Wednesday, 12 January 2011

China’s Charcoal – What Cost?

Baltic Dry Index. 1480 -15

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

"Cold Europe is feeling the warmth of the Chinese breezes. China is doing what the Chinese proverb says about 'sending charcoal in snowy weather."

Liu Xiaoming. China's ambassador to London.

Today, the two sides of China. Export behemoth piling up massive currency reserves, albeit mostly in vulnerable fiat money that can disappear in a heartbeat. Same old communist dictatorship, willing and able to crush anyone at will, for any cause. But first this.

"There are about three hundred economists in the world who are against gold, and they think that gold is a barbarous relic - and they might be right. Unfortunately, there are three billion inhabitants of the world who believe in gold."

Janos Fekete

You're insane if you don't own gold, investors told

Not owning gold during the current financial turmoil is "a form of insanity", according to an investment analyst at a leading City firm.

By Richard Evans 5:46PM GMT 11 Jan 2011

Robin Griffiths, a technical strategist at Cazenove Capital, told CNBC: "I think not owning gold is a form of insanity. It may even show unhealthy masochistic tendencies, which might need medical attention."

He added that the dollar was heading for "oblivion".

Mr Griffiths predicted that gold's 10-year bull run would continue and even intensify. "Although it's been a top performer for each of the last 10 years, it's still in a linear trend," he said. "Eventually it will go exponential and make more in the last little bit than the whole of the 10-year trend."

He said investors should regard any short-term falls in the gold price as a buying opportunity, adding that gold was still not an "over-owned trade".

His comments come against the background of the US Federal Reserve's huge monetary stimulus from quantitative easing, which many believe will result in inflation and a fall in the value of the dollar.


Now back to China. America’s biggest creditor gets bigger still. There’s no way that this ends well. Stay long precious metals. Neither party in Washington is willing to tackle America’s deficits. The trillion dollar deficits roll on indefinitely until one day they don’t. That day, like the next Lehman, gets closer with each passing day.

"The modern mind dislikes gold because it blurts out unpleasant truths."

Joseph Schumpeter

China Currency Reserves Rise to Record $2.85 Trillion

By Bloomberg News - Jan 11, 2011

China’s foreign-exchange reserves climbed by a record last quarter and lending exceeded the government’s annual target, increasing pressure on the central bank to tighten policies to rein in liquidity and inflation.

The currency holdings, reported by the central bank on its website today, rose by $199 billion to $2.85 trillion, the biggest quarterly gain since Bloomberg data began in 1996. Full- year yuan-denominated lending of 7.95 trillion yuan ($1.2 trillion) compared with a target of 7.5 trillion yuan.

The central bank may need to raise benchmark interest rates, boost reserve requirements for lenders and allow faster yuan appreciation, economists from Standard Chartered Plc and Credit Agricole CIB said. Policy makers may also experiment with more ways of encouraging outflows of capital, after expanding a program for exporters to park revenue overseas and letting some citizens invest directly abroad.

“All eyes are going to be on what new policies the central bank can bring to the table,” said Jinny Yan, a Shanghai-based economist at Standard Chartered. “But there’s still going to be a lot of excess liquidity in the market in the first half of the year.”


Next, can a communist leopard ever change its spots? Is China reverting to mean? [Pardon the pun.]

As West woos China, no word about missing rights activist

By Peter Popham Wednesday, 12 January 2011

When the Chancellor, George Osborne, and Boris Johnson, the Mayor of London, hosted visiting Chinese Vice Premier Li Keqiang at a cosy dinner at Mansion House on Monday, it is a fair bet that the extra-judicial torture of the man formerly on China's official list of its 10 best lawyers was not among the topics discussed.

The details of what the Chinese police did to Gao Zhisheng during his mysterious 10-month disappearance would have ruined anyone's appetite.

The brilliant human rights lawyer, who had risen from an orphaned childhood in a cave dwelling to a starring role in Beijing's courts, defending citizens against land theft, censorship and religious intolerance, was beaten day and night, temporarily blinded and threatened with death.

His head was bound in a wet towel until he felt he was suffocating. He was told his children had suffered nervous breakdowns. During one week of abuse he was handcuffed, his mouth and eyes bound with tape and he was pistol-whipped for hours on end. Other things done to him were so grotesque he refused to divulge them.

These details were revealed in an interview with Gao Zhisheng conducted by Associated Press when he reappeared last April. He asked for the interview to be withheld unless he vanished again, but shortly afterwards he was seized once more. As this disappearance has now stretched to more than eight months, AP yesterday decided to release it.

But Mr Li, whose UK visit concluded in Scotland yesterday, did not come to Britain to hear our views about such matters. The rising star of the Communist Party, expected to become prime minister in 2013, has the reputation of being a liberal. But as China's attitude to dissident lawyers and human rights activists grows steadily more ruthless, it is less and less tolerant of criticism from outside. December's Nobel Peace Prize ceremony in Oslo, when Chinese pressure resulted in 16 out of 64 diplomatic no-shows for the awarding of the prize to dissident Liu Xiaobo (himself absent because he was in jail), was due warning.

The Coalition's leaders accept all this without a murmur because we are competing frantically for China's favours. The only talk out of Whitehall since Monday has been of signatures on new deals – a lowly £2.6bn compared with the $11.3bn (£7.3bn) signed in Germany – and "face time" with Mr Li (where we have supposedly outshone the Continent).

Next week Hu Jintao, China's supreme leader, goes to Washington, and despite China's flat refusal to take more than token measures to revalue the renminbi, its crucial role in continuing to invest in the US is likely to keep all political lips tightly zipped. It was a strangely muted President Obama who toured China in November 2009, a shadow of his usual eloquent self, and Mr Hu is likely to bring that infectious air of Confucian calm along with him.

China's ambassador to London, Liu Xiaoming, put it in folksy terms. If "it is up to each one to clear the snow on his doorstep", he said, China was willing to lend a hand with the shovel, becoming "a true friend and partner when Europe is in need". "Cold Europe is feeling the warmth of the Chinese breezes," he went on, a little cloyingly. "China is doing what the Chinese proverb says about 'sending charcoal in snowy weather.'"

Below, China sends a very overt message, despite the diplomatic face saving lies. No one in Beijing or Washington, or anywhere else is fooled.

Test flight of China's stealth jet reported

Wed, Jan 12, 2011 China Daily/Asia News Network

BEIJING - China staged a test flight of its first stealth fighter jet on Tuesday, according to online news sites and Internet blogs.

Although the government and the military have yet to formally confirm the news, an official with the Ministry of National Defense seemed to corroborate it.

Asked by the media to confirm the test flight at a news conference, Guan Youfei, deputy director of the ministry's foreign affairs office, said: "As for the event you mentioned, it is not targeted at any country or particular target, nor does it intentionally coincide with the visit by US Secretary of Defense Robert Gates. It was a normal and routine arrangement.

"China has developed some weaponry to safeguard its national sovereignty, security and territorial integrity ... China's military development must be correctly assessed."

Gates told reporters after talks with President Hu Jintao that the maiden test flight of the advanced J-20 fighter jet prototype was part of their discussions.

Gates said Hu told him that the maiden test flight was not timed to coincide with his visit.

"I asked President Hu about it directly, and he said that the test had absolutely nothing to do with my visit and had been a pre-planned test. And that's where we left it," Gates was quoted as saying by Reuters.

12 January 2011 Last updated at 07:10

Robert Gates tours China nuclear warfare headquarters

US Defence Secretary Robert Gates has visited China's nuclear warfare headquarters, at the end of a four-day visit to try to mend relations between the two militaries.

"There was a discussion of nuclear strategy," including China's policy of not using nuclear weapons pre-emptively, Mr Gates said.

Officials from both countries praised the visit as a success.

Beijing froze military ties last year because of a US arms sales to Taiwan.

The rare view of China's nuclear and missile arsenal was given on a trip to the Second Artillery Corps of the People's Liberation Army (PLA) headquarters.

Both the US and China have long-range missiles capable of reaching each other's shores, but both have said they do not intend to use them.

-----Mr Gates' visit comes ahead of a trip by Chinese President Hu Jintao to Washington next week.

China has agreed to more direct military co-operation with the US but it remains unclear how open and collegial such exchanges will be.

Mr Gates has said he wanted to convene a new round of military talks in the first half of this year to cover nuclear, missile defence, cyberwarfare and the military uses of space alongside the current focus on maritime issues.

Last year, tensions increased significantly over a series of maritime disputes, with the US supporting South East Asian concerns at China's re-stated claim to the South China Sea.

In other Asian news, is Asia cooling or is this a sign of something more? 2011 is a year of great challenges ahead. The west’s vastly over priced stock markets are living on borrowed time.

Asia Exports Cooling Damps Outlook for Commodity Shippers: Freight Markets

By Shamim Adam and Kyunghee Park - Jan 11, 2011 12:54 AM GMT

Asian exports that helped power the world recovery last year are poised to grow more slowly as the region’s manufacturing rebound eases and U.S. unemployment restrains consumption after a post-recession spending spree.

Container traffic growth in Shanghai, Singapore and Hong Kong, the world’s busiest ports, has cooled since the first half of 2010. Singapore exports in 2011 may rise at a third of last year’s pace of as much as 24 percent, according to DBS Group Holdings Ltd. The island’s government joins Taiwan and South Korea in predicting smaller gains in overseas sales.

“2011 is not looking as exuberant as 2010,” said Vishnu Varathan, an economist at Capital Economics (Asia) Pte in Singapore. “The easy part of the trade upswing is over now and demand is getting tighter,” making the outlook for shipping “less bubbly,” he said.

While container-shipping companies may profit from rate increases, the export slowdown may damp growth in other Asia shipping and transport stocks, which are already underperforming Asian stock indexes. The Bloomberg Dry Ships Index fell 8 percent last year while the MSCI World Index rose 10.4 percent.

Leasing costs for capesizes, 1,000-foot-long ships hauling iron ore and coal, will drop 34 percent to average $22,000 a day this year, according to the median in a Bloomberg survey of eight fund managers and analysts. Rates were last that low in 2002.


We end for the day noting rising unemployment and food inflation riots. With massive flooding in Australia and drought in Argentina affecting export food crops, food price inflation is here to stay. Tunisia’s riots follow similar rioting in next door Algeria.

Tunisia's violent protests spread to capital

Police fired into the air to disperse a crowd ransacking buildings in a Tunis suburb on Tuesday, the first time Tunisia's capital has been hit by a wave of violent unrest that officials say has killed 23 civilians

11:18PM GMT 11 Jan 2011

A Reuters reporter in the working class Ettadamen neighbourhood said he saw hundreds of youths throwing stones at police and then smashing shops and setting fire to a bank.

He said the crowd had blocked the roads with burning tyres, set fire to a bus and two cars and also set fire to a local government office.

Police fired warning shots into the air and also fired tear gas grenades to try to force people back from the building, the reporter said.

"We are not afraid, we are not afraid, we are afraid only of God," the crowds chanted.

Reports of the clashes emerged minutes after Tunisia's government raised by another three the total death toll from the unrest, the worst in decades, but it dismissed estimates from human rights groups who put the count higher.

Until Tuesday evening there had been no reports of major new clashes after the army was deployed in the most restive towns, schools and universities were shut indefinitely and police with loudhailers ordered people in at least one town not to gather in the streets.

----Another two people were killed in clashes earlier in the unrest, which has now been continuing for almost a month. A further two committed suicide in acts of protest.

"Gold is not necessary. I have no interest in gold. We'll build a solid state, without an ounce of gold behind it. Anyone who sells above the set prices, let him be marched off to a concentration camp. That's the bastion of money."

Adolf Hitler

At the Comex silver depositories Tuesday, final figures were: Registered 44.89 Moz, Eligible 59.35 Moz, Total 104.24 Moz.


Crooks and Scoundrels Corner.

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

Today, a warning of what goes wrong when rigged stock prices crash. Stay long precious metals.

"Sooner or later a crash is coming, and it may be terrific."

Roger Babson, speech to National Business Conference, Sept. 5th, 1929.

'Our savings have vanished – we've lost everything'

Angry investors take to streets as Dhaka's stock exchange crashes. Andrew Buncombe reports

Tuesday, 11 January 2011

Police in Bangladesh used tear gas and water canons to disperse angry protests by crowds of small investors after a dramatic free-fall plunge on the country's stock market caused the authorities to suspend trading.

Hundreds of outraged investors took to the streets outside the stock exchange in the Motijheel neighbourhood of the nation's capital after the worst plunge in the country's history saw the Dhaka Stock Exchange (DSE) fall by 660 points, or 9.25 per cent, in less than an hour.

Chanting slogans that accused brokers and traders of manipulating stock prices and of the government of failing to properly regulate the situation, the small-scale investors smashed up cars, burned tyres and ran loose until police stepped in to break them up. There were other protests in smaller cities and towns. Four journalists were reportedly beaten by police.

Last night, with trading due to restart later today in both Dhaka and the country's second city, Chittagong, Bangladesh's prime minister, Sheikh Hasina, met with senior financial officials including the governor of the central bank, and ordered them to take steps to try and ease the crisis. The Securities and Exchange Commission (SEC), after an emergency meeting with the central bank, said trading – which was halted yesterday after just an hour – could resume.

But the crisis that began on Sunday, when the DSE's bench mark Dhaka Stock Exchange general index (DGEN) fell by almost 8 per cent, has long been smouldering. Last month there were similar demonstrations to those yesterday when the market fell by around 7 per cent, triggering panic among investors. Since early December, the index – which had climbed by more than 80 per cent in 2010 – has fallen by 27 per cent.

The problem, say experts, is that the booming stock market had in recent years become deeply overvalued, something that had been ignored as investors enjoyed massive gains. Amid demands that it act to address the situation, the authorities had recently taken a series of steps to limit the percentage of deposits that banks can invest in the market and cool the situation. As a result, many larger, institutional investors decided to withdraw from the market, a move that set off the hysteria.

"This was coming – it was only a matter of when it would take place," said Mustafizur Rahman of the Centre for Policy Dialogue, a Dhaka-based think-tank. "The market had been heating up for quite a time, particularly over the last year. There was too much money chasing too few shares... This is a correction."

"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 December:

DJIA: +171 Down 7. NASDAQ: +238 Down 9. SP500: +165 Down 2.

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. December is the seventh down month, but the downward momentum has virtually stopped. I would put on (purchased) synthetic double options here for a breakout in either direction. Professional traders would adopt much more risky granted option strategies.

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