Baltic Dry Index. 2558 +43
LIR Gold Target by 2019: $3,000.
Update: Today 20/08/10 we initiate our new rare earths and metals page covering the arrival of the 21st century age of e-mobility and the 25 year switch over to green energy.
Vanity of vanities, saith the Preacher, vanity of vanities; all is vanity.
Ecclesiastes 1:2
Today we salute the brave soldiers of Canada, who 68 years ago today, supported by the Royal Navy and Royal Airforce, mounted a raid on Dieppe, France. Suffering 60% casualties and captured, the lessons learned from the raid were invaluable in the planning of the later invasions of North Africa and Normandy.
We open this morning with Der Spiegel positing that Greece has tipped over into a death spiral. Chancellor Merkel will just have to cut short her holidays and return to Berlin to order thousands of Germans south to holiday in greater Sparta. Can it be very much longer now, before even the dumbest, work and tax shy Greek, figures out that they are better off out of the euro, and better off defaulting and restructuring their debts. People and companies file bankruptcy all the time, restructuring their debts and restarting their lives. Until the ludicrous, one size fits all Germanic euro came into existence, Europe’s dysfunctional, tax adverse, black economy, Club Med European nations did this all the time too. Poor Greece, trapped in a euro it should never have joined, and never have been allowed to join either, now finds that the price of staying in the D. Mark, sorry euro, is the impoverishment and penury of 70% of its serfs. The outcome of the vanity of European politicians and bureaucrats vainglorious attempt at fulfilling Napoleon and Hitler’s delusions of a United States of Europe. Of course, they both had very different ideas of how it should run from the present crowd of non-entities in Brussels. At least the present bunch of fantasists are not trying to achieve it by war.
“We’re going to squeeze the Greeks till the pips squeak.”
With apologies to UK Labour Chancellor Dennis Healy and the rich.
Entering a Death Spiral?
Tensions Rise in Greece as Austerity Measures Backfire
By Corinna Jessen in Athens 08/18/2010
The austerity measures that were supposed to fix Greece's problems are dragging down the country's economy. Stores are closing, tax revenues are falling and unemployment has hit an unbelievable 70 percent in some places. Frustrated workers are threatening to strike back.
-----This dire prognosis comes even despite Athens' massive efforts to sort out the country's finances. The government's draconian austerity measures have managed to reduce the country's budget deficit by an almost unbelievable 39.7 percent, after previous governments had squandered tax money and falsified statistics for years. The measures have reduced government spending by a total of 10 percent, 4.5 percent more than the EU and International Monetary Fund (IMF) had required.
The problem is that the austerity measures have in the meantime affected every aspect of the country's economy. Purchasing power is dropping, consumption is taking a nosedive and the number of bankruptcies and unemployed are on the rise. The country's gross domestic product shrank by 1.5 percent in the second quarter of this year. Tax revenue, desperately needed in order to consolidate the national finances, has dropped off. A mixture of fear, hopelessness and anger is brewing in Greek society.
----- Perama is certainly an unusually extreme case. But the shipyards' decline provides a telling example of the Greek economy's increasing inability to compete. Barely any of the country's industries can keep up with international competition in terms of productivity, and experts expect the country's gross domestic product to fall by 4 percent over the course of the entire year. Germany, by way of comparison, is hoping for growth of up to 3 percent.
----- Prime Minister George Papandreou's austerity package has seriously shaken the Greek economy. The package included reducing civil servants' salaries by up to 20 percent and slashing retirement benefits, while raising numerous taxes. The result is that Greeks have less and less money to spend and sales figures everywhere are dropping, spelling catastrophe for a country where 70 percent of economic output is based on private consumption.
A short jaunt through Athens' shopping streets reveals the scale of the decline. Fully a quarter of the store windows on Stadiou Street bear red signs reading "Enoikiazetai" -- for rent. The National Confederation of Hellenic Commerce (ESEE) calculates that 17 percent of all shops in Athens have had to file for bankruptcy.
----- The entire country is in the grip of a depression. Everything seems to be going downhill. The spiral is continuing unabated, and there is no clear way out. The worse part, however, is the fact that hardly anyone still hopes that things will improve one day.
The country's unemployment rate makes this trend particularly clear. In 2009, it was 9.5 percent. This year it may rise to 12.1 percent and economists expect it to reach 14.3 percent in 2011. Those, though, are only the official numbers, which were provided by Angel Gurría, secretary general of the Organisation for Economic Co-operation and Development (OECD). The Greek trade union association GSEE considers those numbers far too optimistic. It considers 20 percent to be a more likely figure for 2011.
http://www.spiegel.de/international/europe/0,1518,712511,00.html
Not that having your own fiat currency to play with is any guarantee of success and universal bliss. America’s politician’s have put the world’s leading fiat currency on suicide watch, while below the Old Lady of Threadneedle Street has gone paralytic. Stay long gold and silver.
The only function of economic forecasting is to make astrology look respectable.
J. K. Galbraith.
Economy is on a knife-edge, warn Bank of England policymakers
Britain's economy is teetering on a knife-edge, with "substantial" risks of a relapse balanced against signs of "gathering momentum" in the recovery, according to minutes from the Bank of England's August rate-setting meeting.
By Philip Aldrick, Economics Editor Published: 6:27AM BST 19 Aug 2010
For a third month running, policymakers on the Monetary Policy Committee (MPC) voted 8-1 to hold rates at 0.5pc and leave unchanged the Bank's £200bn quantitative easing (QE) programme after deciding the existing measures "remained appropriate".
However, the minutes said that the "risks were substantial, and members stood ready to respond in either direction as the balance of risks evolved".
Andrew Sentance was once again a lone voice calling for a rate rise in a meeting where the prospect of further QE was also discussed.
Economists believe the MPC could soon be split three ways, with some members calling for more QE in the face of declining economic growth, others demanding rate rises to stave off rising inflation, and the bulk paralysed by the conflicting data.
For the first time, the MPC conceded that it "could not be sure of the extent to which inflation would moderate" as "weak demand... might lead to some capacity being scrapped" by business.
The Bank has argued that prices will remain low as businesses bring back on stream some of their "spare capacity", putting downward pressure on inflation. With less spare capacity, prices may rise earlier.
However, the fears about inflation are unlikely to translate into rate rises, Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club, said. "There appears to be an increasing sensitivity to criticism over persistent overshoots of the inflation target, but little appetite to act,” he noted.
We close for the day and the week, as we’re taking another summer Friday off, the next LIR update will be Monday but check with the blog for the weekend update, with better news from shipping. The Baltic Dry Index has rebounded to a still weak 2558, while below Danish shipping leader Maersk has bounced back into profit. Tempering the relief slightly, a large part of the rebound came from non shipping interest, namely oil, where its oil production arm reduced exploration costs by 40% while the price t got for its oil was up almost 50%. Still, container shipping has rebounded from the terrible days of late 2008 and early 2009, and it might just be a sign that we can avoid a double dip recession after all. My money is still on a double dip.
Things which you do not hope happen more frequently than things which you do hope.
Titus Maccius Plautus
AUGUST 18, 2010, 4:36 A.M. ET
Maersk Raises Outlook Again After Swinging to First-Half Net Profit
In the latest sign of a rebound in the container-shipping industry, A.P. Moller-Maersk AS said Wednesday it swung to a net profit in the first half of the year, as expected, and raised its earnings guidance for the second time in as many months as a recovery in the global economy is driving better demand and freight rates.
The Danish company said it now expects earnings for the full year to exceed $4 billion, although Maersk cautioned that the outlook was subject to considerable uncertainty, not least due to developments in the global economy.
The forecast is based on freight rates, oil prices and the dollar exchange rate remaining at current levels, but it excludes an expected gain from the sale of Netto supermarkets in the U.K., which is still subject to regulatory approval.
Container shipping was hit hard by the global downturn, which curtailed demand and sent freight rates well below profitable levels, resulting in a net loss of $1.31 billion in 2009—the company's first ever full-year loss.
However, the owner of the world's biggest container-shipping company, Maersk Line, said in July it expected full-year net profit to be better than the $3.5 billion net profit it made in 2008, as the container shipping industry rebounds.
----- The company's container shipping unit, its largest source of revenue, recorded a 33% rise in revenue to 70.04 billion kroner as volumes increased 11% to 3.6 million forty-foot-equivalent container units.
Maersk said it expects a similar result in second half, although it added that there was still significant uncertainty, especially in the fourth quarter.
The firm's oil and gas activities recorded a 24% increase in revenue to 22.26 billion kroner. Production, at 70 million barrels of oil equivalents, was 14% below year-earlier levels but the average price of Brent crude oil was 48% higher, Maersk said contributing to the rise in revenue. Exploration costs also fell 40% to 1.01 billion kroner.
The company's oil and gas operations produce more than 600,000 barrels of oil a day in the Danish and British parts of the North Sea, as well as offshore Qatar, Algeria and Kazakhstan.
On top of its container-shipping operations, Maersk also runs tanker fleets, drilling rigs and develops and operates container terminals across the world. A 20% stake in Denmark's Danske Bank also adds to its earnings as does retail operations in Northern Europe.
http://online.wsj.com/article/SB10001424052748703649004575436643269911192.html
I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.
Ecclesiastes 9: 11
At the Comex silver depositories Wednesday, final figures were: Registered 51.04 Moz, Eligible 59.99 Moz, Total 111.03 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
No Crooks or scoundrels today, just a good news perseverance story from Canada. If at first you don’t succeed try, try and try again, unless of course you’re a bankster, in which case back up the truck to the central bank and load up the cash at ½%. Don’t lend it to Main Street though, if you deposit back with the central bank thay’ll pay you interest of 2.5%. Little wonder why people are desperately seeking gold ahead of the coming fiat money crash.
When the world says, "Give up," Hope whispers, "Try it one more time."
Anon.
Eureka moment for stubborn prospector
From Tuesday's Globe and Mail Published on Monday, Aug. 16, 2010 7:30PM EDT Last updated on Tuesday, Aug. 17, 2010 6:50AM EDT
Gold fever is gripping Yukon for the first time in more than a century following a discovery by a penniless and persistent prospector that was determined to find the source of the original Klondike deposits.
Shawn Ryan lived in a tin shack for years before uncovering the so-called White Gold district, not far from the fabled Klondike zones. While his work has yet to result in an operating mine, it has already sparked a record-setting staking rush and led to the multimillion-dollar takeover of a junior gold explorer by a senior producer.
More deals are expected as junior mining companies flock to the area around Mr. Ryan’s findings and raise millions to finance further exploration, making big bets on what they hope will be the next motherlode of gold.
Michael Wark, executive director of the Yukon Chamber of Mines, said Mr. Ryan may in fact have discovered a source of the Klondike gold from the late 1800s, but “regardless, they have a significant gold discovery there.”
For Mr. Ryan, the discovery in the area south of Dawson City, near where the White and Yukon rivers meet, is the reward for the years spent hunting for gold in the heart of one of the world’s most storied mining districts.
The area was made famous by the Klondike gold rush of 1896, but has received only sporadic attention since. In recent years, other companies came close to making the same discovery as Mr. Ryan, but walked away after running out of money or deciding other opportunities looked better.
Mr. Ryan hung in. He and his wife, Cathy Wood, and eventually two children, pinched pennies for years, surviving mostly on an annual $10,000 exploration grant from the Yukon government. Living on the outskirts of Dawson City, they paid $250 a month to rent a 365-square-foot tin shack that had served as the local barbershop at the turn of the previous century.
In 2004, after about eight years of hunching over maps and sampling soil, Mr. Ryan finally found the first signs of what he had been digging for so deeply, when assay results indicated geochemical markers associated with gold.
It took a few years for others to take notice, but now that they have, other exploration firms are flooding into the area, bringing with them a much-needed boost for local businesses ranging from hotels to helicopter companies.
The number of mining claims in Yukon surged to just under 110,000 in the first seven months of this year, about 38 per cent more than all of 2009, which itself was a record year with just under 80,000 claims.
-----Today, the self-taught geologist has become one of the rare prospectors to hit the jackpot. He has made millions through the share options and cash that he has received, and will become even richer if one of the properties he has uncovered turns into an operating gold mine and he begins collecting royalties on the output. Mr. Ryan and his wife now run Ryanwood Exploration Inc., a geology consultant that has expanded to more than 50 employees.
As a general rule the most successful man in life is the man who has the best information.
Benjamin Disraeli.
I’m taking another summer Friday off to enjoy God’s blessings granted to rural southern England. Have a great weekend everyone.
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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