Tuesday, 19 October 2010

Europe Kicks Off. BoA Reforms.

Baltic Dry Index. 2756 -06
LIR Gold Target by 2019: $3,000.

"The leaders of the French Revolution excited the poor against the rich; this made the rich poor, but it never made the poor rich."

Fisher Ames

For a sixth consecutive day, France is under attack from socialists, communist unions, anarchists, and fellow travelers of every stripe. Euros anyone? Stay long precious metals. Civilization, when it comes down to it, is only a veneer on the rough wood of anarchy, and in modern Europe, home of the tax dodging, work shy, “the world owes me a living” worker, anarchy is now only a heartbeat away. The cause of all the French trouble? French workers are being asked to retire at 62 rather than 60, and pay in a little more for their state pension. After 39 years on the Great Nixonian Error of fiat money, the free lunch promised by politicians everywhere for the last 4 decades is coming to its close. It had a good run, longer than most expected, but now it is ending in a massive debt default, bankrupt banks on government life support, and a cushioned “I want it now”, dumbed down populace that thinks striking and rioting will actually make their lives better. Is a second Dark Age dawning?

"The tumultuous populace of large cities are ever to be dreaded."

George Washington. American Revolutionary.

French riot police clash with students as petrol stations run dry

French riot police and students fired tear gas and petrol bombs at each other while truckers blocked roads and almost 3,000 petrol stations ran dry, as nationwide protests intensified.

By Henry Samuel in Paris Published: 7:17PM BST 18 Oct 2010

Despite claims that it had petrol provision “under control”, the government said it had activated an emergency crisis cell charged with maintaining fuel supplies.

The opposition Socialists criticised François Fillon, the prime minister, for failing to speak to the unions over proposed pension reforms, which would raise minimum and full retirement ages to 62 and 67.

-----The Socialists, like the unions, want to allow the French to continue to retire at 60 despite rising life expectancy, saying the shortfall could be filled by increasing tax on capital and the number of years a person paid into the system.

-----All 12 of France’s oil refineries remained closed because of strike action and many fuel depots were blocked by pickets. About 1,500 petrol stations on the forecourts of French supermarkets ran out of fuel, according to their industry association. Taking into account all other petrol stations, over 2,600 had run dry.

The UFIP oil industry lobby has warned that France may see serious fuel supply problems by midweek, obliging the government to look at tapping some of the country’s emergency reserves. A spokesman for Exxon Mobil described the situation as “critical”, while Leclerc, one of France’s biggest supermarket chains, said the filling stations on its forecourts would “all run dry by the end of the week”.

Youth protests turned violent in Paris and a string of major cities on Monday. Molotov cocktails flew outside a school in the Paris suburb of Combes-la-Ville, and police said they were even briefly threatened with a rifle-toting protester angry.

Police also used tear gas to quell protests in the eastern towns of Mulhouse and Montbeliard and clashed with youths in Lyon who smashed a bus shelter, looted a fast-food cafe and burned several cars. Students briefly blocked traffic at Paris town hall and police hemmed in a group of 400 protesters on the Champs-Elysées.

Lorry drivers increased pressure on the government to revoke its bill, which the Senate is due to approve tomorrow, by staging “snail operations” on motorways.

The street demonstrations came ahead of mass strikes and nationwide rallies planned for today — the sixth in a little over a month. Half of flights to and from Paris Orly airport and a third of flights at Roissy-Charles de Gaulle and elsewhere in France will be cancelled as strikers plan to rally at airports.

About half of France’s high-speed TGV trains were in operation on Monday.Traffic on the Eurostar between Paris and London was normal, although Eurostar services between London and Brussels were hit by a 24-hour strike by Belgian rail workers.


On the other side of the planet, the unelected Communist Party that still controls China, was holding a meeting of the “senior leaders” to work out the next 5 year plan. Annual growth is to be slowed down, say the back room gurus, with the wealth spread more evenly, from highest to lowest.

"No one believes more firmly than Comrade Napoleon that all animals are equal. He would be only too happy to let you make your decisions for yourselves. But sometimes you might make the wrong decisions, comrades, and then where should we be?"

George Orwell. Animal Farm.

China to slow down growth, focus on rebalancing in five-year plan

China must make a "major breakthrough" to restructure and rebalance its economy, the Communist party said on Monday as it sketched out the next five years of the country's development.

By Malcolm Moore in Shanghai Published: 1:54PM BST 18 Oct 2010

A key meeting of 202 senior leaders in Beijing discussed China's roadmap for 2011 to 2015 and agreed on the need for the world's second-largest economy to boost wages and improve its domestic consumption.

No target was set for economic growth, but a communique issued after the meeting said that China would try to maintain "stable and relatively fast economic growth" over the period.

In the last five-year plan, China set a target of 7.5pc annual GDP growth, but dramatically overshot it each year, with the economy set to grow by around 10pc this year.

-----Alistair Thornton, an economist at IHS Global Insight in Beijing, said the government may choose to notch its official target down from 7.5pc to 7pc.

----- Hu Jintao, the Chinese president, has promoted the idea of more "inclusive" growth, which would see more Chinese share in the country's prosperity as the wealth gap narrows and workers enjoy higher wages and greater benefits.

China has one of the greatest wealth disparities in the world, with the richest 10pc earning 65 times the average salary of the poorest 10pc, according to a Credit Suisse-sponsored study by Chinese economists.

"China will further boost people's incomes, enhance social construction and deepen reform and opening up," said the official statement of the meeting.

By raising wages, China aims to expand domestic demand, and officials said they intended to establish "a long-term mechanism to expand consumer demand and speed up consumption".

---- The full details of the five-year plan will not be unveiled until March. The plan is a non-binding document, which aims to provide a blueprint for the Communist party's social and economic targets.


In fraudclosuregate, all’s well that ends well. Those lovable pranksters at Bankster of America say that they have reviewed all those dodgy attestations and notarizations and no surprise to anyone nothing much was wrong.

A thing worth having is a thing worth cheating for.

Ebenezer Squid. With apologies to W.C. Fields.

Bank of America resumes foreclosures in 23 states

NEW YORK (CNNMoney.com) -- Bank of America reviewed 102,000 foreclosures in the 23 states where a court must sign off on the proceedings, and it is now restarting the process on those cases, the company said Monday.

The company said the first of the new affidavits will be submitted by Oct. 25, and that it will continue its review in 27 other states.

According to a spokeswoman for the bank, no errors were found during the review, and fewer than 30,000 foreclosure sales across all 50 states will be delayed as a result of the investigation.

The announcement comes one day before the bank's third quarter earnings report, and might ease investor concerns over the scale and timeframe of the bank's review process.

"This is an even better outcome than we previously thought," said Paul Miller, an analyst at FBR Capital Markets. "We thought January was a more likely time to restart the [foreclosure] process."


Phew! For a moment there the market was fooled into thinking BoA was actually going to really conduct a serious review. Unsurprisingly, others are more skeptical than poor Graeme. Woe to the hapless BoA attorney who now gets a skeptical, eagle eyed, judge ready and able to put BoA’s new found probity to the test.

This is rather curious, since there is evidence of Bank of America foreclosing in the name of Bank of America (meaning Bank of America is presented as the owner of the loan) when the loan was originated by Countrywide and Countrywide provided testimony that 96% of its mortgages were securitized (meaning the owner should be a trust, not a bank). It’s an interesting anomaly that only the 4% of the mortgages that Countrywide originated are the ones that are going bad. Note also the peculiar emphasis on “fewer than 30,000 which presumably means nearly 30% are being delayed.

This does not address the underlying question we keep raising: why did the servicers and foreclosure mills rely on robo signers? We had indicated from the get go that the real issue is attempting to put the notes into the trust far too late from the standpoint of what is permitted by the pooling and servicing agreement. This problem is fundamental and remains unresolved.


We end today’s shortened update by noting that yesterday US stocks managed another flash crash, except it was called a program glitch instead. Shame they didn’t save it for today’s anniversary of the 1987 version of the program trading crash. The more things change the more they stay the same. No chance, I suppose, some great vampire squid was attempting to rig the system.

“Those who cannot remember the past are condemned to repeat it”.

George Santayana. Life of Reason, Reason in Common Sense

NYSE Software Glitch Spurs $7.9 Billion Misprice in S&P 500 ETF

Oct. 19 (Bloomberg) -- Regulators can add a faulty software update at NYSE Euronext’s electronic Arca stock market to the list of mishaps that have weighed on investor confidence.

A system upgrade at Arca triggered what appeared to be a 9.6 percent plunge yesterday in an exchange-traded fund that tracks the Standard & Poor’s 500 Index, a drop that would have erased $7.9 billion from one of the most popular securities in the U.S. Data published by the electronic venue at 4:15 p.m. New York time showed the SPDR S&P 500 ETF Trust at $106.46, compared with its opening level of $117.74.

The prices were later voided and the closing price updated to $118.54, up 0.7 percent, exchange officials said.

“Something went wrong, the question is why,” said James Angel, a finance professor at Georgetown University in Washington. “For them to cancel the trades is probably causing heartburn in back offices across the country.”

The glitch in the fund with a market value of more than $80 billion comes as federal regulators are trying to prove U.S. exchanges still work after the May 6 crash that erased $862 billion of share value in 20 minutes. Data showing the decline appeared just as Apple Inc. and International Business Machines Corp. were releasing quarterly profit statements.

The apparent plunge in price involved 7.2 million shares in the closing auction on NYSE Arca, according to data compiled by Bloomberg. The S&P 500 rose 0.7 percent to 1,184.71 yesterday.

-----NYSE Arca will “bust” all the $106.46 trades, according to an e-mail from exchange spokesman Raymond Pellecchia. The fund managed by State Street Global Advisors is one of the most heavily traded securities in the U.S., averaging 223 million shares a day this year, data compiled by Bloomberg show.

Issue Revolved

“The issue has been resolved,” Pellecchia said in an interview. “Operations will be normal tomorrow.” Marie McGehee, a spokeswoman for State Street Corp., declined to comment


“Property is theft.” “Theft is property”.

With apologies to Pierre-Joseph Proudhon.

At the Comex silver depositories Monday, final figures were: Registered 52.19 Moz, Eligible 60.10 Moz, Total 112.29 Moz.


Crooks and Scoundrels Corner.

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

Today, the NY Time’s Nobel economics prize winner and op-ed columnist, Paul Krugman puts China in the dock. “I’m sorry to say, further evidence that the world’s newest economic superpower isn’t prepared to assume the responsibilities that go with that status”, he writes.

"Under capitalism man exploits man; under communism the reverse is true."

Polish proverb.

Rare and Foolish

By PAUL KRUGMAN Published: October 17, 2010

Last month a Chinese trawler operating in Japanese-controlled waters collided with two vessels of Japan’s Coast Guard. Japan detained the trawler’s captain; China responded by cutting off Japan’s access to crucial raw materials.

And there was nowhere else to turn: China accounts for 97 percent of the world’s supply of rare earths, minerals that play an essential role in many high-technology products, including military equipment. Sure enough, Japan soon let the captain go.

I don’t know about you, but I find this story deeply disturbing, both for what it says about China and what it says about us. On one side, the affair highlights the fecklessness of U.S. policy makers, who did nothing while an unreliable regime acquired a stranglehold on key materials. On the other side, the incident shows a Chinese government that is dangerously trigger-happy, willing to wage economic warfare on the slightest provocation.

Some background: The rare earths are elements whose unique properties play a crucial role in applications ranging from hybrid motors to fiber optics. Until the mid-1980s the United States dominated production, but then China moved in.

“There is oil in the Middle East; there is rare earth in China,” declared Deng Xiaoping, the architect of China’s economic transformation, in 1992. Indeed, China has about a third of the world’s rare earth deposits. This relative abundance, combined with low extraction and processing costs — reflecting both low wages and weak environmental standards — allowed China’s producers to undercut the U.S. industry.

You really have to wonder why nobody raised an alarm while this was happening, if only on national security grounds. But policy makers simply stood by as the U.S. rare earth industry shut down. In at least one case, in 2003 — a time when, if you believed the Bush administration, considerations of national security governed every aspect of U.S. policy — the Chinese literally packed up all the equipment in a U.S. production facility and shipped it to China.

The result was a monopoly position exceeding the wildest dreams of Middle Eastern oil-fueled tyrants. And even before the trawler incident, China showed itself willing to exploit that monopoly to the fullest. The United Steelworkers recently filed a complaint against Chinese trade practices, stepping in where U.S. businesses fear to tread because they fear Chinese retaliation. The union put China’s imposition of export restrictions and taxes on rare earths — restrictions that give Chinese production in a number of industries an important competitive advantage — at the top of the list.

Then came the trawler event. Chinese restrictions on rare earth exports were already in violation of agreements China made before joining the World Trade Organization. But the embargo on rare earth exports to Japan was an even more blatant violation of international trade law.

Oh, and Chinese officials have not improved matters by insulting our intelligence, claiming that there was no official embargo. All of China’s rare earth exporters, they say — some of them foreign-owned — simultaneously decided to halt shipments because of their personal feelings toward Japan. Right.

So what are the lessons of the rare earth fracas?

First, and most obviously, the world needs to develop non-Chinese sources of these materials. There are extensive rare earth deposits in the United States and elsewhere. However, developing these deposits and the facilities to process the raw materials will take both time and financial support. So will a prominent alternative: “urban mining,” a k a recycling of rare earths and other materials from used electronic devices.

Second, China’s response to the trawler incident is, I’m sorry to say, further evidence that the world’s newest economic superpower isn’t prepared to assume the responsibilities that go with that status.



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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