Tuesday 30 November 2010

The Euro Is Dying.

Baltic Dry Index. 2145 -25
LIR Gold Target by 2019: $30,000. Revised.

Should the EU really impose a 6.7pc interest charge on Ireland’s bail-out loans, it should not be surprised if the new Irish government in January walks away from the whole stinking arrangement, and pulls the plug on Europe’s banking system. Many might cheer.

Well they didn’t impose 6.7% debt slavery on Ireland, merely 5.7% slavery but they all but confiscated the Irish pension pool. Day after day we get to witness the Irish government selling out its own people in the cause of rescuing banksters in Germany, France, the UK and USA. Any reasonable Irish government would just nationalise the 3 bankrupt banks and tell the international bondholders, including the ECB, to get in line while the Irish government restructures the wreckage and figures out how much or how little each bondholder will eventually get back in Euro. The international banksters should then write down the holdings to zero, and if that causes problems, they can apply for assistance at their own central bank and/or the ECB/Federal Reserve.

This program of enslaving the Irish population was supposedly put in place to prevent contagion to the rest of dodgy Club Med. In that it has spectacularly failed, and we are now watching the slow death of the Euro. The policy having failed, what gain is there to anyone in continuing the crushing of the Irish population? Below, yesterday‘s rout of the Brussels master plan that was supposed to salvage the Euro. Stay long precious metals. This tragedy is likely to get worse for all countries trapped in the dying Euro.

“The big elephant in the room is not Portugal but, of course, it’s Spain. There is not enough official money to bailout Spain if trouble occurs.”

Professor Nouriel Roubini.

Germany faces its awful choice as Spain wobbles

Desperate moments call for desperate measures. In June 1940, the British War Cabinet led by Winston Churchill offered a total national merger to a shattered France.

By Ambrose Evans-Pritchard 5:45AM GMT 29 Nov 2010

“France and Great Britain shall no longer be two nations, but one Franco-British union,” read the declaration.

“The constitution of the Union will provide for joint organs of defence, foreign, financial and economic policies. Every citizen of France will enjoy immediately citizenship of Great Britain, every British subject will become a citizen of France.”

The text was drafted by Jean Monnet, the father of the European Project. If alive today, he would be pounding on the door of the Kanzleramt, exhorting Angela Merkel to offer a total fiscal union to all members of the eurozone before everything falls apart, and to be enshrined in EU treaty law forever.

“All debts of Greece, Cyprus, Italy, Spain, Portugal, and Ireland will be fused immediately with German debt; a single treasury will control spending, and issue euro-bonds for all Euroland,” or some such formula.

This is the sort of game-changer that may now be required to save EMU and the Monnet dream. Germany must contemplate doing for Euroland what it has done for its own Volk in the East over the last 20 years – pay big transfers – or watch its strategic investment in the post-War order of Europe collapse with a bang, and in hideous acrimony. Tough call.

It is clear to those working in the bond markets that the debt crisis in the EMU periphery is nearing danger point, and risks spiralling out of control as quickly as the Lehman-AIG-Fannie-Freddie crisis in 2008.

Prof Willem Buiter, chief economist at Citigroup, said last week that Portugal is likely to need a rescue before the end of the year and that Spain will follow “soon after”.

Klaus Baader from Societe Generale issued a report the same day entitled “Eurozone sovereign debt crisis: next stop Spain”. He suggests that the EU bail-out fund raises money to buy Spanish bonds pre-emptively. Nice idea, but what would the German constitutional court have to say about that?

At Deutsche Bank, Thomas Mayer said Spain might soon need a flexible credit from the IMF. Informed opinion has turned.

Markets are already pricing a 23pc chance of default in Spain (34pc for Portugal, and 39pc for Ireland). If the country needs a rescue, it instantly exhausts the credible financial and political firepower of the EMU system.



Spain Is ‘Big Elephant’ in Room After Ireland, Roubini Says

Nov. 29 (Bloomberg) -- Spain is the “big elephant” in the European debt crisis because there may not be enough money to bail out the Iberian nation, said Nouriel Roubini, the New York University professor who predicted the global financial crisis.

Investor concern has shifted to Spain and Portugal since yesterday, when European governments sought to bolster the euro by giving Ireland an 85 billion-euro ($113 billion) aid package and diluting proposals that would have forced bondholders to bear some costs of future bailouts.

-----HSBC Holdings Plc estimates Spain may need 351 billion euros over three years. The European Union may be able to deploy only 255 billion euros of the 440 billion-euro European Financial Stability Facility, according to Nomura International Plc. That’s because the bailout fund is financed by bonds, and governments agreed to set aside cash and link lending to the creditworthiness of donors to secure a AAA rating.

The cost of insuring the debt of Spain and Portugal soared to record-high levels today, according to CMA prices for credit- default swaps. Contracts on Spain climbed 14 basis points to 336 while Portugal rose 23 basis points to 524.

-----“At some point there might be debt restructuring that become inevitable for the sovereigns and also those financial institutions” that are providing funds, Roubini said. The International Monetary Fund may be one such institution, he said.


For once I have to disagree with the great Professor Roubini. Even a rescue for Spain can be botched together by Germany, the ECB and the rest of the the ill fated Eurozone. But each fix just brings up a bigger problem, and in this case that problem is Italy. But Germany and the rest can’t bailout Italy without putting themselves at risk of sovereign failure. At that point the Germans walk away and the Euro dies. The whole world and his dog can see the ending. For now, no one wants to face up to this harsh reality. Better to enslave tiny Ireland, and pray that the problem will miraculously go away.

Contagion strikes Italy as Ireland bail-out fails to calm markets

The EU-IMF rescue for Ireland has failed to restore to confidence in the eurozone debt markets, leading instead to a dramatic surge in bond yields across half the currency bloc.

By Ambrose Evans-Pritchard, International Business Editor 8:15PM GMT 29 Nov 2010

Spreads on Italian and Belgian bonds jumped to a post-EMU high as the sell-off moved beyond the battered trio of Ireland, Portugal, and Spain, raising concerns that the crisis could start to turn systemic. It was the worst single day in Mediterranean markets since the launch of monetary union.

----- "The crisis is intensifying and worsening," said Nick Matthews, a credit expert at RBS. "Bond purchases by the European Central Bank are the only anti-contagion weapon left. It needs to act much more aggressively."

Investor reaction comes as a bitter blow to eurozone leaders, who expected the €85bn (£72bn) package for Ireland agreed over the weekend to calm "irrational markets".

While the Irish rescue removed the immediate threat of "haircuts" for senior bondholders of Irish banks, it leaves open the risk of burden-sharing from 2013 on all EMU sovereign bonds and bank debt on a "case-by-case" basis. Traders said bond funds have been dumping Club Med bonds frantically to comply with their "value-at-risk" models before closing books for the year.

Yields on 10-year Italian bonds jumped 21 points to 4.61pc, threatening to shift the crisis to a new level. Italy's public debt is over €2 trillion, the world's third-largest after the US and Japan.

"The EU rescue fund cannot handle Spain, let alone Italy," said Charles Dumas, from Lombard Street Research. "We we may be nearing the point where Germany has to decide whether it is willing take on a burden six times the size of East Germany, or let some countries go."



I doubt that God cares one way or the other over the fate of the Euro. I doubt that the problems of Club Med go away. Instead, we’ll plod along botching together serial fixes, fixes that never quite fix anything. Stay long precious metals. 2011 looks set to be a disastrous year for fiat currency.

"Borrowers will default. Markets will collapse. Gold (the ultimate form of safe money) will skyrocket."

Michael Belkin

At the Comex silver depositories Monday, final figures were: Registered 48.44 Moz, Eligible 58.82 Moz, Total 107.26 Moz.


Crooks and Scoundrels Corner.

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

No crooks and scoundrels today, they are all busy partying in Cancun, while Great Britain and much of Europe enter our new Ice Age. Today just a warning from Wikileaks. Will it be "God's team" up at Ebenezer Squid's outfit, or the biggest derivatives gambler of all, the gambling mad banksters up at the house of Morgan?

"All previous attempts to base money solely on intangibles such as credit or government edict or fiat have ended in inflationary panic and disaster."

Donald Hoppe

US bank is next target for major leak, says Assange

By Rob Hastings Tuesday, 30 November 2010

Banking will be targeted in the next batch of WikiLeaks releases, the website's founder, Julian Assange, has said.

Mr Assange said that he planned to publish a major leak exposing a "big US bank" early next year, uncovering "flagrant violations" that "could take down a bank or two".

He refused to give any more details as to the company's identity, nor to speculate on whether it would reveal criminal offences, but compared the scale of the release to that of the emails that came to light following the collapse of Enron. "It's not as big a scale as the Iraq material," he told the business magazine Forbes, "but it's either tens or hundreds of thousands of documents depending on how you define it."

Mr Assange said that WikiLeaks had so far prioritised releasing leaked documents relating to governments and international relations, but estimated that about 50 per cent of the information it was holding related to private-sector companies. He confirmed that the website was in possession of many documents relating to BP, but was still assessing if the material was "original". Pharmaceutical firms could also be implicated by future leaks.



"The international monetary order is more precarious by far today than it was in 1929. Then, gold was international money, incorruptible, unmanageable, and unchangeable. Today, the U.S. dollar serves as the international medium of exchange, managed by Washington politicians and Federal Reserve officials, manipulated from day to day, and serving political goals and ambitions. This difference alone sounds the alarm to all perceptive observers."

Hans F. Sennholz

The monthly Coppock Indicators finished October:

DJIA: +204 Down. NASDAQ: +289 Down. SP500: +196 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. October is the fifth down month in a row. November looks like making that six.

Monday 29 November 2010

Ireland Saved! Saved!!

Baltic Dry Index. 2200 -13
LIR Gold Target by 2019: $30,000. Revised.

I showed my appreciation of my native land in the usual Irish way, by getting out of it as soon as I possibly could.

George Bernard Shaw

Christmas came early for the Irish yesterday, when the Finance Ministers of the Land of Milk and Honey, meeting in Brussels, capital of Euroland, collectively agreed to bailout Ireland, so Ireland can bailout its banks, so its banks can repay their debts to Europe’s banks, so Europe’s banks can carry on pretending they’re not broke. The 4.2 million Irish were told that as a consequence for all this generosity and kindness, their benefits were to be cut, their taxes raised, and that two million of them should hit the emigration road, get jobs and start sending remittances home. Below, Bloomberg and the Irish Times cover the riches to rags story.

"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

Ireland Wins EU85 Billion; Germany Drops Bond Threat

Nov. 29 (Bloomberg) -- European governments sought to quell the market turmoil menacing the euro, handing Ireland an 85 billion-euro ($113 billion) aid package and diluting proposals to force bondholders to bear some cost of future bailouts.

European finance chiefs ended crisis talks in Brussels yesterday by endorsing a Franco-German compromise on post-2013 rescues that means investors won’t automatically take losses to share the cost with taxpayers as German Chancellor Angela Merkel initially proposed to the consternation of bond traders.

The first test of the twin decisions came as markets resumed trading after speculation intensified last week that Portugal and perhaps even Spain will require support. German bunds, Europe’s benchmark, fell after the deals damped demand for the safest fixed-income assets. European stocks gained.

“We’ll maybe see some relief in markets, but governments need to show they’re getting their economies in shape,” said Axel Merk, president and chief investment officer of Merk Investments LLC in Palo Alto, California. “People are now going to focus on Portugal and it’s probably also going to need some help.”

Six months after the Greek rescue exposed flaws in the euro’s makeup and fueled doubts whether 16 countries belong in the same currency union, policy makers again found themselves meeting on a Sunday racing to calm markets. They convened after a week in which the cost of insuring Portuguese, Irish and Spanish government debt against default rose to a record and the 10-year bond yields of those nations, Italy and Greece averaged more than 7.5 percent, a euro-era record.

In a third move yesterday, Greece was told it could have an extra four-and-a-half years to repay emergency loans totaling 110 billion euros to match the seven-year term under Ireland’s deal.



Opposition condemns use of pension fund in €85bn bailout

Monday, November 29, 2010

THE €85 billion EU-IMF bailout package for Ireland announced last night was roundly condemned by the Opposition parties who are now all likely to vote against the Budget on December 7th.

Fine Gael, Labour and Sinn Féin attacked the intention to use the National Pension Reserve Fund to help provide a further €10 billion in further capital for the banks. In total, the banks could end up getting another €35 billion if their losses are bigger than expected.

The remaining €50 billion is to cover the State’s borrowing needs for the next three years. Opposition parties were highly critical of the 5.8 per cent average interest rate that will be charged by the EU and the International Monetary Fund.

A memorandum of understanding to give legal status to the agreement is near completion and will be published before the budget. It will give quarter-by-quarter targets which will have to be met by the Government in order for funds to be released.

Under the agreement the State will contribute €17.5 billion of the package from the National Pension Reserve Fund and cash held by the National Treasury Management Agency while the total external assistance in the fund will come to €67.5 billion. It is comprised of €45 billion from the EU, bilateral loans from Britain, Sweden and Denmark, and €22.5 billion from the IMF.

Britain will lend nearly €8 billion, including €4 billion in a direct bilateral loan. The British have won a major concession from EU partners, particularly the Germans, by ensuring the UK will not be automatically part of any euro-rescue packages after 2013.

Taoiseach Brian Cowen welcomed the fact that there would be no change to the corporation tax rate of 12.5 per cent which was vital to Ireland’s economic recovery.

Speaking at a press conference he said a large portion of the loans, some €50 billion, would go towards paying for social welfare payments, pensions, health and education “as we manage the transition to a sustainable deficit and debt position”.

He said the programme endorsed the proposed adjustment of €6 billion next year and €15 billion over the next four years, while recognising the timeframe for reducing the deficit to 3 per cent of GDP should be extended to 2015.

Minister for Finance Brian Lenihan said junior bank bondholders would face steep losses but made it clear that senior bondholders would not be hit.


As best I can see, this merely buys time to get into next year waiting for something to turn up. From sometime in late 2013, according to reports, Euroland’s new bondholders are being told that in future EU crises they might get stiffed along with the taxpayers. Well maybe. 2013 is a long way off, and most of this year’s crop of finance ministers will be doing other jobs. There’s also a high probability that the unloved Euro will be gone in its present form. As the story is still being spun, we will await the day’s “clarifications” and spin.

The other developing story, is the who said what bad thing about who, as released by Wikileaks from the gossip columns of the massed ranks of US diplomats and spies. More on both probably later in the week.

Stung by last year’s fiasco in the frigid snows of Copenhagen, this year’s global warming flat earthers, are assembling in coven in Cancun to try one more time to convince the world of a need for carbon taxes, carbon futures, carbon capture and a whole lot of other bureaucratic nonsense the new world order fanatics want to impose on the rest of us. More on this global warming conference once Britain and Europe get out of our mini ice age.

At the Comex silver depositories Friday, final figures were: Registered 48.55 Moz, Eligible 58.67 Moz, Total 107.23 Moz.

The paper standard is self-destructive."

Hans F. Sennholz


Crooks and Scoundrels Corner.

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

Today, the US mortgage morass continues to get worse. With no real idea who owns what in phony triple-A securitisations, thanks to MERS, deadbeat borrowers are getting to live rent and mortgage free for longer and longer. Below the Journal gets back on the case. Stay long precious metals. The whole fiat money casino has gone out of control.

November 27, 2010, 5:00 AM ET

Number of the Week: 492 Days From Default to Foreclosure

492: The number of days since the average borrower in foreclosure last made a mortgage payment.

Banks can’t foreclose fast enough to keep up with all the people defaulting on their mortgage loans. That’s a problem, because it could make stiffing the bank even more attractive to struggling borrowers.

In recent months, the number of borrowers entering severe delinquency — meaning they missed their third monthly mortgage payment — has been on the decline, falling to about 700,000 in October, according to mortgage-data provider LPS Applied Analytics. But it’s still more than double the number of foreclosure processes started.

As a result, banks are taking progressively longer to foreclose. The average borrower in the foreclosure process hadn’t made a payment in 492 days as of the end of October, according to LPS. That compares to 382 days a year ago and a low of 244 days in August 2007.

In other words, people who default on their mortgages can reasonably expect, on average, to stay in their homes rent-free more than 16 months. In some states such as New York and Florida, the number is closer to 20 months.

That’s a meaningful incentive, and it’s likely to grow unless banks manage to boost their throughput. Speeding up the process won’t be easy, as demonstrated by the banks’ continuing legal troubles related to robo-signers, bank employees who signed foreclosure affidavits without properly checking the required loan documentation.

Millions of Americans still are paying their mortgages even though they owe more than their homes are worth. The more banks’ backlog grows, the more likely they are to join it, adding to the already giant pile of foreclosures weighing on the housing market


"Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money."

Daniel Webster

The monthly Coppock Indicators finished October:

DJIA: +204 Down. NASDAQ: +289 Down. SP500: +196 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. October is the fifth down month in a row.


Saturday 27 November 2010

Weekend Update – November 27 2010

Europe on the Abyss.

Baltic Dry Index. 2200 +45
LIR Gold Target by 2019: $30,000. Revised.

“We have decided to socialize the private losses of the banking system.”

Professor Nouriel Roubini.

The great Bilderberger “United states of Europe” project in ruins, Europe’s serial bunglers have now mismanaged the Euro crisis to the point where even the bankruptcy of Germany cannot be ruled out. By socialising the private losses of banks, the nation states of Europe are all sequentially falling one after another. Stay long precious metals. What is really falling is fiat money and the financialised crony casino capitalism, bankster and squid economy it bred. Now sensing the ultimate in profits, the great vampire squids have turned on the banksters. A hysterical farce, if it wasn’t so serious as to wreak ruination on the middle class and the poor. While today it’s Europe on the abyss of fiat currency disintegration, Europe’s fall will bring in the fall of all of the fiat currency tokens that pass for modern money. The great Nixonian blunder of August 15, 1971 is entering its death throes. Unfortunately, our deluded leaders and central banksters aren’t yet ready to give up on the corpse of fiat money. And so we blunder along form one attempted fix to another, each fix worse than the one before, as the squids and banksters desperately try to preserve their wealth and position, by socialising the losses and privatising their few remaining profits. But now, the great vampire squids see the end game. Their interests have separated from the dying banksters. They have turned on their former allies, sensing that the existing banking system and fiat money cannot be saved. Within 5 years our fiat currency system will have changed. Will the euro still be with us in December 2011?

"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

EU rescue costs start to threaten Germany itself

The escalating debt crisis on the eurozone periphery is starting to contaminate the creditworthiness of Germany and the core states of monetary union.

By Ambrose Evans-Pritchard 6:00AM GMT 26 Nov 2010

Credit default swaps (CDS) measuring risk on German, French and Dutch bonds have surged over recent days, rising significantly above the levels of non-EMU states in Scandinavia.

"Germany cannot keep paying for bail-outs without going bankrupt itself," said Professor Wilhelm Hankel, of Frankfurt University. "This is frightening people. You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver. It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings."

The refrain was picked up this week by German finance minister Wolfgang Schäuble. "We're not swimming in money, we're drowning in debts," he told the Bundestag.

While Germany's public and private debt is not extreme, it is very high for a country on the cusp of an acute ageing crisis. Adjusted for demographics, Germany is already one of the most indebted nations in the world.

Reports that EU officials are hatching plans to double the size of EU's €440bn (£373bn) rescue mechanism have inevitably caused outrage in Germany. Brussels has denied the claims, but the story has refused to die precisely because markets know the European Financial Stability Facility (EFSF) cannot cope with the all too possible event of a triple bail-out for Ireland, Portugal and Spain.

EU leaders hoped this moment would never come when they launched their "shock and awe" fund last May. The pledge alone was supposed to be enough. But EU proposals in late October for creditor "haircuts" have set off capital flight, or a "buyers' strike" in the words of Klaus Regling, head of the EFSF.

Those at the coal-face of the bond markets are certain Portugal will need a rescue. Spain is in danger as yields on 10-year bonds punch to a post-EMU record of 5.2pc.

Axel Weber, Bundesbank chief, seemed to concede this week that Portugal and Spain would need bail-outs when he said that EMU governments may have to put up more money to bolster the fund. "€750bn should be enough. If not, we could increase it. The governments will do what is necessary," he said.

-----"Italy is in a lot of pain," said Stefano di Domizio, from Lombard Street Research. "Bond yields have been going up 10 basis points a day and spreads are now the highest since the launch of EMU. We're talking about €2 trillion of debt so Rome has to tap the market often, and that is the problem."

The great question is at what point Germany concludes that it cannot bear the mounting burden any longer. "I am worried that Germany's authorities are slowly losing sight of the European common good," said Jean-Claude Juncker, chair of Eurogroup finance ministers.



Ireland Seeks Aid Deal Before Markets Open as Bank Bonds Fall

Nov. 27 (Bloomberg) -- Ireland is in the final stages of negotiating an international aid package to rescue its financial system before markets open on Monday after investors yesterday dumped the bonds of its largest banks.

Euro-area finance ministers may seal an agreement with Ireland tomorrow, with a teleconference slated to begin at 4 p.m. Brussels time, a European Union official said on condition of anonymity. The loans may cost as much as 6.7 percent, compared with a rate of 5.2 percent paid by Greece, state broadcaster RTE said, without citing anyone.

The need for a pact, which may be worth 85 billion euros ($112 billion), is intensifying as capital flows out of the nation’s banks. The Irish government two years ago assured senior bondholders they wouldn’t lose their money if banks failed. For negotiators, the risk is that breaking the pledge may spark concerns about the quality of other euro-region debt.

“One possible scenario is that the financial package for Ireland could include an element of restructuring affecting senior debt,” Fitch Ratings said in a statement yesterday. “Fitch has no visibility of this matter but notes that such a restructuring could have wider implications for the euro area.”

Allied Irish Banks Plc and Bank of Ireland Plc bonds fell yesterday on concern the government will abandon a pledge to protect senior bondholders and instead force them to share the bailout costs. EU and International Monetary Fund officials are taking legal advice on how senior bondholders can share the cost of the rescue without triggering lawsuits, the Irish Times said yesterday, without saying where it got the information.



Bracing for Bailouts 11/26/2010

Which EU Problem Child Will Be Next?

First came Greece, then there was Ireland. The EU is gaining experience in helping out their member states' failed economies. But how long can that last? SPIEGEL ONLINE takes a country-by-country look at the nations on the brink.

Fear is spreading in Europe. How many countries are going to need bailouts -- and how many billions of euros will that take? And is the entire euro alliance at risk?

After Greece had to be rescued with a spectacular aid action earlier this year and then Ireland earlier this week, it is no longer a quest of if another country will require a bailout, but when. Most experts are in agreement that Portugal will be the next country to require assistance, despite denials from Lisbon.

But what scares those who deal with euro policy the most is the situation in Spain. The €750 billion program set up by the European Union and the International Monetary Fund for dealing with the euro crisis may be enough to cover Greece, Ireland and Portugal without problems, but there could be problems if a bailout is needed for Spain, which is Europe's fourth-largest economy.

On Wednesday, Spain's government took pains again to assuage fears. "An abyss separates Ireland from us," Deputy Finance Minister Jose Manuel Campa told the Spanish daily El Pais. However, his comments didn't seem to move the financial markets. Interest yields on 10-year Spanish government bonds rose to over 5 percent for the first time since 2002. Speculators fear the risk of bankruptcy in the country has increased.



Guest Post: Greece → Ireland → Portugal → Spain → Italy → UK → ?

It is now common knowledge that there is a potential domino effect of European sovereign debt contagion in roughly the following order:

Greece → Ireland → Portugal → Spain → Italy → UK

While some people have been writing about this for well over a year, many others have joined the party late (there are now over 600,000 hits from a Google search discussing this topic.)

It is also now common knowledge that while Greece and Ireland have relatively small economies, there will be real trouble if the Spanish domino falls.

Iceland has the world’s 112th biggest economy, Ireland the 38th, and Portugal the 36th. In contrast, Spain has the world’s 9th biggest economy, Italy the 7th and the UK the 6th. A failure by one of the latter 3 would be devastating for the world economy.



"Increasingly, the wealth of the modern world has come to be represented by financial assets rather than real assets, and this to me is a very unhealthy situation, because financial assets are inherently unstable. Financial assets (currencies, bonds, mortgages, stocks, bank credit, etc.) can be quickly and violently reduced in value, or destroyed completely by either inflation or deflation."

Donald J. Hoppe


Friday 26 November 2010

Stumbling and Bumbling to Default.

Baltic Dry Index. 2200 -13
LIR Gold Target by 2019: $30,000. Revised.

"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise."

Jerome F. Smith

Stay long precious metals. The great United States of Europe project is dead. All that’s left now is for Europe’s serial bunglers to stumble and bumble their way to default, probably late next year. Along the way, many more European millions will be sold into Irish style poverty in a vainglorious bureaucratic attempt by Europe’s unelected twin clown Presidents and the ECB, to somehow keep the whole flawed project on life support. The simple fact is, Ireland is nothing like Germany, nor is Greece like Holland or Finland. One size doesn’t fit all, and a Germanic Euro can only bring misery and poverty to the likes of Portugal, Spain, Italy, and now Belgium. At some point ahead even the doziest Europeans will figure out that the problem is fiat currency, and specifically the fiat Euro.

We open today with the new reality in bankster failed Ireland. Now comes the Euro Famine, if the Irish government is daft enough to go through with its Brussels imposed 15 billion austerity package. Ireland like Greece, needs to drop the euro. As a sovereign country, simply convert all Euro Debt to Punts, and extend maturity. European banks would have a heart attack. The 15 billion in austerity measures would be waived faster than Europe’s twin clown Princes could get to Dublin. Impoverishing half Europe will not happen. Long before then Europe’s voters will turn nationalist.

"When paper money systems begin to crack at the seams, the run to gold could be explosive."

Harry Browne

Paddy Power now a bigger company than Bank of Ireland

Heard the one about the Irish bookie and the Irish banker?

By Richard Fletcher 6:13AM GMT 25 Nov 2010

Paddy Power, the Irish bookmaker, has overtaken Bank of Ireland as the crisis-hit country's eighth largest company – not that many in the Emerald Isle are likely to find it a laughing matter.

Shares in the bookmaker have had a good run since late summer, when Paddy Power said it would beat analysts forecasts' for full-year profits. Last week the company announced it would create 500 jobs in Ireland over the next three years, as it expands its online gambling business.

By contrast, Bank of Ireland, which was founded by a royal charter in 1783, and became official banker to the Irish government in 1922 when the country gained independence from Britain, has seen its share price collapse.

The bank's shares have lost more than 40pc of their value this week alone, and the Irish government is now set to take a majority stake, after the country had to be bailed out by the European Union and International Monetary Fund.


Irish Relief Fleeting as ‘Day of Reckoning’ Nears: Euro Credit

Nov. 26 (Bloomberg) -- Borrowing costs for Europe’s most indebted nations are at record highs as Ireland’s capitulation in accepting a bailout of its banking industry stokes concern that other countries also will have to seek aid.

The average yield investors demand to hold 10-year debt from Greece, Ireland, Portugal, Spain and Italy reached 7.52 percent yesterday, a euro-era record. The average premium investors demand to hold those securities instead of German bunds widened to 480 basis points, approaching this year’s 485 basis-point high reached on Nov. 11. The average cost of insuring against a default by the five nations using credit- default swaps reached a record 517 basis points on Nov. 23.

“It’s no longer taboo to speak about a restructuring,” said Johannes Jooste, a portfolio strategist at Bank of America Corp.’s Merrill Lynch Global Wealth Management in London, which oversees about $1.4 trillion for clients. “The fact that bond yields continue to rise and put pressure on countries that have to fund from the market makes investors less and less confident, and it’s bringing forward the day of reckoning.”

The Nov. 22 relief rally after Irish Prime Minister Brian Cowen conceded that the nation needed financial support proved transient. Irish 10-year bond yields fell 4 basis points, before jumping 88 basis points through yesterday, exceeding 9 percent for the first time since 1995. The euro’s respite was still more fleeting; the bailout inspired a 0.8 percent gain for the currency before it slumped to a two-month low.



Nigel Farage To European Parliament: “The Euro Game Is Up… Just Who The Hell Do You Think You Are?

November 25 2010.

Famous euroskeptic Nigel Farage (as seen previously here), in just under 4 brief minutes tells more truth about the entire European experiment than all European bankers, commissioners, and politicians have done in the past decade. As we have already said pretty much all of this before, we present it without commentary:

“Good morning Mr. van Rompuy, you’ve been in office for one year, and in that time the whole edifice is beginning to crumble, there’s chaos, the money’s running out, I should thank you - you should perhaps be the pinup boy of the euroskeptic movement. But just look around this chamber this morning, look at these faces, look at the fear, look at the anger. Poor Barroso here looks like he’s seen a ghost. They’re beginning to understand that the game is up. And yet in their desperation to preserve their dream, they want to remove any remaining traces of democracy from the system. And it’s pretty clear that none of you have learned anything.

When you yourself Mr. van Rompuy say that the euro has brought us stability, I supposed I could applaud you for having a sense of humor, but isn’t this really just the bunker [or banker?] mentality. Your fanaticism is out in the open. You talk about the fact that it was a lie to believe that the nation state could exist in the 21st century globalized world. Well, that may be true in the case of Belgium who haven’t had a government for 6 months, but for the rest of us, right across every member state in this union, increasingly people are saying, “We don’t want that flag, we don’t want the anthem, we don’t want this political class, we want the whole thing consigned to the dustbin of history.”

We had the Greek tragedy earlier on this year, and now we have the situation in Ireland. I know that the stupidity and greed of Irish politicians has a lot to do with this: they should never, ever have joined the euro. They suffered with low interest rates, a false boom and a massive bust. But look at your response to them: what they are being told as their government is collapsing is that it would be inappropriate for them to have a general election. In fact commissioner Rehn here said they had to agree to a budget first before they are allowed to have a general election.

Just who the hell do you think you people are. You are very, very dangerous people indeed: your obsession with creating this European state means that you are happy to destroy democracy, you appear to be happy with millions and millions of people to be unemployed and to be poor. Untold millions will suffer so that your euro dream can continue. Well it won’t work, cause its Portugal next with their debt levels of 325% of GDP they are the next ones on the list, and after that I suspect it will be Spain, and the bailout for Spain will be 7 times the size of Ireland, and at that moment all the bailout money will is gone - there won’t be any more.



We end for the weekend with bad news from the key copper market. MF Global Holdings suggests that copper is in a “corrective move”. As goes copper, so goes much of the commodities market, so goes much of the global economy. Copper demand is a good proxy for the state of the world economy. On a similar note, the Baltic Dry Index is also a rough proxy for the health of the global economy. Since the end of May it has fallen by roughly half, signaling a rough start to 2011 ahead. Sell in May go away, runs the old stock market saw. I think it a good idea to let others play the trading game for the coming month of December. With so much trading now program trading with one computer trying to fake out another, I think that there’s a high possibility of another flash crash ahead of Christmas.

Copper ‘Sell Signal’ at $3.60 on Comex: Technical Analysis

Nov. 26 (Bloomberg) -- Copper is in a “corrective move” which may worsen should prices close below $3.60 a pound, according to technical analysis by MF Global Holdings Ltd.

The attached chart shows the New York-traded futures fell to an intraday low of $3.6110 a pound on Nov. 17, a level below a trend channel that has spanned from the middle of this year, said Anantharajan Paulpandian, a technical analyst at the brokerage in Singapore.

“If $3.60 broke, it’s a sell signal” that may trigger deeper declines, Anantharajan said in a phone interview yesterday. Support is located at $3.5250 and around $3.39, “where the commodity may fight back,” he said. “Copper is in a corrective move,” and if prices don’t stabilize above $3.3895, the correction may go far deeper, he said.

The most active Comex contract rallied to a 30-month high of $4.0875 a pound on Nov. 11 on expectations of increased demand from China, the biggest consumer, where manufacturing expanded. The metal traded at $3.7540 a pound today.

A trend reversal in the Dollar Index, which headed for a third weekly gain, is likely to contribute to further weakness in copper, Anantharajan said.


"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."

F.A. von Hayek

At the Comex silver depositories Wednesday, final figures were: Registered 48.55 Moz, Eligible 58.68 Moz, Total 107.23 Moz.


Crooks and Scoundrels Corner.

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

Today, Europe. Is any EU bank safe? Isn’t every EU bank suspect now that Ireland’s banks wiped out Ireland as a free state? When you want a decision about Ireland call Brussels. Poor Ireland’s serfs and their children are indentured to Germany. Forget the Soldier’s Song, for the foreseeable future Ireland’s Anthem is Deutschland Uber Alles.

If you rob people of their identity, if you rob them of their democracy, then all they are left with is nationalism and violence.

Nigel Farage.

European stress tests weren't worth the paper they were written on

Last updated: November 23rd, 2010

Remember last summer’s famous stress testing of European banks? This was meant finally to put the lid on the European banking crisis by reassuring the money markets that eurozone banks were essentially solvent.

Temporarily it seemed to work. For a few months things calmed down. But now the tests have turned out to be not just demonstrably worthless, but in some cases downright dishonest too.

Take Ireland, whose insolvent banks have now so completely overwhelmed the public finances that it is being forced to seek a joint EU/IMF bailout. Less than four months ago, the Committee of European Banking Supervisors pronounced the Irish banking system to be completely sound.

True enough, the stress testing wasn’t applied to the big daddy of Ireland’s banking calamity, Anglo Irish Bank, because that was already in national ownership. But it was applied to the now almost equally bust Allied Irish Banks, which was pronounced to have a comfortably adequate tier one capital buffer of 6.5 per cent. Bank of Ireland was even better at 7.1 per cent.

Economic and financial conditions have deteriorated further in Ireland since then, but that was the whole purpose of the stress testing – to reassure that capital was adequate to withstand the worst the economy could throw at it. The tests were meant to be a “what would happen to the capital ratio if everything goes wrong” type exercise.

The key variable was to test banks against a 3 per centage point deviation in GDP from the central European Commission forecast. You might not thinking this hugely testing, but in fact no European economy has yet deviated by that much. National regulators also applied their own local criteria which in Ireland’s case were naturally said to be much more exacting than the common European tests.

Most of us said at the time that the tests had been designed for banks to pass, yet the fact is that it is now hard to believe they took place at all. Conditions have no where near deteriorated as far as the tests had assumed, yet still Allied Irish looks essentially bust. In other words the tests were a lie.

If the Irish stress tests were a sham, what about the rest of the eurozone?


Another weekend, and a bitter, cold and snowy one expected here. Hardly the start to the final weeks of Christmas shopping that retailers were hoping for. Here in the rarely snowed on sleepy Thames Valley, it’s another chance for our intrepid drivers to venture out and show off their skills. Last year, most opted for the eccentric uphill too slow, downhill too fast technique. A pleasure to see, on its rare success. Have a great weekend everyone.

"The gold standard sooner or later will return with the force and inevitability of natural law, for it is the money of freedom and honesty."

Hans F. Sennholz

With St Andrew’s Day fast approaching, below a vital link for my fellow Scots.

The Whisky Shop (Inverness)


The monthly Coppock Indicators finished October:

DJIA: +204 Down. NASDAQ: +289 Down. SP500: +196 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. October is the fifth down month in a row.

Thursday 25 November 2010

Singeing Spain’s Beard.

Baltic Dry Index. 2213 +14
LIR Gold Target by 2019: $30,000. Revised.

There is one day that is ours.  There is one day when all we Americans who are not self-made go back to the old home to eat saleratus biscuits and marvel how much nearer to the porch the old pump looks than it used to.  Thanksgiving Day is the one day that is purely American. 

O. Henry

And so to Spain. The rain in Spain falls mainly on the banks. How safe are Spanish banks? Who knows. Irelands banks passed the EU stress tests with flying colours, only to collapse later in a test far less than the stress tests were supposed to be checking. Spain’s banks are probably as risky as Irelands, who knows? Certainly not the ECB, Elena Salgado, or the markets. Like deficits, dodgy accounts don’t matter until one day they do. The whole Bilderberger United States of Europe project is collapsing under the weight of its own internal lies and deceptions. To get the whole misguided, vanity, fiat Euro currency up and running, everyone lied to each other and fiddled the books. Now the worst of the cheats are collapsing, and there isn’t any way to let the cheats and deadbeats out to devalue. As a result, cabin after cabin fills up with water, in the great SS EU-Titanic, while the ECB and others franticly rush around on deck rearranging the deck chairs. Down below decks first the Greeks were told to drop dead and die like good little Europeans for the German Euro, then the Irish were told the same, now it’s the turn of the Iberian peoples, to trash their futures for the good of the failing Bilderberger project, and after them will come the Italians. At some point this madness ends, and the world’s people will wake up to the nightmare of fiat currency, and a bankster financialised crooked world. But not yet. Stay long precious metals. Our central banksters and crooked politicians aren’t yet ready to abandon voodoo economics. This square peg will relentlessly be hammered into that round hole, until one day next year it’s the Germans and French who are asked to die like good little Europeans for the cause of the United States of Fiat Europe.

Elena Salgado, Spain’s finance minister, insisted on Wednesday that Spain would not need rescuing. She told Spanish radio that “we are in the best position to resist against these speculative attacks.”

Fears Mount Over Spain, and Risks to the Euro

By RAPHAEL MINDER Published: November 24, 2010

MADRID — Europe so far has survived the bailout of Greece. The financial rescue of Ireland also is manageable. Even if Portugal becomes the third country to succumb and seek aid, as many people widely predict, it is unlikely to push Europe to the financial brink.

But any bailout of Spain — with an economy twice the size of the other three combined — could severely stress the ability of Europe’s stronger countries to help the financially weaker ones, and spell deep trouble for the euro, Europe’s common currency. Even though Spain, like Ireland, has adopted an austerity plan to help it avoid the need for a bailout, it still could need aid if its banking system proves frailer than the government thinks it is, as was the case in Ireland.

This troubling possibility has unnerved lenders, with Spain’s borrowing costs rising even though Madrid has cut its deficit and the country’s banks maintain they have sufficient strength to absorb their bad real estate loans. “Europe can afford the collapse of Ireland, even perhaps that of Portugal, but not that of Spain, so Spain’s ultimate line of defense is in fact this knowledge that it’s too big to fail and that it represents a systemic risk for the euro,” said Pablo Vázquez, an economist at the Fundación de Estudios de Economía Aplicada, a research institute here.

Reflecting the worries of investors, the yield spread between Spanish 10-year government bonds and those of Germany continued to widen on Wednesday — to as high as 2.59 percentage points, the biggest gap since the introduction of the euro. Spreads typically widen when investors perceive greater risk of not being repaid.

The problem for Spain is one of “self-fulfilling expectations,” said Jordi Galí, director of the Center for Research in International Economics at Barcelona’s Pompeu Fabra university. “If investors expect Spain to have trouble refinancing its debt, now or somewhere down the road, then Spain will have trouble,” he added. “This is only aggravated by the fact that the reluctance of investors to purchase the country’s public debt leads to an increase in the interest rate it has to pay and thus in the budget deficit and the amount of debt it has to issue.”

----Indeed, some say that one of Spain’s relative strengths is that a large amount of its government debt — 203.3 billion euros ($271.1 billion) — is owed to its own banks, rather than foreign lenders. If the government’s financial condition worsens, the thinking goes, Spanish banks would have a greater incentive to help out by easing terms on the loans than would foreign banks, which might take a harder line.

Of course, it is a bit of a double-edged sword; if the Spanish banks need to ease terms to help the government, they could be forced to swallow steep losses, hurting their balance sheets.

The likelihood of entering such a vicious circle could also rise next year, when Spain is due to repay lenders 192 billion euros, or about a fifth of the total debt. As a result of increasing interest it would have to pay for new borrowing, Spain faces a rise of 18 percent in the cost of financing its debt, according to the government’s budgetary plan.


'Ireland was just one big pyramid scheme'

"A sticking plaster over the open wound in the eurozone", was the judgment from Ireland's finance workers as their Government revealed a €15bn (£12.7bn) package of cuts.

By Emma Rowley 9:57PM GMT 24 Nov 2010

Much of the four-year plan – or the "IMF/EU directive, they signed it off", in the words of one Dublin trader – had been leaked ahead of Wednesday's announcement.

As expected, the income tax base was widened, the minimum wage was cut €1 to €7.65 and Ireland's much-vaunted corporation tax rate stayed at 12.5pc.

Dealers in Dublin were combing through the 140-page plan for nuances that could affect their positions, but saw no major surprises – or cause for cheer.

No one views the redoubled efforts to cut Ireland's deficit, which stands at about 12pc of GDP even without factoring in the costs of propping up the banks, as drawing a line under the eurozone's debt crisis.

-----A fellow trader was equally unconvinced about the plan's ability to stabilise sentiment. "I don't believe this is going to calm the markets," he said. "We can save money, tax people more, but the sums are so enormous, the total amount of bail-out is so large, that market participants are definitely looking to the eurozone as a whole."

Worryingly for European politicians, the talk from the pair, who trade across equities, bonds, commodities and currencies, was not idle chat. Trader One said he was carefully reviewing the wording of his futures contracts to see how they will be affected if the euro collapses.

"I'll be looking for [the package] to have a negative effect on the eurozone markets – maybe not initially – but the measures are too small for the scale of the problem, and it's not just Ireland that's the issue," he said, referring to other debt-laden eurozone nations.

There has been speculation struggling periphery countries such as Portugal and Spain could be allowed to devalue as a survival strategy, but he was deeply sceptical. "I don't see the point of the euro continuing if we have a two-speed euro."

That said, there was agreement over the need for Ireland to make cuts, and the International Monetary Fund's (IMF) involvement was welcomed.

"It's a good thing that external people are looking in. We've a government that isn't qualified to take on this mess," said one female banker, again speaking anonymously.

There was definitely room for savings to be made, people believed, with concern over the current basic dole rate – estimated at €5 an hour – and relatively high minimum wage.

But many worried the general public has yet to grasp that there is no alternative to the severe and lasting cuts and feared civil unrest.


Nor is America in much better position. Stay long precious metals.

China, Russia quit dollar

By Su Qiang and Li Xiaokun (China Daily)Updated: 2010-11-24 08:02

St. Petersburg, Russia - China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.

Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.

"About trade settlement, we have decided to use our own currencies," Putin said at a joint news conference with Wen in St. Petersburg.

The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities.

The yuan has now started trading against the Russian rouble in the Chinese interbank market, while the renminbi will soon be allowed to trade against the rouble in Russia, Putin said.

"That has forged an important step in bilateral trade and it is a result of the consolidated financial systems of world countries," he said.

Putin made his remarks after a meeting with Wen. They also officiated at a signing ceremony for 12 documents, including energy cooperation.

The documents covered cooperation on aviation, railroad construction, customs, protecting intellectual property, culture and a joint communiqu. Details of the documents have yet to be released.


Some hae meat and canna eat, -
And some wad eat that want it;
But we hae meat, and we can eat,
Sae let the Lord be thankit.

Robert Burns

At the Comex silver depositories Wednesday, final figures were: Registered 48.55 Moz, Eligible 58.68 Moz, Total 107.23 Moz. Silver is once again leaking out of inventory.


Crooks and Scoundrels Corner.

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

No crooks today just more on our arriving global cooling. Is our new Dalton Minimum in sunspots indicative of another 20 years to come? Snow starts today?

Snow May Cover 90% of U.K. by Nov. 29 With Six Inches in London

Nov. 23 (Bloomberg) -- Snow is forecast to cover as much as 90 percent of the U.K. by Nov. 29 with six inches in London as cold weather approaches, according to weather forecasts.

There may be as much as six inches (15 centimeters) of snow in southeast England, northeast England and much of Scotland, British Weather Services, which sells forecasts to businesses including energy companies, said in an e-mail.

“We expect the country to be whitened out,” Jim Dale, a senior meteorologist at British Weather Services in High Wycombe, England, said by telephone. “There’s a good chance we could be waking up to large volumes of snow.” Snowfall is also forecast across the rest of Europe, particularly across the Alps and Scandinavia, he said.

Weather forecasters use models which can predict trends in weather. The models can change. The U.K.’s Met Office issued a heavy snow warning on its website at 11:30 a.m local time. Cold weather can spur demand for natural gas, used to heat more than half of the country’s homes and businesses.

Snow is going to come “progressively as we get to the end of this week and into next,” Dale said. “On current trends, we can’t see an end to this until mid-December.”


Thanksgiving is an emotional holiday. People travel thousands of miles to be with people they only see once a year. And then discover once a year is way too often.

Johnny Carson.

With St Andrew’s Day fast approaching, below a vital link for my fellow Scots.

The Whisky Shop (Inverness)


The monthly Coppock Indicators finished October:

DJIA: +204 Down. NASDAQ: +289 Down. SP500: +196 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. October is the fifth down month in a row.

Wednesday 24 November 2010

Turkeys and Geese.

Baltic Dry Index. 2199 +20
LIR Gold Target by 2019: $30,000. Revised.

"Spain is a bit too big to be bailed out," said Antonia Garcia Pascual, of Barclays Capital. "The size of rescue required would use up all the funds available and then you have Italy with contagion as well."

Euroland 2010. Ireland is in chaos, the government there in danger of failing to pass its austerity budget needed to get access to the EU, UK and IMF’s bailout cash. Depositors are fleeing Irish banks, well aware that Ireland’s promises to protect all deposits 100% is fiction. Portugal, the next Ireland has gone on a general strike. Spain looms behind Portugal, Italy looms behind Spain. In Berlin, paymaster to the whole sorry Euroland project, there is righteous indignation at the idea of bailing out the Irish when the Irish won’t raise corporation tax from just half the level of Germany’s. If the Irish won’t take steps to help themselves, why should German taxpayers bother bailing out Ireland. And thus did the wheels fly off the Bilderberger United States of Europe project. As of this morning the Euro is hurtling towards a brick wall and disintegration. “Don’t worry, be happy,” says the EU’s unelectable joke of a second Presidency. “Portugal does not need any help.” This is all getting too funny for words.

What was supposed to be a US policy of devaluing the dollar, has been turned by spectacular European incompetence into the impending crash of the Euro. Stay long gold and silver. Club Med has gone broke and the Germans aren’t willing or able to rescue them. The striking people of Portugal and the government of Ireland don’t even seem willing to rescue themselves. Suddenly everyone is looking to stiff the European bank bondholders. The Squids have turned on the banksters.

"Portugal does not need any help – it is in a very different situation to Ireland,"

Herman Van Rompuy.

Euro crisis worsens after bond investor says cash will be taken out of Ireland

• Ireland's banks described as 'bleeding deposits'
• Euro falls as fears over Portugal increase

Tuesday 23 November 2010 21.23 GMT

The world's biggest bond investor tonight inflamed the growing crisis engulfing the eurozone by virtually inviting depositors to take their money out of Ireland's stricken banks.

In a day of turbulence in the currency markets when the euro plunged more than two cents against the dollar and share prices fell heavily in Europe and North America, expectations mounted that Portugal would quickly follow Ireland in calling in the International Monetary Fund and the European Union.

Tensions between North and South Korea further strained nerves in already febrile markets, while Germany admitted that the future of the euro was at stake through the Irish bailout.

Mohamed El-Erian, chief investment officer of the powerful bond manager Pimco, added to the anxiety by describing Ireland's banks as "bleeding deposits". He said: "What you advise your sister in Ireland now is that you'd say take your money out of an Irish bank and put it in another bank headquartered elsewhere. That's what happened in Argentina and in emerging economies. People worry about their savings."

-----El-Erian, who was interviewed by the Bloomberg news agency, said the Irish government needed to conclude those negotiations to restore confidence in the banking system.

"It will seriously undermine the prosperity of this country for a generation. The first thing they must do is execute on what they announced this weekend, which is a big external aid package and steps by the Irish government," said El-Erian.

His remarks were made amid signs that the authorities had failed to use Ireland as a fire-break for the crisis which now risks enveloping Portugal and even Spain. The cost of borrowing for both countries rose yesterday. Spain did not manage to raise as much money as it had hoped in its regular bond auction and was forced to pay more to raise the funds.


Swaps Soar on ‘Sacrosanct’ Senior Europe Debt: Credit Markets

Nov. 24 (Bloomberg) -- The cost of protecting against defaults on senior notes of European banks is soaring on speculation bondholders will be forced to take losses as governments try to share the burden of taxpayer-funded bailouts.

The Markit iTraxx Financial Index of credit-default swaps on senior debt increased 12 basis points, or 0.12 percentage point, to 152.9 basis points, the most since May. Contracts on Portugal’s Banco Espirito Santo SA are at a record, and Spain’s Banco Santander SA are at the highest level in five months.

Europe’s debt crisis has spread to Ireland from Greece, and bond investors bet that Portugal and Spain may be next in line for a bailout from the European Union and International Monetary Fund. EU officials estimate that a rescue package for Ireland may total about 85 billion euros ($114 billion), according to two officials familiar with the situation who spoke on condition of anonymity because the talks were private.

“Senior bondholders will most likely find themselves as potential burden-sharers, which is in stark contrast with the rules of engagement of the market,” said Roberto Henriques, a fixed-income analyst at JPMorgan Chase & Co. in London. “Even at the worst point of the current crisis, it was generally a given that senior debt was sacrosanct.”


Wednesday, November 24, 2010

Dramatic fall in value of Irish bank stocks

A DRAMATIC fall in the value of Irish bank stocks led a global sell-off in equities yesterday, as markets failed to be convinced that Ireland’s EU-IMF plan will solve the euro zone’s financial woes.

The value of the euro and peripheral euro zone government bonds also fell sharply as fears about the health of the euro zone mounted.

Bank of Ireland tumbled by 23 per cent, closing at 30 cent, as investors rushed to sell their holdings of the bank’s shares.

AIB shed 19 per cent to finish at €0.33, while Irish Life Permanent shed 10 per cent to €0.75.

The sell-off was due to fears that Irish banks would be nationalised or, at the very least, shareholder value would be severely diluted in the event that the Government increases its stake in the State’s main lenders, a move that is widely expected.

The banks’ bonds were also hit, with the value of AIB and Bank of Ireland’s subordinated debt falling.

According to one Dublin trader, the major concern driving the downward movement was the status of deposits in the institutions.

The uncertainty was not helped by a comment from a senior executive at Pacific Investment Management, Mohamed A. El-Erian, who said Ireland risked a “major bank run” unless European officials act quickly to calm the financial turmoil in the country.

Minister for Finance Brian Lenihan said yesterday that deposits in Irish banks were “safe”, and that the European Central Bank “continued to meet” the funding needs of the State’s banks.

Banking stocks in other peripheral euro zone nations also suffered.

Spain’s Santander bank declined 4.6 per cent, while Portugal’s Banco Espirito Santo lost 3.4 per cent.

Overall, European markets fell to a six-week low.


Spain and Portugal under fire as bond spreads hit record

Borrowing costs for Portugal and Spain have surged to danger levels on fears that Europe's leaders are losing political control of the Irish crisis and have yet to agree on a coherent plan to tackle the eurozone's deeper debt woes.

By Ambrose Evans-Pritchard 9:58PM GMT 23 Nov 2010

Yields on 10-year Portuguese bonds jumped to 6.9pc, replicating the pattern seen in Greece and Ireland just before they capitulated and turned to the EU and the International Monetary Fund.

Spreads on 10-year Spanish bonds rose to a post-EMU record of 233 basis points over Bunds, pushing the yield to 4.87pc. Spain's central bank governor, Miguel Angel Fenrandez Ordonez, said the contagion had spread rapidly to the eurozone periphery and "made itself felt" in the Spanish debt markets. He called on Madrid to accelerate fiscal reforms to persuade the markets the country really means to put its house in order.

"Spain is a bit too big to be bailed out," said Antonia Garcia Pascual, of Barclays Capital. "The size of rescue required would use up all the funds available and then you have Italy with contagion as well."

Saxo Bank said the EU's €440bn (£370bn) bail-out fund would lose its AAA credit rating if Spain needed serious help. Germany and France would have to put up fresh money, creating a political storm.

German Chancellor Angela Merkel admitted on Tuesday that the eurozone was "facing an exceptionally serious situation". She brushed aside criticism that German insistence on bondholder "haircuts" from 2013 was fuelling the crisis. "I will not let up on this because the primacy of politics over markets must be enforced," she said.

Dutch finance minister Jan Kees de Jager sent a further chill through markets, saying "holders of subordinated bonds in Irish banks will have to bleed" under the Irish rescue. The comment touched a neuralgic nerve, heightening fears that investors may be treated harshly under the bail-out terms for any other country needing a rescue.



The World From Berlin 11/23/2010

'Germany Must Make Clear That its Capacity to Fund Bailouts is Limited'

Ireland, which has applied for aid from the EU and IMF, is under mounting pressure from politicians in Germany and elsewhere in Europe to increase its corporate tax rate. Irish corporate tax is less than half that levied by other EU nations. German editorialists are divided on the issue of bailing out Dublin.

Following Ireland's request for billions in aid from the European Union rescue fund, calls for the stricken EU member state to raise its corporate tax rate are increasing in Germany. In continental Europe, many countries have long been miffed by Ireland's 12.5 percent corporate tax rate, which is less than half that levied by many other EU countries, including Germany. They argue that it leads to an exodus of jobs to Ireland and represents unfair competition. In an interview with Germany's tabloid daily Bild published on Tuesday, however, Irish Finance Minister Brian Lenihan rejected those demands.

----In Brussels, officials assume that, in addition to making painful cuts in its budget, Ireland will also be unable to avoid raising taxes. "It is probable that Ireland will not continue to be a low-tax country," a spokesman for EU Economics Commissioner Olli Rehn said.

Given that Germany will have to provide a considerable part of Ireland's credit guarantees, criticism amongst politicians in the country over the Irish taxation system is growing. "It cannot be that the companies and residents in Ireland pay lower taxes than companies and residents in the countries that are providing the aid," Hartmut Möllring, the finance minister for the state of Lower Saxony, a member of Chancellor Angela Merkel's conservative Christian Democratic Union party, told the Braunschwieger Zeitung newspaper. "Irish taxes must at least be average or a little bit above."

The finance policy spokesman in the German parliament for the Green Party, Gerhard Schick, also took aim at Dublin. Ireland, he told the Ruhr Nachrichten newspaper, had massively grown its financial sector through "unfair tax competition and lax financial market regulations."

Ireland needs to "improve its banking supervision and increase its revenues," said Carsten Schneieder, a budget spokesman for the center-left Social Democrats in the German parliament.

The irony here is that retaining all sovereignty on the issue of determining its corporate tax rate was a concession the EU, including the leaders of its member states, made to Dublin in exchange for support for the Lisbon Treaty after a first referendum on the EU reforms was rejected by Irish voters in 2008.



As America heads off to celebrate Thanksgiving with turkey tomorrow, Euroland’s goose is just about cooked. Does the Euro die at the weekend?

"Anybody has the right to evade taxes if he can get away with it. No citizen has a moral obligation to assist in maintaining the government."

J.P. Morgan the Greek.

At the Comex silver depositories Tuesday, final figures were: Registered 48.56 Moz, Eligible 58.32 Moz, Total 106.88 Moz. Silver is once again leaking out of inventory.


Crooks and Scoundrels Corner.

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

Today, Zero Hedge and Peak Oil. It’s already here says the IEA in their latest World Energy Outlook. With rose tinted glasses, the IEA magically adjusts future production with a set of dubious and unlikely assumptions. This report alone makes the case for a crash program of building renewable energy. Stay long precious metals as well. Financialised assets and fiat currencies will not fare well in an age of energy scarcity.

If facts do not conform to theory, they must be disposed of."

N.R.F. Maier. Maier's Law.

Guest Post: It's Official: The Economy Is Set To Starve

11/23/2010 20:25 -0500

Once a year, the International Energy Agency (IEA) releases its World Energy Outlook (WEO), and it's our tradition here at ChrisMartenson.com to review it.  A lot of articles have already been written on the WEO 2010 report, and I don't wish to tread an already well-worn path, but the subject is just too important to leave relegate to a single week of attention.

-----My only comment here is that these fields cannot overcome the expected rate of loss in the dark blue band below them.  All of the conventional oil that we know about is now past peak.  In order to keep conventional oil flat, we have to move up to the third band (light blue), which goes by the spine tingling name "fields yet to be found" - which will apparently be delivering a very hefty 22 mbd by 2035.  In other words, the IEA is projecting that in 25 years, more oil will be flowing from "fields yet to be found" than from all the fields ever found and put into production by the year 2010.   

Colin Campbell, one of the earliest analysts of peak oil who has decades of oil field experience, is on record as saying that the "fields yet to be developed" category, originally introduced to the world as unidentified Unconventional in 1998, is a "coded message for shortage" and was, off the record, confirmed as such by the IEA. That coded message is getting easier and clearer to receive by the day. 

But back to the main story line.  Even if the final assessment of future oil production isn't notched down even one more tick, we have all the information we need to spot an enormous problem in the global story of growth.  Assuming that we stick with the 99 mbd by 2035 estimate going forward, this represents a growth rate in oil of only around one-half of one percent (0.5%) per year between now and then.

This means that over the next 25 years, the global economy will have to make do with less than half the rate of growth in oil that it enjoyed over the prior 25 years.  How will the economy grow with less oil available?  What will happen to the valuations of financial assets that explicitly assume that prior rates of growth stretch endlessly into the future?

To cut to the chase, the admission by the IEA that we will not be achieving past levels of energy growth should be the most gigantic red flag in history, at least to those who might care that their money or other paper-based forms of wealth be worth something in the future.  What if that future growth does not emerge?  What happens when the collateral for a loan goes sour?  The IEA report indicates an enormous set of risks for an over-leveraged world reliant on constant growth.



"For more than two thousand years gold's natural qualities made it man's universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper."

Hans F. Sennholz

With St Andrews Day fast approaching, below a vital link for my fellow Scots.

The Whisky Shop (Inverness)


The monthly Coppock Indicators finished October:

DJIA: +204 Down. NASDAQ: +289 Down. SP500: +196 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. October is the fifth down month in a row

Tuesday 23 November 2010

One Down, Four To Come.

Baltic Dry Index. 2179 +24
LIR Gold Target by 2019: $30,000. Revised.

That is what happened specifically in the origination of mortgages in the United States in the middle part of the last decade. You had a transition from a traditional method of issuing mortgages to people who could be reasonably expected to service them, to a method of originating mortgages that were sold off immediately, that were rated in a way that permitted them to be bundled and sold to fiduciaries, and where the issuer had no interest in whether the borrowers could pay or not. In fact, in some ways the lenders actively preferred people who did not intend to pay, because they could then inflate the value of the loan and earn a larger fee upfront for doing it.

James K. Galbraith.

Ireland down, Portugal, Spain, Italy and Greece to go. But first, North Korea seems to have attacked a South Korean island, in a new skirmish that could all too easily escalate. Already nervous stock markets aren’t likely to take the news well. While the markets complacently expect this to quickly blow over, I think it wiser to prepare for something more than just an incident. North Korea seems to have something to say. They very pointedly have just shown off their new nuclear enrichment plant to the west and now this. North Korea seems to want a crisis, and the danger is that they will escalate again. Stay long precious metals. As noted elsewhere, silver seems to be leaking away from the Comex depositories.

Now back to the Irish bailout that’s bringing down the government. It is by no means certain that the Irish austerity plan will pass the Irish parliament, but even if it does that markets recognise that it merely brings up Portugal and Spain, and right behind them, Italy and the tax and work shy Greeks again. Europe’s rescue plan seems to have Titanic written all over it. Stay long precious metals. To me at least, it looks as if the Euro in its present form is doomed.

In central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly and results far much less.

John Kenneth Galbraith

Ireland bail-out: Markets brand rescue package a failure due to lack of detail

Ireland's bail-out had been branded a failure by the markets owing to the lack of detail on the multi-billion euro loan

By Philip Aldrick 7:20PM GMT 22 Nov 2010

As the country descended into political chaos, hopes that the deal to pull Ireland back from the brink would stem contagion across Europe were also quickly dashed. The cost of insuring Spanish and Portuguese government debt rose, while the euro also closed down against the dollar and sterling.

"This is not a ringing endorsement as fundamentally no one is addressing the real issues," Marc Ostwald, interest rate strategist at Monument Securities, said. Simon Derrick, currency chief at the Bank of New York Mellon, added: "Rescue or no rescue, Ireland and the other peripheral nations face some difficult times ahead."

Failure to win over the markets could prove highly damaging for the euro area as Brussels attempts to shore up confidence in the embattled project. "Speculative actions against Portugal and Spain are not justified, though it can't be excluded," Jean-Claude Juncker, president of the euro group, conceded.

Ireland has agreed to a loan of €80bn-€90bn (£68bn-£77bn) to recapitalise the banks and set aside a contingency fund for government borrowing, making it the second eurozone member to need a bail-out after Greece. As part of the package, the government is doubling its austerity drive to €30bn, with €5bn of the additional measures coming from tax rises and €10bn from spending cuts.

Throwing the country into chaos, the Green Party – the ruling Coalition's minority partners – demanded an election in January and independents threatened to vote down some of the measures. The unsettling political mood sent jitters through the markets and comes just days ahead of Portugal's largest general strike in protest at its own deficit reduction plans.

Economists now expect Ireland to miss earlier economic targets. "The growth forecast for next year will be severely challenged simply because of confidence and credit availability," Amit Kara at UBS said. Credit rating agency Moody's said a "multi-notch" downgrade in Ireland's AA2 credit rating was "most likely" because the rescue package would increase the country's debt burden.


Irish Debt Crisis Forces Collapse of Government

By LANDON THOMAS Jr. Published: November 22, 2010

DUBLIN — The Irish government faced imminent collapse on Monday, only a day after it signed off on a $100 billion bailout, setting the stage for a new election early next year and injecting the threat of political instability into a European financial crisis that already has markets on edge.

Confronted with high-level defections from his governing coalition, Prime Minister Brian Cowen said he would dissolve the government after passage of the country’s crucial 2011 budget early in December.

His announcement capped a grim day for Ireland, as protesters tried to storm the Parliament building in Dublin, and Moody’s Investors Service, the ratings agency, lowered the rating on Irish debt by several notches.

In agreeing to new elections, Mr. Cowen seemed sure to become the first political casualty of the debt crisis in the 16-member euro zone.

The developments sent a chill through financial markets and political circles in the euro zone, where the severe austerity measures imposed to keep the currency union from fracturing have yet to be tested in general elections.

The impending collapse of the Irish government after an expensive bailout seemed only to reconfirm fears that the financial crisis was far from contained.

Analysts warned that deeply indebted countries like Portugal and Spain that are pushing through unpopular budget cuts may soon face an uncomfortable choice: punishment by financial markets that will hammer any laxity in deficit-cutting with exorbitant interest rates, or by an angry electorate annoyed by prolonged economic hardship.

“It will be the same story with all these countries — Ireland is just ahead of the game,” said Desmond Lachman, a former policy executive from the International Monetary Fund who is now with the American Enterprise Institute in Washington. “They all have a fixed exchange rate and have to make these massive adjustments, so people are asking whether they are on the right path.”



Irish Rescue Plan Shifts Focus to Portugal, Spain: Euro Credit

Nov. 23 (Bloomberg) -- Ireland’s plan to seek a European rescue risks escalating, rather than alleviating, the sovereign debt crisis as investors turn their focus to the high budget- deficit nations of southern Europe, led by Portugal.

----- Even as EU leaders said Ireland’s bailout will stem contagion in the euro region, investors are turning their attention to Portugal, which hasn’t cut government spending and has barely grown for a decade. A rescue of Portugal may increase pressure on its high budget-deficit neighbor Spain, whose gross domestic product is almost twice the size of Portugal, Greece and Ireland combined.

After Portugal “the next question would be Spain and then Italy and then France and then the EU,” said Antonio Garcia Pascual, chief southern European economist at Barclays Capital in London. “Spain is bit too big to be bailed out, the size of a rescue required would use up all the funds available and then you have Italy with contagion as well,” prompting “a situation where the euro itself is put into question,” he said.

---- Portugal’s debt amounts to 76 percent of gross domestic product, compared with 53 percent in Spain, 66 percent in Ireland and 116 percent in Italy last year. Spending by the Portuguese government, which lacks a parliamentary majority, continued to grow in the first 10 months of 2010, Finance Minister Fernando Teixeira dos Santos said on Nov. 17.


Greece May ‘Shut Down’ on Cash Shortage, High Frequency Says

Nov. 22 (Bloomberg) -- Parts of Greece’s government may be forced to “shut down” as early as next week if the country isn’t able to cover a revenue shortfall after its European Union partners delayed its next tranche of aid money, High Frequency Economics Ltd. said.

“With a big tax revenue shortfall, cash requirements are surely greater than the 6.5 billion euros ($8.95 billion) Athens was meant to receive next week,” Carl B. Weinberg, chief economist at Valhalla, New York-based High Frequency wrote in a note to clients today.

“Unless the government gets funds soon after Nov. 30, it will run out of cash,” Weinberg said. “If so, the government will have to shut down, at least in part.”


These are not times to be rash in the markets. Nothing is working out as the central banksters thought it would. The great ships of the fiat currency states are all at sea in uncharted waters, and smashing into reefs that the central banksters said weren’t there.

At the Comex silver depositories Monday, final figures were: Registered 49.18 Moz, Eligible 58.59 Moz, Total 107.77 Moz. Silver is once again leaking out of inventory.


Crooks and Scoundrels Corner.

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

Today, more on the growing scandal in America that threatens to give us “the next Lehman” at some point next year. Several hundred billion of residential mortgage backed securities sold worldwide look like they’ve become unbacked securities with income streams dependent on the goodwill of the mortgaged homeowner. My guess is that the holders will just put back the bogus security to the sellers. My guess is that they in turn will have to put up the “security” with the Fed in yet another bailout. A monstrous scandal to hit in 2011. Little wonder all the squids and banksters are looting the system via bonuses for all it’s worth before the roof falls in.

"The principal cause of the crisis was the dismantling of the system of regulation and supervision in the financial sector which had for much of the post-war period kept the most dangerous elements of that sector in check. In the absence of an appropriate system of effective supervision and regulation, what happens is that the actors in the system, who are intent upon taking the greatest degree of risk — including actors who are intent upon using fraudulent methods to increase their returns — come to dominate parts of the system.”

James K. Galbraith.

The Big Fail

posted by Adam Levitin

Last week the US Bankruptcy Court for the District of New Jersey issued an opinion in a case captioned Kemp v. Countrywide Home Loans, Inc. This case looks like the first piece of evidence in what might turn out to be the Securitization Fail or, in homage to Michael Lewis, The Big Fail.

Briefly, Countrywide as servicer filed a proof of claim for a mortgage in a bankruptcy case on behalf of Bank of New York as trustee for a securitization trust. The bankruptcy court denied the claim because there was no evidence that Bank of New York ever owned the mortgage. The mortgage note had never been negotiated or delivered to Bank of New York, despite the requirement to do so in the Pooling and Servicing Agreement (PSA) that governed the securitization of the loan. That meant that Bank of New York as trustee had no interest in the loan, so the proof of claim filed on its behalf was disallowed.

This opinion could turn out to be incredibly important. It provides a critical evidence for the argument that many securitization transactions simply failed to be effective because non-compliance with the terms of the transaction: failure to properly transfer the mortgage meant that the mortgages were never actually securitized. The rest of this post explains the chain of title issue in mortgage securitizations and how Kemp fits into the issue.

---- Now here's the real kicker: there's no reason to think that the Kemp note was a unique, one-off problem. All evidence from actual foreclosure cases points to the lack of a chain of endorsements on the Kemp note being not the exception, but the rule, and not just for Countrywide, but industry-wide. Certainly on the non-delivery point (separate from the non-endorsement problem), Countrywide admitted that non-delivery was "customary." If either of these issues, non-delivery or non-endorsement is widespread, then I think we've got a massive problem in our financial system.

----- Federal bank regulators should be all over this; there is monstrous systemic risk potential. The new Financial Stability Oversight Counsel, as well as the OCC and the Fed and FDIC should all be doing very targeted examinations of the large trustee banks' collateral files to grasp the scope of the problem. I don't know what they're actually doing, but I'm afraid that they aren't undertaking the proper investigation. Fortunately, this particular issue is easily within the expertise of bank regulators: just go to the collateral files and start looking at a large sample of notes. See how many are missing complete chains of endorsement or lack signatures altogether. That will be a very quick way to tell if there is a problem.

---- If the mortgages weren't properly transferred, there could be a variety of securities law violations, including servicers' regular Reg AB attestations. There could also be securities law violations on behalf of the banks--if the assets weren't properly transferred, they are still on the banks' balance sheets (as are the losses) and should be accounted for as such.



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.

John Kenneth Galbraith

With St Andrews Day fast approaching, below a vital link for my fellow Scots.

The Whisky Shop (Inverness)


The monthly Coppock Indicators finished October:

DJIA: +204 Down. NASDAQ: +289 Down. SP500: +196 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. October is the fifth down month in a row.