Thursday, 11 November 2010

ECB Call Home.

Baltic Dry Index. 2454 -13
LIR Gold Target by 2019: $30,000. Revised.

The German Government requests the President of the United States of America to take steps for the restoration of peace, to notify all belligerents of this request, and to invite them to delegate positions for the purpose of taking up negotiations. The German Government accepts, as a basis of peace negotiations, the Program laid down by the President of the United States in his message to Congress of 8 January 1918, and his subsequent pronouncements, particularly in his address of 27 September 1918.

In order to avoid further bloodshed the German Government requests to bring about the immediate conclusion of an armistice on land, on water, and in the air.

Max, Prince of Baden, Imperial Chancellor.

5 October 1918

While the great and the greater, meet in Seoul with the greatest, we open this morning with yet more good employment news for China. Gap Inc, is today opening its flagship store in Shanghai. Go east young man, go east, that’s where the jobs have gone, another unintended consequence of fiat money. Below the NY Times cover the Gap going east.

Gap, Its U.S. Sales Tepid, Joins the Rush to China

By DAVID BARBOZA Published: November 10, 2010

SHANGHAI — With sales in the United States sluggish, one of America’s best-known apparel brands — Gap Inc. — is joining the rush to enter China’s fast-growing consumer market.

The retailer plans to open a flagship store here on Thursday, followed this month by three other large outlets in Shanghai and Beijing, two of China’s wealthiest cities. The company also expects to eventually add its other brands, like Old Navy and Banana Republic.

Some multinationals already have a huge presence in China, like McDonald’s, Coca-Cola and Procter & Gamble. But American retailers are just beginning their push into this country as consumption is on the rise and an investment boom is resulting in scores of new upscale malls and shopping districts.

“The timing is right,” John Ermatinger, Gap’s president for the Asia-Pacific region, said Wednesday, while touring the flagship store here as workers folded shirts and spruced up the interior. “We’ve declared that 12 percent to 25 percent of our revenue will come from the international market by 2013. And I think we can do that.”

---- The streets of Shanghai and Beijing look increasingly like New York City, Chicago or San Francisco, with Louis Vuitton, Gucci, Nike, Starbucks and Apple all seeking to entice shoppers. A report released in January by Credit Suisse predicted that by 2020 China would account for nearly a quarter of the world’s private consumption.

---- Many global retailers are scrambling to find good locations in China’s biggest cities. European retailers like Carrefour, Tesco and Metro A.G. are opening big supermarkets. Luxury brands say that in the next few years China should overtake Japan as the world’s biggest market for luxury goods.

And midrange apparel retailers like H&M, Zara and Uniqlo of Japan have gotten off to a strong start with new outlets in Shanghai — sometimes with long waiting lines just to enter the stores.

If money is now only a casino token issued by governments and distributed as a mere privilege for the masses to use, it logically follows that at some point the country with the biggest population, operating a mixed command economy, and loosely following fractional reserve banking, that their “money” must win out over all the others. With nothing backing fiat money, the winner is the country with the largest world population using that money. From 1945 to date that winner has been the US dollar. Though the US population base is relatively small, up until fallen guru Greenspan set off his last mega bubble in US real estate, spawning the biggest securitisation fraud the planet has ever seen, the world was relatively content to conduct international trade in dollars. Besides roughly 40% of the world had self excluded itself under murderous, Godless communism. All that has changed now. At the G-20 meeting they could start the global process of replacing the fiat dollar with some sort of new international settlement system, fairer to all, and meeting the new realities of the 21st century. They could, but they won’t. The US Treasury Secretary will go around cracking everyone up with his “strong dollar” jokes, the head of the Fed will crack everyone up with his QE2 weak dollar jokes, and President Obama deliver platitudes on change we can believe in, and try not to annoy too much his leading creditor, China. Everyone else in the room has their own gripes about something or other, and everyone is mad at the banksters of Wall Street who defrauded the world and left the global financial system poised to collapse when the next Lehman hits.

When the next Lehman hits, history is likely to record the G-20 meeting in Seoul the dubious honour of being the meeting that failed to avert the 2011 dollar crisis. A crisis that will finally force a very different world from 1971, when President Nixon made the great strategic error of forcing fiat currency on the world, to acknowledge that the fiat dollar reserve standard has failed and has to be replaced. Stay long precious metals. Once on a fiat currency policy of quantitative easing, a central bank can’t get off it without bringing about the very collapse QE was intended to prevent.

'Currency war' showdown looms as leaders head to G20 summit

By Nigel Morris, Deputy Political Editor, in Seoul

Thursday, 11 November 2010

World leaders flew into South Korea last night to meet and try to avert an international "currency war".

Tensions have been rising between the United States and China, with Washington accusing Beijing of keeping the value of its currency artificially low to give itself an export advantage over rivals.

China has retaliated by protesting about the US decision to boost the dollar by pumping extra cash into the American money supply. The Beijing administration is digging in its heels. It is sitting on a $2.6 trillion surplus in its currency reserves, against the $4.7 trillion deficit facing the US.

The acrimonious stand-off will dominate the two-day G20 summit which begins today in the South Korean capital of Seoul. It has provoked fears of a return to protectionism around the world, in turn dealing a blow to the fragile recovery in the global economy.

David Cameron urged China to loosen its purse strings and start spending. He warned that a "dangerous tidal wave of money" moving between continents threatened to pitch the world into a fresh financial crisis.

---- President Barack Obama is to hold talks with the Chinese President, Hu Jintao, to try and find common ground. But President Obama has been weakened by the Democrats' disastrous showing in the mid-term Congressional elections and will be wary of appearing to make concessions to China.

In European news, it was a nightmare day for Ireland. Time for the ECB officials holidaying in Seoul to call home. No one now seriously expects Ireland not to default at some point next year. Things are now so bad in EU imposed austerity wracked Ireland, that the unemployment figure is now only holding steady by the significant emigration of the work force. The ECB could come in with a rescue, but moneybags Germany is insisting that the bondholders must share in the pain. That, of course, drives all of the PIIGS interest rates higher. With the Irish economy probably capable of limping along with a growth rate of 2%, how can they issue new 10 year debt at 8.64%? At least, with any expectation that Ireland wouldn’t have to default. Would the last family out please turn off the lights. Below that, Spain reappears ready to join Ireland and Greece with a begging bowl at the ECB’s door. Can we even get to 2011 without a currency crisis?

Ireland's cost of borrowing soars after dramatic sell-off

Ireland’s cost of borrowing has rocketed to its highest level since the launch of the euro in 1999 after a dramatic sell-off by bondholders and banks.

Ireland’s cost of borrowing has rocketed to its highest level since the launch of the euro in 1999 after a dramatic sell-off by bondholders and banks.

Ten-year bond yields hit 8.64pc on Wednesday, rising by more than half a percentage point. The sell-off was triggered by a cash-call estimated to be $1bn (£620m) by a clearing house on Wednesday morning.

The move increased concerns that the Irish government will be forced to seek external aid to help it bail out the country’s banks.

On Wednesday night the International Monetary Fund said that Ireland had not requested financial assistance and that relations were “normal”.

NOVEMBER 11, 2010

Merger Delays for Spain's Regional Banks

Four months after Spain forced a wave of mergers meant to stabilize its teetering regional savings banks, the process of combining the institutions has slowed to a crawl amid political and technical problems.

The Bank of Spain last spring forced a dozen shotgun weddings among the regional institutions, known as cajas, reducing the number of such banks from 45 to 18. Deal partners ranged from tiny southern lender Caja Jaen, to the large La Caixa, which has more than 5,000 branches across the country.

The move was seen as a victory for the Spanish regulator, which was scrambling to fix a sector that was being towed under by a backlog of toxic real-estate loans.

But after the initial flurry, people close to the situation say, the process of combining the local lenders has been mired in governance battles, labor disputes and technical hurdles. Six of the 13 deals haven't been completed yet. Those six deals represent half of the assets in the regional-bank sector.

And those that are complete have made little progress toward tackling the cajas' mountain of bad loans, which represent about half of the €180 billion ($248 billion) in delinquent or "doubtful" loans related to Spain's property and construction sector.

"The mergers have been a way of putting together the accounts of different institutions," said José García Montalvo, chairman of the department of economics and business at the Universitat Pompeu Fabra in Barcelona. "But it is mostly on paper. The cleaning of the balance sheets is moving too slowly."

The mergers have been waylaid on both practical issues—such as reconciling clashing tax rules among Spain's different regions—and small but fierce local battles, such as an outcry by employees of Valencia-based Bancaja over its merger partner's effort to impose Thursday afternoon branch openings.

How quickly and successfully the new entities can restructure and address the toxic real-estate assets on their balance sheets is important not just for Spain, but for the stability of the euro zone.

That is because the network of savings banks account for half of the financial sector of Spain, the fourth-largest economy in the euro zone, and their troubles have been a factor in provoking investor jitters and driving up the cost of funding for all banks.


France Joins Germany Ganging Up on Bondholders: Euro Credit

Nov. 11 (Bloomberg) -- French Finance Minister Christine Lagarde said investors must share the cost of sovereign debt restructurings, backing a German call that helped send yields on Irish and Portuguese bonds to record highs.

“All stakeholders must participate in the gains and losses of any particular situation,” Lagarde said during an interview yesterday in Paris for Bloomberg Television’s “On the Move” with Francine Lacqua. “There are many, many ways to address this point of principle.”

----- Ten-year Portuguese yields jumped 26 basis points to 7.18 percent, while Greek and Spanish bond yields also climbed.

Lagarde’s comments mark France’s most explicit backing of German proposals to make bondholders contribute in bailouts, which deepened the slump in bonds of the so-called euro peripherals. Risk premiums that investors demand to buy their debt have risen since an Oct. 29 European Union summit when German Chancellor Angela Merkel sparred with European Central Bank President Jean-Claude Trichet over forcing bondholders to take losses in restructurings, so-called haircuts.

And so on to tomorrow’s second G-20 day in Seoul. How to square the circle.

At the Comex silver depositories Wednesday, final figures were: Registered 50.54 Moz, Eligible 57.36 Moz, Total 107.90 Moz.


Crooks and Scoundrels Corner.

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

While the Irish slash and burn everything in sight in a desperate effort to appease the God’s of Brussels, in a far away land occupied by a tax and work shy people of whom we know nothing, the Greek higher education system has some explaining to do. As reported by “respected Greek magazine Proto”, “Mr. Professor, where did you get that Porsche, then?” Not to worry, Olaf’s on the case, so that’s alright then. The German’s will just have to work harder for longer. The Irish cut deeper and faster, and emigrate more. Welcome to the Alice in Euroland world of Greek higher education.

Greece professors ‘spent £172m EU cash on luxuries’

Allan Hall, in Berlin 09.11.10

Up to 20 professors from two Athens universities are alleged to have misused £172 million of European Union research and development cash, using it to fund a life of luxury.

The claim, reported in respected Greek magazine Proto, has caused outrage — not least in Germany which underwrote Greece to the tune of billions this year to prop up the euro.

Proto's headline was: “Mr Professor, where did you get the Porsche, then?” The European Union anti-fraud unit, Olaf, confirmed it is investigating the professors.

It is claimed that over 10 years, the academics — who would normally earn between £1,300 and £1,700 a month at most — drove up the costs of their work and funnelled the cash to bogus mailbox firms which they set up in Cyprus. They spent the money on a “fabulous lifestyle”, building villas, taking holidays and buying fast cars and fine wine, according to Proto.

The scandal has prompted claims of an almost total lack of checks within the EU to prevent such fraud.

Germany's Bild newspaper reported that European Union investigators have searched houses together with Greek police and state lawyers, and have seized “extensive” documentation.

Wall Street Takes $4 Billion From Taxpayers as Swaps Backfire

Nov. 10 (Bloomberg) -- The subprime mortgage crisis isn’t the only calamity Wall Street created that’s upending the finances of U.S. states and cities.

For more than a decade, banks and insurance companies convinced governments and nonprofits that financial engineering would lower interest rates on bonds sold for public projects such as roads, bridges and schools. That failed promise has cost more than $4 billion, according to data compiled by Bloomberg, as hundreds of borrowers from the Bay Area Toll Authority in Oakland, California, to Cornell University in Ithaca, New York, quietly paid Wall Street to end agreements since 2008.

California’s water resources department this year spent $305 million unwinding interest-rate bets that backfired, handing over the money to banks led by New York-based Morgan Stanley. North Carolina paid $59.8 million in August, enough to cover the annual salaries of about 1,400 full-time state employees. Reading, Pennsylvania, which sought protection in the state’s fiscally distressed communities program, got caught on the wrong end of the deals, costing it $21 million, equal to more than a year’s worth of real-estate taxes.

“It was brilliant, and it all blew up on me,” said Brian Mayhew, chief financial officer of the Bay Area Toll Authority, the state agency that gave Ambac Financial Group Inc., the New York-based bond insurer that filed for bankruptcy this week, $105 million to end $1.1 billion of interest-rate agreements. The payments equal more than two months of revenue on seven bridges the authority oversees around San Francisco.

------Borrowers from New York to California are now paying to get out of agreements. Altogether, they have made more than $4 billion of termination payments to firms including New York- based Citigroup Inc., New York-based JPMorgan Chase & Co. and Charlotte, North Carolina-based Bank of America Corp. since the beginning of 2008, according to a review of hundreds of bond documents and credit-rating reports by Bloomberg News.

In contrast to the subprime crisis, few taxpayers know anything about the cost of untangling municipal swaps. The only disclosure of payments to Wall Street often is buried in documents borrowers have to give investors when they sell bonds.


The Armistice was agreed at 5 AM on 11 November, to come into effect at 11 AM Paris time, for which reason the occasion is sometimes referred to as "the eleventh (hour) of the eleventh (day) of the eleventh (month)". It was the result of a hurried and desperate process.

Acting German commander Paul von Hindenburg had requested arrangements for a meeting from Ferdinand Foch by telegram on 7 November. He was under pressure of imminent revolution in Berlin, Munich, and elsewhere across Germany.

The German delegation headed by Matthias Erzberger crossed the front line in five cars and was escorted for ten hours across the devastated war zone of Northern France. They were then entrained and taken to the secret destination, aboard Foch's private train parked in a railway siding in the forest of Compiègne.

Foch appeared only twice in the three days of negotiations: on the first day, to ask the German delegation what they wanted, and on the last day, to see to the signatures. In between, the German delegation discussed the detail of Allied terms with French and Allied officers. The Armistice amounted to complete German demilitarization, with few promises made by the Allies in return. The naval blockade of Germany would continue until complete peace terms could be agreed upon.

There was no question of negotiation. The Germans were able to correct a few impossible demands (for example, the decommissioning of more submarines than their fleet possessed), and registered their formal protest at the harshness of Allied terms. But they were in no position to refuse to sign. On Sunday 10 November, they were shown newspapers from Paris, to inform them that Kaiser Wilhelm II had abdicated.

Erzberger was not able to get instructions from Berlin because of the fall of the government. However, he was able to communicate with the German Army Chief of Staff Paul von Hindenburg in Spa who instructed him to sign at any price as an armistice was absolutely necessary.[3] Signatures were made between 5:12 AM and 5:20 AM, Paris time.

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.

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