Friday, 29 October 2010

EU Prepares for Greek Default.

Baltic Dry Index. 2748 +21
LIR Gold Target by 2019: $3,000.

Behind the apparent uniformity of the euro currency it is possible to tell the country of origin. Coins are clearly marked. Notes are seemingly identical, but each serial number contains a prefix showing which country issued it.

The serial number also contains a secret clue to the country which issued the note. The clue lies in what is known as the digital root of the serial number. This can be calculated by adding together the digits, then taking the result and adding its digits together again and so on until a single digit is left.

Here's an example. On a note the code reads X50446027856. The X immediately indicates that the note is German, but a second test is to add the digits. So (5+0+4+4+6+0+2+7+8+5+6) gives 47. Add these digits (4+7) gives 11. Finally add these digits (1+1) gives 2, the code number for Germany. Some countries share a code number.

In the insane asylum marked Eurozone, now under the management of the inmates, Germany is pushing a plan to allow for a future Greek default. Of course it’s not called that, and where Greece boldly goes the other PIIGS are sure to follow. What Germany wants, Germany usually gets, the rest will likely just get very much higher interest rates as lenders will now demand an extra premium for lending to Club Med. At some point even the doziest Greek will figure out that exiting the Euro and restructuring outside of it, beats anything on offer staying within it. If I didn’t know better, I’d think that this was some sophisticated German Trojan horse designed to lower the euro in the ongoing international currency wars. They wouldn’t do that would they? Just remember only German Euro notes start with an X. Greek ones start with a Y.

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

J Edgar Hoover

EU 'haircut' plans rattle bondholders

Investors face large potential losses on eurozone debt under German plans likely to win backing from EU leaders on Friday – risking a boycott of Greek, Irish, and Portuguese bonds.

By Ambrose Evans-Pritchard, and Bruno Waterfield in Brussels Published: 7:37PM BST 28 Oct 2010

Germany has agreed to give the EU's €440bn (£383bn) bail-out fund permanent status rather than letting it expire in 2013 as planned, but only as part of a "Crisis Resolution Mechanism" that forces bondholders to share losses from any future bail-outs. The fund must be anchored in EU law through changes to the Treaties in order to head off legal challenges at Germany's constitutional court.

A draft proposal from Berlin – now serving as a working text for the European Commission – calls for "orderly insolvency" by eurozone countries in trouble. Details are sketchy but this "Chapter 11" for sovereign states would include an extension of debt maturities, a "holiday" on interest payments for as long as needed to let debtors recover, and a suspension of bondholder rights. The blueprint is akin to debt-restucturing schemes used by the International Monetary Fund.

Under a Finnish proposal, there are likely to be "Collective Action Clauses" in all new bond issues to prevent minority bondholders blocking a default deal.

European President Herman van Rompuy will be tasked to draw up a blueprint for the crisis mechanism. There may also be a Sovereign Debt Restructuring Mechanism (SDRM).

Berlin is determined to avoid a repeat of the €110bn bailout for Greece when banks were shielded from losses, leaving eurozone taxpayers facing the full cost.

Silvio Peruzzo, Europe economist at RBS, said talk of "haircuts" for bondholder at this delicate juncture could backfire. "The debt crisis in the eurozone periphery has not been sorted out. These countries need markets to keep buying the bonds, but investors are going to stay away if you open the door to private sector pain," he said.

It is unclear whether the latest bond jitters in Greece, Ireland, and Portugal is linked to growing awareness of the German plans. Each country has its own troubles. Yields on Ireland's 10-year bonds briefly rose to a post-EMU high above 7pc on Thursday, partly due to a stand-off between Dublin and angry funds facing losses on the junior debt of Anglo Irish Bank.

However, EU officials fear that the proposals could make it harder for high-debt states to tap debt markets, risking a self-fulfilling crisis.

On the other side of the world, far away from America’s serial mortgage frauds, Japan is slowing again, even before the impact of any Chinese rare earth elements embargo. With austerity stalking Europe and Japan slowing, and America mired in a growing scandal of mortgage fraud and mortgage security fraud to the point where title to some 65 million homes is clouded if not lost, it looks like all hopes of a global recovery now rest on China and OPEC. We stand on the shores of Dunkirk, looking out for the Chinese and OPEC rescue boats. Something tells me this sequel ends differently.

“----We shall go on to the end. We shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our island, whatever the cost may be, we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender."

Winston S. Churchill

Oct. 28, 2010, 10:35 p.m. EDT

Japan industrial output slows in September

TOKYO (MarketWatch) — Japan industrial output fell more than expected in September, government data showed Friday, underscoring that the strong yen and global slowdown are taking a toll on the nation’s manufacturers.

Separate government data showed the country remained in the grip of deflation that month, while the national jobless situation in September was also slightly better than expected.

Industrial production fell 1.9% in September from August, marking the fourth-straight month of decline. Output in September was 11.1% above its year-ago level, the Ministry of Economy, Trade and Industry said. The ministry said overall production is showing a weakening trend.

Japan Says No Sign China Resumed Rare Earths Exports

Oct. 29 (Bloomberg) -- Japan said it has no evidence China resumed exports of rare-earth metals, which were disrupted last month during a territorial dispute that soured relations between Asia’s two largest economies.

“As of yesterday, there is no information about new cargo movements,” Chief Cabinet Secretary Yoshito Sengoku told reporters in Tokyo. “The Japanese government intends to use every opportunity to ask China to improve the situation regarding export restrictions.”

Sengoku’s comments come after the New York Times reported that China yesterday ended an unannounced embargo on exports of rare earths to the U.S., Europe and Japan. While customs officials allowed shipments to resume to all three destinations, those to Japan face extra scrutiny and delays, the report said, citing four industry officials it didn’t identify. China had blocked exports to Japan since Sept. 21, and to the U.S. and Europe on Oct. 18, the New York Times said.

China’s customs bureau said today there has never been a cutoff in outbound shipments of rare earths, a group of 17 chemically similar metallic elements including cerium and europium. China has been reviewing export licenses and other paperwork for rare-earth shipments, according to a statement read by an official in the bureau’s news office who declined to be identified. China in July said it was cutting export quotas for rare earths by 72 percent for the second half of the year.

Environmental Damage

Prices of rare earths have climbed as much as sevenfold in the past six months. China controls more than 90 percent of world supply, leading Japan, the U.S. and Germany to seek new supplies. Greenwood, Colorado-based Molycorp Inc. and Sydney- based Lynas Corp. plan to open rare-earth mines in the U.S. and Australia in the next two years.

The 11 digit serial number on every note begins with a prefix which identifies which country issued it.

German notes begin with an X, Greek notes start with a Y, Spain's have a V, France a U, Ireland T, Portugal M and Italy S. Belgium is Z, Cyprus G, Luxembourg 1, Malta F, Netherlands P, Austria N, Slovenia H, Slovakia E and Finland L.

At the Comex silver depositories Thursday, final figures were: Registered 51.93 Moz, Eligible 58.86 Moz, Total 110.79 Moz.


Crooks and Scoundrels Corner.

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

Today, Haliburton, JP Morgan and HSBC bank. Note, all are innocent until convicted in a court of law. In the court of public opinion, well that’s a matter for another day. For a ha’pence worth of real cement and common sense, the Gulf of Mexico and 11 poor souls were lost.

"We had too many people that were working to save the world"

Tony Hayward. CEO BP. 12 May, 2009. Stanford University Graduate School of Business.

Panel Says Firms Knew of Cement Flaws Before Spill

By JOHN M. BRODER Published: October 28, 2010

WASHINGTON — Halliburton officials knew weeks before the fatal explosion of the BP well in the Gulf of Mexico that the cement mixture they planned to use to seal the bottom of the well was unstable but still went ahead with the job, the presidential commission investigating the accident said on Thursday.

In the first official finding of responsibility for the blowout, which killed 11 workers and led to the biggest offshore oil spill in American history, the commission staff determined that Halliburton had conducted three laboratory tests that indicated that the cement mixture did not meet industry standards.

The result of at least one of those tests was given on March 8 to BP, which failed to act upon it, the panel’s lead investigator, Fred H. Bartlit Jr., said in a letter delivered to the commissioners on Thursday. “There is no indication that Halliburton highlighted to BP the significance of the foam stability data or that BP personnel raised any questions about it,” Mr. Bartlit said in his report.

Another Halliburton cement test, carried out about a week before the blowout of the well on April 20, also found the mixture to be unstable, meaning it was unlikely to set properly in the well, but those findings were never sent to BP, Mr. Bartlit found after reviewing previously undisclosed documents.

Although Mr. Bartlit did not specifically identify the cement failure as the sole or even primary cause of the blowout, he made clear in his letter that if the cement had done its job and kept the highly pressurized oil and gas out of the well bore, there would have been no accident.

-----The failure of the cement set off a complex and ultimately deadly cascade of events as oil and gas exploded upward from the 18,000-foot-deep well. The blowout preventer, which sits on the ocean floor atop a well and is supposed to contain a well bore breach, also failed.

-----Mr. Bartlit, who conducted a much-praised investigation of the 1988 Piper Alpha blowout in the North Sea off Britain that killed 167 workers, said the flawed cement was not the whole story. Many human and mechanical failures combined to create the disaster, he said, and backup procedures were skipped or ignored.

What is the crime of robbing a bank compared with the crime of founding one.

Bertolt Brecht

JPMorgan, HSBC sued for alleged silver conspiracy

Wed Oct 27, 2010 6:16pm EDT

* Hundreds of millions in illegal profit alleged

* Triple damages sought in one of two lawsuits

* CFTC proposed new tools to thwart price manipulation

NEW YORK, Oct 27 (Reuters) - JPMorgan Chase & Co (JPM.N) and HSBC Holdings Plc (HSBA.L) were hit with two lawsuits on Wednesday by investors who accused them of conspiring to drive down silver prices, and reaping an estimated hundreds of millions of dollars of illegal profits.

The banks, among the world's largest, were accused of manipulating the market for COMEX silver futures and options contracts from the first half of 2008 by amassing huge short positions in silver futures contracts that are designed to profit when prices fall.

"Defendants reaped hundreds of millions of dollars, if not billions of dollars in profits" from the conspiracy, one of the complaints said.

The respective plaintiffs, Brian Beatty and Peter Laskaris, each said they traded COMEX silver futures and options and contracts, and lost money because of the alleged manipulation.

Beatty lives in Connecticut and Laskaris in New York, court records showed. The lawsuits seek class-action status, damages that may be tripled and other remedies. The defendant banks are major participants in the silver market.

JPMorgan declined to comment. An HSBC spokeswoman had no immediate comment.

The lawsuits were filed one day after the Commodity Futures Trading Commission proposed regulations to give it greater power to thwart traders who try to manipulate prices.

The CFTC began probing allegations of silver price manipulation in September 2008.

"Paper money polluted the equity of our laws, turned them into engines of oppression, corrupted the justice of our public administration, destroyed the fortunes of thousands who had confidence in it, enervated the trade, husbandry, and manufactures of our country, and went far to destroy the morality of our people."

Pelatiah Webster. Political Essays on the Nature and Operation of Money, Public Finances, and Other Subjects (Philadelphia, 1791)

Another weekend and the last weekend before Americans head to the polls next Tuesday. According to the media and pollsters, a very different much more conservative Congress is about to be elected to take power next January. A lively November in the markets lies ahead. Until then, yet another time to enjoy God’s autumn countryside before November’s rains, gales and frosts, turn it into our leafless windswept winter landscape. Time to gather the last of the sweet chestnuts. Have a great weekend everyone.

The monthly Coppock Indicators finished September:

DJIA: +227 Down. NASDAQ: +321 Down. SP500: +221 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. September is the fourth down month in a row.

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