Thursday 30 December 2010

Year End December 31 2010


A year gone by and so many dearly beloved departed. A year to come and a time to end unending war, and negotiate some sanity. People cannot be cannon fodder forever.

Today and tomorrow, a glimpse at another period of senseless war. Thomas Tallis gets the space in Protestant divided England to compose the greatest Catholic piece of music to a Jewish –Christian God of the time up to now. An embarrassment to the evolving Anglican Church and the then hostile Catholic Church both at the same time, it has largely languished unknown ever since. This version was put up by a very talented young lady from Montana. May America be possessed of enough wisdom to employ her.

This weekend, the masterpiece of Thomas Tallis circa 1570. History shows, we can all be kinder and nicer to all, even our enemies, especially once we have them largely beaten . We don’t need to existentially fight to the death. We, if we want to, can use our creation in the image of God and his reason, to use diplomacy and common sense to work things out.

A very happy, healthy, and prosperous New Year 2011 to all and your families, and I do mean all. After the banksters, we deserve it.

Spem in alium numquam habui praeter in te

Deus Israel

qui irasceris

et propitius eris

et omnia peccata hominum in tribulatione dimittis

Domine Deus

Creator coeli et terrae

respice humilitatem nostram


I have never put my hope in any other but in you

God of Israel

who will be angry

and yet become again gracious

and who forgives all the sins of suffering man

Lord God

Creator of Heaven and Earth

look upon our lowliness.

Year End December 31, 2010

A year gone by and so many dearly beloved departed. A year to come and a time to end unending war, and negotiate some sanity. People cannot be cannon fodder forever.

Today and tomorrow, a glimpse at another period of senseless war. Thomas Tallis gets the space in Protestant divided England to compose the greatest Catholic piece of music to a Jewish –Christian God of the time up to now. An embarrassment to the evolving Anglican Church and the then hostile Catholic Church both at the same time, it has largely languished unknown ever since. This version was put up by a very talented young lady from Montana. May America be possessed of enough wisdom to employ her.

This weekend, the masterpiece of Thomas Tallis circa 1570. History shows, we can all be kinder and nicer to all, even our enemies, especially once we have them largely beaten . We don’t need to existentially fight to the death. We, if we want to, can use our creation in the image of God and his reason, to use diplomacy and common sense to work things out.

A very happy, healthy, and prosperous New Year 2011 to all and your families, and I do mean all. After the banksters, we deserve it.

Spem in alium numquam habui praeter in te

Deus Israel

qui irasceris

et propitius eris

et omnia peccata hominum in tribulatione dimittis

Domine Deus

Creator coeli et terrae

respice humilitatem nostram


I have never put my hope in any other but in you

God of Israel

who will be angry

and yet become again gracious

and who forgives all the sins of suffering man

Lord God

Creator of Heaven and Earth

look upon our lowliness.

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Wednesday 29 December 2010

The Great Fire of London 1940

Baltic Dry Index. 1773

LIR Gold Target by 2019: $30,000. Revised due to QE.

The "Second Great Fire of London" is a name used to refer to one of the most destructive air raids of the London Blitz over the nights of 29 December/30 December 1940. The raid and the subsequent fire destroyed many Livery Halls and gutted the medieval Great Hall of the City's Guildhall, destroying an area arguably greater than that of the Great Fire of London of 1666.


Seventy years ago tonight, while Britain stood alone with the Dominions and Empire in opposing Nazi Germany, Germany’s airforce set about burning down London. On the night of the 29-30th, the Luftwaffe dropped 22,000 incendiary bombs on the City of London’s main business district. St Paul’s and London survived. By the war’s end, cities would not survive a single bomb.

Today in this last update of 2010, we focus on developments in China. The Project for the New American Century looks more and more having turned into the Project for the New Chinese Century. Up first, the multi-national firms set out to ride a Panda. Thankfully Pandas eat bamboo. But is this Panda really a tiger in disguise? I rather think that it might be.

"Let China Sleep, for when she wakes, she will shake the world,"

Napoleon Bonaparte.

DECEMBER 28, 2010

China Squeezes Foreigners for Share of Global Riches

BEIJING—Foreign companies have been teaming up with Chinese ones for years to gain access to the giant Chinese market. Now some of the world's biggest companies are taking a risky but potentially rewarding second step—folding pieces of their world-wide operations into partnerships with Chinese companies to do business around the globe.

General Electric Co. is finalizing plans for a 50-50 joint venture with a Chinese military-jet maker to produce avionics, the electronic brains of aircraft. The deal with Aviation Industry Corp. of China would give GE access to a Chinese government project aimed at challenging Boeing Co. and Airbus in the civilian-aircraft market.

General Motors Co. established a joint venture this year with SAIC Motor Corp., its longtime partner in China, to produce and sell their no-frills Wuling-brand microvans in India, and eventually in Southeast Asia and other emerging markets as well.

The two deals show China Inc.'s growing international ambitions, as well as its increasing leverage over foreign partners. To make the GE deal happen, GE Chief Executive Jeffrey Immelt made an extraordinary concession, agreeing to fold into the venture all of GE's existing world-wide business in nonmilitary avionics. GM, in its deal, contributed technology, its manufacturing facilities in India and use of its Chevrolet brand name in that market.

Several forces are motivating China's foreign partners to strike global deals that would have been unthinkable a few years back. China's big government-backed companies now have enormous financial resources and growing political clout, making them attractive partners outside China. In addition, the Chinese market has become so important to the success of multinational companies that Beijing has the ability to drive harder bargains.


Next China attempts to slow their explosive, chaotic growth of road traffic.

Dec. 29, 2010, 12:30 a.m. EST

China auto shares mixed as tax-incentive expiry looms

HONG KONG (MarketWatch) — Chinese automobile stocks were mixed Wednesday after the government announced it will allow a tax incentive on small-car purchases to lapse by the end of the week, marking the latest move by China to ease the growth in vehicle use.

The Ministry of Finance Tuesday said that a tax on purchase of cars with engine capacity of 1.6 liters or less will be restored at 10% from Jan. 1 from 7.5% at present. The government had in January 2009 halved the tax to 5% to stimulate car purchases in the wake of the global financial crisis, before increasing the rate to 7.5% from the beginning of this year.

The looming expiry of the incentive, which had been well anticipated by prospective car buyers on the mainland, has boosted automobile sales in recent months as consumers brought forward their planned purchases. But sales next year could be a different story.


Outlook 2011: China Says No More Cars, Down Goes Auto Industry

December 27, 2010

While the world is still unwrapping the Christmas gift from China in the form of an interest rate hike, this other piece of news with ample implications for the auto industry seems to have gone largely under the radar -- The City of Beijing will limit the number of new license plates issued in 2011 to 240,000 to help control traffic congestion. Xinhua reported that car buyers in Beijing will have to draw lots before obtaining a vehicle license plate.


Below, China attempts to slow the west?

China to Tighten Limits on Rare Earth Exports

By KEITH BRADSHER Published: December 28, 2010

HONG KONG — China’s commerce ministry announced on Tuesday in Beijing a steep reduction in export quotas for rare earth metals in the first months of next year, a move that threatens to cause further difficulties for manufacturers already struggling with short supplies and soaring prices.

The reduction in quotas for the early months of 2011 — a 35 percent drop in tonnage from the first half of this year — is the latest in a series of measures by Beijing that has gradually curtailed much of the world’s supply of rare earths.

China mines more than 95 percent of the global supply of the metals, which are essential for smartphones, electric cars, many computer components and a range of military hardware. In addition, the country mines 99 percent of the least common rare earths, the so-called heavy rare earths that are used in trace amounts but are crucial to many clean energy applications and electronics.

In what seemed to be an effort to reassure traders and users of rare earths, the commerce ministry said in a follow-up statement late Tuesday on its Web site that it had not decided what the total export quotas would be for all of 2011. The ministry typically issues a second, supplementary batch of quotas each summer.

The ministry said on Tuesday night that companies should not make guesses about the total export quotas for next year based on the initial reductions issued earlier in the day.

“We will be considering the production of rare earths in China, domestic demand and sustainable development needs to determine” the full quotas for the entire year, the ministry Web site quoted its foreign trade department director as saying, without naming the director.

Earlier this month, China’s finance ministry raised export taxes to 25 percent from 15 percent for some of the most crucial rare earths. The ministry also extended taxes to exports of some rare earth alloys that previously were not taxed.

China gradually reduced its annual tonnage of export quotas from 2006 to 2009, then cut the tonnage of allowed exports by more than half in the second half of 2010.

Separately, the Chinese government imposed an unannounced embargo on shipments of raw rare earth minerals to Japan from mid-September to late November, a ban that started during a territorial disagreement over disputed islands.

In addition, rule changes for export quotas have had the effect of reducing the availability of supplies leaving China. Until now, the quotas mostly covered alloys and oxides with a rare earth content of at least 50 percent.

Starting next year, industry executives said, exports of some additional alloys will face restrictions as well, which will have the effect of tightening quotas by about 6 percent.


Gold bears the confidence of the world's millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history. There is no reason to believe it will lose the confidence of people in the future."

Oakley R. Bramble

At the Comex silver depositories Tuesday, final figures were: Registered 46.22 Moz, Eligible 58.26 Moz, Total 104.48 Moz.


Crooks and Scoundrels Corner.

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

Today, how the roof just fell in on the next Lehman, the insolvent Bank of America. Sounds like another print job for the Fed and America’s long suffering tax slaves. 2011 is about to become mortgage payback time for the giant US banks. Stay long precious metals. Once on Quantitative Easing, it’s impossible for a fiat currency to stop. BoA is a too big to fail, crony of the Fed. But in 2011 the Fed will be bailing out fraudsters, will the new Congress really allow them to do that? I’d bet the Squids have gone heavily short BoA. Time to split BoA into a good bank-bad bank affair, hammering the good bank part into JP Morgan?

"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

How Allstate Used Sampling To Confirm BofA/Countrywide Lied About Virtually Everything When Selling Mortgages

Submitted by Tyler Durden on 12/28/2010 17:43 -0500

A few days ago, news broke that MBIA was allowed to use statistical sampling in its ongoing Bank of America fraud lawsuit. This happened despite the Countrywide acquiror's loud protests. And now, courtesy of today's brand new lawsuit against BofA (and Agent Orange himself) filed by Allstate, in which the insurer "seeks unspecified damages, alleges fraud, negligent misrepresentation and violation of U.S. securities laws" we know just why Bank of America was so very against allowing sampling to be used by plaintiffs. According to the full report (pdf attached below), Allstate has determined that Bank of America misrepresented virtually everything in its prospectuses: from the percentage of owner-occupied properties reped in prospectuses (about a 10% differential), to the LTV thresholds on represented loans (both at the 90% and 100% threshold), while inbetween finding willful and malicious intent to defraud and deceive. We are confident that none of this, however, will result in a prison sentence for Mozillo, as laws in America are meant to be broken by anyone who can demonstrate an LTV more than 100,000% or have more than $100MM in annual income (including that derived from golden parachutes).

From the just released prospectus, which opens a green light for everyone who believes that the banks or its predecessor was dishonest in representing any and all deal components, and wishes to do so using statistical sampling, which is now permitted:


"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

A very happy, healthy and prosperous New Year to all. The next update will be Monday January 3. Check with the blog for the weekend update.

The monthly Coppock Indicators finished November:

DJIA: +178 Down. NASDAQ: +247 Down. SP500: +167 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. November is the sixth down month in a row.

Tuesday 28 December 2010

2011 – There May Be Trouble Ahead.

Baltic Dry Index. 1773 -22

LIR Gold Target by 2019: $30,000. Revised due to QE.

"You have to choose between trusting to the natural stability of gold and the natural stability and intelligence of the members of the government. And with due respect to these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold."

George Bernard Shaw

While London and much of the former British Empire parties on for another day of rest and recovery, and the North Eastern part of America gets reacquainted with the delight of snow, we look ahead towards the incoming year, and think it’s bunker time once again. Oil has surged back towards $91. Inflation is staring to reappear in many parts of the world. The Fed is to press on with QE2 through June 2011, and outside of Germany, Russia, China and Brazil, the global economy is on life support. To this old trader, it’s time to scale back on risk, add to gold and silver physical positions, and add a few more firms to my rare metals list. Below, why there may be trouble in 2011, and I haven’t even covered likely unrest and civil disobedience in the UK and Europe as austerity and higher taxes bite.

China Increases Rates to Counter Highest Inflation in Two Years

Dec. 26 (Bloomberg) -- China raised interest rates for the second time since mid-October to counter the fastest inflation in more than two years, and more moves may follow.

The benchmark one-year lending rate will rise by 25 basis points to 5.81 percent and the one-year deposit rate will climb by the same amount to 2.75 percent, effective today, the People’s Bank of China said in a one-sentence statement on its website late yesterday.

----- “This demonstrates how determined the government is to control inflation,” said Wang Qing, a Hong Kong-based economist with Morgan Stanley. “Interest rates on medium and long-term loans are adjusted by banks at the beginning of every year so by raising rates now, this will have a much greater tightening effect than it would have in January.”

Wang said he expects three more interest-rate adjustments of 25 basis points each in the first half of next year. Ken Peng, an economist at Citigroup Inc. in Hong Kong said yesterday he forecasts increases totaling 100 basis points next year.

Andy Xie: Either America Or China Will Crash In 2011
Andy Xie's latest sees the liquidity war getting worse in 2011.

America will continue to pump the financial system with liquidity via tax cuts and quantitative easing. China will keep the yuan cheap and avoid clamping down on inflation.

The tense equilibrium can't last for long, as either sovereign debt or inflation gets too heavy to bear. Whoever lasts longer, wins

----- The most likely candidates to trigger the next global crisis are the U.S.'s sovereign debt or China's inflation. When one goes down first, the other can prolong its economic cycle. China may have won the last race. To win the next one, China must tackle its inflation problem, which is ultimately a political and structural issue, in 2011. If China does, the U.S. will again be the cause for the next global crisis. China will suffer from declining exports but benefit from lower oil prices.
----- Xie notes that China may have the advantage here. While America has committed to a liquidity hose, Beijing still has the opportunity to crack down on inflation:

China's inflation problem stems from the country's rapid monetary growth in the past decade. That is due to the need to finance a vast property sector, which is, in turn, to generate fiscal revenues for local governments to finance their vast expenditure programs. Unless something is done to limit local government expenditure, China's inflation problem is likely to get out of control...

---- How bad is the Chinese property bubble? Check out AMAZING photos of newly constructed Chinese ghost cities >

Lehman 'prophet' fears second crisis if US interest rates are kept low

America is storing up a second financial crisis by keeping interest rates at record low levels, according to David Einhorn, the hedge fund manager who first publicly warned about the financial catastrophe facing Lehman Brothers.

By Richard Blackden, US Business Editor 6:30AM GMT 26 Dec 2010

"The crisis that required zero interest rates has passed," said Mr Einhorn, who co-founded and runs Greenlight Capital, a $6.5bn (£4.2bn) fund. By not raising rates "it increases the chance that governments will over-borrow and fall into a debt trap".

The criticism of the Federal Reserve comes as it embarks on another $600bn (£380bn) of quantitative easing – or printing money – in an effort to fire up a stronger recovery next year.

Interest rates around the western world, including in Britain, have sat at or below 1pc since the near collapse of the financial system in 2008 triggered a global recession.

"If interest rates ever do go up again, you have another crisis," Mr Einhorn told The Sunday Telegraph.

Those in favour of very low interest rates point to the support it has given the real estate market in the US and that, as in the UK, it should encourage politicians to begin to tackle the $1.3 trillion budget deficit without fear of damaging the economy.

----Greenlight, which Mr Einhorn founded in 1996 with about $1m, including an investment from his parents, has its single largest position in gold – an asset that many investors have historically turned to during periods of economic uncertainty.

The gold price, which is closing in on a tenth straight year of gains, reached a record $1,432.50 an ounce earlier this month.

Mr Einhorn admits that he is having to pay far more attention to the broader economic picture when making decisions about which companies to invest in than he has ever done.

Will Germany be pressured into a debt union in 2011? Yes says the Greek Prime Minister, ready to issue new debt to support the Greek Dolce Vita way of life, to be paid for by the hard working Lutherans between the Rhine and the Oder. Seen from London, all this ganging up against Germany is too bizarre for words. Dragging Germany into the Club Med Follies, makes Germany poorer but doesn’t solve the problems of the Euro and club Med.

Greece calls for e-bonds as budget passes
Thursday 23 December 2010 - by Nicola York

Greek Prime Minister George Papandreou has joined calls from other politicians urging the European Union to issue e-bonds as a measure of last resort if austerity measures fail to curb Greece's crippling debt.
Earlier today, Greece passed its austerity budget for 2011 meaning it will continue to receive aid from bailout funds from the International Monetary Fund and the European Union.
In recent weeks, Eurogroup chairman and Italian finance minister Giulio Tremonti and Luxembourg PM Jean-Claude Juncker have called for e-bonds to be issued to boost stability in the eurozone.
Greece's main opposition conservative leader Antonis Samaras said it was unlikely that markets would lend to Greece in the future as debt-to-GDP will remain high.
He said Greece would have to resort to using e-bonds before the end of 2012 unless the current Government changes its policy now.
Papandreou agreed with Samaras that e-bonds should be adopted by the EU, calling for support of the proposal.

In other largely unreported news likely to have a big impact next year, Russia published its grain production figures for 2010, while China recently surprised everyone by announcing the size of their need to import corn next year. The good news, based on contracted shipping, China’s corn imports should drop next month before rising again later in the spring. Food price inflation is going to be around for awhile. Make that commodity inflation. Are we about to repeat the Carter years?

Russia Grain Crop Fell 37% to 60.9 Million Tons, SovEcon Says

Dec. 27 (Bloomberg) -- Russia’s grain harvest fell 37 percent this year to 60.9 million metric, SovEcon said today, citing preliminary data from the state statistics agency.

The figure is given after drying and cleaning the grain, SovEcon said. Wheat output fell about 33 percent to 41.5 million tons while the barley harvest plunged about 54 percent to 8.3 million tons, the Moscow-based researcher said, citing the Rosstat data.

China Corn Imports May Rise to Record, Group Says

Dec. 16 (Bloomberg) -- China may boost corn imports to a record next year as the U.S., the world’s biggest grain exporter, potentially faces increased competition from rival supplier Argentina, the U.S. Grains Council said.

Corn purchases may grow fivefold from 1.5 million metric tons this year “to upward of” 7.4 million tons in the 2011 calendar year, Thomas Dorr, president of the industry group, said in an interview in Beijing. The group in July forecast imports of 5.8 million tons.

The world’s biggest grain user may overtake Japan as the largest corn importer within five years, buying as much as 25 million tons by 2015, driving prices higher as rising incomes fuel demand for pork and chicken, Rabobank Groep NV said last week. Chinese officials are “aggressively” trying to add Argentina to their alternative suppliers as domestic reserves dwindle, boosting competition for U.S. exporters, Dorr said.

Soybeans at 28-Month High on Concern Dry Weather to Curb Crops

Dec. 28 (Bloomberg) -- Soybeans advanced to a 28-month high on concern that dry weather in Argentina will spread to parts of Brazil, hurting crops in the biggest exporters after the U.S.

March-delivery soybeans gained as much as 0.8 percent to $13.95 a bushel, the highest price for the most-active contract since August 2008. It traded at $13.8975 a bushel on the Chicago Board of Trade at 2:33 p.m. Manila time.

“Heat and dryness is expected to expand out of Argentina and into Rio Grande Do Sul this week,” depleting soil moisture and increasing stress to crops in the area, Telvent DTN Inc. said in a forecast yesterday.

“The market is worried about downgrades for yields,” Tetsu Emori, a commodity fund manager at Astmax Co. Ltd., said by phone from Tokyo today. “The market is getting tighter after the harvest in the U.S. and people will rely on supply from South America.”

Soybean acreage in Argentina may be 18.5 million hectares this season, 200,000 hectares smaller than earlier estimated because of dry conditions, the Buenos Aires Cereals Exchange said Dec. 23. Yields in Brazil’s southern Rio Grande do Sul state may be cut by as much as 20 percent as the La Nina weather pattern produces hot, dry weather into next year, Somar Meteorologia said Dec. 20.

Copper Tops Record in New York on Currency Alternative, Demand

Dec. 28 (Bloomberg) -- Copper gained to a record in New York for a second day as investors sought alternatives to depreciating currencies and on expectation demand will outpace supply as consumption improves.

Metal for March-delivery on Comex climbed as much as 0.6 percent to $4.3075 a pound, surpassing the previous peak for a most-active contract of $4.2985 reached yesterday. It traded at $4.3030 a pound by 1:25 p.m. Singapore time, up 29 percent this year, poised for a second annual increase.

“It’s weaker currencies, inflationary concerns and the outlook for a shortfall next year that’s been driving prices,” Wen Jinghai, an analyst at Bohai Futures Co., said from Dalian.

----- Stockpiles of copper in Shanghai Futures Exchange warehouses fell 7,410 tons last week to 120,426 tons, the largest tonnage decrease since the week ending Sept. 9, bolstering the demand outlook in China, the world’s largest user. The International Copper Study Group is expecting a 435,000-ton deficit in the refined metal next year.

"Gold is not less but more rational than paper money. Money holds value so long as it is in limited supply; gold will always be in limited supply, and would require real resources to produce even from the sea; paper and printing ink are not in limited supply. The gold system is much closer to a modern automatic scientific control system than the crude and relatively unstable system of paper."

William Rees-Mogg

At the Comex silver depositories Thursday, final figures were: Registered 46.39 Moz, Eligible 58.72 Moz, Total 105.11 Moz. Yesterday’s figures were not released due to snow.


Crooks and Scoundrels Corner.

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

The Crooks section will resume in the new year.

"Start buying gold now, regardless of the price. By acting now, you will not have to react when it's too late. Too late will be when the majority of the public finally figures out what is happening to paper money and frantically tries to get aboard. Remember, if you're one of the ones holding paper in the end, you will have given away your products and services for nothing."

Robert Ringer

The monthly Coppock Indicators finished November:

DJIA: +178 Down. NASDAQ: +247 Down. SP500: +167 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. November is the sixth down month in a row.

Wednesday 22 December 2010

Christmas 2010


Peace on Earth, Good Will Towards Men.



A Merry Christmas to one and all.


Tuesday 21 December 2010

A Case to Answer.

Baltic Dry Index. 1955 -44

LIR Gold Target by 2019: $30,000. Revised due to QE.

Today we take the opportunity to wish everyone a most happy, healthy, and wealthy Christmas. The LIR is taking a break until Tuesday the 28th. If enough interesting things happen, I will post occasionally to the website. Despite everything, we made it through 2010. I suspect that 2011 will be more difficult, but hope to be proved wrong. Merry Christmas everyone, especially to those forced to spend it in a Siberian Europe far from the best laid plans.

The Phantom slowly, gravely, silently approached. When it came, Bernoccio bent down upon his knee; for in the very air through which this Spirit moved it seemed to scatter gloom and mystery.

It was shrouded in a deep black garment, which concealed its head, its face, its form, and left nothing of it visible save one outstretched hand. But for this it would have been difficult to detach its figure from the night, and separate it from the darkness by which it was surrounded.

He felt that it was tall and stately when it came beside him, and that its mysterious presence filled him with a solemn dread. He knew no more, for the Spirit neither spoke nor moved.

``I am in the presence of the Ghost of Christmas Yet To Come?'' said Bernoccio.

The Spirit answered not, but pointed onward with its hand.

``You are about to show me shadows of the things that have not happened, but will happen in the time before us,'' Bernoccio pursued. ``Is that so, Spirit?''

The upper portion of the garment was contracted for an instant in its folds, as if the Spirit had inclined its head. That was the only answer he received.

With apologies to Charles Dickens.

Up first, The World’s biggest bond fund calls the ECB’s bluff on Ireland, Greece and Portugal. Trapped in the Euro, they think, all three can never get back to economic growth and will eventually have to default. It’s either never ending transfer payments from Germany or the EMU becoming a full fiscal union. No German in his right mind would join in a fiscal union with a Club Med that includes Italy. No other sensible European would either. Below, The Telegraph takes up the story.

Pimco says 'untenable' policies will lead to eurozone break-up

Pimco, the world's largest bond fund, has called on Greece, Ireland and Portugal to step outside the eurozone temporarily and restructure their debts unless the currency bloc agrees to a radical change of course.

By Ambrose Evans-Pritchard 7:00PM GMT 20 Dec 2010

Andrew Bosomworth, head of Pimco's portfolio management in Europe, said current policies are untenable in the absence of fiscal union and will lead to a break-up of the euro.

"Greece, Ireland and Portugal cannot get back on their feet without either their own currency or large transfer payments," he told German newspaper Die Welt.

He said these countries could rejoin EMU "after an appropriate debt restructuring", adding that devaluation would let them export their way back to health.

Mr Bosomworth said EU leaders were too quick to congratulate themselves on saving the euro last week with a deal for a permanent bail-out fund from 2013.

"The euro crisis is not over by a long shot. Market tensions will continue into 2011. The mechanism comes far too late," he said.

The bond fund argues that the EU strategy of forcing heavily indebted countries to undergo draconian fiscal austerity without offsetting stimulus is unworkable.

The austerity policies are stifling the growth needed to stabilise debt levels.

"Can countries inside a fixed exchange-rate system like the euro grow and tighten budget policy at the same time? I don't think so. It didn't work in Argentina," Mr Bosomworth said.

Pimco also gave warning that the bond vigilantes have lost faith in the policy and are trying to liquidate their holdings of peripheral EMU faster than the European Central Bank (ECB) can buy the debt, causing a relentless rise in yields, and a vicious circle.

Despite this, the ECB said on Monday that it had cut purchases of government debt last week, settling €603m (£509m), down from €2.68bn a week earlier. The withering comments from the world's top investor in EMU sovereign debt is a blow for Portugal and Spain. Both nations are hoping bond spreads will start to narrow before they face a funding crunch in the first quarter of next year.

Jacques Cailloux, chief Europe economist at RBS, agreed that last week's European summit had failed to grasp the nettle.

"None of the policy responses put in place in Europe since the start of the crisis provides a credible backstop to prevent further contagion," Mr Cailloux said.


But will the Chinese cavalry ride in to rescue Europe’s Club Med “Custers”?

Dec. 21, 2010, 12:03 a.m. EST

China official says will help EU with debt: report

SYDNEY (MarketWatch) -- Chinese Vice Premier Wang Qishan said Tuesday that China is prepared to help European Union countries with sovereign debt issues, Chinese state media Xinhua reported. Speaking at the High-Level Economic and Trade Dialogue meeting, Wang said that China supports the actions already taken by the European Union and the International Monetary Fund, according to the report.

Next, China and the ECB may soon be the only buyers of Club Med and Ireland’s debt. Stay long precious metals.

This sucker’s going down.

President George W. Bush.

Moody's may cut Portugal rating by a notch or two

Dec. 21, 2010, 3:21 a.m. EST

LONDON (MarketWatch) -- Moody's Investors Service on Tuesday placed Portugal's A1 long-term and Prime-1 short-term government bond ratings on review for possible downgrade. The main triggers for the review include uncertainties about Portugal's longer-term economic vitality, and concerns about the nation's ability to access the capital markets at a sustainable price. Also, Moody's is worried about the possible impact on the government's debt metrics of further support for the banking sector, which may be needed for the banks to regain access to the private capital markets. Moody's said the rating could be lowered by a notch or two. "In Moody's opinion, Portugal's solvency is not in question," said Anthony Thomas, Moody's Vice President and lead analyst for Portugal, "but the likely deterioration in debt affordability over the medium term and ongoing concerns about the economy's ability to withstand fiscal consolidation and private sector deleveraging mean its outlook may no longer be consistent with an A1 rating."

Moody’s lowers ratings on five Irish banks

December 20, 2010

Moody’s Investors Service has today downgraded the ratings on five Irish banks – Allied Irish Banks, Bank of Ireland, EBS Building Society, Irish Life and Permanent and Irish Nationwide Building Society.

The downgrade came after Moody’s last week slashed Ireland’s credit rating by five notches to Baa1, from Aa2 – citing ongoing uncertainties over the country’s public finances.

Commenting on today’s downgrade, Moody’s said: “Over the foreseeable future, Irish banks are likely to continue to face very difficult conditions in the wholesale markets and will therefore continue to rely on central bank funding.”

The moves come just weeks after Ireland was forced to accept an €85 billion bailout loan from the European Union and the International Monetary Fund.

In weather news, more of the same in Europe, with fresh snow falling as I look out my window at southeast England turned into Canada. Far across the Atlantic in sunny California, it’s not quite as sunny anymore either.

Heavy Snows Delay U.K., European Travel by Air, Train

Dec. 21 (Bloomberg) -- Air-travel disruptions rippled across Europe for another day as Gatwick airport reopened after suspending outbound flights because of heavy snow.

Gatwick, which serves London, reopened as planned at 6 a.m. with 600 flights scheduled for the day, according to the hub’s website. Paris’s Roissy-Charles de Gaulle and Orly airports were set to begin the day with at least 28 canceled flights before 7 a.m., data tracker said.

Snow slowed train services and airlines for a fourth day as travelers tried to get home for the Christmas and New Year holidays. The two Paris airports stayed open late yesterday to clear a backlog of flights delayed by the snow, and operating hours were extended for four days at London’s Heathrow airport.

---- Airlines and rail operators urged travelers to stay home if possible, and U.S. carriers waived fees as more snow was forecast for England, France and Germany. Hundreds of flights were canceled or delayed yesterday from London, Paris, Frankfurt and Geneva.

Dublin’s airport restarted flights at 11:30 p.m. after suspending services earlier last night while crews cleared the runway of snow and ice, according to a website statement.

---- Eurostar Group Ltd., which links London to Paris and Brussels by train, asked passengers not already at stations not to come and urged all clients to cancel non-essential travel. The service isn’t accepting new bookings through Dec. 24, a spokesman said.

Most other trains throughout France were slower than normal, though 90 percent were arriving less than 1 hour late, according to train operator SNCF.

---- Deutsche Lufthansa AG said it expects the number of flights within Germany and Europe to gradually increase and return to normal by tomorrow as the weather is set to improve, according to Frankfurt-based spokeswoman Bettina Rittberger.

---- Qantas canceled flights from London and turned back other flights headed to the U.K., affecting 3,000 passengers, Simon Rushton, a spokesman for the Sydney-based carrier, said yesterday.

Deutsche Bahn AG spokeswoman Kathrin Fellenberg said the winter weather continued to disrupt Germany’s national railroad network, causing numerous train delays and cancelations.

California Mountains Face Crushing Snowfall

By Katie Storbeck, Meteorologist Dec 19, 2010; 11:16 AM ET

A stormy weather pattern has settled in over the West, and California will endure the harshest conditions well into this week. While rain drenches much of the state, heavy snow will continue to pile up in the mountains.

Snowfall totals in parts of the Sierra Nevada reached 2-5 feet at many locations through Sunday afternoon.

Another 1 to 3 feet of snow can be expected in these areas through Monday night.

This means that storm totals will reach as much as 6 to 8 feet of snow, with locally higher amounts in some of the peaks above 6,000 feet.

---Travel will become impossible in these areas. Officials may be forced to close the mountain passes, including I-80's Donner Pass as the snow continues to pile up.

On top of the heavy snowfall, gusty winds will lead to blowing and drifting snow. The wind-whipped snow could create white-out conditions for a time.

Wintry weather can be expected in the Cascades and northern Rockies today as well.

While accumulations will not be quite as hefty, as much as a foot of snow will blanket the higher mountains of Wyoming, Utah and Colorado through tonight. Travel could become slippery and slower along portions of Interstates 84, 80, 70 and 15 as a result.

The first fall of snow is not only an event, it is a magical event.  You go to bed in one kind of a world and wake up in another quite different, and if this is not enchantment then where is it to be found? 

J.B. Priestley

At the Comex silver depositories Monday, final figures were: Registered 46.37 Moz, Eligible 58.49 Moz, Total 104.86 Moz.


Crooks and Scoundrels Corner.

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

Today, scandal on both sides of the Atlantic.

DECEMBER 20, 2010

Auditors Face Fraud Charge

New York Set to Allege Ernst & Young Stood By as Lehman Cooked Its Books

New York prosecutors are poised to file civil fraud charges against Ernst & Young for its alleged role in the collapse of Lehman Brothers, saying the Big Four accounting firm stood by while the investment bank misled investors about its financial health, people familiar with the matter said.

State Attorney General Andrew Cuomo is close to filing the case, which would mark the first time a major accounting firm was targeted for its role in the financial crisis. The suit stems from transactions Lehman allegedly carried out to make its risk appear lower than it actually was.

Lehman Brothers was long one of Ernst & Young's biggest clients, and the accounting firm earned approximately $100 million in fees for its auditing work from 2001 through 2008, say people familiar with the matter.

The suit, led by Mr. Cuomo, New York's governor-elect, could come as early as this week. It is part of a broader investigation into whether some banks misled investors by removing debt from their balance sheets before they reported their financial results to mask their true levels of risk-taking, a person familiar with the case said. The state may seek to impose fines and other penalties.

Mr. Cuomo's office has sought documents and information from several firms, including Bank of America Corp., which earlier this year disclosed six transactions that were wrongly classified. Jerry Dubrowski, a Bank of America spokesman, said the bank's practice is to cooperate with any inquiry from regulators.

It is possible that Ernst & Young will try to settle before any suit is filed. The firm declined to comment. A spokesman for the Lehman Brothers estate also declined to comment.

The transactions in question, known as "window dressing," involve repurchase agreements, or repos, a form of short-term borrowing that allows banks to take bigger trading risks. Some banks have systematically lowered their repo debt at the ends of fiscal quarters, making it appear they were less risk-burdened than they actually were most of the time.

Lehman Brothers dubbed transactions of this type "Repo 105." The maneuver came to light in March, when the bankruptcy examiner investigating the firm's collapse more than two years ago found that it moved some $50 billion in assets off its balance sheet. Lehman labeled those transactions as securities sales instead of loans, which led investors to believe the firm was financially healthier than it really was.


'Cases to answer' over Anglo

Monday, December 20, 2010, 15:00

The former chairman of Anglo Irish Bank Se├ín FitzPatrick and its former chief executive David Drumm have “prima facie” cases to answer in relation to their roles in certain controversial dealings at the bank, according to reports prepared by a special investigator.

The reports by the former Comptroller and Auditor General, John Purcell, were submitted to the Complaints Committee of the Chartered Accountants Regulatory Board on December 14th, and have now been forwarded to the board’s Disciplinary Committee.
Mr Purcell found that Anglo’s former finance director Willie McAteer and the former finance director at Irish Life and Permanent Peter Fitzpatrick also had prima facie cases to answer. The four men are chartered accountants.

Public hearings by a three-person Disciplinary Tribunal to be established by the committee are expected to be held around March or April of next year. Maximum sanctions of fines up to €30,000 and expulsion are available to the tribunal.
In relation to Mr FitzPatrick the special investigator said that in his opinion there were cases to answer in relation to his role in the temporary transfer of his loans from Anglo so that they did not appear in the bank’s financial statements; his role in relation to transactions with Irish Life at certain dates in 2008; and his role in relation to a loan to Mr McAteer in 2008.

The special investigator decided he had no case to answer in relation to the provision of loans to 10 customers who bought shares in the bank.
In relation to Mr Drumm, Mr Purcell made findings to do with: the transfer of Mr FitzPatrick’s loans and their non-appearance in the Anglo books; the transactions with Irish Life; his role in the amendment of the terms of loans to ten bank customers who bought shares in the bank; and his role in relation to loans to four key management personnel and in 2008 to Mr McAteer.
The special investigator decided Mr Drumm had no case to answer in relation to the provision of loans to the 10 customers who bought shares in the bank.
In relation to Mr McAteer, Mr Purcell made findings in relation to: the transfer of Mr FitzPatrick’s loans and their non-appearance on the bank’s books; the transactions with Irish Life in 2008; and his role “in relation to the appropriate disclosure of a loan” made by Anglo to him in September 2008.
Mr Purcell decided Mr McAteer had no case to answer in relation to the loans to the ten customers and the loan made to him in September 2008.
In relation to Peter Fitzpatrick, the special investigator decided there was a case to answer in relation to the Irish Life transactions with Anglo at key reporting dates in 2008.

"God bless us every one!" said Graeme,  the last of all.

With apologies to Charles Dickens.

The monthly Coppock Indicators finished November:

DJIA: +178 Down. NASDAQ: +247 Down. SP500: +167 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. November is the sixth down month in a row.

Monday 20 December 2010

Europe Frozen & Closed.

Baltic Dry Index. 1999 -29

LIR Gold Target by 2019: $30,000. Revised due to QE.

The warnings about global warming have been extremely clear for a long time. We are facing a global climate crisis. It is deepening. We are entering a period of consequences.

Al Gore.

As readers of the LIR know only too well, we are probably entering or have entered a new “Dalton Minimum” double 11 year cycle of reduced sunspots. The past suggests that this will be a period of global cooling, although quite why this happens is a subject of much disagreement. Sadly the operators of Europe’s airports and road systems aren’t readers of my daily updates or even occasional readers of the blogs sunspot section. As a result no one, absolutely no one in Europe prepared for this year’s record cold. Roads go unplowed trapping hundreds of motorists unwise enough to think that they can go on as normal and drive through blizzards or on ice. People were trapped overnight Saturday from Britain down to Italy and across Germany. Thousands are trapped at Europe’s snow clogged airports, with thousands more unable to get to the airports, and thousands more stranded around the world unable to fly back. In the week before Christmas, the best laid plans retailers and the hospitality industry are all going horribly wrong. Today, we present dumbed down Europe. While Europe’s bungling politicians are off tilting at windmills, busy trying to save the planet from the nonexistent threat of global warming, all across Europe people are unprepared for life in a 20 to 30 year period of a colder world.

Christmas travel plans ruined for half a million air passengers

The boss of Britain’s busiest airport was facing mounting anger after the Christmas travel plans of half a million air passengers were ruined.

By David Millward, Martin Evans and Stephen Adams 9:15PM GMT 19 Dec 2010

Snow and ice grounded the vast majority of flights in and out of Britain, with Heathrow the worst-affected airport.

The airport cancelled all incoming flights on Sunday (December 19) after the authorities were unable to de-ice the taxiing areas and stands where planes are parked.

As the airport was inundated with increasingly angry passengers trying to leave, many other travellers faced a frantic scramble to get home to Britain in time for Christmas.

Most flights this week were already full to capacity during what is the busiest period of the year.

One million passengers were due to pass through Heathrow alone this week and with warnings of further bad weather in the next few days, some travellers whose flights have been cancelled were told they faced waits of up to five days.

---- As passengers were forced to sleep in terminal buildings for a third night, there was mounting criticism of BAA, the airport operator.

----BAA, which is controlled by Spain’s Ferrovial, claimed it had spent an extra £6million on equipment to deal with snow and ice compared with last year. But with pre-tax profits expected to near £1 billion this year, the operator has been accused of failing to invest properly in equipment to cope with the extreme cold.

Only 16 flights left Heathrow yesterday out of a total of 650 scheduled services. More than 400,000 passengers had been due to pass through the airport this weekend. Although the runways were deemed safe, the areas around the stands remained covered in ice making it too dangerous to move planes.

Economy feels chill as UK grinds to a halt

Cost of travel and retail chaos running at £1bn a day / Government under pressure over lack of preparation

By Jonathan Brown Monday, 20 December 2010

The economic impact of the freezing winter will deepen this week as Britain prepares for more travel gridlock, and millions of workers, travellers and shoppers were expected to stay at home in the run-up to Christmas rather than brave the icy conditions.

Heavy snow and sub-zero temperatures cost the aviation and retail industries many millions of pounds in lost revenue during one of the most crucial weekends of the year.

Heathrow, the world's busiest international airport, was closed to all but a handful of flights on Saturday and yesterday, forcing thousands to abandon their festive travel plans. Meanwhile, shopping centres in the South were also badly hit as consumers were forced to postpone buying Christmas presents on what had been billed as "Super Saturday". But with the Met Office predicting no let-up in freezing conditions and more snow likely in the South-east, the North and Scotland, economists fear that the knock-on effects will begin to hit the whole of the UK's economy at a key moment in its fragile recovery from recession.

Estimates from the insurer Royal Sun Alliance (RSA) have put the cost of the weather to the economy at £1bn per day, a sum that is thought to be hitting retailers, restaurants and bars the hardest. The total cost is expected to be around £13bn.

Howard Archer, the chief economist at IHS Global Insight, said many firms could now consider working between Christmas and the New Year to make up for lost business. But retailers, who had been hoping for a bonanza festive season as consumers sought to beat the January VAT rise, fear that many shoppers might now simply not bother.

"It now looks highly probable that some people may end up buying fewer Christmas presents and these sales are not subsequently made up," said Mr Archer. "If the bad weather persists most or all of the coming week, these problems will be magnified."

It's not just the UK – the Continent is suffering too

By John Lichfield in Paris Monday, 20 December 2010

Airports were closed, motorists were stranded, football matches were cancelled, politicians were blamed.... Britain? Yes, but the picture was the same in almost every other European country.

In Germany, hundreds of travellers were trapped at Frankfurt airport overnight. Almost 500 flights were cancelled as blizzards set in, and despite an emergency law last month ordering all motorists to buy winter tyres, accidents caused immense tailbacks on autobahns on Friday and Saturday.

In France, 40 per cent of flights were cancelled at Roissy-Charles de Gaulle and Orly airports. Most remaining flights were delayed. Over 20,000 passengers were stranded at Charles de Gaulle alone.

Even the Eiffel Tower was forced to close because large falls of snow had accumulated on the steel-work and on the lifts. A concert by the American pop-singer Lady Gaga at the Palais Omnisports in Paris was cancelled because equipment trucks broke a government ban on heavy transport on motorways.

Even in Scandinavia, often held up as an example of how to cope with winter, many trains were cancelled and roads blocked by drifting snow and ice after temperatures fell to -20C.

Travel chaos across Europe

Last Updated: Monday, December 20, 2010, 07:09

Heavy snows throughout Europe have caused transport chaos for the travelling public with hundreds of flights cancelled or delayed over the final weekend before Christmas.

While airports in Ireland remained open many flights were cancelled as a result of snow and ice across Britain and parts of Germany, France, Italy, Sweden and the Netherlands over the weekend.

This morning all Irish airports are open however passengers are strongly advised to consult with their airline before travelling to the airport because of the risk of knock-on delays.

Ryanair has put on a number of extra flights today in an attempt to clear the backlog and Aer Arann has had to cancel a number its services including Knock to Dublin, Sligo to Dublin and Dublin to Sligo.

London’s Heathrow airport is open this morning but they said there will be further delays and cancellations in the next few days.

Lufthansa said it expected a reduction in flights within Germany and Europe.

There is a risk of snow of up to 20cm in parts of the south and west of the UK today after a fall of 15cm yesterday forced cancelations at Heathrow and Gatwick for a second day.

Frankfurt will likely have "light snow" today and tomorrow, according to the World Meteorological Organization's website.

Flights at Paris's Roissy-Charles de Gaulle Airport were reduced by 40 per cent because of snowfall in northern France, the nation's civil aviation authority said. French authorities have prevented heavy trucks and coaches from using roads in northern France and the greater Paris area and car use is inadvisable.

Amsterdam's Schiphol said on its website passengers should be prepared for delays and cancellations. Air France-KLM Group's Dutch KLM unit cancelled more than 60 departing and arriving flights at the airport yesterday.

Two thousand scientists, in a hundred countries, engaged in the most elaborate, well organized scientific collaboration in the history of humankind, have produced long-since a consensus that we will face a string of terrible catastrophes unless we act to prepare ourselves and deal with the underlying causes of global warming.

Al Gore.

At the Comex silver depositories Friday, final figures were: Registered 46.36 Moz, Eligible 58.87 Moz, Total 105.23 Moz.


Crooks and Scoundrels Corner.

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

No crooks today, unless you consider Europe’s politicians crooks for not informing the public about our unfolding mini ice age, today Germany’s weather service is suddenly talking about our new reality. Where were they 2005 on. Now comes the scramble for adequate energy supply.

Today we're seeing that climate change is about more than a few unseasonably mild winters or hot summers. It's about the chain of natural catastrophes and devastating weather patterns that global warming is beginning to set off around the world.. the frequency and intensity of which are breaking records thousands of years old.

President Barrack Obama.

Speculation Alert: “New Little Ice Age Cannot Be Ruled Out”
Wednesday, 15 December 2010 09:16 Rickmer Flor,

Everybody is talking about global warming – but in Germany and also in many other countries around the world people are currently fighting with the adversities of extreme cold. And indeed: “The year 2010 will be the coldest for ten years in Germany,” said Thomas Globig from the weather service Meteo Media talking to . And it might even get worse: “It is quite possible that we are at the beginning of a Little Ice Age,” the meteorologist said. Even the Arctic ice could spread further to the south.

---- In Berlin, there was an absolute cold record in early December, “For 100 years it had not been as cold as in the first decade of December,” said Globig. This also applied to other regions.

--- Globig sees two main causes for the significant cooling: First, the cyclical changes in the big air currents over the Atlantic, and second, the variations in solar activity.

---- The low temperatures could very well go on a few years, maybe decades. Even more icy cold could be possible. „It has happened before, and can be explained with natural climate variability,” said Globig. We could even be at the beginning of a Little Ice Age, “the probability is at least given.”

This is also supported by the current development of solar activity. Solar activity has passed the zenith of a nearly 200 years continuing phase of high activity and will decline in coming decades. Around the years 2040/2050, scientists expect a new so-called solar minimum, with very little supply of solar energy into the Earth’s atmosphere.More.

Not only is the Kyoto approach to global warming wrong-headed, the climate change establishment's suppression of dissent and criticism is little short of a scandal. The IPCC should be shut down… In Europe, where climate change absolutism is at its strongest, the quasi-religion of greenery in general and the climate change issue in particular have filled the vacuum of organised religion, with reasoned questioning of its mantras regarded as a form of blasphemy.

Former Chancellor of the Exchequer Nigel Lawson.

The monthly Coppock Indicators finished November:

DJIA: +178 Down. NASDAQ: +247 Down. SP500: +167 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. November is the sixth down month in a row.

Sunspots – A 22 year colder world? (From 2004?)

Spotless Days Dec 12
Current Stretch:2 days

2010 total: 47days (13%)
2009 total: 260 days (71%)
Since 2004: 815 days
Typical Solar Min: 485 days

Saturday 18 December 2010

Weekend Update – December 18 2010

Baltic Dry Index. 1999 -96

LIR Gold Target by 2019: $30,000. Revised.

"'Perhaps it hasn't one,' Alice ventured to remark. "'Tut, tut, child!' said the Duchess. 'Everything's got a moral, if only you can find it.'"

Lewis Carroll. Alice in Wonderland

We open this last weekend before Christmas, with Great Britain turned into a look alike Canada, but without the snowplows. Something that will have to be remedied if this is to become our new way of life for the next 20 years or so, in our new Dalton Minimum in sunspots. Up first, the view this December on America by PIMCO. A well worth reading article, but one that will be ignored until the “next Lehman” wipes out the Fed. Stay long precious metals. With the Squids now taking on the banksters in the war over the euro, it’s only a matter of time until the next Lehman hits.

Investment Outlook William H. Gross| December 2010

· The global economy is suffering from a lack of aggregate demand. With insufficient demand, nations compete furiously for their share of the diminishing growth pie.

· In the U.S. and Euroland, many policies only temporarily bolster consumption while failing to address the fundamental problem of developed economies: Job growth is moving inexorably to developing economies because they are more competitive.

· Unless developed economies learn to compete the old-fashioned way – by making more goods and making them better – the smart money will continue to move offshore to Asia, Brazil and their developing economy counterparts, both in asset and in currency space.

Below, a tale of two Europes. There’s Germany and there’s everyone else. While Europe’s PIIGS collapse the euro, Germany’s exporters are booming. The one size fits all Germanic Euro has never fitted Germany better. Pity about the Irish debt slaves though. My guess is that Ireland’s next government knows exactly what to do once they take power early next year. Since “restructuring” will likely drop the euro further, Germany’s boom looks good for 2011.

Life is divided into the horrible and the miserable.

Woody Allen

EU shocked by Irish debt downgrade

European leaders received a nasty shock as the credit agency Moody's downgraded Ireland's debt, even as the politicians closed a summit intended to prop up confidence in the eurozone.

By Emma Rowley 7:56PM GMT 17 Dec 2010

The dramatic downgrading of Irish debt by five levels sent the cost of the country's borrowing up, as yields - the returns demanded by wary investors - on 10-year government bonds rose more than 24 basis points to pass 8.6pc.

If Ireland cannot stabilise its debt then further revisions may follow, warned Moody's, which has also told Greece and Spain their ratings could fall.

"I don't understand what they do," Nicolas Sarkozy, the French president, said of the agency's latest move. "This decision – I simply call it stunning."

However, the International Monetary Fund (IMF) warned that Ireland is not on track to hit its target of achieving a budget deficit of 3pc of GDP by 2015. The beleaguered nation faces significant risks that could affect its ability to repay the IMF's share of the €85bn (£72bn) international bail-out it received, the fund said.

The European Central Bank (ECB) on Friday said it has arranged to borrow up to £10bn from the Bank of England in a temporary swap to ease liquidity at Irish banks.

----Analysts took the latest move to indicate that Irish banks are short of sterling, as deposits and wholesale funding fall away.

The developments came as European leaders on Friday closed a two-day summit in Brussels, where they agreed to tweak the EU treaty to create a permanent financial safety net to resolve future crises.

Germany insisted that the long-term mechanism, to come into force in 2013, would come with the condition, enshrined in the treaty, that it only be activated "if indispensable to safeguard the stability of the euro as a whole".

DECEMBER 17, 2010, 5:14 A.M. ET

ECB's Weber Rejects Common Bonds

MUNICH, Germany—The joint issuance of bonds by euro-zone member states is no solution for the region's sovereign-debt problems, Deutsche Bundesbank president Axel Weber said Friday.

Mr. Weber, a member of the European Central Bank's governing council, told an audience of bankers that the idea "should be viewed very critically," because the implied joint liability would hollow out individual fiscal responsibility and would hardly strengthen trust in public finances.

He said that a far better way to overcome the current crisis was a thorough consolidation of public finances, combined with more effective rules to enforce budget discipline and a comprehensive mechanism to deal with future crises.

Mr. Weber noted that the implicit obligations on the German state in respect of future pension provision are far larger than the relatively manageable current debt. Whereas Germany's gross outstanding debt this year is around 74% of gross domestic product, the implicit contingent liabilities are close to 270% of GDP. This underlines the need to reduce current budget deficits, he said.

In contrast to an increasingly euroskeptic German press and public, Mr. Weber stressed the advantages that the country has had from the single currency. He said Germany is "one of the countries that has profited most" from the project, and repeated that it is in the country's interest to continue it.

An opinion poll for the magazine Stern earlier this week had shown a majority of Germans in favor of abandoning the euro and reintroducing the deutsche mark.

Mr. Weber was speaking a day after European Union heads of government agreed to set up a permanent mechanism to deal with state debt problems, replacing the European Financial Stabilization Facility, the guarantees for which run out in 2013.

Mr. Weber's comments on the European debt crisis were the main theme of his speech, most of which was devoted to demographic issues. Mr. Weber has frequently used demographics to justify Germany's current account surpluses, arguing that its ageing population has to save. He noted that even German pensioners have a savings rate of 4% to 5%, driven by the fear of health and nursing costs, and by a sense of duty toward their families.

German business sentiment hits record high

Fri Dec 17, 2010 5:34am EST

BERLIN, Dec 17 (Reuters) - German business morale rose to its strongest level since 1991 in December, buoyed by an increasingly strong domestic sector that is helping the economy power ahead of weaker euro zone peers.

 The Munich-based Ifo think tank said on Friday its business climate index, based on a monthly survey of some 7,000 firms, rose to 109.9 from 109.3 in November. The rise was the seventh in a row and surpassed expectations for a fall to 109.1 

 The reading amplified the positive message from other German data released this week, showing Europe's largest economy is leaving behind those weaker members of the euro zone struggling with a debt crisis.

"The German economy is truly in top form," said DekaBank economist Andreas Scheuerle.

 "The manufacturing sector doesn't see the debt crisis as a burden because Ireland and Greece are such small markets for German companies," he added. "At the same time, the depreciation of the euro is giving companies windfall earnings."

 Reflecting the strength of the recovery, German steelmaker ThyssenKrupp (TKAG.DE) said late last month it saw profit rising next year, driven by economic growth in Germany and emerging markets.   Ifo indices on current conditions and expectations both rose. The expectations index hit a record high, suggesting the recovery will power on into the New Year.

  "The German economy is entering the New Year at full throttle," said ING economist Carsten Brzeski.

"The secret of life is honesty and fair dealing. If you can fake that, you've got it made."

Groucho Marx


Friday 17 December 2010

Going Down.

Baltic Dry Index. 2028 -19

LIR Gold Target by 2019: $30,000. Revised due to QE.

"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

The big idea to save the euro, seems to be to punt the problem out to 2013, when from then on European bank and sovereign debt bondholders are supposed to get “haircuts” on any new debt they take on if the issuer gets into trouble and needs to default, err make that “restructure”. The real plan is to somehow get rid of Germany’s Chancellor Merkel by then, and have a more “European” malleable German Chancellor agree to take Germany into an EMU debt union. As usual, the EU’s Lords of the Universe are living in a parallel universe to the one that exists in reality. Below, welcome to Europe as it really is. Rioting against austerity in London, Dublin, Rome and Athens. Europe’s banks all holding each other’s national debt in a giant daisy chain that leads to insolvency. A core country with no government for 6 months which looks like it’s going to disappear. A central bank that’s gearing up to try to bailout Spain, in violation of its own rules, and which appears to be a job that is likely beyond its abilities. A Bank of England that already owns most of UK banking, warning of a new tsunami of losses ahead and that the new BIS rules will cost almost 10 million banking sector jobs. Stay long precious metals. I doubt Europe has until 2013 to save the unloved Euro. The Euro’s going down, and the pace is quickening. The Squids are now betting against the banksters. The Squids never lose.

"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 Creates Post-2013 Crisis Tool Amid Next Step Split

Dec. 17 (Bloomberg) -- European Union leaders agreed to amend the bloc’s treaties to create a permanent crisis- management mechanism in 2013, while divisions flared over steps to prevent concern over debts from engulfing Portugal and Spain.

Germany, the biggest contributor to Europe’s bailouts of Greece and Ireland, pushed through an accord to set up a system that would allow financial aid “if indispensable” to underpin the euro and might force bondholders to bear some of the costs of future rescues.

“Our task now is to hold the course, walk not talk, and prove those wrong who predicted the demise of our common currency,” European Commission President Jose Barroso told reporters after the first session of an EU summit in Brussels late yesterday. The summit is slated to end around 1 p.m. today.


DECEMBER 17, 2010

Bailout Deal Fails to Quell EU Rifts

Europe's leaders endorsed plans for a new fund to rescue indebted euro-zone countries, and proposed treaty changes to make that possible, but failed to resolve deepening disagreements over whether more radical action is needed to quell a debt crisis that has raged on the region's fringe for more than a year.

Meeting in Brussels for the final 2010 summit, European Union leaders agreed to replace the region's emergency rescue fund, which ends in 2013, with a permanent crisis-finance program.

But the crisis gripping the weaker governments of the euro zone showed no signs of abating. On Thursday, Spain was forced to offer significantly higher interest rates at a debt auction Thursday than it paid just a month ago. Bond markets fell across Europe.

Earlier on Thursday, the head of the International Monetary Fund said he's worried European officials are "too much behind the curve" in comparison with the speed at which markets are moving, risking further contagion in the euro area.

"The risk is always to act only at the last minute," IMF Managing Director Dominique Strauss-Kahn told Thomson Reuters, adding Europe must press urgently ahead with developing a comprehensive and integrated crisis-management plan.

Interview with Flemish Separatist De Wever 12/16/2010

'Belgium Has No Future'

Six months after the general election, Belgium still has no new government. Flemish nationalist Bart De Wever, head of the country's largest party, wants to split Belgium into two states. In an interview that has caused a scandal in his country, he told SPIEGEL why the nation has "no future."

Belgium has sunk into political chaos. Following the parliamentary elections six months ago, all attempts to build a new government have failed. The country is divided into two camps that oppose each other, apparently irreconcilably: the socialists, who won the most votes in Wallonia, the French-speaking southern region of the country, and the nationalist conservatives in Flanders, the wealthier Dutch-speaking northern region.

The New Flemish Alliance (N-VA) obtained the most parliamentary seats in June's elections. Its leader Bart De Wever wants to split Belgium into two. In an interview with SPIEGEL that was published in German on Monday, De Wever described how Begium is the "sick man" of Europe and has "no future in the long run."

The interview caused a massive outcry throughout Belgium. The French-speaking daily Le Soir called it "a bomb" intended to stir up the markets for Belgian government bonds. The Flemish newspapers were more sympathetic regarding the content of the interview, but criticized its timing.

De Wever himself said he regreted it if anybody felt insulted but confirmed the message of the interview. "I have my opinion and my analysis is accurate," he said. "There is nothing in the interview that is not true."


European Central Bank arms itself for Spanish crisis

The European Central Bank (ECB) is to double its capital base to cope with "credit risk" stemming from the eurozone debt crisis, paving the way for direct action to shore up the Spanish debt markets if necessary.

By Ambrose Evans-Pritchard 6:00AM GMT 17 Dec 2010

The ECB said it would raise its subscribed capital by €5bn (£4.2bn) to €10.76bn, the first increase since the launch of the monetary union.

"Basically they are insuring themselves in case they have to step up bond purchases, and that probably implies Spain," said Julian Callow from Barclays Capital. "They have to be ready to dig the fire-break early on this because Spain is too large to handle, and there is risk of contagion to Italy."

The ECB's move came as Spain braved the debt markets following a downgrade alert by Moody's. Madrid paid the highest interest rates for a decade with yields on 10-year bonds rising to 5.45pc, compared with 4.63pc in November.

Spain's government and banks have to refinance almost €300bn of debt next year, leaving the country prey to a buyers' strike. "The auction wasn't a disaster but the markets are going to lose patience very quickly if the bond spreads widen further," said Elizabeth Afseth from Evolution Securities.

The ECB has so far bought €71bn of Greek, Irish, and Portuguese bonds in a bid to cap yields, but this was done against Bundesbank objections, and may breach EU treaty law. Jean-Claude Trichet, the ECB's president, is irked that the bank is having to shoulder the burden of propping up the EMU periphery, blurring the lines between fiscal and monetary policy. Critics in Germany say the ECB is turning into a "bad bank" for toxic debts.

----Officials fear that the ECB could face losses on bond purchases, as well as loans worth €334bn to Greek, Irish, Portuguese, and Spanish banks – much of it in exchange for suspect housing collateral. Barclays Capital said eurozone central banks have already lost about €5bn.

A report by Goldman Sachs said EMU states hold $760bn (£487bn) of Spanish debt securities, on top of other loans, or
three-quarters of all foreign holdings. "Debt sustainability in the European periphery is to a very large extent a domestic problem for the eurozone," it said.

France has $252bn, Germany $212bn, Luxembourg $77bn, Ireland $62bn, The Netherlands $61bn, and Belgium $48bn. Outside EMU, Britain has $69bn and the US $26bn.

Banks face an extra £80bn of bad debts

Britain's four largest lenders are facing losses on loans to consumers of up to £80bn over their own forecasts, the Bank of England has warned.

By Philip Aldrick, Economics Editor 6:00AM GMT 17 Dec 2010

The four banks – Royal Bank of Scotland, Lloyds Banking Group, Barclays and HSBC – have set aside £71bn in provisions, the Bank noted. However, losses on consumer debts alone – such as mortgages and credit cards – will be £100bn if "write-off rates return to their pre-crisis average" and £150bn if losses on bad debts hit "levels seen in the early 1990s recession", the Bank said in its Financial Stability Report.

The extra impairments will "be a further drain on banks' profits" and, in the extreme case, would amount to 28pc of lenders' £281bn of total core tier one capital – their buffer against future problems.

Although "manageable", the Bank said the extra bad debts are just one risk the industry is facing. A resurgent eurozone crisis would also devastate UK bank profits. The lenders have a £210bn exposure to Spanish and Irish debt – about 75pc of total capital. Another £288bn is in German and French debt, which may suffer if the eurozone crisis worsens.

In addition, the Bank said, UK lenders have to refinance £400bn to £500bn of wholesale funding in the next two years, having managed just £130bn this year. If refinancing costs rise 50pc above current levels as funding conditions deteriorate, the Bank said, lenders would lose "around 15pc of pre-tax profits in 2011 and 20pc in 2012".

Pressure on banks' profits comes as they begin an eight-year transition to new regulatory standards on capital and liquidity. The industry has warned that the new rules could reduce global growth by more than 3pc over five years and cost a potential 9.7m jobs.

"Until government administrators can so identify the interests of government with those of the people and refrain from defrauding the masses through the device of currency depreciation for the sake of remaining in office, the wiser ones will prefer to keep as much of their wealth in the most stable and marketable forms possible - forms which only the precious metals provide."

Elgin Groseclose

At the Comex silver depositories Thursday, final figures were: Registered 46.40 Moz, Eligible 57.36 Moz, Total 103.76 Moz.


Crooks and Scoundrels Corner.

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

Today, a must read article for all who follow precious metals especially silver. In addition to JPMorgan and HSBC, who else is massively short silver and seemingly holding the massive losses for now off balance sheet. Stay long physical precious metals. The next Lehman will take out the Fed.

Why did I take up stealing? To live better, to own things I couldn't afford, to acquire this good taste that you now enjoy and which I should be very reluctant to give up.

Cary Grant. To Catch A Thief.

Something’s Wrong in the Silver Pit, and It’s Much Bigger than J.P. Morgan

Dec 10, 2010 - 12:52 PM By: Rob_Kirby

When researching the precious metals, often times things are seldom as they appear on the surface. GATA Secretary and Treasurer – Chris Powell – has said that the true picture of a nations’ gold holdings are, “more closely guarded than their nuclear secrets”.

This has been more-or-less proven true based on the Federal Reserve’s reaction to GATA’s 2009 FOIA request for information concerning GOLD SWAPS. The Fed is ON RECORD admitting they’ve done gold swaps – which, by definition, necessarily utilize sovereign American gold stocks.

To date, the Federal Reserve has stonewalled GATA’s FOIA request citing their ‘privileged status’ and reluctance to divulge ‘trade secrets’.

GATA has maintained that the Federal Reserve / U.S. Treasury in conjunction with other Central Banks have for years been suppressing the price of gold [and silver too] – in efforts to mitigate and to cover up their own debasement of fiat currencies.

Historically, when Central Banks or governments print more and more fiat money, precious metals prices RISE. The money printing is not only inflationary but when done to excess it can undermine confidence in faith based fiat currency regimes. Precious metal has no counterparty risk and cannot be printed – which is why it “is” and always will be money. Remember folks, gold is money, as evidenced by EVERY Central Bank in the world listing gold bullion on their balance sheet as an official reserve asset.

GATA has identified and documented that Central Banks utilize precious metals derivatives, and in particular swaps, as a primary method by with Central Banks rig metal prices.

In the presence of EXTREME money printing, it’s understandable why Central Banks and governments would want to suppress the price of gold [and silver] and be less than transparent about their nefarious activity in this regard. Knowledge and detail regarding these activities could undermine a nations’ currency, their credit rating and thus their ability to service their sovereign debt.


Another weekend, and our new Ice Age returns across Britain. For much of Europe it never ended. Now the unloved Euro has entered its own Ice Age as it skates and stumbles towards disintegration. A one size fits all Euro really only now fits the hard working, tax paying Germans. The Greeks and Irish are being crushed to save Europe’s fat cat banksters. Coming next, crushing the freeloading peoples of the Iberian peninsula. The Squids can easily see what comes next in 2011. The crushed become the bankster crushers, when they rebel and vote in governments willing to default. To the Squids it’s like taking money off a baby. The Squids have Europe’s banksters over a barrel. Have a great last Christmas shopping weekend everyone.

"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium."

Murray N. Rothbard

The monthly Coppock Indicators finished November:

DJIA: +178 Down. NASDAQ: +247 Down. SP500: +167 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. November is the sixth down month in a row.