Baltic Dry Index. 1519 -25
LIR Gold Target by 2019: $30,000. Revised due to QE.
“The Federal Reserve’s responsibility is to make sure that the institutions it regulates have good systems and good procedures for ensuring that their derivatives portfolios are well managed and do not create excessive risk in their institutions.”
Dr. Ben Bernanke. November 2005.
Today we focus on trouble in the international coal industry. All is not well with Old King Coal. A vital ingredient in the making of steel, (metallurgical coal,) and a vital ingredient in the making of electricity, (thermal coal,) trouble in Australia and South Africa has the world scrambling for supplies of coal. Though America can meet part of the missing supply, the rapidly rising price of coal will quickly get passed on to the consumer. Stay long precious metals ahead of our year of rising inflation. Food inflation is being joined by rising fuel inflation. Countries like China and Germany are starting to run low on coal.
Australia floods cause months, possibly years, of damage
By: Reuters 7th January 2011
GLADSTONE - Australia's flood-stricken coal industry may face months of disruptions as reports emerge of key rail and road links being washed away, while some infrastructure may take years to repair, authorities said on Friday.
"There are some aspects of the rebuilding of infrastructure that will take, potentially, years," Major-General Mick Slater, chief of the flood recovery operation in Queensland state, told a news conference in Rockhampton.
"We still don't know what it looks like underwater. I know that major roads, rail lines, and bridges are all damaged.
About 200 000 people scattered across an area the size of France and Germany combined have been affected by the flooding and three people killed. Damage from the floods, the worst in the state in 50 years, has been estimated at $5-billion.
Floodwaters were receding on Friday in some areas but fresh flooding was forecast downstream as a result of more monsoon rains.
The muddy inland sea has stranded some of Australia's best beef cattle on tiny islands, destroyed wheat and sugar crops, and swept deadly snakes into homes.
---- Australia's $50-billion coal export industry has been brought to a virtual standstill.
The biggest coal port, Dalrymple, has returned to near normal export levels, but port authorities are concerned they are being supplied by stockpiles from mines which may soon run out, causing exports to drop off if mines do not resume production. Gladstone port is closed, and more wet weather is forecast as the wet season has only just started.
The floods have swamped mines in Queensland state, paralysing operations that produce 35% of Australia's estimated 259-million tons of exportable coal. Australia contributes two-thirds of global coking-coal exports, needed to make steel.
Queensland's mines minister and analysts say it will be months until mines in Australia's biggest coking coal area, the Bowen Basin, are fully operational.
PUMPING WATER FROM MINES TO TAKE WEEKS
One obstacle facing flooded mines from resuming operations is they are only permitted to pump some water out of pits and into the still flooded rivers.
London-listed Anglo American , one of the nation's top four miners of steel-making coal, said it could take some weeks to pump water out of its flooded mines.
"It's going to take some months to come back fully online," Queensland Mines Minister Stephen Robertson told BBC.
In 2008, flooding stalled some mines for as long as six months, but others began producing within six weeks.
Anglo's major rivals, Rio Tinto , Xstrata and BHP Billiton , have also been hit by the floods, and all have made force majeure declarations.
SA coal ships delayed, rain hits KZN - sources
By: Reuters 7th January 2011
LONDON – South Africa has joined coal exporters facing shipment delays after three derailments on the line from mines to Richards Bay Coal Terminal (RBCT) brought stocks there to very low levels, industry sources said.
The delays to South African shipments, though minor, will exacerbate structural, fundamental tightness in thermal coal supply which has caused a 45% rise in prices since October, according to producers, traders and utilities.
International coal prices soared following floods in Queensland, Australia that have caused up to 4,5-million t of lost thermal coal exports .
Utilities in Asia are scouring the market for alternative cargoes but will find there is nothing to spare from South Africa because most cargoes were committed and stocks are so low that exporters are struggling to meet existing commitments.
STOCKPILES LOW
Vessels are waiting up to nine days to load at RBCT because there is insufficient stockpiled coal to load at the usual rate, they said.
"Port congestion at Richards Bay has increased to a high level -- as of the beginning of this week, nine vessels are anchored off Richards Bay, the largest amount since October 2009," said Jeffrey Landsberg, MD of dry bulk consultancy Commodore Research.
"The derailments have affected the loading of coal shipments," he said.
---- Stockpiles at RBCT fell to 1,7-million t at the start of the week, largely due to the derailments, producers said.
"Everybody has enough coal at the mines, we don't have enough trains," a producer source said.
The low stockpiles will have a definite impact on first-quarter exports, RBCT chief executive Raymond Chirwa said in a January 4 statement.
South Africa exported 63,43-million t of coal in 2010 -- less than half Australia's thermal exports -- but is a vital supplier to India, South Korea, Taiwan, and Europe.
So far heavy rains in parts of South Africa have not hit exports -- the problems have been due to slow rail transport. But severe rains in Kwa Zulu Natal have cut mine output and affected supply to state utility Eskom, producers said.
http://www.miningweekly.com/article/sa-coal-ships-delayed-rain-hits-natal-sources-2011-01-07
Next a troubling view of the current health of the world’s largest consumer. The Fed’s policies are generating dangerous divisions.
Deepening crisis traps America's have-nots
The US is drifting from a financial crisis to a deeper and more insidious social crisis. Self-congratulation by the US authorities that they have this time avoided a repeat of the 1930s is premature
By Ambrose Evans-Pritchard 7:39PM GMT 09 Jan 2011
There is a telling detail in the US retail chain store data for December. Stephen Lewis from Monument Securities points out that luxury outlets saw an 8.1pc rise from a year ago, but discount stores catering to America’s poorer half rose just 1.2pc.
Tiffany’s, Nordstrom, and Saks Fifth Avenue are booming. Sales of Cadillac cars have jumped 35pc, while Porsche’s US sales are up 29pc.
Cartier and Louis Vuitton have helped boost the luxury goods stock index by almost 50pc since October. Yet Best Buy, Target, and Walmart have languished.
Such is the blighted fruit of Federal Reserve policy. The Fed no longer even denies that the purpose of its latest blast of bond purchases, or QE2, is to drive up Wall Street, perhaps because it has so signally failed to achieve its other purpose of driving down borrowing costs.
Yet surely Ben Bernanke’s `trickle down’ strategy risks corroding America’s ethic of solidarity long before it does much to help America’s poor.
The retail data can be quirky but it fits in with everything else we know. The numbers of people on food stamps have reached 43.2m, an all time-high of 14pc of the population. Recipients receive debit cards – not stamps -- currently worth about $140 a month under President Obama’s stimulus package.
The US Conference of Mayors said visits to soup kitchens are up 24pc this year. There are 643,000 people needing shelter each night.
Jobs data released on Friday was again shocking. The only the reason that headline unemployment fell from 9.7pc to 9.4pc was that so many people dropped out of the system altogether.
The actual number of jobs contracted by 260,000 to 153,690,000. The “labour participation rate” for working-age men over 20 dropped to 73.6pc, the lowest the since the data series began in 1948. My guess is that this figure exceeds the average for the Great Depression (minus the cruellest year of 1932).
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We end for today with more on the rise of China. China is now the second leading buyer of Rolls Royce cars. China quietly accumulates gold. Not a bad idea given the mismanaged fiat currencies.
Chinese lift Rolls-Royce car sales
Sales of Rolls-Royce cars reached record levels last year as demand in Asia soared and cash-rich buyers splashed out on bespoke models as the global economy recovered.
By Graham Ruddick 7:13PM GMT 09 Jan 2011
China has now overtaken the UK to be Rolls' second- biggest market after the US, while Asia-Pacific is the biggest region thanks to strong growth in the UAE, India, Korea and Japan.
In 2010, 2,711 cars were sold in total, the highest level since new Rolls cars re-emerged under BMW ownership in 2003. The total is 171pc up on 2009 sales and more than double 2008's previous record of 1,212.
Rolls cars have a rich heritage in the UK, with Prince Charles and the Duchess of Cornwall using a classic Rolls-Royce Phantom VI on the night their convoy was attacked by rioters. That car had been with the Royal family for more than 30 years and the prestige associated with the brand has made Rolls popular in Asia.
Demand in 2010 was also fuelled by a new model, the Ghost. The car has been designed to be driven primarily by its owner, as opposed to the chauffeur-driver Phantom, and 80pc of buyers have never owned a Rolls car before.
However, Phantom sales also held firm as bespoke sales rose to record levels, according to Rolls. Bespoke models allow the customer to personalise various features, such as unique exterior paints and internal stitching.
China estimates 2010 gold output at record 340 t
By: Reuters 7th January 2011
BEIJING – China's gold output is expected to have exceeded 340 t in 2010, the Ministry of Industry and Information Technology said on Friday.
If confirmed, the annual figure would be a new record and an increase of more than 8 percent over the previous year. China has raised gold production every year since 2004, producing a total of 313,980 t in 2009.
The ministry said gold output in the first 11 months of the year was 308,390 t, up 9,2% from the same months of 2009
http://www.miningweekly.com/article/china-estimates-2010-gold-output-at-record-340-t-2011-01-07
"This is far and away the strongest global economy I've seen in my business lifetime."
Henry Paulson. July 12th, 2007
At the Comex silver depositories Friday, final figures were: Registered 44.89 Moz, Eligible 59.65 Moz, Total 104.54 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, the scoundrels pick each other’s pocket. Not to worry, only the Squid’s clients lose out. Wall Street Fees and Emoluments 1 billion, Wall Street Clients and Dupes minus 600 million. It’s like taking candy from a baby. Wall Streeter’s can do “God’s work” like this till the cows come home.
"the fallout in subprime mortgages is "going to be painful to some lenders, but it is largely contained."
Henry Paulson. March 13th, 2007
Paulson Group Said to Seize CNL Hotels From Morgan Stanley Funds
By Hui-yong Yu and David M. Levitt - an 8, 2011 5:01 AM GMT
A lender group including Paulson & Co., the New York-based hedge fund run by John Paulson, seized control of former CNL Hotels & Resorts Inc. properties from Morgan Stanley’s real estate funds through a $600 million debt restructuring, said two people with knowledge of the deal.
The transaction involves the corporate debt used to finance Morgan Stanley’s 2007 acquisition of the hotel owner near the peak of the real estate market. Under the terms of the restructuring, $200 million of corporate debt was extinguished and $400 million was converted into equity, said the people, who asked not to be identified because the information is private.
In addition to Paulson, the lenders are Winthrop Realty Trust, Capital Trust Inc. and Morgan Stanley’s special property group, according to the people. The restructuring, completed Jan. 6, gave the group control of eight luxury resorts, one of the people said. Morgan Stanley’s real estate funds have the right to participate in future capital raising, they said.
Erica Platt, a spokeswoman for Morgan Stanley in New York, declined to comment. Armel Leslie, a Paulson spokesman, declined to comment, as did Beverly Bergman, a spokeswoman for Boston- based Winthrop. Stephen Plavin, chief executive officer of Capital Trust, didn’t respond to a call and e-mail yesterday.
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“With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”
Dr. Bernanke. November 2005.
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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