Friday, 14 January 2011

CIC Goes to Toronto.

Baltic Dry Index. 1446 -07

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

"It's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation".

US Treasury Secretary Paulson. July 20th, 2008

More on China Investment Corp later. We open today with the ongoing fraud known as Citigroup. We now know that Citigroup was on the verge of failing on November 24, 2008 even after it had already received and lost its 25 billion taxpayer bailout under Too Big To Fail.

"I expect there will be some failures. I don't anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system."

Bernanke. February 29th, 2008

Citigroup Was On The Verge Of Failure, New Report Finds; Rescue Was Based On 'Gut Instinct'

First Posted: 01-13-11 03:33 PM   |   Updated: 01-13-11 04:19 PM

Citigroup, the nation's third-largest bank by assets, was on the verge of being closed by regulators the week of Nov. 24, 2008 as depositors rapidly withdrew money and the bank's counterparties declined to provide it credit, according to a government report released Thursday.

The new findings shed light on the degree to which Citigroup, the financial services behemoth with a long history of finding itself in trouble and receiving government support, was actually in danger of failing during the fall of 2008. Until now, few were aware that Citi was perilously close to being shut down.

"We were on the verge of having to close this institution because it can't meet its liquidity Monday morning," said Sheila Bair, chairman of the Federal Deposit Insurance Corporation, during a meeting the previous Sunday night, according to the report by the Special Inspector General for the Troubled Asset Relief Program.

"Without substantial government intervention," said another FDIC official, bank regulators and Citigroup "project that Citibank will be unable to pay obligations or meet expected deposit outflows next week," according to the report.

Yet while policy makers unanimously agreed that Citigroup needed additional help -- this was after the megabank had already received $25 billion in TARP funds -- the "strikingly ad hoc" nature of the response was troubling, notes the inspector general, known as SIGTARP.


Gold could break past $1600/oz by end of year, say analysts

Possible sovereign debt defaults and low interest rates could push up the price of the commodity


Published: 2011/01/14 06:39:08 AM


T HE gold price could soar to a record high of $1600 an ounce this year because of possible sovereign debt defaults and low interest rates, metals research consultancy GFMS has said.

JPMorgan Asset Management fund manager Ian Henderson recently said he would be "quite surprised" not to see gold trading above $1600/oz this year.

Gold posted its 10th successive annual gain last year — the longest winning streak in 90 years. SA’s producers realised an average R287400/kg as a strong rand against the dollar offset dollar gains in the gold price.

Whether SA’s producers will reap much benefit from further increases in the metal’s price depends entirely on what the rand does against the dollar this year, analysts said.

The gold price tends to strengthen as the dollar weakens against the euro. The rand tends to be countercyclical to the dollar gold price. Local gold producers pay costs in rand and generate dollar revenue, making the exchange rate a critical factor.

----Gold, which was trading at $1 381 late yesterday, could push through $1 600 by the end of this year or early next year, GFMS said.

Below, more bad news for Citi and Bank of America. With nothing fixed at either and many non performing mortgages still generating phantom “profits” at both, plus many securities still marked to the fantasy model rather than written down to reality, it looks to me like both will be back time and again for front or back door taxpayer help.

"This is far and away the strongest global economy I've seen in my business lifetime."

US Treasury Secretary Paulson. July 12th, 2007

The Foreclosure Dump

Published: Thursday, 13 Jan 2011

-----Today's report from RealtyTrac serves as a warning to big banks, Fannie, Freddie and local communities; The foreclosure glut is coming, and they'd better be ready to get rid of that glut in a big way.

2010 saw a record number of bank repossessions, over a million, even with a big drop in volume toward the end of the year, thanks to the robo-signing scandal and ensuing foreclosure freezes.

"Early indications in January were that this robo-signing related delay will be over by the end of first quarter if not sooner," says RealtyTrac's Rick Sharga. "I think we're going to see a significant spike in foreclosure activity early in 2011, and that will contribute in part to 2011 being a record year."

Sharga estimates as many as a quarter of a million foreclosures that should have happened in 2010 will now be pushed into the 2011 numbers, and added to an already huge supply of bank owned properties. The four biggest banks already have close to $7 billion worth of foreclosed properties (REO) on their books, and Fannie and Freddie have about $24 billion collectively. While REO sales make up about one third of all sales in the current market, there is an estimated 3 year supply.

Next, look who’s coming to play in Canada’s resource stocks. It’s got to be worth a China premium on many of the stocks. Presumably China is looking ahead at the resources and food supplies it will need 2020 onwards, but it might just be a sign that they are short needed supply 2015. Business class between NY and Toronto is about to get crowded. London to Toronto probably too. Did anyone just say Potash?

China’s sovereign wealth fund sets up shop in Toronto

Published Wednesday, Jan. 12, 2011 6:54PM EST

China is preparing to step up its investments in Canada with the opening of a Toronto office for its deep-pocketed sovereign wealth fund, representing the first permanent foreign location for the state-backed institution.

China Investment Corp. (CIC), which has recently plowed billions of dollars into the Alberta oil sands and Canadian resource companies, will unveil plans for an office in Canada’s financial capital next week.

By choosing Toronto over other financial centres such as London and New York for its first corporate location outside of China, the $300-billion (U.S.) fund is signalling it plans to ramp up its Canadian holdings, particularly in the resource sector.


We end for the week with the shipping impact of Queensland’s Great Flood. Will Queensland or Australia adopt Chile’s earthquake reconstruction plan?

Australia floods force ships to look for coal supplies elsewhere

13th January 2011

SINGAPORE/LONDON - An increasing number of dry bulk carriers are departing eastern Australia's coal ports empty-handed as devastating floods force companies to look for supplies elsewhere, traders and industry experts said.

Deadly floods in Queensland, Australia's largest coal producing state, have severely impacted port operations and forced Asian steel producers and utilities to scramble in search of supplies from Indonesia to South Africa.

"Patience in Asia is quickly running out," said a Shanghai-based shipbroker. "I would say less than a dozen ships have been diverted from eastern Australia in the last week or so, but I'm sure that number will rise."

Port congestion has surged at Dalrymple Bay and Gladstone, with some vessels anchored as long as 50 days waiting to load, according to UK-based Global Ports. That is four times longer than the average wait a month ago.

"Our channels indicate that ordinarily it would be several weeks before coal production and export levels would return to normal, however with above average rainfall still in the forecast, longer delays could materialize," said Michael Webber, an analyst with Wells Fargo Securities.

Facing rising demurrage costs of $10 000 to $15 000 daily in managing the anchored vessels, global mining giant Rio Tinto and others that charter ships have ordered vessels to other regions, two traders said.

All of the major miners operating in Australia, including Rio, BHP Billiton and Xstrata have been affected by the floods and forced to invoke force majeure, a legal provision that relieves companies of delivery obligations in the event of acts beyond their control.

"You have got some nervous charterers just sitting there and watching the clock tick and they are wondering if it's worth staying there or whether they should head off somewhere else," said Robert Driver, senior associate for law firm Norton Rose Asia.

Evidence of this desertion can be seen by the declining number of ships waiting to load at Dalrymple Bay, which is operating at 60 percent of normal levels.

A queue of 43 ships were anchored offshore the Australian coal terminal waiting to load, down from last year's daily average of 52 vessels, according to Global Ports.

The floods have also affected shipments of wheat, cotton and other commodities, but not to the same extent as coal.

With slightly more than half of the world's metallurgical coal exports coming from Australia, the natural disaster could remove 5 percent or more of the steelmaking ingredient from world markets and lift prices by a third or more, analysts estimated.

"As we have already seen, coal customers will try to find other ways to satisfy their demand for thermal coal but the real trouble is coking coal, as it is very hard to get from elsewhere," said Peter Sand, shipping analyst with ship association BIMCO.

Most miners agree to tax hike in copper giant Chile

12th January 2011

SANTIAGO - Most miners in Chile have agreed to pay higher taxes to fund post-earthquake reconstruction, but investment is seen safe in the top world copper producer as prices for the red metal soar and new projects remain scarce.

Mining Minister Laurence Golborne said on Wednesday nearly all of Chile's mining industry, which initially criticized the plan, will adopt a new royalty scheme that will link tax payments to margins and cash in on a copper bonanza

"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 45.05 Moz, Eligible 59.61 Moz, Total 104.66 Moz.


Crooks and Scoundrels Corner.

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

No crooks today, just an update on the global floods, most likely related to the strong La Nina continuing in the Pacific Ocean. All the disruption now threatens to aggravate food and commodity inflation. Stay long precious metals. Food inflation carries with it the risk of social instability.

Brisbane floods: Queensland facing reconstruction 'of post-war proportions'

Australia's third largest city is facing a clean-up of "post-war" proportions as thousands of residents returned to assess the damage caused to their homes by the biggest flood to hit Brisbane in decades.

By Bonnie Malkin, Brisbane 12:01PM GMT 13 Jan 2011

----An estimated 50 suburbs across Brisbane have been swamped with dirty, muddy water and 11,900 homes have been hit by serious flood damage.

Another 14,000 properties and 6,000 businesses are partially flooded.

----Ms Bligh also warned that some of the homes damaged by the flood will no longer be habitable.

"We are going to see damage and destruction in the CBD, parks and schools and the homes of people we know and love.

"We now face a reconstruction task of post-war proportions."

While the floods did not reach the peak of the last major inundation in 1974, Ms Bligh said the crisis presented the city with an unprecedented challenge because of the number of people now living in flood-ravaged suburbs.

She said that floods now gripped two-thirds of the state and had become Queensland's worst natural disaster in history.

Brazil floods: country's worst natural disaster in decades as 482 die

Rescue workers dug for survivors on Thursday and struggled to reach areas cut off by floods and landslides that have killed at least 482 people in one of Brazil's deadliest natural disasters in decades.

1:10AM GMT 14 Jan 2011

----Hillsides and riverbanks in the area, about 60 miles (100km) north of Rio, collapsed after the equivalent of a month's rain fell in 24 hours from Tuesday night.

More heavy rain is forecast, complicating rescue efforts and raising the risk of further mudslides.

Sri Lanka flood toll rises to 27
Fri, Jan 14, 2011, 11:53 am SL Time, ColomboPage News Desk, Sri Lanka

Jan 14, Colombo: The death toll from devastating floods in Sri Lanka's North Central and Eastern Province and from mud slides in Central hill country has risen to 27 as the flood waters start to recede, Disaster Management Center (DMC) reported.

Latest statistics from the DMC recorded another 12 as missing. Additional 47 people have suffered injuries.

The adverse weather prevailing for the past few weeks in the country has affected 1,055,185 people while 361,143 have been displaced from their homes.

13 January 2011 Last updated at 16:25

Battle to reach thousands of Sri Lanka flood victims

13 January 2011 Last updated at 16:25

----The priority since the rains abated on Thursday has been to deliver emergency food and medical supplies.

In the centre and east, farmland has been flooded and rice fields destroyed.

Thousands of people who fled the flooding are now living in camps on higher ground, a spokesman from the disaster management centre told the BBC.

But officials say that in some cases those camps in turn have been flooded; late on Wednesday reports said 25 out of 200 had been inundated in the coastal area of Batticaloa, one of the worst-hit regions

----"Access to clean water is becoming a major problem and we and other agencies are distributing purification tablets."

The UN says that crocodiles and snakes are a threat to anyone wading through the flood waters.

Mr Fletcher said that the floods were especially bad news for people in the east, who in recent years have also endured a civil war and a tsunami.

The floods have left some stretches of railway line under nearly a metre of water.

----A number of big reservoirs have burst their banks, destroying paddy fields in a major rice-growing area.

Rains Disrupt South African Coal, Motor Fuel, Chrome and Corn Transport

By Carli Lourens - Jan 12, 2011 3:17 PM GMT

Heavy rains in South Africa derailed trains carrying coal and chrome and shut lines used to move corn and fuel, state-run rail and port operator Transnet Ltd. said.

“Further aggravating the situation is that key ports such as Richards Bay and Maputo have also been adversely affected,” Transnet Freight Rail said in an e-mailed statement today. Mine operators are unable to load and off-load rail wagons, it said.

Mining companies’ problems in South Africa, the largest producer of ferrochrome that’s used to produce stainless steel, follow floods in Australia that have closed mines and railways.

South Africa’s Richards Bay Coal Terminal supplies the commodity used to fire power plants in Europe and India.

On Jan. 3, rains caused the cancellation of 18 trains carrying coal for export and on Jan. 6 another shipping chrome derailed, Transnet said. A rail line taking corn to ports for export has been closed, as has a line carrying motor fuel to Botswana, it said.

South Africa has warned of “severe flooding” downstream of the confluence of the Vaal and Orange rivers in the Northern Cape. The country’s largest dam, the Gariep, is 117 percent full and the second largest, the Vanderkloof dam, is 113 percent full, the Department of Water Affairs said on its website.

La Niña

La Niña is a coupled ocean-atmosphere phenomenon that is the counterpart of El Niño as part of the broader El Niño-Southern Oscillation climate pattern. During a period of La Niña, the sea surface temperature across the equatorial Eastern Central Pacific Ocean will be lower than normal by 3–5 °C. In the United States, an episode of La Niña is defined as a period of at least 5 months of La Niña conditions. The name La Niña originates from Spanish, meaning "the girl", analogous to El Niño meaning "the boy".


Another weekend, and our thoughts and prayers go out to those suffering from all the flooding. We can only hope that they will get the international relief and help that they need, and that the rains now abate to assist dealing with the aftermath. Have a good weekend everyone.

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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