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.

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