Tuesday, 25 January 2011

Danger Signals.

Baltic Dry Index. 1345 -25

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

"The most puzzling development in politics during the last decade is the apparent determination of Western European leaders to re-create the Soviet Union in Western Europe."

Mikhail Gorbachev

Today is a triple witching day, and we are spoiled for choice. Later today, the unelected, unaccountable, grey men of the crony bankster Fed, gather in coven to start their two day séance on the fate of the US economy, and dollar. This evening, a wobbly President Obama addresses the US nation with his take on the health of the USA. A nation seen from the outside, as all but at war with itself and split between the super rich, great vampire squids, and bailed out banksters, and a declining middle class and growing under class. A nation still trapped in two unending, unendable, wealth draining wars. On a happier note, thousands of Scottish Burns Societies worldwide, are preparing to pipe in the haggis and settle down to eat the inedible, recite the unpronounceable Old Scots verses, washed down with multiple glasses of malt whisky. We suggest that the grey men of the Fed join their nearest Burns Society and give up on trying to rig the US and world economy. If the Fed it hasn’t got it right in 98 years of trying, it’s unlikely to work in the next two days.

We open today with something of real concern. We are one crop failure away from famine in much of the world. Droughts in China and Argentina, and too much rain in Australia and elsewhere, plus the USA still converting corn into ethanol, have the world on a knife edge until this year’s northern hemisphere grain harvest come in. Below, the BBC covers the drought in China. A vast global food price inflation lies ahead through at least the middle of the year.

Crop warning over China drought

24 January 2011 Last updated at 11:56

A prolonged dry spell in parts of northern, central and eastern China is threatening both crops and water supplies, Chinese state media says.

Shandong province is experiencing its driest weather for 60 years.

Half the wheat-growing land there is affected, while almost a quarter of a million people face drinking water shortages, the China Daily said.

Beijing has also been experiencing its longest dry spell for more than 30 years, another state daily said.

The Chinese capital has had no significant rainfall for three months, the Beijing Times reported.

Analysts say this drought is likely to put further pressure on food prices, which have been rising sharply for months.

'Big losses'

Earlier this month, the authorities pledged $15bn (£9.4bn; 98.6bn yuan) in support to help farmers cope with the effect of the drought.

Guo Tiancai, a wheat expert at the agriculture ministry, said that although measures to date were providing adequate irrigation for the winter wheat crop, further drought would be damaging.

"As the temperature warms up in spring and wheat grows faster, any measures which are not in place during the period could cause big losses to the final yield... immeasurable losses," he wrote in a notice on the ministry's website.

In Shandong, many areas had seen no rain for four months, the provincial water bureau said. Fire trucks were being used to deliver water to 240,000 people and 107,000 livestock.

The northern provinces of Shanxi and Hebei have also experienced lower than average rainfall, while the central province of Henan is facing drought.

Visiting Henan at the weekend, Premier Wen Jiabao called for more investment in technologies aimed at reducing the impact of drought, China Daily said.

Forecasters say the dry weather could continue well into the spring.


Stay long precious metals. Nothing creates global instability as much as famine. The world has never experienced a global famine, but thanks to our 21st century integrated economy, that is a distinct possibility this year and next, if the northern hemisphere grain crop is much less than average. The idea of a possible famine is not even on the agenda at the World Economic Forum about to meet in Davos. Not on the agendas of the world’s central banks. While no one can predict how the weather will affect the northern hemisphere crops, and thankfully they are produced across a vast geographical area, anything less than an average harvest will result in price inflation shutting out the bottom third of humanity from adequate access to staple foods.

Staying with China for now, China is planning to create the world’s largest city. My instinct tells me that mega cities are unlikely to be a good idea. While there will obviously be many gains from the economies of scale, at some point mega urbanization will generate many unintended consequences.

China to create largest mega city in the world with 42 million people

China is planning to create the world's biggest mega city by merging nine cities to create a metropolis twice the size of Wales with a population of 42 million.

By Malcolm Moore in Shanghai and Peter Foster in Beijing 12:21PM GMT 24 Jan 2011

City planners in south China have laid out an ambitious plan to merge together the nine cities that lie around the Pearl River Delta.

The "Turn The Pearl River Delta Into One" scheme will create a 16,000 sq mile urban area that is 26 times larger geographically than Greater London, or twice the size of Wales.

The new mega-city will cover a large part of China's manufacturing heartland, stretching from Guangzhou to Shenzhen and including Foshan, Dongguan, Zhongshan, Zhuhai, Jiangmen, Huizhou and Zhaoqing. Together, they account for nearly a tenth of the Chinese economy.

Over the next six years, around 150 major infrastructure projects will mesh the transport, energy, water and telecommunications networks of the nine cities together, at a cost of some 2 trillion yuan (£190 billion). An express rail line will also connect the hub with nearby Hong Kong.

"The idea is that when the cities are integrated, the residents can travel around freely and use the health care and other facilities in the different areas," said Ma Xiangming, the chief planner at the

Guangdong Rural and Urban Planning Institute and a senior consultant on the project.

---- "It will help spread industry and jobs more evenly across the region and public services will also be distributed more fairly," he added.

Mr Ma said that residents would be able to use universal rail cards and buy annual tickets to allow them to commute around the mega-city.

Twenty-nine rail lines, totalling 3,100 miles, will be added, cutting rail journeys around the urban area to a maximum of one hour between different city centres. According to planners, phone bills could also fall by 85 per cent and hospitals and schools will be improved.



Next, the dismal scientists at the IMF peer into their cloudy crystal ball. All will be well, they think. We shall see. They never saw the recession coming. They never saw all Wall Street’s “triple-A” fraud. They never saw AIG’s CDS follies. They never saw the Fed’s US real bubble and bust. But then they never saw a Russian default nor the Asian crisis either, and made both worse by the policies they imposed. With a track record like that, little wonder that more and more hedge funds have started betting against China.

Jan. 25, 2011, 3:00 a.m. EST

U.S. to grow 3% while China, India surge: IMF

WASHINGTON (MarketWatch) — The two-speed economic recovery will continue this year as the United States grows at a 3% clip, while emerging economies like China and India continue to surge, the International Monetary Fund said Tuesday in its latest forecast.

The IMF’s world economic outlook calls for global growth of 4.25% this year, up a quarter-point from the group’s October estimate, which the IMF mostly credited to a tax deal reached by President Barack Obama and congressional Republicans, as well as stimulus measures in Japan.

The U.S. forecast of 3% growth this year is up 0.7% from the IMF’s previous estimate, but the estimate of 2.7% growth in 2012 is 0.3% lower.

The IMF’s view is more conservative than other projections. The Federal Reserve, for instance, sees the U.S. economy growing in a range of 3% to 3.6% this year, accelerating to 3.6% to 4.5% in 2012.



While we wait for the outcome of the Fed’s deliberations, and wait for the President’s speech, Bloomberg covers the boom time in Davos. For banksters in Davos austerity’s over. Conspicuous consumption is back.

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

J. Edgar Hoover

Wall Street Partying in Davos as Bank CEOs Overcome `Angst' After Crisis

By Christine Harper - Jan 24, 2011 11:00 PM GMT

As Wall Street chief executive officers flock to the World Economic Forum, they’ll be breathing a sigh of relief along with the Swiss mountain air: There are no panels on compensation or redesigning financial regulation.

After spending much of last year’s meeting defending the industry and debating proposed rules, bankers plan to focus on wooing clients and winning business, according to executives at three Wall Street companies, who spoke anonymously because they weren’t authorized to comment publicly.

The bankers will be coming to Davos, Switzerland, with a renewed sense of confidence. JPMorgan Chase & Co.’s profits last year were the highest in the bank’s history, and Citigroup Inc. returned money to the U.S. Treasury and reported its first full- year profit since 2007. Governments have so far opted against breaking up or levying extra taxes on banks deemed too big to fail, and the Basel Committee on Banking Supervision, which sets global financial-regulatory guidelines, isn’t requiring lenders to meet new capital standards until 2015.

“It will feel less acute,” said Anne M. Finucane, Bank of America Corp.’s chief strategy and marketing officer, who attended with CEO Brian T. Moynihan for the first time last year and is returning this week. “The level of angst should have dissipated some given that there is movement in the economy.”

Goldman, Morgan Stanley

Two years ago, after the 2008 financial crisis, the CEOs of Bank of America, Citigroup and Morgan Stanley stayed away from the annual forum. This year the only major Wall Street banks that aren’t sending CEOs are Goldman Sachs Group Inc. and Morgan Stanley, instead represented by President Gary D. Cohn, 50, and Chairman John J. Mack, 66, respectively.

That means banks will be spending on parties. JPMorgan upgraded its cocktail reception to the Kirchner Museum from last year’s event at the Tonic Piano Bar at Hotel Europe Davos. Bank of America’s Moynihan and the firm’s other top executives will meet clients for drinks on Jan. 27 at the Steigenberger Grandhotel Belvedere -- the same night Morgan Stanley’s Mack is hosting a private dinner at restaurant Gasthaus in den Islen. Standard Chartered Plc and Deutsche Bank AG are both hosting events at the Belvedere the following night.



“A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him."

John Maynard Keynes 1931

At the Comex silver depositories Monday, final figures were: Registered 44.44 Moz, Eligible 60.67 Moz, Total 105.11 Moz.

Crooks and Scoundrels Corner.

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

Well we might as well stick with China, and Macau is now very much part of China. Below, Bloomberg on the end of an era. A fool and his money are soon parted, it’s said, and nothing parts people from their money like casinos. Casinos stand second only to governments in parting fools from their money. Just as the hapless Irish and Greeks.

Stanley Ho Accuses Family Members of Seizing Stake in Macau Gaming Empire

By William Mellor and Debra Mao - Jan 25, 2011 6:34 AM GMT

Macau billionaire Stanley Ho accused family members of seizing his stake in Asia’s biggest casino empire, plunging ownership of the gambling business he built over five decades into dispute.

Ho, 89, may take action to keep control of Sociedade de Turismo e Diversoes de Macau, said his lawyer Gordon Oldham, the senior partner of Oldham, Li & Nie. The transfer of most of Ho’s casino holdings went against his wishes to divide his assets equally among his family, Oldham said.

“What really upsets him is that he’s not even dead yet, but in the twilight of his life his second and third families appear to be squabbling and pinching it for themselves,” Oldham said by phone today. “There’s no doubt that he has all his faculties.”

Brunswick Group, the public-relations company representing some of the family members, said today that Ho provided written authorization of the transfer of a 31.7 percent stake in STDM. The billionaire, who built his gambling empire after fleeing to Macau from Hong Kong ahead of the Japanese army in World War II, had started shifting assets after being released from a seven- month hospital stay last year.

‘Slight Concern’

SJM Holdings Ltd., the publicly traded arm of Asia’s biggest casino operator, halted its shares in Hong Kong trading today pending the release of a “price-sensitive statement.” SJM, which has the biggest gambling share in the former Portuguese colony, dropped the most in a month in Hong Kong trading yesterday on concern the ownership transfer may affect decision making.

SJM, operator of 20 casinos in the city whose gambling revenue is more than double that of all of Nevada's, said yesterday that Ho agreed to transfer his stake in parent STDM to two companies owned by family members.

“There’s a slight concern over the legal action,” Andrew Sullivan, director of institutional sales at OSK Securities Hong Kong Ltd., said by phone today. “There will be that split between family members. Yet whatever the outcome of the re- distribution, I very much doubt you’ll see the company severely damaged. Day-to-day running of the company will continue.”

The stake in STDM represented about 80 percent of the value of Ho’s assets, said Oldham. Ho may take legal action if the dispute isn’t settled within 48 hours, Oldham said.



"The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

John Maynard Keynes

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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