4.8 per cent.

There was also weak data from the manufacturing sector. Orders for durable goods, including "big-ticket" items like kitchen appliances, or business investment in factory equipment and computers, rose by less than was anticipated.


Next, a must read article in the Journal on BP’s last day on Transocean’s Deepwater Horizon oilrig. Can the TV movie be far behind?

AUGUST 26, 2010

On Doomed Rig's Last Day, a Divisive Change of Plan

On April 20 at 10:43 a.m., a young BP PLC engineer sent a 173-word email to colleagues aboard the Deepwater Horizon drilling rig. The email spelled out a recent change to a key safety test that sparked confusion and debate aboard the rig.

Less than 12 hours later, the rig was engulfed in flames so hot they melted steel. Eleven workers were dead.

The worst offshore oil spill in U.S. history had begun.

The Deepwater Horizon blowout has become one of the most scrutinized maritime disasters ever. Congressional investigators and outside experts have identified a series of decisions in the weeks beforehand that made the blowout more likely.

But a central uncertainty remained: Why didn't the crew recognize the warning signs in the final hours and bring the well under control while there was still time to prevent a lethal eruption?

The Wall Street Journal has reviewed BP internal documents along with hours of public testimony before a joint Coast Guard and Interior Department panel. The Journal also interviewed dozens of witnesses to the disaster. What emerges is a startling picture of the last day of the Deepwater Horizon—a day filled with disruption and disagreement.



Back in the United States of Europe, honesty and playing by the rules doesn’t pay for the hapless, austerity bound Irish.

"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

It Pays to Riot in Europe

By Ambrose Evans-Pritchard Last updated: August 25th, 2010.

Ireland must now pay more than Greece to borrow.

Dublin has played by the book. It has taken pre-emptive steps to please the markets and the EU. It has done an IMF job without the IMF. Indeed, is has gone further than the IMF would have dared to go.

It has imposed draconian austerity measures. The solidarity of the country has been remarkable. There have no riots, and no terrorist threats.

Yet as of today it is paying 5.48pc to borrow for ten years, or near 8pc in real terms once deflation is factored in. This is crippling and puts the country on an unsustainable debt trajectory if it lasts for long.

Yet Greece is able to borrow from the EU at 5pc and from the IMF at a staggered rate far below that (still too high for the policy to work, but that is another matter). These were the terms of the €110bn joint bail-out.

To add insult to injury Ireland is having SUBSIDIZE Greece to meet its share of the rescue fund.

I am sure you can all see the absurdity of this. It has moral hazard written all over it, and shows what happens once a dysfunctional system twists itself into ever greater knots rather confronting the core issue.


While we await the great bankster’s speech tomorrow, we end for the week, and the UK’s last bank holiday of summer, with the Japanese now setting out to offend more than just the Chinese. Proof positive that politicians are universally stupid and that ignorance isn’t just a monopoly of the west.

“ I see you’ve set aside this special time to humiliate yourself in public.”

Japanese politician launches attack on 'River Kwai' Britons

A politician tipped as a future Japanese prime minister has said the British are not very likeable, but admitted the way British prisoners marched in The Bridge on the River Kwai demonstrated their best qualities.

By Chris Irvine Published: 6:45AM BST 26 Aug 2010

Ichiro Ozawa, the former secretary-general of Japan’s ruling Democratic Party, also said he values US democracy but dismissed the American people as “simple-minded”.

The 68-year-old veteran politician, who resigned as the second most important official in the ruling party in June after coming under fire for campaign finance scandals, reportedly said: “I don’t like British people,” before praising British democracy and their discipline, citing the 1957 Second World War II film, The Bridge on the River Kwai, in which British prisoners of war march in orderly ranks.

Veterans of the Second World War who fought against Japan said Mr Ozawa’s comments about Britain were insensitive but they would “not get into a sweat about it”.

--- --As well as the British, Mr Ozawa criticised the Americans, questioning their intelligence.

“Why is the United States so simple? I like Americans, but they are somewhat like single-cell (organisms),” Mr Ozawa told a political seminar in Tokyo, according to Japanese media reports.

Despite his opinion of the American people, he praised US democracy, in particular the achievement of Barack Obama becoming president.

“A black president was born in the United States where having a black president seemed impossible,” he said.

“There are rumours that a black (leader) will surely be assassinated, but they chose Obama, who emphasised change.”

Mr Ozawa, 68, an old-school backroom fixer sometimes described as the “Shadow Shogun”, resigned from his DPJ post of the DPJ in June as Yukio Hatoyama resigned as prime minister amid sagging approval ratings.

Naoto Kan, who distanced himself from Mr Ozawa, replaced Mr Hatoyama as premier but is now struggling to stay in office after his party suffered losses in upper house elections in July.


At the Comex silver depositories Wednesday, final figures were: Registered 51.35 Moz, Eligible 60.05 Moz, Total 111.40 Moz.


Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

Today. more on the world’s leading non-government Ponzi scamster. Poor Bernie Madoff must be wondering why he’s doing a hard 150, while Ebenezer Squid and all the other Squids, live the life of Riley on Wall Street, robbing the rest of the world blind. He only stole a measly 50 billion or so, and in no way threatened to crash the whole world’s financial system. The Squids got bailed out to pay themselves more telephone number bonuses, and resume their casino capitalist ways. Bernie got to stamp out license plates for the rest of his life, alternating with sewing mailbags on Wednesday’s and Friday’s.

Below that, a must read primer for every CEO, CFO, COO of any company likely to face the third degree from America and the EU’s growing Gestapo charged with investigating alleged corporate crime. Those unfortunate to reside in former Prime Minister Stalin Brown’s Great Britain, face further jeopardy from an outrageous one sided extradition treaty with America, designed to fast track terrorists to their just rewards but only ever used against alleged white collar crime and a deluded hacker looking for info on UFO’s, plus the even more ridiculous and infamous European Arrest Warrant, where once free born Britons or residents, are now slaves to the caprice and whim foreign courts and are delivered up to rot in a foreign jail while, the overseas tyrants rig the trial. Yet more reason for the UK to withdraw from the United States of Europe.

“There's a difference between criminals and crooks. Crooks steal. Criminals blow some guy's brains out. I'm a crook.”

Ronnie Biggs. Great Train Robber.

AUGUST 25, 2010, 11:29 A.M. ET

Judge Asks Gibraltar Court to Release Funds to Madoff Victims




© 2010 Financier Worldwide Limited.

Permission to use this reprint has been granted by the publisher.


Twenty years ago, searches/seizures and dawn raids to investigate business crimes, fraud and wrongdoing were largely unheard of.

Investigators at that time asked businesses for the records and voluntary cooperation; on occasion, grand juries and other investigatory bodies served subpoenas and compelled oral testimony. A new era of EU cartel enforcement and, in the US, the collection of billions of dollars in criminal fines and forfeitures and controversies surrounding Enron, Madoff, Goldman Sachs, private bribery cases, and devastating oil spills over the last 20 years have changed that. Wrongful business conduct has been thoroughly ‘criminalised’, and investigators now use tactics previously reserved for investigating organised crime and drug dealers, including searches/seizures and raids. The use of these investigatory tactics has become more frequent and visible. This means that company executives and in-house counsel should take steps to plan for their possibility.

Unfortunately, few in-house counsel or company executives have been trained on how to handle searches/seizures or dawn raids or have personally experienced such tactics. These tactics are extremely intimidating to executives, employees, and in-house counsel – as they are intended to be. Investigators use them to gather physical evidence, documents and electronic documents, data and metadata, but also to create an environment of fear, distrust, intimidation and compulsion – hoping to create circumstances and an environment whereby executives and employees make statements that they would not otherwise make.

More often than not, these statements are made outside the presence of company counsel or a witness to ensure accuracy and completeness as well as simply knowing what has been said to investigators, giving investigators tactical advantages relative to the company’s and executives’ defences.

Know what to expect



Email for a copy of the PDF. Have a great weekend everyone. Check with the weekend blog for updates.

The monthly Coppock Indicators finished July:

DJIA: +264 Down. NASDAQ: +427 Down. SP500: +275 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. July seems to have confirmed June’s reversal and end of the bull market.

Wednesday 25 August 2010

Goldilocks Dead!

Baltic Dry Index. 2861 +20
LIR Gold Target by 2019: $3,000.

'If money isn't loosened up, this sucker could go down.'

President George W. Bush.

We report the death this morning of Goldilocks, the much loved niece of Bubbles Greenspan and God daughter to Helicopter Ben Bernanke. After many years of playfully wrecking the beds of a series of bears and stealing their food, in an unfortunate Washington miscommunication, she was savaged to death yesterday morning by the hungry bears. On August 10th, in a surprise move of unintended consequence, the grumpy old white men of the Washington Fed, unexpectedly overruled Helicopter Ben and in an economy savings measure, withdrew her support team of handlers who used to feed the bears each day near the NYSE close. After two weeks of not eating, the hungry bears lead by baby bear, savaged to death Goldilocks when she showed up for porridge yesterday after a brief summer vacation visiting empty condo blocks along the Redneck Coast. It is believed now that Goldilocks must have missed her Twitter message, informing her of the change on the 10th. The post of Goldilocks is now vacant and the NY Times Paul Krugman has been hired to find a replacement and acquire new team of happy bears.

Below, the WSJ and The Telegraph take up the case.

Government is the only institution that can take a valuable commodity like paper, and make it worthless by applying ink.

Ludwig Von Mises.

AUGUST 25, 2010

Plunge in Home Sales Stokes Economy Fears

U.S. home sales plummeted in July to a level not seen in more than a decade, spurring fears of renewed weakness in housing prices and the broader economy.

Sales of previously owned homes fell 27.2% from June to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors said Tuesday, the lowest level since the industry group started its tally in 1999.

The expiration of a home-buyer tax credit in the spring was expected to damp buying, though less severely. Economists said the sales drop—together with a corresponding rise in the inventory of unsold homes—meant another decline in housing prices was on the horizon. House prices had stabilized last year after declining since 2006.

High unemployment and meager wage growth already are driving many Americans' reluctance to make major purchases, so a return of falling home equity could further depress confidence and consumer spending.

"At this point in the recovery, every little bit counts," said economist Paul Dales of Capital Economics. "A double dip in the housing market and house prices would not be enough to generate another recession. It would certainly help to hold back the recovery." He expects home prices to fall another 5% after a 30% decline during the recession.

----- The renewed worry about housing comes as economists downgrade their forecasts for the economy this year and early next year. Traditionally, the housing sector, along with purchases of durable goods such as furniture, would help pull the economy out of a recession as lower interest rates spurred higher demand. But this time, potential home buyers either don't have the jobs or savings to jump in or are wary of another decline in the market.

"Consumers and housing are in no position to lead us out," said Nigel Gault, chief U.S. economist at IHS Global Insight. "We've gone through the inventory-cycle boost. The stimulus boost is fading. We're falling back on whatever underlying strength there is in the private sector, in exports and business-equipment spending, and there's not a lot."

----- Buyers who signed contracts by April 30 have until the end of next month to close on those sales and receive credits worth as much as $8,000. Sales of homes priced between $100,000 and $250,000, which would have received the biggest benefit from the tax credit, were off 35% in July from a year ago.

The number of unsold homes on the market grew by 2.5% to nearly four million in July. At the current sales pace, it would take 12.5 months to clear that inventory, the highest level in more than a decade.

Sales may have been even worse if mortgage rates hadn't been so low, said David Berson, chief economist at PMI Group Inc., a mortgage insurer in Walnut Creek, Calif.

------ One troubling sign for the market is that banks appear to be listing more homes for sale, just as demand has dropped. The number of bank-owned listings increased 12% in August from the previous month. The figures, tracked by Zelman & Associates, include listings for the top 10 U.S. banks in 20 states and from mortgage companies Fannie Mae and Freddie Mac.


Hard-nosed Fed sends global markets reeling

The global bond markets and the twin havens of the yen and Swiss franc have been flashing warning signs for weeks, tracking leading indicators as they topple like dominoes. They always sniff trouble first.

By Ambrose Evans-Pritchard Published: 9:31PM BST 24 Aug 2010

Wall Street and Western bourses have until now brushed aside worries that recovery in the US, Japan and southern Europe may be stalling – as have commodity markets – betting the lords of finance will come to the rescue with more liquidity if needed.

Equity investors learned this week that they had misjudged the risk of a relapse as fiscal stimulus wears off, and misread the willingness of the US Federal Reserve to respond. Wrongly viewing Ben Bernanke's Fed as a soft touch, they took a fresh blast of quantitative easing for granted before it was agreed.

What has emerged since the acrimonious Fed meeting on August 10 is that Bernanke was unable to marshal a consensus behind fresh QE. Seven members argued that Fed should not take such a drastic step until the economy was in serious trouble, according to Wall Street Journal Fed-watcher Jon Hilsenrath.

They settled on a compromise that the Fed should roll over holdings of bonds as they reach maturity to avoid passive tightening. But there was no deal on further action. Philadelphia's Charles Plosser grumbled that the Fed had sent "a garbled message".

More ominously, some Fed officials fear the central bank is already "pushing on a string" and does not have the means to revive the economy. Whether or not they are right, this comes as a psychological shock for investors schooled by the "Greenspan Put' into thinking that there is a deus ex machina in the wings.

Market tensions have been simmering for days. They erupted on Tuesday when Japan's yen smashed through resistance against all major currencies, reaching a 15-year peak against the US dollar. The Nikkei index buckled below 9,000 as yen strength pushed Japan's export industry deeper under water.

"This has been one of the most interesting days in finance ever," said Andrew Roberts, head of credit at RBS. "We are right at the tipping point. Yields are about to collapse even further, equities are about to turn over. The end game approaches, probably in next few weeks."

------ The Richmond Fed's manufacturing index showed a plunge in August expectations on Tuesday, with shipments dropping to 7 from 40 two months earlier, and the backlog of orders dropping to -1 from 22. This follows the Philly Fed's crash last week to -7.

Stephen Lewis from Monument Securities said bond yields have dropped further than they did in the "flight to safety" extreme of late 2008, a sign that markets fear that underlying conditions are even worse today than they thought then. "Now they fear the global economy will remain in the mire for decades," he said.

For the Japanese this has become a nightmare. Their V-shaped rebound has been cut off short of its 2008 peak. Growth stalled to just 0.1pc in the second quarter. Unemployment has been rising for four months.


We close for the day back in Europe, where Ireland is in bad need of a lucky shamrock or finding a leprechaun’s crock of gold. So far poor Ireland has only found Anglo Irish Bank’s crock of non performing loans.

Ireland Credit Rating Cut One Step by S&P on Rescue

Aug. 25 (Bloomberg) -- Ireland’s credit rating was cut one step by Standard & Poor’s to AA-, the lowest since 1995, on concern the rising cost of supporting the country’s struggling banks will swell the budget deficit.

S&P raised its estimate for recapitalizing the banking system to as much as 50 billion euros ($63 billion) from a previous estimate of as much as 35 billion euros. Ireland’s rating is still one notch better than Italy and three above Portugal.

“A further downgrade is possible if the fiscal cost of supporting the banking sector rises further, or if other adverse economic developments weaken the government’s ability to meet its medium-term fiscal objectives,” S&P said in a statement yesterday. Ireland is slated to sell between 400 million euros and 600 million euros worth of bills tomorrow.

----- “They’re going to pay very high yields for a prolonged period of time,” Jacob Kirkegaard, a research fellow at the Peterson Institute for International Economics in Washington, said in an interview. “The misfortune for Ireland is not only have they had an incredible housing bust, they have also had a very poorly regulated banks and that sets them quite apart” from a country such as Spain.

----- The spreads on Spanish and Irish bonds have risen above the levels touched in May, when the Greek fiscal crisis prompted the European Central Bank to buy government bonds for the first time.


For each petal on the shamrock this brings a wish your way- good health, good luck and happiness for today and every day.

At the Comex silver depositories Tuesday, final figures were: Registered 50.76 Moz, Eligible 60.84 Moz, Total 111.60 Moz.


Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

No crooks today, just an update on what looks to be commodity inflation arriving even as the G-7 economies stumble. With the central banksters on the verge of unleashing QE2 on their fiat currencies, stay long gold as events will now start to get seriously weird.

Inflation is one form of taxation that can be imposed without legislation.

Milton Friedman.

Gold Demand Jumped 36% in Second Quarter on ETFs, Industry Says

Aug. 25 (Bloomberg) -- Gold demand rose 36 percent in the second quarter as investors boosted purchases of bullion-backed funds and sent prices surging during Europe’s sovereign-debt crisis, the producer-funded World Gold Council said.

Global demand rose to 1,050.3 metric tons from 769.6 tons a year earlier, the London-based industry group said today in a report. Investors purchased 291.3 metric tons of gold in exchange-traded funds, or ETFs, the second-highest quarter on record, and central banks were net buyers for a fifth straight period.


AUGUST 25, 2010

What's the Beef? Food-Inflation Fears

Cattle prices are soaring toward records, pushing up the cost of beef in grocery stores and adding to the risk of a broader wave of food inflation.

The gains are being fueled by rising appetites globally and a dwindling U.S. herd. Purchases of U.S. beef around the world have surged as emerging economies become more prosperous. At the same time, ranchers hit in recent years by drought and the financial crisis have cut the number of cattle to the lowest level in decades.

The rally has driven up the futures market for cattle by 11% since early July


Coffee falls more than 8% as investors turn bitter on risk

Aug. 24, 2010, 6:22 p.m. EDT

SAN FRANCISCO (MarketWatch) -- Arabica coffee futures closed down more than 8% Tuesday as investors booked profits on the recent high-flying commodity amid a general bias toward assets deemed safer if the global recovery stalls.

Coffee for December delivery closed down 15 cents, or 8.1%, to $1.684 a pound on ICE Futures U.S. in New York. That's the largest one-day drop since March 2008.

----- Arabica coffee prices hit their highest in nearly 13 years on Friday, settling at $1.85 a pound. On Monday, the contract closed at $1.83 a pound after having touched fresh 12-year highs.

Such volatility, however, is not unheard of in the coffee market, traders say. For starters, it's a thinly traded commodity dependant on weather trends.

---- Coffee has gained about 30% so far this year as crops in top producing countries were dogged by weather-related problems and crops worldwide are cyclically yielding fewer beans.

Smith said he sees upside and projects coffee hitting $2 a pound in the near term.

Colombia's 2008-09 crop got hit by excessive rain, and there are concerns about Brazil's next crop. Brazil and Colombia rank No. 1 and No. 2, respectively, as the largest coffee exporters, with Brazil's accounting for about 50% of the supply of Arabica coffee.


Lindt Weighs Higher Chocolate Prices to Offset Cocoa Costs

Aug. 24 (Bloomberg) -- Lindt & Spruengli AG, the world’s largest maker of premium chocolate, said it’s considering price increases to offset rising cocoa costs.

Price rises will “mainly depend on the rate of inflation and the currency situation in different countries,” the Kilchberg, Switzerland-based chocolatier said in a statement today.

Cocoa futures have more than doubled in the past three years, putting pressure on chocolate makers’ profitability.

---- Lindt said it will keep trying to offset higher cocoa prices as much as possible by cutting costs.

“The company’s priority will remain the strengthening of the brand and gaining market share,” the maker of Ghirardelli chocolate said.


Extreme La Niña brings illness and misery to Peru

Mass of polar air also hangs over Chile, Argentina, Uruguay, Paraguay and southern Brazil

---- For the first time in 40 years, temperatures in Lima fell to 8.8C at the end of July. Since then they have hovered around 13-15C. Houses are poorly insulated in Lima, and according to Percy Mosca of the Peruvian department of meteorology and hydrology, "the cold is made worse by the unusually strong winds in the region, as well as high humidity of more than 80% and sometimes even 95%".

"It's so cold your bones ache," said Dionisia. The whole of Peru is having an unusual cold spell as a result of La Niña, a cyclical climatic phenomenon leading to a cooling of the Pacific Ocean. But the drop in temperatures is also due to a mass of cold air from the south pole, which has also affected Chile, Argentina, Uruguay, Paraguay and southern Brazil.

Unusually low temperatures of 10C have even reached the Amazonian forest, which is more used to recording figures of 20-30C.


Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.

Ronald Reagan.

The monthly Coppock Indicators finished July:

DJIA: +264 Down. NASDAQ: +427 Down. SP500: +275 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. July seems to have confirmed June’s reversal and end of the bull market.

Tuesday 24 August 2010

Cui Bono

Baltic Dry Index. 2841 +85
LIR Gold Target by 2019: $3,000.

"It is a wide road that leads to war and only a narrow path that leads home again."


Are we in line for an Autumn surprise? Rupert Murdoch’s pro-war media are back conditioning the public again against Iran. Below, the Journal takes up recent events inside Iran. By all accounts in today’s Journal, any action against Iran ought to be another “cakewalk”. Iran by all accounts is failing from within, at war with itself. Is President Obama up for “shock and awe two?” Is another “slam-dunk” being planned?

"Ladies and gentlemen, these are not assertions. These are facts, corroborated by many sources, some of them sources of the intelligence services of other countries."

Secretary of State Colin Powell, to the United Nations Security Council, Feb. 5, 2003

AUGUST 24, 2010

Cracks in the Iranian Monolith

Opposition is spreading in the streets, in prisons, and even in the military

The Iranian regime loves to boast of its military strength, international clout and hold on domestic power. Much of this is accepted by outside experts, but in fact the regime is in trouble. Iran's leaders have lost legitimacy in the eyes of the people, are unable to manage the country's many problems, face a growing opposition, and are openly fighting with one another.

A few weeks ago, according to official and private reports, the Iranian air force shot down three drones near the south-western city of Bushehr, where a Russian-supplied nuclear reactor has just started up. When the Revolutionary Guards inspected the debris, they expected to find proof of high-altitude spying. Instead, the Guards had to report to Supreme Leader Ali Khamenei that the air force had blasted Iran's own unmanned aircraft out of the sky.

The Iranian regime loves to boast of its military strength, international clout and hold on domestic power. Much of this is accepted by outside experts, but in fact the regime is in trouble. Iran's leaders have lost legitimacy in the eyes of the people, are unable to manage the country's many problems, face a growing opposition, and are openly fighting with one another.

A few weeks ago, according to official and private reports, the Iranian air force shot down three drones near the southwestern city of Bushehr, where a Russian-supplied nuclear reactor has just started up. When the Revolutionary Guards inspected the debris, they expected to find proof of high-altitude spying. Instead, the Guards had to report to Supreme Leader Ali Khamenei that the air force had blasted Iran's own unmanned aircraft out of the sky.

---- These incidents have taken place against a general backdrop of internal conflict within the regime. In late July, Mohammad Ali Jaffari, commander of the Revolutionary Guard Corps, the regime's Praetorian Guard, admitted publicly that many top officers were supporters of the opposition Green Movement. Shortly thereafter, according to official government announcements, some 250 officers suddenly resigned. In the past weeks, several journalists from the Guards' FARS news agency have defected, some to France and others to the United States.

Meanwhile, Iran has suffered a series of attacks against its petroleum industry. As Iranian media reported (detailed in the London Telegraph), a pipeline to Turkey was blown up last month, most likely by Kurdish oppositionists. Soon afterwards there was an explosion in a natural gas pipeline near Tabriz.

That was followed by a spectacular blast at the Pardis petrochemical plant in Assalouye, which—being a major facility for converting natural gas to fuel for vehicles—is central to Iranian efforts to cope with the new United Nations, U.S. and European Union sanctions against refined petroleum products.

The same plant was similarly sabotaged six months ago. No one has taken responsibility for that attack, but it suggests an activist opposition with considerable "inside" assistance.

That opposition is fed by enduring social and economic crises. Unemployment last month reached 15% and is as high as 45% in some regions. In Tehran, health officials warned pregnant women and mothers of young children not to drink the water. Electrical failures are widespread. Taxi drivers have been striking around the country this summer, some because of the long lines at gas stations and others because of a shortage of compressed natural gas. The sanctions seem to be having an effect.

As these pressures have mounted, Supreme Leader Ali Khamenei—against whom Iranians chant "Death to the Dictator!" at public gatherings and nightly from their rooftops—has sought to reaffirm his authority. Late last month he issued a fatwa declaring that his opinions had a status equal to those of the prophet Mohammed. The fatwa caused such consternation that it was removed from his website, then quietly returned a few days later.


Mr. Ledeen, a scholar at the Foundation for the Defense of Democracies, is the author of "Accomplice to Evil: Iran and the War Against the West" (St. Martin's, 2009).


Next, more on the futility of discretionary war. Lessons unlearned by Messrs Blair and Brown as they toyed with Her Majesty’s Army. Below, does anyone remember them now, or the forlorn cause in which they were ordered to sacrifice for? What top vital national interest had Britain at stake in the region, and if there was one, just why would the Admiralty think just three ships would make all the difference? The more things change the more they stay the same. Penny packet deployments in unwise areas that lack reasonable means of support. Who thought Camp Keating Afghanistan, was a wise use of brave men, material and wealth.

"My answer is bring 'em on."

President George W. Bush

British warships sunk 90 years ago found

By Kunal Dutta Tuesday, 24 August 2010

The wrecks of three British warships that were intended to forestall a Soviet and German takeover of the Baltic states after 1917's October revolution have been found off the coast of Estonia.

An Estonian minesweeper located the remains of the cruiser HMS Cassandra and two Flower Class sloops, HMS Myrtle and HMS Gentian, in 300ft of water near the island of Saaremaa. The vessels were sunk as they tried to protect Estonia from being overrun by Bolshevik or German forces after Vladimir Lenin seized power in neighbouring Russia.

Commander Ivo Vark, the chief-of-staff of the Estonian navy, said the wrecks legally belonged to Britain and added: "We are confident these are the British ships in question, which were lost during the war of independence."

The vessels formed part of a British squadron sent to the Baltic Sea in 1918 to extend support and deliver arms to the newly-created state of Estonia, which was fighting to remain independent of both Russia and Germany.

The light cruiser Cassandra sank on 6 December 1918 after hitting a mine. The explosion killed 10 sailors but the remaining crew of 400 was evacuated. The minesweepers Gentian and Myrtle both sank on 15 July 1919 while on routine patrols. Nine sailors died in the two blasts.


"When planning a military expedition into Pashtun Tribal areas, the first thing you must plan is your retreat. All expeditions into this area sooner or later end in retreat under fire."

British General Andrew Skeen. 1895

At the Comex silver depositories Monday, final figures were: Registered 50.82 Moz, Eligible 60.69 Moz, Total 111.51 Moz.


Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

Today, more on Bloomberg v the banksters at the Federal Reserve. What have they got to hide, I wonder, and why must it be kept a state secret of the first order? Why should a central bank have secrets from the people it’s supposed to be serving, unless of course it’s not serving the people. What did they know and when did they know it, and how and why did they decide to swamp some in cash while others were hammered to J.P. Morgan at an arbitrary price?

"It is always the best policy to speak the truth, unless of course, you are an exceptionally good liar."

Jerome K. Jerome

Federal Reserve loses disclosure appeal

WASHINGTON (MarketWatch) -- The Federal Reserve has lost an appeal it lodged at the U.S. Second Circuit Court of Appeals that may force the central bank to disclose documents regarding borrowing from its discount window and other emergency lending programs. The loss means that the Fed now only has the U.S. Supreme Court as a venue to appeal. A Fed spokesman said it's reviewing the decision


Below, why the Greenspan-Bernanke Fed has plenty to hide. Click on the link for an excellent video clip of professional squirming of the finest order.

Incompetent paid shill Frederic Mishkin in his own words

The guy is also a former Fed governor, in case you were wondering what kind of corrupt idiots are running our entire financial system.
Here's his 2005 take on Too Big To Fail: What, Me Worry? Then there's his great housing bottom call in April 2007.
And congratulations to the Columbia Business School for allowing this man to remain a professor.
The interview above is reportedly by filmmaker Charles Ferguson, whose film Inside Job, about the financial collapse, will be released this fall.


Banks are an almost irresistible attraction for that element of our society which seeks unearned money.

J. Edgar Hoover

The monthly Coppock Indicators finished July:

DJIA: +264 Down. NASDAQ: +427 Down. SP500: +275 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. July seems to have confirmed June’s reversal and end of the bull market.

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.


Sunspots – A 22 year colder world? (From 2004?)

Spotless Days Aug 23
Current Stretch: 4 days

2010 total: 39 days (17%)
2009 total: 260 days (71%)
Since 2004: 807 days
Typical Solar Min: 485 days


The long minimum seems to have ended or has it? I’m beginning to think our new Dalton Minimum of arriving global cooling, might turn out in fact to be a much longer more severe Maunder Minimum.

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