Friday, 3 December 2010

A Reprieve.

Baltic Dry Index. 2133 +37

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

"Never have the world's moneys been so long cut off from their metallic roots."

Murray M. Rothbard

Yesterday the ECB managed to face both ways at the same time. Amazingly they pulled it off for the day. Officially the ECB will follow German rules and refrain from mass purchases of Club Med bonds. In practice, the ECB will join the Fed and the Bank of England and do whatever it takes to prop up the bond of the failing members of Club Med. We have no nuclear option, say the ECB’s Trichet, well at least not now, not today. Watch what they do and not what they say. Stay long precious metals. The Euro is heading off on the road to Rome. Lira anyone.

"We shouldn't pour cold water on everything. We, the eight or nine players in global investment banking, have a very good future."

Deutsche Bank, CEO Josef Ackermann. Davos, January 2007.

ECB bows to German veto on mass bond purchases

The European Central Bank has rebuffed calls for mass purchases of southern European bonds, despite growing pressure from Spain and Italy for dramatic action to buttress monetary union

By Ambrose Evans-Pritchard, International Business Editor 7:15PM GMT 02 Dec 2010

Jean-Claude Trichet, the ECB's president, said emergency lending support for eurozone banks would be extended until at least April next year, citing "acute tensions" in the market.

The delay removes the risk that Frankurt might soon pull away the prop holding up the Irish and Greek banking systems, as well as the Spanish cajas – or savings banks – and the sovereign states behind them. Traders say the ECB intervened directly in the weakest bond markets on Thursday to drive down yields and calm nerves.

However, Mr Trichet said there had been no decision to step up purchases of peripheral bonds to a whole new level – the so-called "nuclear option" – despite the potentially dangerous rise in Spanish, Italian, Belgian and even French yields over the past three weeks.

-----Rainer Bruderle, the German economy minister, spelled out Berlin's objections on Thursday just hours before the ECB meeting, insisting that "the permanent printing of money is not a solution".

A chorus of influential voices in Germany has warned that any attempt by the ECB to prop up Club Med with loose money would be a grave error, undermining German political support for monetary union.

"It would be fatal if the ECB was to squander its credibility," said Klaus Zimmerman, head of the DIW German Economic Research Institute. He said the bank is the last bastion of credibility after the serial breach of EU fiscal and debt rules.

"Broader purchases of the distressed eurozone debt would calm speculation for a short time, but would just invite risk-taking by investors in general," he said.

Thomas Mayer from Deutsche Bank said that if the ECB is put in a position of having to buy up to €2 trillion of debt to support Spain and Italy, it will cross a ruinous line. "If the ECB is thrown into the fire, who knows what will happen," he said.

----Lothar Binding from the Social Democrats said it was becoming "very difficult" to keep explaining to taxpayers why they should provide fresh money to these countries at a time of welfare cuts at home. He warned that the chasm between Europe's northern and southern nations had grown impossibly wide and that sooner or later the common currency might have to split in two

It might not make much difference for long. Sooner or later Club Med and Ireland have to restructure, the oh so polite way of saying default.

"We finished the year, and we reported that we had $17 billion of cash sitting at the bank's parent company as a liquidity cushion. As the year has gone on, that liquidity cushion has been virtually unchanged."

Bear Stearns CEO Alan Schwartz. March 12, 2008. Bankrupt March 17th.

Italian Banks’ Costs Climb on Contagion Concern, Nation’s Debts

Dec. 3 (Bloomberg) -- Italian banks are paying the price of the nation’s debt, the second-highest in the euro zone, as the crisis threatening the region’s currency erodes their perceived creditworthiness and drives up borrowing costs.

The cost of insuring the debt of UniCredit SpA, Italy’s biggest bank, posted the largest monthly jump in November since February 2009, according to data provider CMA. UniCredit’s credit default swaps this week implied a junk rating to the company’s bonds for the first time, data from Moody’s Investors Service’s capital markets research group show. Swaps on Intesa Sanpaolo SpA, the No. 2 bank, posted a record monthly increase.

Prime Minister Silvio Berlusconi faces a confidence vote on Dec. 14, adding to investor concern that Italy may struggle to finance its 1.76 trillion euros ($2.3 trillion) of debt should his government fall. While Italian banks skirted the real estate busts of Ireland and Spain, the crisis may drive up the cost of refinancing at least 118 billion euros of debt in 2011 and squeeze profitability that is already below the region’s average.

“Contagion fears due to the country’s high debt will affect Italian banks’ profitability because they will pay higher a cost of funding and will record losses on bonds they own,” said Stefano Girola, who helps oversee about 3 billion euros at Banca Albertini Syz & Co. Banca Popolare dell’Emilia Romagna, a regional cooperative bank based in central Italy, is the only Italian lender he holds.

Customer Loans

Italian banks survived the worst financial crisis in 70 years by lending to individual and corporate clients, and steering away from bets on markets, analysts say. About 61 percent of their assets are loans to clients, higher than Spanish, U.K., French and German banks, according to data compiled by ABI, Italy’s banking association

In other news, Japan is joining China, India and the USA in killing off the scam of “climate change”, formerly known as global warming. Now if only moronic socialist Europe would do the same thing.

CancĂșn climate change summit: Japan refuses to extend Kyoto protocol

Talks threatened with breakdown after forthright Japanese refusal to extend Kyoto emissions commitments

Wednesday 1 December 2010 18.16 GMT

The delicately balanced global climate talks in CancĂșn suffered a serious setback last night when Japan categorically stated its opposition to extending the Kyoto protocol – the binding international treaty that commits most of the world's richest countries to making emission cuts.

The Kyoto protocol was adopted in Japan in 1997 by major emitting countries, who committed themselves to cut emissions by an average 5% on 1990 figures by 2012.

However the US congress refused to ratify it and remains outside the protocol.

The brief statement, made by Jun Arima, an official in the government's economics trade and industry department, in an open session, was the strongest yet made against the protocol by one of the largest emitters of greenhouse gases.

He said: "Japan will not inscribe its target under the Kyoto protocol on any conditions or under any circumstances."

The move came out of the blue for other delegations at the conference.

"For Japan to come out with a statement like that at the beginning of the talks is significant," said one British official. "The forthrightness of the statement took people by surprise."

If it proves to be a new, formal position rather than a negotiating tactic, it could provoke a walk-out by some developing countries and threaten a breakdown in the talks. Last night diplomats were urgently trying to clarify the position.

The move provoked alarm among the G77, the grouping of developing countries who regard the Kyoto protocol as the world's only binding agreement on climate change cuts.

Japan gave no reasons for making its brief statement on the second day of the talks, but diplomats said last night that it represented a hardening of its line. "Japan has stated before that it wants only one legal instrument and that it would be unfair to continue the protocol," said one official who did not wish to be named.

Japan, which last night declined to clarify its position, has said in the past that it would not reject a new legally-binding overall agreement, but is concerned that it would be penalised if it signed up to cuts while other countries such as India and China were not legally bound to make similar cuts.

Perhaps the Japanese were following events in Ice Age Europe, where even the infamous Climate Research Unit of the University of East Anglia has gotten itself snowed in. Perhaps they can use their famous hockey stick to warm their way back out.

Snow, freezing weather and high winds strand millions across Europe

Coldest start to December since records began causes major problems to road, rail and air travel on the continent

Thursday 2 December 2010 16.52 GMT

Millions of Europeans have been caught up in chaos caused by heavy snow, freezing temperatures and high winds following the coldest start to December since records began. Harsh conditions ground much of the continent's transport network to a halt and caused several deaths.

In Poland temperatures fell to -26C, leading to eight deaths from exposure, on top of several other cold-related deaths in recent days.

Almost the whole of Germany woke up to heavy snow this morning, which caused gridlock on roads and railway lines throughout the country. Hundreds of commuters were stranded at railway stations as conditions were deemed too severe for German trains to run.

At Leipzig and Frankfurt scores of passengers had to sleep in railway carriages as hotels ran out of room after train journeys were cancelled because of snow drifts.

Three people died in accidents on icy roads in Germany, while an undisclosed number were said to have died in other parts of central Europe because of exposure or traffic accidents.

Prague airport closed overnight following the heavy snow that gripped the whole of the Czech Republic.

More than 400 miles of traffic jams were reported in Belgium, with Flanders badly hit. Thousands of motorists were trapped in their cars in Brittany and Normandy, and 10,000 lorries were brought to a standstill as parts of France also faced harsh conditions. Hundreds of homes in central France were left without electricity after power cuts.

-----Meteorologists forecast that the snowy and freezing conditions would continue for several days due to the slow eastwardly movement of a low-pressure front over western Europe.

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

Richard M. Ebeling

At the Comex silver depositories Thursday, final figures were: Registered 48.14 Moz, Eligible 59.25 Moz, Total 107.39 Moz.


Crooks and Scoundrels Corner.

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

Today, was JP Morgan a crook or a scoundrel in the Madoff Ponzi scheme? A crook, says the trustee trying to get back billions for the defrauded victims. Below, JP Morgan gets sued and stands accused or being Madoff’s chief enabler. We look forwards to JP Morgan’s day in court. Of course with access to the Fed’s unlimited cave of instant wealth, JPM might just as well pay off the $6.4 billion claim and pass along the tab to the Fed and the hapless US taxpayers. On the magical system of fiat currency, nothing is real anymore, everything just an anarchic electronic entry to be one way or another, rigged and fixed away. Casino capitalism 21st century style.

Banks are an almost irresistible attraction for that element of our society which seeks unearned money.

J Edgar Hoover

Bernard Madoff trustee sues JP Morgan for $6.4bn

• JP Morgan was primary banker to Bernard L Madoff Investment Securities
• Lawyers claim bank thought returns were 'too good to be believable'

Friday 3 December 2010

The trustee charged with recovering billions lost by victims of disgraced financier Bernard Madoff yesterday sued JP Morgan for $6.4bn (£4.1bn) claiming the bank played a central role in his fraud.

A lawsuit filed in New York by Irving Picard alleges the bank ignored well-documented suspicions about Madoff and continued to collect fees and profits.

Picard, who took the action in the US bankruptcy court, is seeking to recover at least $1bn in fees and profits and $5.4bn in damages to be distributed to Madoff's victims.

"JP Morgan was wilfully blind to the fraud, even after learning about numerous red flags surrounding Madoff," said David Sheehan of Baker & Hostetler, legal counsel for the trustee.

He said that while many financial institutions enabled Madoff to carry out his fraud, JP Morgan was "at the very centre of that fraud, and thoroughly complicit in it". It was primary banker to Bernard L Madoff Investment Securities (BLMIS) for more than 20 years, and was responsible for knowing the business of its customers, he said.

"Madoff would not have been able to commit this massive Ponzi scheme without this bank. JP Morgan should pay the price for its central role in enabling Madoff's fraud."

According to the complaint, JP Morgan had clear and documented suspicions about the legitimacy of BLMIS's operations. "JP Morgan admitted in the months before Madoff's arrest that BLMIS's returns were too good – especially in down markets – to be believable, but for years they pretended that was not the case," said Deborah Renner, a partner at Baker & Hostetler.

"Just as in the children's fable, they knew the 'emperor had no clothes,' but looked the other way, allowing the fraud to continue."

JP Morgan strongly denied all the allegations. In a statement the bank said the suit "distorted the facts" and it would defend itself "vigorously" against the charges.

Victims lost billions when Madoff's business empire was exposed as a giant fraud in December 2008. He is serving 150 years in prison.

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.

Another weekend, and wintry one for much of Europe including the UK. I have to wonder what this is doing to Europe’s Christmas retail trade and to Europe’s winter crops. While it’s far too soon to know, and some winter wheat and barley can get replanted later with spring sown varieties, it might be a reasonable trade to buy in a few mid summer grain call options. Have a great weekend everyone

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.

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