Monday, 24 January 2011

Super Rich, Super Cycle - Davos.

Baltic Dry Index. 1370 -23

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

“If you misprice risk, don't come looking to us for liquidity assistance. The longer this goes on and the more risky positions are built up over time, the more luck you need.”

Axel Weber. Davos 2007.

You’ve never had it so good, is the word to the serfs from the Lords of the Universe assembling in Davos this week. The long term growth cycle has never looked better, according to the great and greater and greatest. In fact, things look so good, all the way out to 2030, no one need ever work again. Sit back and let stocks, bonds and bankster bonuses take the strain. What could possibly go wrong? Below, Bloomberg covers the view from toney Davos. Pass round the Rolexes and another glass of Pol Roger PDQ. “God’s work” is about to deliver for all.

"Why a four-year-old child could understand this report. Run out and find me a four-year-old child. I can't make head nor tail out of it."

Groucho Marx.

Super-Cycle Leaves No Economy Behind Before Davos Summit

By Simon Kennedy - Jan 23, 2011 11:01 PM GMT

For only the third time since the Industrial Revolution, the world may be entering a long-term growth cycle that will lift all economies simultaneously, driving bond yields and commodity prices higher.

The depth and scope of the expansion will be a focus for discussion at this week’s annual meeting of the World Economic Forum in Davos, Switzerland. Evidence of a broadening global recovery will enable U.S. Treasury Secretary Timothy F. Geithner, investor George Soros and 2,500 political, business and academic leaders to shift their emphasis away from crisis- fighting.

With the economic and investment outlooks “much better” than in recent years, “people are talking about how to get back to business as normal and what comes next,” said Jitesh Gadhia, a delegate to the conference and the London-based senior managing director at Blackstone Group LP, which runs the world’s largest buyout fund.

Goldman Sachs Group Inc., PricewaterhouseCoopers LLP and London’s Standard Chartered Bank are among the financial companies sending executives to the meeting. Their economists predict a growth spurt in coming decades led by emerging nations that will be strong enough to boost developed countries.

Global gross domestic product will swell to $143 trillion by 2030, allowing for inflation and market-exchange rates, from $62 trillion in 2010, with China and other emerging markets accounting for about two thirds of the rise, estimates Gerard Lyons, chief economist and group head of global research in London for Standard Chartered, which generates most of its earnings from Asia.


I’d like to be a believer in the Gospel of Davos, and if you’re a too big to fail bankster, gambling on “heads I win, tails you lose” guarantees written on the taxpayers, it probably seems that way, but down in the trenches with the rest of the Euro-serfs, things look far from rosy and universal victory. Down here in the trenches the picture looks more like Custer’s last stand. Unless ECB, BOE, and Federal Reserve QE reinforcements arrive soon, the non bankster part of the global economy is more likely to relapse. We are still heading towards Ireland’s manifest destiny.

“I think we agree, the past is over.”

President George W. Bush.

But supposing, the Davos Gospel is right. Supposing the great super cycle is rescued by the great global quantitative easing, what then? With all countries firing on all cylinders, and suddenly expanding again, awash with mountains of new cash and new credit, and facing limited access to foodstuffs and fuel, a great monstrous inflation lies directly ahead. Stay long precious metals. While I think stagflation is more likely our fate, with a very real chance that the Chinese bubble bursts later this year, a scramble to swap dodgy fiat currency for tangible assets of enduring value, is also a real possibility later this year.

Below, Irish politicians race to sell out Ireland for banksters across Europe in an effort to prop up the Euro. Jonathan Swift must be spinning in his grave.

"War is Peace" "Freedom is Slavery" "Ignorance is Strength."

George Orwell. 1984.

Ireland Races to Pass Budget as Coalition Collapses

By Finbarr Flynn - Jan 24, 2011 7:57 AM GMT

Irish political leaders said they’ll press to pass a budget before elections as the collapse of Prime Minister Brian Cowen’s coalition threw the government into disarray.

Finance Minister Brian Lenihan will meet at 4 p.m. today with lawmakers from the Green Party, which withdrew from the coalition yesterday, and opposition parties in Dublin to discuss a timetable for passing the Finance Bill. The plan would enact 6 billion euros ($8.2 billion) of tax increases and spending cuts.

Passing the budget is a condition of Ireland’s 85 billion- euro aid package from the International Monetary Fund and the European Union. The Greens said yesterday an election may take place late next month. Cowen said the finance bill has to pass before national elections are held as scheduled on March 11.

“It looks like the finance bill will pass,” said Kevin Rafter, a professor at Dublin City University who has published books about Irish politics, including a history of Fine Gael, the biggest opposition party. “All the parties want it off the table before the election.”

----“More uncertainty is about to enter the stage with negative consequences for European sovereign debt and the euro,” Mark Grant, managing director at Southwest Securities Inc. in Fort Lauderdale, Florida, said yesterday. “If the finance bill does not pass or is postponed until after the elections, then there will be a significant amount of stress placed upon both sovereign and bank debt in Europe.”

Next, the latest news out of coalition Britain. There’s little sign of the Gospel of Davos outside of banksters bonuses.

Double-dip talk returns as UK economic growth slows

The number of British companies in financial distress has risen for the first time since the beginning of 2009, in a statistic that will drive fears that Britain could be entering a double-dip recession

By James Hurley 6:00AM GMT 24 Jan 2011

Almost 148,000 companies are in difficulties before the the full impact of spending cuts and tax rises has even been felt, according to a report from Begbies Traynor, the insolvency specialist.

Begbies, which monitors the warning signs of company distress, found the first year-on-year increase in companies experiencing 'significant' or 'critical' financial problems since the beginning of 2009.

The report comes ahead of official data out tomorrow which is expected to confirm that the UK's gross domestic product (GDP) grew by as little as 0.2pc in the final three months of last year, down from 0.7pc and 1.1pc in the previous quarters. The release of the data will mark the first anniversary of Britain being officially diagnosed as out of recession.

The 147,836 firms that experienced significant or critical financial problems in the last three months of 2010 represent a 4pc increase on the same period in 2009 – and a 20pc increase on the third quarter of last year.

We close for the day with the picture from Australia. The great rebuilding is about to get underway. Will an exodus of Irish and British unemployed construction workers now also get underway?

Brisbane Roads Circling Globe Twice Needed in Flood Disaster

By Gemma Daley and Lisa Pham - Jan 24, 2011 6:43 AM GMT

To build an average house, you need 6,200 bricks, 2,950 roof tiles, 785 floor tiles and 15 cans of paint -- multiply that 28,000 times and you get a picture of the task to rebuild Brisbane after Australia’s worst flood.

It gets worse: the state of Queensland will need to rebuild 90,000 kilometers (56,000 miles) of roads, enough to circle the globe twice, thousands of kilometers of rail line, almost 100 schools, an unknown number of bridges, several regional airports, power lines, sewers and water treatment -- the list goes on.

Australian companies, including its largest building- materials seller Boral Ltd., the No. 1 furniture and electrical retailer Harvey Norman Holdings Ltd., paint maker DuluxGroup Ltd. and plumbing supplier Reece Australia Ltd., will benefit from the reconstruction estimated to cost A$20 billion ($20 billion). The floods are the most expensive natural disaster in the nation’s history and have claimed at least 20 lives.

“The state’s a disaster zone,” said Greg Hoffman, general manager at the Queensland Local Government Association, which estimates up to 90,000 kilometers of road and “tens of thousands of drains” will need to be replaced or repaired across Queensland. “Roads have been torn away, airport terminals have been uprooted and you can’t believe your eyes when you see the wasteland left behind,” he said in a telephone interview.

Reinforcements Needed

The average cost of building a new home is A$300,000, meaning the bill to replace housing alone in Brisbane, Australia’s third-largest city with a population of 2 million, may be A$8 billion, Australia & New Zealand Banking Group Ltd. says. ANZ based its forecast on the state Premier Anna Bligh’s Jan. 16 comment that 28,000 dwellings need rebuilding. Bligh says 2.1 million people have been affected by Queensland’s flood.


A permanent Governor of the Bank of England would be one of the greatest men in England. He would be a little `monarch` in the City; he would be far greater than the `Lord Mayor.` He would be the personal embodiment of the Bank of England; he would be constantly clothed with an almost indefinite prestige. Everybody in business would bow down before him and try to stand well with him, for he might in a panic be able to save almost anyone he liked, and to ruin almost anyone he liked. A day might come when his favour might mean prosperity, and his distrust might mean ruin. A position with so much real power and so much apparent dignity would be intensely coveted.

Walter Bagehot. Lombard Street. 1873.

At the Comex silver depositories Friday, final figures were: Registered 44.44 Moz, Eligible 59.71 Moz, Total 104.15 Moz.


Crooks and Scoundrels Corner.

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

Today, US taxpayers get hit twice. You really couldn’t make this sort of injustice up. Below that, is rising China the Germany of 1900? Despite the inappropriate headline, the whole article is well worth the read.

"It's strange that men should take up crime when there are so many legal ways to be dishonest. “

Al Capone

Mortgage Giants Leave Legal Bills to the Taxpayers

By GRETCHEN MORGENSON Published: January 24, 2011

Since the government took over Fannie Mae and Freddie Mac, taxpayers have spent more than $160 million defending the mortgage finance companies and their former top executives in civil lawsuits accusing them of fraud. The cost was a closely guarded secret until last week, when the companies and their regulator produced an accounting at the request of Congress.

The bulk of those expenditures — $132 million — went to defend Fannie Mae and its officials in various securities suits and government investigations into accounting irregularities that occurred years before the subprime lending crisis erupted. The legal payments show no sign of abating.

Documents reviewed by The New York Times indicate that taxpayers have paid $24.2 million to law firms defending three of Fannie’s former top executives: Franklin D. Raines, its former chief executive; Timothy Howard, its former chief financial officer; and Leanne Spencer, the former controller.

----- Since Fannie Mae and Freddie Mac were taken over by the government in September 2008, their losses stemming from bad loans have mounted, totaling about $150 billion in a recent reckoning. Because the financial regulatory overhaul passed last summer did not address how to resolve Fannie and Freddie, Congress is expected to take up that complex matter this year.

In the coming weeks, the Treasury Department is expected to publish a report outlining the administration’s recommendations regarding the future of the companies.

Well before the credit crisis compelled the government to rescue Fannie and Freddie, accounting irregularities had engulfed both companies. Shareholders of Fannie and Freddie sued to recover stock losses incurred after the improprieties came to light.


Appeasement is the proper policy towards Confucian China

We all learned at school how the status quo powers mismanaged the spectacular rise of Germany before World War I, a strategic revolution so like the rise of China today.

By Ambrose Evans-Pritchard, International Business Editor 6:07PM GMT 23 Jan 2011

-----Is China now where Germany was in 1900? Possibly. There are certainly hints of menace from some quarters in Beijing. Defence minister Liang Guanglie said over New Year that China’s armed forces are “pushing forward preparations for military conflict in every strategic direction”.

Professor Huang Jing from Singapore’s Lee Kwan Yew School and a former adviser to China’s Army, said Beijing is losing its grip on the colonels.

“The young officers are taking control of strategy and it is like young officers in Japan in the 1930s. This is very dangerous. They are on a collision course with a US-dominated system,” he said.

Yet nothing is foreordained. Which is why it was so unsettling to learn that most of the leadership of the US Congress declined to attend the state banquet at the White House for Chinese President Hu Jintao, including the Speaker of House.

Senate Majority Leader Harry Reid called Mr Hu a “dictator”. Is this a remotely apposite term for a self-effacing man of Confucian leanings, whose father was a victim of the Cultural Revolution, who fights a daily struggle against his own hotheads at home, and who will hand over power in an orderly transition next year?

Or for premier Wen Jiabao, who visited students in the Tiananmen Square protests of 1989, narrowly surviving the “insubordination purge” that followed? These leaders may be wrong in their assessment of how much democracy China can handle without flying out of control, but despots they are not.


It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way

A Tale of Two Cities. Charles Dickens.

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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