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.
http://noir.bloomberg.com/apps/news?pid=20601087&sid=as_qBg7ixI3k&pos=1
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.
http://noir.bloomberg.com/apps/news?pid=20601012&sid=adGfheeAyiKk
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.
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=ailBBqr0MwPk
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.
http://www.guardian.co.uk/world/2010/aug/24/peru-cold-weather-temperature-el-ninia
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.
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