Baltic Dry Index. 2468 -36 29/9/10
LIR Gold Target by 2019: $3,000.
"Until government administrators can so identify the interests of government with those of the people and refrain from defrauding the masses through the device of currency depreciation for the sake of remaining in office, the wiser ones will prefer to keep as much of their wealth in the most stable and marketable forms possible - forms which only the precious metals provide."
Elgin Groseclose
A fiat currency war has broken out, as more and more countries have joined the UK in manipulating its currency lower. But first this. Right on the heels of reading Goldman’s latest excellent, if gloomy report on the US economy:
Investment Strategy Group
US Economic and Equity Market Outlook
September 2010
I ran into the following equally dismal news portending imminent disaster in the US real economy. Far away from where Wall Street banksters ply their religion, the trucks of America have gone into reverse. Below, the wheels fly off the American Trucking Association’s tonnage index. The numbers might actually still be over optimistic due to the way the index is constructed. So why is the S&P 500 back near 1150 again? If the stock market is a forward looking indicator, right now it’s got its eyes tightly shut and blindfolded. As the month-end and end of quarter approaches, could it be that the professional money managing squids are busy dressing up the pig for their quarterly bonus?
ATA Truck Tonnage Index Plunged 2.7 Percent in August | |
September 28, 2010 4:00 PM |
ARLINGTON, VA — The American Trucking Associations’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index fell 2.7 percent in August, which was the largest month-to-month decrease since March 2009. The latest drop lowered the SA index from 110 (2000=100) in July to 106.9 in August.
The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 113.5 in August, up 3.2 percent from the previous month.
Compared with August 2009, SA tonnage climbed 2.9 percent, which was well below July’s 7.4 percent year-over-year gain. Year-to-date, tonnage is up 6.2 percent compared with the same period in 2009.
ATA Chief Economist Bob Costello said that August’s data highlights that the economy, while still growing, is slowing.
----Note on the impact of trucking company failures on the index: Each month, ATA asks its membership the amount of tonnage each carrier hauled, including all types of freight. The indexes are calculated based on those responses. The sample includes an array of trucking companies, ranging from small fleets to multi-billion dollar carriers. When a company in the sample fails, we include its final month of operation and zero it out for the following month, with the assumption that the remaining carriers pick up that freight. As a result, it is close to a net wash and does not end up in a false increase. Nevertheless, some carriers are picking up freight from failures, and it may have boosted the index. Due to our correction mentioned above, however, it should be limited.
Trucking serves as a barometer of the U.S. economy, representing 68 percent of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods.
http://www.truckline.com/pages/article.aspx?id=791%2F%7B8E1C7279-ED27-4C03-B189-CEEEE26BBB12%7D
Below, another explanation for the S&P 500 at 1150 in the face of an economy heading into a double dip. Thankfully it’s only fiat money, and there’s plenty more where that comes from.
"When paper money systems begin to crack at the seams, the run to gold could be explosive."
Harry Browne
‘Stealth QE’ in fact never ended
-----American QE1 officially ended last March, but between April 1st and 22nd July, the Fed's own stats show that it greased the New York markets by continuing to buy Wall St banking debts - to the tune of $130 billion during that four-month period. Over a year, given lighter trading in some summer months, that would be equivalent to a half-trillion dollar QE exercise. QE1 contained $1 trillion worth of expiration purchases - so in real terms, a secret arrangement has continued QE at a roughly 50% level. The mini bail-outs ended in August - by which time the White House team had already decided on some form of QE2 anyway - details of which The Slog covered yesterday.
What makes the allegations especially damning is that ALL the big Federal Treasury bank payments were made during weeks when loss-making options were due to expire. Thus the major banks had most of their trading mistakes settled....the price for this action being that the monies must go back into stock purchases. This they duly did - creating the rally that never was. Effectively, investors who became bullish during that time have been cheated by the US Government....a scam the taxpayers underwrote without any knowledge of it.
While firms such as Goldman Sachs, Credit Suisse, J P Morgan and BoA were paying their staff vast bonuses, ordinary Americans were struggling to avoid foreclosure - but unwittingly ensuring the payment of those bonuses. The banks simply couldn't lose.
Now, however, Slog sources in the US insist that Ben Bernanke's secret slush-fund operation started up again last week, when some $15-20 billion were again 'given' to the primary banks.
"It's a sweet deal," an informant told us, "in that just like with the banks buying low-cost US securities, everyone wins. The Feds clear all the debts and the Banks keep buying the stocks."
http://nbyslog.blogspot.com/2010/09/revealed-how-bernanke-propped-up-stock.html
Now back to the currency wars.
"We need only take our heads out of the sand to see clearly that interventionism not only has failed to provide the promised something-for-nothing, but has led to all sorts of undesirable consequences. Indeed, many are just beginning to realize that we are moving towards disaster even though we have been on a wrong heading for decades."
Leonard Read
Capital controls eyed as global currency wars escalate
Stimulus leaking out of the West's stagnant economies is flooding into emerging markets, playing havoc with their currencies and economies
By Ambrose Evans-Pritchard Published: 6:00AM BST 29 Sep 2010
Brazil, Mexico, Peru, Colombia, Korea, Taiwan, South Africa, Russia and even Poland are either intervening directly in the exchange markets to prevent their currencies rising too far, or examining what options they have to stem disruptive inflows.
Peter Attard Montalto from Nomura said quantitative easing by the US Federal Reserve and other central banks is incubating serious conflict. "It is forcing money into emerging market bond funds, and to a lesser extent equity funds. There has truly been a wall of money entering many countries," he said.
"I worry that we are on the cusp of a competitive race to the bottom as country after country feels they need to keep up."
Brazil's finance minister Guido Mantega has complained repeatedly over the past month that his country is facing a "currency war" as funds flood the local bond market to take advantage of yields of 11pc, vastly higher than anything on offer in the West.
"We're in the midst of an international currency war. This threatens us because it takes away our competitiveness. Advanced countries are seeking to devalue their currencies," he said, pointing the finger at America, Europe and Japan. He is mulling moves to tax short-term debt investments.
Goldman Sachs said net inflows have been running at annual rate of $520bn (£329bn) in Asia over the last 15 months, and $74bn in Latin America. Intervention to stop it creates all kinds of problems so the next step may be "direct capital controls", the bank warned.
----"Everybody is worried that global growth is fading and they are trying to use exchange rates to protect exports. Brazil has watched as the Asians intervened and feels it can't stand by," said Ian Stannard, a currency expert at BNP Paribas.
Brazil has used taxes to slow the capital inflows but the allure of super-yields and the country's status as a grain, iron ore, and commodity powerhouse have proved irresistible. It is a textbook case of the "resources curse" that can afflict commodity producers.
A $67bn share issue by Petrobras has been a fresh magnet for funds, forcing the central bank to buy an estimated $1bn of foreign bonds each day over the past two weeks. Such action is hard to "sterilise" and can it fuel inflation.
Japan has begun intervening to stop the yen appreciating to heartburn levels for Toyota, Sharp, Sony and other exporters. A strong yen risks tipping the country deeper into deflation.
Switzerland spent 80bn francs in one month to stem capital flight from the euro, only to be defeated by the force of the exchange markets, leaving its central bank nursing huge losses.
Stephen Lewis from Monument Securities said the Fed is playing a risky game toying with more QE. There are already signs of investor flight into commodities. The danger is a repeat of the spike in 2008, which was a contributory cause of the Great Recession.
We end for the day with “better” news. Der Spiegel’s interview with the head of Volkswagen. Like me Mr. Winterkorn thinks hybrid cars will lose out to eventually to the arriving electric car. Tomorrow will not be like today which was like yesterday.
SPIEGEL Interview with VW Chief Martin Winterkorn
'The Next Step Is the Electric Car'
09/28/2010
SPIEGEL: Still, many companies are only providing their top managers with company cars with hybrid engines. The Mercedes-Benz S Class and the BMW 7 Series are available with hybrid engines, but the Audi A8 isn't.
Winterkorn: It will become available soon as a hybrid vehicle, as will the new A6. All the excitement over hybrids will settle down once people realize that this is a bridge technology. The next big step is the electric car.
SPIEGEL: The car bodies need to be lighter so that electric vehicles can have a sufficient range. But BMW is also at the forefront when it comes to lightweight construction, an Audi specialty for years. BMW is developing models with carbon fiber bodies that weigh significantly less than Audi's aluminum cars.
Winterkorn: Audi has long been using parts made of carbon fibers, in the A8, for example. Lamborghini makes an entire body out of carbon fibers. We have mastered this technology. So far our competitors have only offered announcements. They still have to prove that they can produce a car for the mass market with a carbon fiber body at a reasonable cost.
More.
http://www.spiegel.de/international/business/0,1518,719730,00.html#ref=nlint
No update tomorrow due to travel. On what promises to be the wettest day of the week in an wet week, your hapless writer sets out in search of fame and fortune and a warm bar. More on Friday.
At the Comex silver depositories Tuesday, final figures were: Registered 53.78 Moz, Eligible 56.68 Moz, Total 110.46 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
No crooks or scoundrels today, just virtuous, hard working, modern reunified Germany getting set to pay off its last remaining debt from World War One. Yes that’s WW1 which ended with the armistice of 11/11/1918 and was formally brought to an end with the Treaty of Versailles in 1919. A lesson for all in the financial cost of war.
Though Germany got all the blame for starting WW1, it was actually the Austrians who started it 4 years earlier, when they refused to accept Serbia’s groveling acceptance of all but one of Austria’s demands following the assassination of Archduke Ferdinand and his wife Sophie in Sarajevo on the 28th of June 1914. Serbia was complicit in the murders. But Germany was also all out for war to crush Russia’s ally Serbia. Ironically, Archduke Ferdinand had been an advocate of Austria reaching an accommodation with Serbia, and had argued that any war with Serbia would bring in Russia setting off a generalized European war to the detriment of all. He never lived to see just how right he was.
Wilhelm II declared on July 4 that he was entirely for “settling accounts with the Serbia”. He ordered the German ambassador in Vienna, Count Heinrich von Tschirschky, to stop advising restraint, writing that “Tschirschky will be so good to drop this nonsense. We must finish with the Serbs, quickly. Now or never!”. In response, Tschirschky told the Austro-Hungarian government that same day that “Germany would support the Monarchy through thick and thin, whatever action it decided to take against Serbia. The sooner Austria-Hungary struck, the better”. On July 5, 1914, Count Moltke, the Chief of the German General Staff, wrote that “Austria must beat the Serbs”.
Germany Closes Book on World War I With Final Reparations Payment
By David Crossland 09/28/2010
Germany will make its last reparations payment for World War I on Oct. 3, settling its outstanding debt from the 1919 Versailles Treaty and quietly closing the final chapter of the conflict that shaped the 20th century.
Oct. 3, the 20th anniversary of German unification, will also mark the completion of the final chapter of World War I with the end of reparations payments 92 years after the country's defeat.
The German government will pay the last instalment of interest on foreign bonds it issued in 1924 and 1930 to raise cash to fulfil the enormous reparations demands the victorious Allies made after World War I.
The reparations bankrupted Germany in the 1920s and the fledgling Nazi party seized on the resulting public resentment against the terms of the Versailles Treaty.
The sum was initially set at 269 billion gold marks, around 96,000 tons of gold, before being reduced to 112 billion gold marks by 1929, payable over a period of 59 years.
Germany suspended annual payments in 1931 during the global financial crisis and Adolf Hitler unsurprisingly declined to resume them when he came to power in 1933.
But in 1953, West Germany agreed at an international conference in London to service its international bond obligations from before World War II. In the years that followed it repaid the principal on the bonds, which had been issued to private and institutional investors in countries including the United States.
Under the terms of the London accord, Germany was allowed to wait until it unified before paying some €125 million in outstanding interest that had accrued on its foreign debt in the years 1945 to 1952. After the Berlin Wall fell and West and East Germany united in 1990, the country dutifully paid that interest off in annual instalments, the last of which comes due on Oct. 3.
----- France and Britain needed the reparations to repay their own debts. Both countries had borrowed vast sums from the US during the war. Germany only settled about an eighth of its treaty obligations by the time it suspended payments.
http://www.spiegel.de/international/germany/0,1518,720156,00.html#ref=nlint
As a "Czech countess [she] was treated as a commoner at the Austrian court". Emperor Franz Joseph had only consented to their marriage on the condition that their descendants would never ascend the throne. The 14th anniversary of the morganatic oath fell on 28 June. As historian A. J. P. Taylor observes:
[Sophie] could never share [Franz Ferdinand's] rank ... could never share his splendours, could never even sit by his side on any public occasion. There was one loophole ... his wife could enjoy the recognition of his rank when he was acting in a military capacity. Hence, he decided, in 1914, to inspect the army in Bosnia. There, at its capital Sarajevo, the Archduke and his wife could ride in an open carriage side by side ... Thus, for love, did the Archduke go to his death.
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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