Wednesday, 15 December 2010

Goodnight Euro.

Baltic Dry Index. 2069 -07

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

Gracie: Well, I sent your handwriting in to be analyzed, and you’re in the wrong business. You have the hands of a surgeon.

Trichet: What?

Gracie: Your handwriting has revealed the inner you, the real Jean-Claude Trichet. You were never meant to be a bankster. That’s why people laugh at you.

With apologies to Burns and Allen.

Today, the sad state of Europe. No words need from me today, this selection of today’s news says it better than anything I could add. The Euro is a dead currency on ECB life support just waiting for the day that they pull out the plug. Stay long physical gold and silver.

“The history of paper money is an account of abuse, mismanagement, and financial disaster."

Richard M. Ebeling

DECEMBER 15, 2010, 2:28 A.M. ET

Moody's Threatens Spain Downgrade

Moody's Investors Service warned Wednesday it may downgrade Spanish government debt, citing the country's refinancing needs next year and the strain of recapitalizing its debt-strapped banks.

The ratings company put on review for possible downgrade the Aa1 local and foreign-currency ratings on the debt of the Spanish government and the government-guaranteed Fund for Orderly Bank Restructuring (FROB) bank-bailout fund. The move hurt the recently steady euro by highlighting concerns over the spread of the European debt crisis from peripheral countries like Greece to bigger nations closer to the euro-zone core.

Moody's said a downgrade could be triggered by "Spain's vulnerability to funding stress given its high refinancing needs in 2011," a problem that "has recently been amplified by fragile market confidence."

Spain's debt problem could worsen "should the cost of bank recapitalization prove to be higher than expected," Moody's said in a press release, adding that there are concerns whether Spain can achieve the needed "sustainable and structural improvement."

"However, Moody's also wants to stress that it continues to view Spain as a much stronger credit than other stressed euro-zone countries," said Kathrin Muehlbronner, Moody's lead analyst for Spain. "This is reflected in the significantly higher rating for the Spanish sovereign."

The agency "does not believe that Spain's solvency is under threat," she said, and the "base-case assumptions" don't assume Spain will need liquidity support from the European Union's €440 billion ($588.76 billion) European Financial Stability Facility, she said.


Eurozone debt crisis spreads to Belgium on rising political risk

Europe's debt woes have moved closer to the core of monetary union after Standard & Poor's threatened to downgrade Belgium over the failure of Flemings and Walloons to form a government.

By Ambrose Evans-Pritchard 6:11AM GMT 15 Dec 2010

The warning comes a day after the International Monetary Fund said Belgium "urgently needed" to control spending as public debt pushes above 100pc of GDP. "A clear plan is needed to contain contagion from abroad," it said.

The yield spread on Belgian 10-year bonds has ballooned to 102 basis points over German Bunds, raising fears of a funding squeeze next year. S&P said the country needs to refinance debt equal to 11pc of GDP next year, leaving it "exposed to rising real interest rates".

"It's ugly for our reputation," said Jean Deboutte, head of Belgium's debt office. "This is bearable but the premiums are mounting little by little."

The country has been limping along with caretaker ministers since Flemish separatists emerged as the biggest party in June. Talks have broken down over the scale of subsidies to the poorer French-speaking areas, making Belgium a microcosm of EMU's North-South divide.

It is unclear whether the political system can muster the discipline of the early 1990s when Belgium came back from the brink of a debt compound spiral with an impressive fiscal squeeze.

"We believe Belgium's prolonged domestic political uncertainty poses risks," said S&P. "Belgium's current caretaker government may be ill-equipped to respond to shocks to public finances. If Belgium fails to form a government soon, a downgrade could occur, potentially within six months."

----- Jean-Claude Trichet, head of the European Central Bank (ECB), said a "quasi-fiscal union" may now be required to stabilise the eurozone's debt markets, adding the EU's €440bn rescue fund should be deployed with "maximum flexibility", and beefed up in "quantity and quality".

Mr Trichet hopes to prod political leaders into authorising use of the fund for pre-emptive purchases of bonds, perhaps from Spain, relieving the ECB of its lonely burden. The ECB has been stuck with the task of propping up the banks and debt markets of peripheral Europe, conducting a fiscal rescue without a legal mandate and on slender resources.

Officials are mulling plans to raise the ECB's capital to cope growing liabilities, which means asking member states to provide fresh money. Its capital base is just €5.8bn, compared with the US Federal Reserve's $57bn (£36bn).


Germany Opposes Bailout Boost in Face-Off With ECB

Dec. 15 (Bloomberg) -- Germany stiffened its opposition to expanding government-financed aid for debt-plagued euro nations, leaving the European Central Bank to shoulder the bulk of the burden of fighting the crisis.

With Chancellor Angela Merkel ruling out an increase in the euro area’s 750 billion-euro ($1 trillion) emergency fund, Germany yesterday put the spotlight on the ECB by endorsing a possible boost in its capital.

Discord between Merkel and ECB President Jean-Claude Trichet and Luxembourg Prime Minister Jean-Claude Juncker on the eve of a European Union summit evokes the tensions during the first phase of the debt crisis, when Germany held out for more than two months before consenting to a loan package for Greece.

“The consequence is a stalemate that leaves us with a familiar sense of déjà vu,” Ken Wattret, chief euro-area economist at BNP Paribas SA in London, said in a note to investors. “Market tensions are likely to resurface, as governments remain very publicly divided on the appropriate way forward.”

The euro weakened after Moody’s Investors Service said today it may cut Spain’s Aa1 credit rating. The country lost its top rating in September. The currency declined 0.5 percent to $1.3312 at 7:35 a.m. in London.

The review is “not good for spreads or the euro,” Charles Diebel, head of market strategy at Lloyds TSB Corporate Bank in London wrote in an e-mailed note.


New general strike brings Greece to a halt

AP Wednesday, 15 December 2010

A new general strike hit Greece today, grounding flights and disrupting hospital and transport services as unions protested against freshly approved labour reforms amid painful austerity and rising unemployment.

Security is tight in central Athens, where two separate demonstrations are planned. Previous protests have been marred by violence, and in May three people died in a bank torched by rioting demonstrators.

The new general strike is the seventh organised this year by unions appalled at a wave of austerity measures meant to pull Greece out of its worst financial crisis since the Second World War.

All air, rail and ferry services have been cancelled, while traffic in Athens is being severely disrupted as public transport workers and taxi drivers walk off the job for hours. Journalists are also holding a 24-hour strike, causing TV, radio and internet news blackouts, and newspapers will not be published on Thursday.

Crippled by high budget deficits and a mountain of debt, Greece was saved from bankruptcy in May by a 110 billion euro international rescue loan package. In return, the Socialists slashed pensions and salaries, hiked taxes, raised retirement ages and eased restrictions on private sector layoffs.

Late yesterday, the government won a key vote in parliament on a fresh labour reform package that includes fresh pay cuts, salary caps and involuntary staff transfers at state companies. The new law also reduces unions' collective bargaining powers in the private sector, where employers will be able to substantially reduce salaries.

All opposition parties opposed the reforms, which left-wing parties claim will take labour relations "back to the Middle Ages".

Silvio Berlusconi vote sparks violence in Rome

Silvio Berlusconi narrowly won a vital no confidence vote yesterday following a series of sex and corruption scandals sparking chaos inside the Italian parliament and violent protests on the streets of Rome.

By Nick Squires, Rome 5:45PM GMT 14 Dec 2010

The margin of victory was so razor-thin that Mr Berlusconi remains the leader of a lame-duck government which was declared "clinically dead" by the opposition.

After months of political crisis, the prime minister scraped through by just three votes in the lower house of parliament, where his once-guaranteed majority was shattered by a split with his one-time ally, Gianfranco Fini, during the summer.

Mr Berlusconi's government defeated the no confidence motion by just 314 votes to 311. It won a similar vote in the upper house of parliament with a more comfortable majority.

Voting had to be suspended at one point in the Chamber of Deputies after a scuffle broke out between MPs when a member of Mr Fini's breakaway party took the surprise decision to vote for the government.

Catia Polidori broke ranks with her colleagues and cast her vote in favour of Mr Berlusconi, prompting jeers and accusations of bribery, with scuffles erupting between rival groups of MPs. One of her colleagues called her a "whore" while others shouted "shame".

Outside the Italian parliament, around 100,000 students and demonstrators clashed with police as they railed against the government, in particular its plans to cut university funding.

They hurled stones, bottles, paint bombs and fire crackers at police and threw uprooted traffic signals through the windows of banks, including a branch of Barclays close to the Vatican.

As word spread that Mr Berlusconi had won the vote, demonstrators banged on the metal blinds of shuttered shops and surged towards symbols of authority such as the two houses of parliament, daubing them with paint.

They fought running battles along Via del Corso and in Piazza del Popolo, close to the Spanish Steps, digging up cobblestones and throwing them at riot police, who responded with tear gas and baton charges.

"The first requisite of a sound monetary system is that it put the least possible power over the quantity or quality of money in the hands of the politicians."

Henry Hazlitt

At the Comex silver depositories Tuesday, final figures were: Registered 47.75 Moz, Eligible 58.09 Moz, Total 105.84 Moz.


Crooks and Scoundrels Corner.

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

"The dollar will be wiped out."

Dr. Franz Pick (After President Nixon severed the gold link.)

US will lose AAA credit rating, says M&G's Jim Leaviss

A leading fund manager has warned that the world's largest economy will be downgraded within two years because of its high levels of debt.

By Philip Aldrick 6:11AM GMT 15 Dec 2010

Jim Leaviss, head of retail fixed interest at M&G, the fund management arm of the Prudential, said France remains "the AAA economy closest to a downgrade" and that the US "will lose its AAA rating – but not in 2011" as the two countries grapple with debt.

Although the UK is under pressure, he believes, he did not state whether it would also lose its rating.

His concern is that "economic growth will not make the inroads ... that the central banks want to see". However, he does not believe there will be a double-dip recession in any of the three countries. "These economies will continue a period of expansion that is sub-trend," he said.

The UK, he predicts, will see "a renewed bout of quantitative easing" even though "inflation will remain above target at a headline level".

"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

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.

No comments:

Post a Comment