Tuesday 21 September 2010

It’s Over!!!

Baltic Dry Index. 2628 -48
LIR Gold Target by 2019: $3,000.

There can be few fields of human endeavour in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.

J K Galbraith

It’s official, if the US economy slumps again, it will be recession number two, the rare but much feared double dip recession. According to the “experts” at the National Bureau of Economic Research who never saw the Great Recession coming, the unexpected recession ended in June last year, and any new weakness will be called a new recession by the world experts in unexpected recessions. When it comes to knowledge of unexpected recessions, no one in the world knows more than the NBER. The “good news” prompted a new stock rally on Wall Street. Below, Bloomberg on the end of the Great Recession.

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.

Donald Rumsfeld.

Worst U.S. Recession Since 1930s Ended in June 2009

Sept. 20 (Bloomberg) -- The worst U.S. recession since the Great Depression ended in June 2009, the National Bureau of Economic Research said today, as a slowdown in economic growth raises the possibility of another slump.

“We are still expanding, but disappointingly slowly,” Robert Hall, a Stanford University economics professor who heads the NBER committee charged with dating business cycles, said in an interview. “It’s still too early to tote up the cost, given that we are still far from recovered from its effects. It’s definitely the worst apart from the Depression, which was far, far worse.”

The decision came as Federal Reserve policy makers meet this week to consider whether new measures to boost growth are needed and the Obama administration proposes additional fiscal stimulus. Bruce Kasman is among economists projecting the world’s largest economy will not grow enough to lower joblessness, which has been hovering near 10 percent.

“It’s a recovery that feels fragile, and still raises questions about the risks to its sustainability,” Kasman, chief economist at JPMorgan Chase & Co. in New York, said in an interview. “We’re seeing job growth, but it hasn’t been robust. A year from now, we expect the unemployment rate will be pretty much where it is.”

The odds of the economy falling back into another recession are about 25 percent, Kasman said.

---- “In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity,” the Cambridge, Massachusetts- based NBER’s group said today in a statement. “The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007.”

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a4Krx3jfaiMk

I suspect that history, after the next Lehman hits, will revise the NBER’s judgment call. Our western banks are insolvent operating on pretend accounts, Europe stands on the cusp of sovereign debt default, the US and UK governments are underpinning what modest upturn there is, and in the US economy, a good half dozen States are nearing as good as passes for State bankruptcy. To stave off the Great Recession, the US government has run back to back deficits of almost 1.5 trillion a year, with continuing trillion dollar deficits planned as far as 2019. And despite all this, the best we have is a massive US Bond bubble that can only end badly at some point ahead, an economy that limps along looking for all the world like it’s starting to double dip despite zero interest rate policies virtually everywhere, and we all await the next Lehman because nothing was fixed in the leveraged gambling system that brought about the Great Recession. Stay long gold and silver, our fiat dollar reserve standard is now no longer fit for purpose. With deficits in the trillions, fiat money is losing its role as money. Below, the OECD on America’s recovery.

"If the financial system goes down, our business is going down and, trust me, yours and everyone else's is going down, too."

Lloyd Blankfein. CEO Goldman Sachs. November 8, 2009

Millions of Americans risk exclusion from the job market forever, OECD warns

Millions of Americans risk falling out of the job market forever, the Organisation for Economic Co-operation and Development said today, as it cautioned a full recovery will take years.

By Richard Blackden Published: 1:30PM BST 20 Sep 2010

This recession has left the US with a long-term unemployment rate - a measure of those without work for more than six months - of 4.5pc, almost double that seen in the downturns of the 1980s and 1990s.

"Previous US recessions have exhibited no long-term damage to the economy or long-term increase in unemployment, but it is possible this recession will trigger these effects," the OECD said in its first survey of the economy since late 2008.

The wide-ranging analysis also urged the US to consider a Value Added Tax to tackle its deficit, to radically reshape its housing policy and for the Federal Reserve to begin withdrawing the stimulus that has cushioned the economy in the past two years.

A more urgent priority, the OECD says, is for President Obama to marshall support across the capital for measures, including tax incentives for companies to hire and retraining programmes, to help ease the growing crisis in the labour market.

http://www.telegraph.co.uk/finance/economics/8013515/Millions-of-Americans-risk-exclusion-from-the-job-market-forever-OECD-warns.html

Back across the Atlantic, in the continent made for tanks, the ECB is now propping up bonds to stave of default in Club Med, meanwhile it’s more austerity again this time for Holland. Well actually faux austerity. Following the June election, Holland struggles along with an outgoing caretaker government, while the “winners” of the June election struggle to put together a new coalition government, that’s supposed to tackle the deferred problems. At the weekend, Sweden joined Britain, Holland and Belgium in the camp of weak coalition governance.

I think we can all agree the past is over.

George W. Bush.

SEPTEMBER 20, 2010, 4:57 P.M. ET

ECB Steps Up Its Bond Buys Amid Worries

FRANKFURT—The European Central Bank has increased its purchases of government bonds amid rising concerns in financial markets about the ability of Greece, Ireland and Portugal to repay their debts.

The ECB initiated the bond-buying program in May, the height of Europe's fiscal crisis, purchasing the debt of troubled countries in the 16-nation euro zone. The program was the central bank's two-fold bid to build confidence—first, public confidence in the ability of those countries to meet their obligations and second, investors' confidence that the central bank could always step in to keep markets liquid.

Critics worried that the program—a first for the ECB—would raise doubts about the central bank's independence from politics.

----- Although the ECB has spent more than €61 billion ($79.58 billion) since May on government bonds, borrowing costs haven't declined for struggling countries on Europe's fringe. Yield spreads between government debt in Greece, Ireland and Portugal and their safer German equivalents are hitting or approaching record highs, making it harder for the countries to finance mountingdebts.

----- The ECB said it spent €323 million on government bonds last week, up from €237 million the previous week and its highest level since mid-August. The bank doesn't offer breakdowns of its purchases by country or maturity.

---- The latest increase in debt purchases "is an illustration that the sovereign-debt crisis is surfacing again, but it's not as severe as May," says Carsten Brzeski, economist at ING Bank in Brussels.

On Monday, yields spreads between Irish and German 10-year bonds—a key measure of investors' perception of the risk associated with Irish bonds—exceeded four percentage points, a record, and more than double the spread that existed on May 10 when the ECB started buying government debt.

Portuguese yield spreads also hit a record Monday, at more than four percentage points above safer German equivalents. That spread was just 1.89 percentage points on May 10, a sign, some analysts said, that the ECB hasn't been able to affect market sentiment. Greek spreads are near highs at more than nine percentage points above German government bonds.

The ECB's bond purchases "are not serving much of a purpose in their current size," says Marco Annunziata, chief economist at lender UniCredit in London.

http://online.wsj.com/article/SB10001424052748703305004575503890298006762.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

SEPTEMBER 20, 2010, 3:25 P.M. ET

Dutch Government to Unveil Cuts

AMSTERDAM—The Netherlands' caretaker government on Tuesday is to present a 2011 budget that will sidestep many of the country's pressing fiscal issues because talks to form a new government after June elections are still without a result.

The delay in reforms underscores the country's political fragmentation since the previous government fell in February, with particular concerns rising from a looming pension crisis. General elections in June resulted in a fragmented political landscape with no majority of parties being to able find enough common ground to form a coalition government.

The stalemate has left power in the hands of a caretaker government, consisting of the conservative Christian Democrats and left-leaning Christian Party, which has been unable to tackle the impact of Holland's aging population on the budget.

The caretaker government on Tuesday is expected to announce about €3.2 billion ($4.17 billion) in budget cuts for the period up to 2015, a modest reduction in comparison with the major cutbacks elsewhere in Europe to curb fiscal deficits. The Dutch cuts are to affect childcare benefits and include a salaryfreeze for civil servants.

The budget itself will be of "little importance," said Sylvester Eijffinger, a professor of financial economics at Tilburg University. "The new government will have to come up with a real package."

The Dutch economy, the euro zone's fifth-largest, has strongly recovered after suffering the deepest recession since WWII. Although the Netherlands' fiscal shortfall is smaller than many others in the European Union, it is rising and expected to reach 6.6% of gross domestic product this year—more than twice the EU limit of 3%.

The top concerns for policy makers are Dutch demographics. The impact of the aging population is threatening the Dutch welfare system, which is seen as relatively generous compared with those of other countries.

---- According to a 2009 IMF report, longer life spans could add 9.4% of GDP to expenditures by 2060, almost double the median 5.3% across the EU. This is in large part the result of increased costs related to pensions, the elderly and health care.

In their most recent reports on The Netherlands, both the International Monetary Fund and the Organization for Economic Cooperation and Development highlighted the necessity for reform of the pension system.

----- Economists worry that the fragmented politics of the lowland country could seriously impair efforts to tackle the politically thorny issue of pruning one of Europe's most generous social-welfare systems.

http://online.wsj.com/article/SB10001424052748703989304575503834111945558.html?mod=WSJEUROPE_hpp_MIDDLESecondNews

We end for today with recent events in Venezuela. If we didn’t know better, someone might think it deliberate. While Petroleumworld fret over China, I wonder what it does to shipments to America.

Oil terminal blaze could curb PDVSA exports to China

PARAGUANA, Venezuela
Petroleumworld.com, Sep 20, 2010

A huge fire that knocked a major Caribbean oil terminal out of action until further notice adds to the woes of Venezuela's state-run PDVSA and temporarily curbs its efforts to boost exports to China.

Bonaire Island , a 12 million-barrel terminal that had been receiving up to 25 tankers per month, is an important conduit for supplies to Asia from the South American OPEC member.

Combined with two other fires at a loading dock at PDVSA's Cardon refinery and at a terminal on island of Curacao , the shutdown at Bonaire complicates moves by President Hugo Chavez's government to ramp up its shipments to China to 1 million barrels per day (bpd).

Only 3 percent of China 's crude comes from Venezuela , but Beijing relies on Venezuela for 20 percent of its fuel oil imports, according to Chinese customs data.

----- PetroChina, Asia 's top oil and gas company, lifts most of PDVSA's fuel oil with three to four very large crudecarriers, or 5.4 to 7.2 million barrels, a month, traders say.

PDVSA also uses the 21.5 million barrel Borco terminal on the island of Grand Bahama . But that is much further north, and the Venezuelan company's access to tanks there has been limited since it sold the facility two years ago.

The U.S.-based trader said PDVSA could also not make up for any shortfall using fuel oil stored at its Paraguana Refining Center, which includes Cardon and is one of the biggest refinery complexes in the world, because recent rains had seeped into stocks there.

Last week's fires are just the latest in a series of accidents and maintenance outages across PDVSA's refining and distribution network in recent months that have cut output and forced the continent's top crude producer to import products.

One Chinese trader said on Friday that PetroChina's fuel oil loadings had not been affected yet by the fire at Bonaire .

http://www.petroleumworld.com/storyt10092002.htm

"In economics, hope and faith coexist with great scientific pretension."

J K Galbraith.

At the Comex silver depositories Monday, final figures were: Registered 53.73 Moz, Eligible 59.02 Moz, Total 112.75 Moz.

+++++

Crooks and Scoundrels Corner.

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

No crooks or scoundrels today, although Berkshire Hathaway’s Charlie Munger deserves to be included if this Bloomberg report is accurate:

"It doesn't matter if you're rich or poor, as long as you've got money."

Joe E. Lewis.

Munger Says ‘Thank God’ Bailouts Came Before Handouts

Sept. 20 (Bloomberg) -- Charles Munger, the billionaire vice chairman of Berkshire Hathaway Inc., defended the U.S. financial-company rescues of 2008 and told students that people in economic distress should “suck it in and cope.”

“You should thank God” for bank bailouts, Munger said in a discussion at the University of Michigan on Sept. 14, according to a video posted on the Internet.

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aX_2CN5uwwQU

We’ll just put it down to his age, and let his misguided arrogance speak for itself. Winner of the 2010 “Marie Antoinette” award.

Today we cover the latest man-made global warming blunder. No reason to check on the facts before running with the story.

'Beam me up Scotty."

ITV embarrassed by report of polar bear washed up on beach

When reports came in that a polar bear had washed up on a Cornish beach, television presenter Naomi Lloyd was first with the news.

By Anita Singh Published: 6:55AM BST 21 Sep 2010

The presenter of ITV's West Country breakfast bulletin informed astonished viewers that an animal more commonly spotted near the North Pole had turned up in the seaside town of Bude. Video footage showed a large, white beast lying on the shore.

"A walker in Cornwall has caught an extraordinary sight on camera. A polar bear has washed up on a beach near Bude," an excited Miss Lloyd said. "The bear comes from the Arctic Circle and an investigation is under way as to how it could have ended up there."

Alas for Miss Lloyd, the tale of the Cornish polar bear turned out to be several thousand miles wide of the mark.

Closer inspection revealed that the polar bear was, in fact, a cow. The farm animal had been bleached white by sea water.

Red-faced bosses at ITV dropped the item from later bulletins, but insisted that it was an easy mistake. "The animal caused quite a stir in Bude. Several people has seen the animal from a cliff top and thought it was a polar bear," a spokesman said. "Its size and colour and its lying position on the beach did make it look like a polar bear and we had several calls.

"But on closer inspection we discovered it was a cow. The tide was very strong and it did bring several dead animals in along that stretch of coast."

---- Several dog walkers and ramblers contacted the television station after spotting the animal early yesterday morning. The British Divers Marine Life Rescue (BDMLR) service also received calls.

A BDMLR spokesman said: "Mostly we deal with stranded seals, whales, dolphins and porpoises. We don't get calls about polar bears in Cornwall all that often. Or cows, for that matter."

Miss Lloyd was unavailable for comment last night.

----- This was not the first time that something unusual washed up on the beach at Bude. In 2008, seven suitcase-sized packages of cocaine were found on the beach, part of a £2.5 million haul washed up along the coastline.

http://www.telegraph.co.uk/earth/wildlife/8014541/ITV-embarrassed-by-report-of-polar-bear-washed-up-on-beach.html

"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."

William F. Rickenbacker

The monthly Coppock Indicators finished August:

DJIA: +243 Down. NASDAQ: +366 Down. SP500: +243 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. August is the third down month in a row and “crash season” approaches.

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