Monday, 28 February 2011

Oil At $100.

Baltic Dry Index. 1245 +03

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

Costanza Jacazio, an energy analyst at Barclays Capital in New York, says further unrest — or simply fear of further unrest — could well drive oil prices higher. “The degree of geopolitical risk now is massive.”

With world attention focused on events in Libya, and the temporary loss of about 1.4 mbpd of Libyan light oil, speculators and oil companies have nervously bid up the price of oil to $100 for West Texas Light, and about $119 for Brent Crude. Will that give a big push towards the second electric revolution and e-mobility, and with it extra demand for many of the REEs? The simple answer is no and maybe.

For now it’s assumed that once a new government is installed in Libya, Libyan oil production will quickly come back on-stream again, oil prices will decline, and any extra push towards the second age of electricity will be fleeting. Besides, converting the world to e-bikes, cars, busses and commercial vehicles, is a multi-year decadal project, with very little inputs from short term crises. Complacently we all “know” in our hearts, that Libyan oil is coming back quickly. But is that complacency really correct? What if the unthinkable needs to be thought? What if this is just the start of a long extended period of Middle East instability in the region that produces about 32% of the world’s oil supply. In effect, about almost 100% of the world’s “mobility”. Airplanes, busses, cars, trucks, many trains, shipping and most vans all run on derivatives of oil. Oil is the world mover of people and goods.

That’s where the “maybe” kicks in. There’s a generational dimension to the revolutions sweeping the region, the old order is no longer acceptable to the masses outside of the first tier of the old order. From Morocco to Iran the masses want change, yet change isn’t necessarily compatible with keeping an uninterrupted oil supply flowing. Or at least, flowing in the way we are accustomed to having it flow. First, the thousands of traumatized workers who have just fled Libya are unlikely to be in any hurry to immediately return. It may not be possible to get Libyan oil production back up to 1.4 mbpd again, at least not as quickly as we currently assume. The loss of this quality light crude will have to be made up from rickety Nigeria, just possibly Ghana might be a contender too. Pumping extra heavy sour crude in Saudi Arabia is of little value to most of the world’s refineries. We just might be looking at an oil price structure with much more upside than downside.

In the Gulf, Bahrain has to try to work out some sort of transition to a constitutional monarchy with an elected government. Or alternately, a republican democracy dispensing with monarchy. But that, once it happens, will become a blueprint for change in Saudi Arabia, Kuwait, and the UAE. Across the Gulf in Iran, the pressure for democratic change will only grow. All of which implies that regional instability is likely to be with us for months, and probably we’ll be very lucky if we get out of all this without some sort of further oil disruption ahead. Once that realization takes hold, our over dependence on oil as a method of transportation, becomes obvious and some much better minds than mine will be attracted back to the business of making e-transportation fast tracked. That probably means more efforts in solar and wind renewable energy. More expedited investigation of tidal resources. More input from those working on “clean coal” solutions. An expedited push towards nuclear. For without the reliable availability of the “e” in e-mobility, there won’t be an e-mobility era. Much of which will generate extra demand for REEs 2015-2025.

Shorter term, US stock markets remain vulnerable to another flash crash driven by oil news, and likely will remain so for weeks. Below, today’s update on Libya.

Tremors From Libya Threaten to Rattle the Oil World

By JAD MOUAWAD and CLIFFORD KRAUSS Published: February 27, 2011

This is no oil shock — not yet, anyway.

But the events unfolding in the Arab world, the epicenter of global oil production, are a sobering reminder that trading in oil, that mother of all commodities, is at heart a political game. Not since Iraq invaded Kuwait in 1990 have the politics of crude loomed so large. Like much of the Arab world, this market seems like a pocket full of firecrackers, just waiting for a match.

As rebels tightened their noose around Tripoli on Sunday, its critical oil supplies remained constricted. Production from most of Libya’s oil fields was down to a trickle.

Several ports and refineries were left stricken by workers too afraid to go to work. And with most foreign oil company employees having left the country and armed men beginning to loot equipment left behind, a return to normal production appears weeks away at best.

About 80 percent of the nation’s oil production lies in rebel-held territory, though there is not a way to verify how much rebel leaders directly control.

Granted, the world can cope with a disruption of exports from Libya. But what has brought us to $100-a-barrel oil again — and set people on edge — is the possibility that the uprisings that toppled autocrats in Egypt and Tunisia might spread to other OPEC nations in the Middle East.

For the moment, heavyweights like Saudi Arabia can make up the difference, and big consumers, like the United States, have stored millions of barrels of oil for just this kind of emergency.

But few oil experts are surprised that the unrest has so unnerved the market. The world is thirsty for oil, and supply and demand are in delicate balance. There is little room for more disruptions in supplies. Indeed, spare capacity — essentially that amount of extra oil that OPEC members are able to produce in a pinch — is now about five million barrels a day. That is about 6 percent of the oil that the world consumes every day. That cushion is greater than in 2008, when it equaled about 2 percent of daily consumption, but it remains worryingly thin. And that is not even taking into account the loss of about one million barrels a day exported from Libya.


Jan Stuart, an energy economist at Macquarie Securities, explained: “This brings back the political dimension to oil-price dynamics. For the best part of the past 25 years, the Saudis have bent backwards to make sure politics would be banned from discussions about oil supplies. The risk today is we could go back the other way again.”

At the Comex silver depositories Friday, final figures were: Registered 43.17 Moz, Eligible 59.76 Moz, Total 102.93 Moz.


Crooks and Scoundrels Corner.

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

No crooks today just a warning from China. China’s leaders want the pace of growth in the economy lower. If they are serious about making it happen, it will happen. That’s pretty much how China still works, but what would it mean for the rest of the world economy? Lower imports, for a start, and a slower recovery on either side of the Atlantic? If so, it looks like QE3 will be happening by year end. Stay long precious metals.

"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise."

Jerome F. Smith

China lowers growth targets

China's Premier has lowered the country's economic growth targets and declared that the world's second-biggest economy can no longer "blindly" pursue unsustainable expansion
By Rupert Neate 6:59PM GMT 27 Feb 2011

Wen Jiabao reduced China's annual growth target from 8pc to 7pc for the next five years in an effort to curb soaring food and housing prices.

In an online "chat" with his nation's citizens, Mr Wen said: "We want to put the emphasis of our work on the quality and the benefits of economic growth. We want the fruits of development to benefit the people."

Mr Wen said China must become more self-sustainable by increasing domestic consumption and reducing its reliance on exports and investment.

Analysts said that while Mr Wen's message was clear, the lower growth target was principally a symbolic gesture because China has exceeded its previous 8pc target every year for the last six years. Last year growth reached 10.3pc, making China the fastest-growing major economy in the world.

Alistair Thornton, China analyst for IHS Global Insight, said: "The roadmap is clear, but the extent to which the political will and power is sufficient remains to be seen."

Kenneth Jarrett, head of APCO Worldwide's China consultancy, said: "No one will really have 7pc as their target. Everyone's going to be higher than that. [But] the message is that they want growth to slow down."

Mr Wen acknowledged that the gap between China's official rate of inflation and the cost of food and housing is making life difficult for hundreds of millions of Chinese people.

Officially inflation is running at almost 5pc, but food prices are climbing at an annual rate 10pc, according to figures released in January.

"Rapid price rises have affected the public and even social stability," Mr Wen said, in the online forum which was broadcast across all state media in China. "The Party and Government have always made a priority of keeping prices at a generally stable level."

The decision to lower China's growth target came as Mario Draghi, a possible successor to Jean-Claude Trichet, the President of the European Central Bank, became the latest top-ranking official to warn of the dangers of accelerating inflation.

"The first requisite of a sound monetary system is that it put the least possible power over the quantity or quality of money in the hands of the politicians."

Henry Hazlitt

The monthly Coppock Indicators finished January:

DJIA: +161 Down 10. NASDAQ: +228 Down 10. SP500: +161 Down 4.

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.

Saturday, 26 February 2011

Weekend Update February 26, 2010

Baltic Dry Index. 1245

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

This weekend, it’s all about oil and Libya. Will Saudi Arabia collapse like Tunisia? What would it mean for oil supplies if it did. Today, a what if and a new reality for Italy. Is Germany ready to bailout Italy? In all likelihood they can’t even if there was the will to do it, taking on tiny Greece and Ireland was hard enough. If Italy goes, the euro goes with it. European Debt Union anyone? The fall of Gaddafi might finally knock some sense into the capitals of Europe. Do they really want a United States of Europe, that contains Europe’s PIIGS?

"The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."

Hans F. Sennholz

If the Saudis revolt, the world’s in trouble

The fate of the global recovery rests on events in Riyadh , says Jeremy Warner.

By Jeremy Warner 8:24PM GMT 24 Feb 2011

Be careful what you wish for. After an ambiguous start, Western leaders have broadly welcomed the wave of protest and revolutions sweeping North Africa and parts of the Middle East. But beneath the words of encouragement about people taking charge of their own destiny, there is a growing and vital concern – the security of our oil and gas supplies.

The West’s complicity in supporting the autocratic regimes that characterise many of the big oil-exporting nations is in part explained by the fact that, whatever their sins, they did at least seem to provide stability in the energy markets. That stability, however, has been thrown up in the air by the wave of protest sweeping the region.

Initially, it was assumed that there was a difference between oil-poor Arab nations such as Tunisia and Egypt, where the uprisings have been as much about living standards as anything else, and the much richer Gulf states. That theory was swiftly proved wrong.

In Saudi Arabia, even King Abdullah’s panicky decision to order another multi-billion-dollar splurge of spending on education, healthcare and infrastructure may not be enough to buy off the opposition. People seem to want something more precious than money: freedom.

Whatever happens, speculation about the possibility of major interruptions in supply has sent the already perky oil price bounding higher. At one point yesterday, Brent crude hit $120 a barrel, which in real terms is approaching the sort of peaks we saw in the 1970s.

---- Everyone has been so focused on buttressing the banking system against further catastrophe that they seem to have forgotten about the continued power of oil to shock. Analysts have polarised into

two distinct camps – the alarmist and the broadly sanguine, with little room for argument in between.

Those of a sanguine disposition point to the fact that, although Libya is an important producer, it represents less than 2 per cent of global output. Even if all production were suddenly to cease, the Saudis and other producers should be able to fill the gap from their ample reserves of spare capacity.

This, of course, assumes that the Saudis do indeed possess such spare capacity (many believe they don’t) and that it remains largely unaffected by the unrest. If Saudi falls, then the oil price will go through the roof, and probably stay there for a considerable length of time. That’s the alarmist scenario – and it seems more likely by the day.

----- One positive effect of high prices is that they encourage this process. After each recession, the gas guzzlers eventually return to American highways, but always in smaller numbers than before. Most nations are also taking steps to insulate themselves from these shocks by developing alternative sources of energy. If oil consumption per head in the US were to fall to European levels, it would reduce world demand by a quantity approximately equal to Saudi’s entire output.


Kissing the Hand of the Dictator

What Libya's Troubles Mean for Its Italian Allies

By Hans-Jürgen Schlamp 02/25/2011

Few countries stand to lose more from the possible fall of Libyan dictator Moammar Gadhafi than Italy. Rome has invested heavily in Libya, and the country, in return, also has significant holdings in many top Italian companies. Those deep ties could now haunt Silvio Berlusconi's government.

When it came to deep male bonding, the two were bosom buddies. Moammar Gadhafi, the self-named "Revolutionary Leader" of a North African country rich in oil and gas, even invited his "amico" from Rome, Prime Minster Silvio Berlusconi, to his harem, where the Italian leader learned about "bunga bunga" sex games. Berlusconi reciprocated in his own way. Last spring, a guest at a meeting of Arab leaders in Sirte, Libya, Berlusconi kissed the Libyan leader on the hand to greet him, a gesture he usually reserves for the pope.

Berlusconi long remained loyal to his buddy from across the Mediterranean. Just last week, as Gadhafi had already begun to gun down and bomb Libyans protesting against his regime, Berlusconi refused to utter a single word of criticism, saying instead that he preferred not to "disturb" Gadhafi.

As recently as Monday, Italy blocked a European Union resolution condemning the killing. Only after Washington exerted massive pressure -- including several phone calls by Secretary of State Hillary Clinton to Rome -- did Berlusconi cave in. When he finally did, though, he did so completely. Italian daily La Republicca quoted him as saying that Gadhafi was "crazy," and that he might even resort to firing rockets at Italy.

Immense Damage for Rome

But even if the Libyan leader doesn't live up to such dire predictions, the damage to Italy is already immense. The Italian business sector is particularly concerned. Libya, after all, is far more to Italy than a mere raw materials supplier and important importer of Italian products. It also has stakes in many Italian firms. With a 7.2 percent holding, the desert nation is the most powerful shareholder in Unicredit, Italy's largest bank. Correspondingly, the bank's vice president is a Libyan, Farhat Bengdara, who is also the head of the central bank in Tripoli. His whereabouts are unknown at the moment. Unicredit President Dieter Rampl says they have no contact with Bengdara.,1518,747745,00.html#ref=nlint

“With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."

F.A. von Hayek


Friday, 25 February 2011

Goodbye Friday 2?

Baltic Dry Index. 1242 -11

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

Like many of the refugees arriving at the border, Marwan complained about the lack of effort on the part of Tunisia to evacuate its citizens from Libya -- the local Tunisair official even tried to blackmail them into handing over €90 each for a seat on the plane. "I went to Libya because there is no work here," Marwan said, "but they have always been racist toward us. I will never go to work in an Arab country again. Only to Europe."

Is today “goodbye Friday” for the Gaddafi regime in Libya? Even if it isn’t, Libya’s chaos will be with us for months. Libya’s oil has stopped flowing and is unlikely to restart anytime soon. Italy, Germany, France and Spain will be the big losers. Getting replacement light crude won’t be easy. Tens of thousands of foreign workers have left or are leaving, with many traumatized and unlikely to return. A great wave of mass migration from north Africa to Europe looks likely in the coming weeks and months. All kinds of Libyan construction projects now look likely to fail with the regime. Construction companies from Turkey to Italy look likely to get stiffed. All kinds of investment into Libya over the last few years will probably have to be written off. Below, today’s update on the continuing chaos in Libya.

FEBRUARY 24, 2011

U.S. Fears Tripoli May Deploy Gas As Chaos Mounts

WASHINGTON—The government of Col. Moammar Gadhafi hasn't destroyed significant stockpiles of mustard gas and other chemical-weapons agents, raising fears in Washington about what could happen to them—and whether they may be used—as Libya slides further into chaos.

Tripoli also maintains control of aging Scud B missiles, U.S. officials said, as well as 1,000 metric tons of uranium yellowcake and vast amounts of conventional weapons that Col. Gadhafi has channeled in the past to militants operating in countries like Sudan and Chad.


Refugees from Libya

Gadhafi's Henchmen Chase Foreigners

By Mathieu von Rohr  in Ben Guerdane, Tunisia 02/24/2011

Death, destruction and terror -- refugees coming from Libya tell of horrific scenes as Moammar Gadhafi tries to stay in power. Foreigners, especially Tunisians and Egyptians, have become a particular target in the latest wave of violence.

At the Ras Jdir border crossing a stream of refugees has been fleeing western Libya for three days. Nearly all the tired, scared people who arrive here in Tunisia have horror stories about the bloodshed in Libya and Moammar Gadhafi's dwindling grip on power. Many have told of rebels storming army weapons depots in the town of Zuara, 50 kilometers from the border, and celebrating on the streets. And the rebels are reportedly in power in most other cities in the 150 kilometers between Tripoli and the western border of Libya, while Gadhafi's forces supposedly only have firm control in the capital and the border region.

Most of the arrivals also reported encountering pro-Gadhafi forces on the road, too. There is utter confusion: Every few kilometers, different militias and soldiers hold sway. Anarchy prevails. Some tell of having been robbed by Libyan taxi drivers. Others praise ordinary Libyans who defended them from Gadhafi's henchmen. According to media reports, Misurata, the country's third largest city which is situated east of Tripoli, has now fallen to the rebels.

----Like most who have escaped, Marwan, 23, has a shocking story to tell. He made it to Tunis airport on a special Tunisair flight, he says, trembling and wide-eyed at the horrific scenes in Tripoli. He'd worked as a hairdresser in the capital for a year, but three days ago a group of Gadhafi supporters stormed the apartment where Marwan lived with other Tunisians. They foreigners were attacked with knives and beaten with rifle butts; many were seriously injured. Gadhafi's men vandalized the apartment, says Marwan, stealing mobile phones and all their savings -- including $3,000 (€2,200) belonging to him. "I saw 15 to 20 dead foreigners behind a hospital with my own eyes, it was horrible," he said.


Libya: Gaddafi's billions to be seized by Britain

Ministers have identified billions of pounds that Col Muammar Gaddafi and the Libyan regime have deposited in London, The Daily Telegraph can disclose.

By Robert Winnett, and James Kirkup in Muscat 10:52PM GMT 24 Feb 2011

The funds are expected to be seized within days. The Treasury is understood to have set up a unit to trace Col Gaddafi's assets in Britain, which are thought to include billions of dollars in bank accounts, commercial property and a £10 million mansion in London.

In total, the Libyan regime is said to have around £20 billion in liquid assets, mostly in London. These are expected to be frozen as part of an international effort to force the dictator from power.

A Whitehall source said: "The first priority is to get British nationals out of Libya. But then we are ready to move in on Gaddafi's assets, the work is under way. This is definitely on the radar at the highest levels."

Col Gaddafi was on Thursday accused of ordering the deaths of thousands of protesters, but he refused to surrender as Libya descended into civil war.

----Hundreds of Britons were finally able to leave Libya in military planes and on a Royal Navy warship after several days stranded in the country. More than 350 British nationals had been rescued by last night.

Those returning to this country spoke of Libya "descending into hell". United Nations experts estimated that more than 3,000 people may have died, while militias were reported to have executed wounded protesters.

Special forces soldiers were understood to be assisting the evacuation of dozens more British oil workers.


FEBRUARY 24, 2011

Chaos Hinders Mass Evacuation

For two days, Italian telecom worker Enzo Presutti hunkered down in a Libyan hotel as gunfire ripped across Tripoli, waiting to make a run for the airport.

"We felt completely abandoned," Mr. Presutti told Italian television reporters shortly after arriving in Rome on a Tuesday flight from Libya.

Tens of thousands more foreigners remain in Libya, caught up as a government meltdown and street battles have derailed one of the biggest cross-border evacuations of the past decade.

Countries world-wide were seeking Wednesday to repatriate their citizens from Libya, where oil, telecommunications, construction and other jobs employ more than 100,000 foreign nationals—Italians and Dutch, Chinese and Americans, Turks and Greeks. With most commercial flights canceled, countries were organizing planes, ships and even buses and fishing boats to evacuate their citizens.

These efforts are running up against the turmoil of Col. Moammar Gadhafi's Libya. As central control unravels, rescue planes from France and Netherlands were unable to get clearance to land; after circling above Tripoli, the flights were diverted to Sicily and Malta. Russian news agencies said a plane sent by energy giant OAO Gazprom was forced to land in Malta. A plane sent by China was waiting in Athens for clearance to proceed.

----Libya's ports, too, were closed. Some evacuation ships were getting through, but the U.S. State Department said a ferry that had been scheduled to evacuate Americans on Wednesday had been waylaid in Tripoli due to inclement weather. Those onboard were safe, it said. The U.S. State Department estimates there are several thousand Americans in Libya, many of them with dual citizenship.

-----Countries also helped one another. The Dutch Ministry of Foreign Affairs said one flight that had already landed in the Netherlands carried 32 Dutch citizens and 50 others, including Belgians, British and Americans. Russia's Emergency Situations Ministry said it was seeking to evacuate 1,263 people, including Turkish, Serbian and Montenegrin citizens working in Libya with Russian companies.

Turkey had among the most extensive rescue operations, as it extracted an initial 5,000 of the 25,000 Turkish citizens estimated to be in Libya. On Wednesday, several aircraft—one from Turkish Airlines, as well as charter jets from Egypt and a Libyan Airlines aircraft—landed hundreds of passengers at airports around Turkey.

-----"Thousands of Egyptians, with bags and sacks, were sitting around [the airport] wanting to get out," she said, as she disembarked from an Austrian Airlines flight from Tripoli. "There was fighting, people were hit with batons by the airport security personnel," she added.

Austrian Airlines said late Wednesday that it had suspended Tripoli flights because safety couldn't be guaranteed.

Egypt, which shares a border with Libya, is also bracing for an influx. Foreign Minister Ahmed Abul Gheit told local media that Libya hosts 1 million to 1.5 million Egyptian expatriate workers, many of whom will be eager to return.


The chaos of Libya has the ability to tip the global economy back into severe recession. The loss of 1.4 mbpd of Libyan light crude isn’t really replaceable. Nearly all the excess production capacity is heavy sour crude unsuitable for the refineries that were getting Libyan crude. Equally bad, who’s next. Unstable regimes cling to power in energy exporting Algeria and Saudi Arabia. With turmoil in Bahrain, who will want to invest in or move to Dubai? More and more Dubai look like a mal-investment doomed to permanent default.

At the Comex silver depositories Thursday, final figures were: Registered 41.91 Moz, Eligible 60.42 Moz, Total 102.33 Moz.


Crooks and Scoundrels Corner.

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

No crooks again, just an assessment on the Libyan disruption is about to affect us all.

As you can see, were oil to go back to $150 a barrel and stay there, that would add more than 3 percentage points to US inflation but only 1 point to inflation here.

Hamish McRae: Oil's power to shock the world economy has not gone away

Economic Life: Opec has promised to increase production to offset any reduction in output from Libya. Yet the oil price has risen by more than $20 a barrel

Friday, 25 February 2011

It gets worse. At some stage – and let us all hope soon – Libya will be back to some sort of calm and a new regime installed. Meanwhile the world has to cope with the reality that a civil war in a middling-sized oil producer – it pumps a little more than the UK – has had an immediate and potentially devastating impact on the oil price and potentially on the world economy. What is happening is primarily a human story and a deeply distressing one. But it is also an economic story, so some words about that.

You can see what has happened to the oil price in the top graph: a surge from the levels during the early period of the recession, but still a long way from the previous peak. But the surge is troubling for obvious reasons. For a start, the price was rising even ahead of recent events. Note, too, that this is a relatively small shock to supply. Opec has assured the markets that other members will increase production to offset any reduction from Libya. And yet the oil price has risen by more that $20 a barrel. This matters tremendously because oil is still the principal source of the world's primary energy source, larger than gas or coal and far larger than the renewable options. It is also an important chemical feedstock, so it is not just energy prices that are pushed up: a large range of other prices are affected too.

So what will be the inflation effect? It is difficult to calculate because you have to allow for secondary effects as well as the initial one, so any estimates should be treated cautiously but I have been intrigued by some calculations by Fathom Consulting shown in the bar charts. Along the bottom axis is the price of oil, working from a base of $90 a barrel, in $10 increments. On the vertical axis is the rise in the inflation in the UK, measured by the RPI, in Europe and in the US. As youcan see we are all affected but the US is affected much more seriously than the UK and continental Europe.

-----So what happens now? I think the question really is whether this is just Libya, or whether unrest spreads to places such as Algeria and the Gulf. You begin to try to think through worst case scenarios, the various "what if?" questions.


Another weekend, and a worrying one at that. Time to fill up the cars and fuel cans, and start making plans for life under a different oil supply regime. If Saudi Arabia blows, better a plan b, than none at all. If Bahrain is about to reinvent itself as Sunni constitutional monarchy with a Shiite elected government, will change be long delayed in Kuwait and Saudi Arabia? Have a great weekend everyone. Nissan Leaf???  Stay long gold and silver, a new recession brings in QE 3, 4, 5 and 6.

The monthly Coppock Indicators finished January:

DJIA: +161 Down 10. NASDAQ: +228 Down 10. SP500: +161 Down 4.

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.

Thursday, 24 February 2011

Libya – What Next?

Baltic Dry Index. 1253 -26

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

"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."

William F. Rickenbacker

With the end near for the regime of Gaddafi, the big question is what next? Will whoever takes power be able to keep the oil flowing, now that tens of thousands of foreign engineers have fled? How many will return and how soon? About half the Libyan population relied on state salaries and handouts in one form or another, what happens to them? The Libyan dinar is a fiat currency, just like the dollar, Pound and Euro, what value have the savings of most of the Libyan people? Is a great wave of mass migration north, next? Can Italy survive without Gaddafi, given its dependence on Libyan oil and Gaddafi’s recycled dollars? If a repressive regime like Gaddafi’s can fall to people power, how long can a repressive monarchy last in Saudi Arabia? Can the remaining pro-west monarchies in the Middle East reform into constitutional monarchies in the face of mounting people power, or is it already too late? Yes, from our western and Chinese perspective, it’s all about oil. Without cheap, free flowing oil, the global economy as we know it comes to a slump. No one can see the future, but suddenly our future has never looked more iffy, our politicians never looked so irrelevant. Below, this morning’s coverage of the Libyan crisis.

FEBRUARY 24, 2011

Gadhafi Flails as Libya Splinters

----The chaos that has consumed Libya since protesters last week began pushing for Col. Gadhafi's ouster has spawned an array of security concerns—over oil supplies, the safety of tens of thousands of foreign workers there and the risks posed by the weapons in Col. Gadhafi's remaining arsenal.

Oil prices surged over fears about the security of supplies from Libya, a major oil producer. Prices for light, sweet crude for April delivery—the main U.S. oil contract—at one point in the trading day hit $100 a barrel for the first time in more than two years.

The U.S., China, Turkey and several European nations struggled to bring home citizens stranded in Libya, where an estimated 100,000 foreigners work in industries including oil and construction. Airplanes sent from France and the Netherlands circled Tripoli's airport but had no clearance to land and turned back.


Libya: civil war breaks out as Gaddafi mounts rearguard fight

Forces loyal to Col Muammar Gaddafi made good on threats to trigger a civil war in Libya on Wednesday night, by taking up positions across the capital, Tripoli and launching a rearguard fight against rebels in major cities.

By Richard Spencer, Middle East Correspondent 9:17PM GMT 23 Feb 2011

Residents of parts of the capital were trapped in their homes as "thousands" of soldiers patrolled the streets accompanied by African mercenaries.

Tanks took up positions around public buildings including government offices, while sandbag defences were also being built.

"We will fight until death," a pro-Gaddafi soldier in his early 20s said outside a military compound close to Tripoli's Green Square, which had been cleared of demonstrators by yesterday morning.

"The country needs stability at a time like this, and this is what we are providing. The people are on our side."

Residents said bodies were still piling up in hospitals from the shootings of the previous two days.


Tripoli: a city in the shadow of death

Gunfire in the suburbs – and fear, hunger and rumour in the capital Thousands race for last tickets out of a city sinking into anarchy
Robert Fisk, with the first dispatch from Libya's war-torn capital, reports

Thursday, 24 February 2011

Up to 15,000 men, women and children besieged Tripoli's international airport last night, shouting and screaming for seats on the few airliners still prepared to fly to Muammar Gaddafi's rump state, paying Libyan police bribe after bribe to reach the ticket desks in a rain-soaked mob of hungry, desperate families. Many were trampled as Libyan security men savagely beat those who pushed their way to the front.

Among them were Gaddafi's fellow Arabs, thousands of them Egyptians, some of whom had been living at the airport for two days without food or sanitation. The place stank of faeces and urine and fear. Yet a 45-minute visit into the city for a new airline ticket to another destination is the only chance to see Gaddafi's capital if you are a "dog" of the international press.

There was little sign of opposition to the Great Leader. Squads of young men with Kalashnikov rifles stood on the side roads next to barricades of upturned chairs and wooden doors. But these were pro-Gaddafi vigilantes – a faint echo of the armed Egyptian "neighbourhood guard" I saw in Cairo a month ago – and had pinned photographs of their leader's infamous Green Book to their checkpoint signs.

----I was told that at least 30,000 Turks, who make up the bulk of the Libyan construction and engineering industry, have now fled the capital, along with tens of thousands of other foreign workers. On my own aircraft out of Tripoli, an evacuation flight to Europe, there were Polish, German, Japanese and Italian businessmen, all of whom told me they had closed down major companies in the past week. Worse still for Gaddafi, the oil, chemical and uranium fields of Libya lie to the south of "liberated" Benghazi. Gaddafi's hungry capital controls only water resources, so a temporary division of Libya, which may have entered Gaddafi's mind, would not be sustainable. Libyans and expatriates I spoke to yesterday said they thought he was clinically insane, but they expressed more anger at his son, Saif al-Islam. "We thought Saif was the new light, the 'liberal'", a Libyan businessman sad to me. "Now we realise he is crazier and more cruel than his father."


Libya: Middle East airports turn away Gaddafi planes

Airports around the Middle East were on Wednesday night turning away planes carrying members of Col. Muammar Gaddafi's family.

An official at Beirut Airport in Lebanon said it had denied a request to allow a plane belonging to the Gaddafi family to land. On board was Aline Skaff, the wife of one of the dictator's sons, Hannibal Gaddafi.

A Libyan Arab Airlines aircraft carrying 14 people made an unscheduled appearance in Maltese airspace and was also refused permission to land after failing to supply full details. Al-Jazeera said it was carrying Gaddafi's daughter, Ayesha.

It was not clear whether Gaddafi's family were defecting or being sent to safety. Gaddafi's sons are said to be leading the effort to defend his regime.

Other senior figures were actively going over to the rebels. Questions were still being asked about the statement read from his office in Benghazi by the former public security minister, Abdul Fattah Younis, that he had changed sides. The government claimed he had been kidnapped and was making his statement under duress.

The justice minister, Mustafa Abdel-Jalil, was among the first to stand down. He is now saying he has evidence that Col. Gaddafi personally ordered the Lockerbie bombing.


Libya: Italy fears 300,000 refugees

Italy fears that up to 300,000 Libyans could try to reach Italian soil as a result of the chaos in the North African country.

Feb. 23, 2011, 12:01 p.m. EST

Italy’s ties to Libya in spotlight amid unrest

Libya turmoil could hurt Italian companies, Eni in focus

LONDON (MarketWatch) — Few European countries have closer ties to Moammar Gadhafi’s Libya than Italy.

It’s little surprise then that the Italian stock market fell sharply this week, as a popular uprising against the 42-year regime of Gadhafi escalated, leading to violent turmoil and uncertainty about the path ahead for the oil-rich North African nation.

Libya, which was once an Italian colony, is a key supplier of oil and natural gas to Italy. Prime Minister Silvio Berlusconi’s government has spent years wooing Gadhafi, leading to considerable cross-border investment.


Stay tuned for what the fall of Libya means for the west. While Europe can always drop fuel taxes to soften the economic blow from rising oil prices, in North America that’s not really an option given their low fuel taxes. If Libyan oil exports drop to any significant extent, first Italy and Germany will scramble for replacement oil, followed quite quickly by all the rest of the world.

In other news, Ireland goes to vote tomorrow. To vote to be German and ECB serfs forever, or to vote to be brave Icelanders and take back their lives. Out of the news due to events in Libya, as Ireland votes probably determines how long the Euro has left. Still if Italy falls with the regime in Libya, the great one size fits all, fiat Euro experiment will come to an end, possibly triggering then end of the great Nixonian blunder of fiat currency.

FEBRUARY 24, 2011

Irish Remedy for Hard Times: Leaving

CARLOW, Ireland—The people of Ireland go to the polls Friday to deliver what's expected to be a knock-out blow to the governing party. But many are choosing to vote in a traditional Irish fashion: with their feet. Tens of thousands are joining in a new wave of emigration, turning their backs on a country mired in economic malaise.


"The history of paper money is an account of abuse, mismanagement, and financial disaster."

Richard M. Ebeling

At the Comex silver depositories Wednesday, final figures were: Registered 41.91 Moz, Eligible 60.45 Moz, Total 102.36 Moz.


Crooks and Scoundrels Corner.

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

No crooks today. With momentous events happening in Libya and Ireland about to vote out the Euro, who needs an update on Wall Street’s crooks. A failure of Libyan oil supply or a failure of Italy and the Euro, are quite enough to bring down the banksters of Wall Street. “God’s work” on Wall Street might be coming to an end.

"Were we to be directed from Washington when to sow and when to reap, we should soon want bread."

Thomas Jefferson

The monthly Coppock Indicators finished January:

DJIA: +161 Down 10. NASDAQ: +228 Down 10. SP500: +161 Down 4.

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.

Wednesday, 23 February 2011

A Libyan Disaster.

Baltic Dry Index. 1279 -16

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

"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."

Antony C. Sutton

This morning Libya stands at the brink of disaster. Italy and continental Europe, stand facing the loss of up to 1.4 million barrels of crude oil a day. If Libya collapses will Italy collapse with it? Will the ECB be up to the task if Italy collapses? Will Gaddafi unleash civil war on a Libyan people yearning to be free? Will any outside power be tempted to intervene? Today and tomorrow, appear to be the critical days.

FEBRUARY 23, 2011

Dictator Loses Grip in Desert

On the ground in the eastern chunk of this oil-rich desert nation, the signs of rebellion are plain to see in the armories of a military base near Baida: Weapons crates lie busted open and empty. Rifles are missing from their racks. Left behind are helmets and gas masks and cleaning kits—things that can't shoot.

For four days, rebels newly armed with anti-aircraft guns and Kalashnikovs battled forces loyal to Libyan strongman Col. Moammar Gadhafi and commanded by one of his sons. After days of firefights, feints and an ambush on unarmed local sheiks, the regime forces surrendered their hold on the vital local airport Tuesday morning—placing nearly all of eastern Libya outside Col. Gadhafi's control.

----- On Tuesday, Libya's top policeman, a longtime Gadhafi loyalist, joined the string of diplomats, soldiers and others to abandon their leader of 42 years. In a video aired on the Al Jazeera news channel Tuesday, Interior Minister Abdel Fattah Younes al-Abidi announced his support for anti-Gadhafi protesters and called on Libya's armed forces to switch loyalties. It was unclear how much influence he has over the key security forces considered die-hard loyalists to the regime, such as the armed revolutionary committees or the military units controlled by Col. Gadhafi's family members.

----The events threw one of the region's major oil economies into turmoil. Libya's ports—including Zawia, Tripoli, Benghazi and Misurata—have been closed, traders in the country said. Foreign oil companies, including Italy's Eni SpA and Spain's Repsol YPF, said they had suspended some operations.

With Col. Gadhafi inciting more clashes and the streets around Tripoli still heavily patrolled by uniformed security forces, many Libyans feared that the nation could fracture on tribal or regional lines.

"We've been calling for an end to Gadhafi's rule for years," said Hafed Al-Ghwell, a U.S.-based Libyan opposition activist. "But what we've always feared is the day after. Right now it looks like the worst-case scenario is coming true—that Libya becomes like Somalia, with every strongman with a gun ruling his own fiefdom."


In other news, China seems to want to fast track the Yuan in world trade. But is a Beijing controlled fiat Yuan any improvement on a Washington controlled fiat dollar? Why would communist politicians in Beijing run a fiat currency any better than Washington politicians have run fiat dollar over the last 40 years?

"Gold bears the confidence of the world's millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history. There is no reason to believe it will lose the confidence of people in the future."

Oakley R. Bramble

Yuan convertibility may quicken - PBOC official

Published: Tuesday, 22 Feb 2011 | 1:13 AM ET

By James Pomfret and Farah Master

HONG KONG, Feb 22 (Reuters) - The pace of the yuan's convertibility may accelerate as global demand grows for trade settlement in the Chinese currency, a Chinese central bank official said.

"If you look at the history and the progress of international use of our renminbi (yuan), you find that sometimes demand grows very quickly," said Xing Yujing, deputy director general of the monetary policy department of the People's Bank of China. "If there's demand from the market in order to facilitate trade and investment, the change may be quicker than we imagined before," Xing told an economic conference held by Goldman Sachs in Hong Kong on Tuesday.

China is seeking to promote the use of the yuan overseas as part of a longer-term plan to make it an international reserve currency along with the U.S. dollar, analysts say. Beijing's promotion of Hong Kong as an offshore yuan trading hub has resulted in a flurry of yuan-denominated corporate bonds also known as dim-sum bonds, banks creating new structured products, and more Chinese importers settling trade in renminbi. Speaking at the same event, Hong Kong Monetary Authority Deputy Chief Executive Peter Pang said the growth potential for foreign direct investment (FDI) flowing into China from yuan bond issuance in Hong Kong was huge and could double from last year.

Next, Danish shipping giant Maersk plans the ultra ships of the China to EU trade. Thankfully China doesn’t export bananas, or Europe would be swamped with 860 million bananas every time one of these behemoths docks. At over two bananas per EU citizen, the price of bananas would slump. When 18 million flat screen TVs won’t do much for that European market either. One wonders what will be shipped back in these Maersk “mega containers”.

Maersk claims new 'mega containers' could cut shipping emissions

Danish firm signs a deal for 10 of the world's biggest ships that it says will save fuel and lower emissions

Monday 21 February 2011 16.21 GMT

Think of a 400m-long row of 20-storey high office blocks cruising the ocean at the speed of Usain Bolt. Or a container ship as long as the Empire State building and as wide as an eight-lane motorway that is able to carry more than 860m bananas or 18m flat-screen televisions in 18,000 containers.

The sheer scale and capacity of what will be the largest vessels afloat – the first 10 of which were ordered on Monday by Danish shipping firm Maersk – is likely to change international shipping in the same way that the super-jumbo is revolutionising air transport or high-speed rail has changed the way people travel across continents.

While at 400m long and 73m tall the new "Triple-E" container ships will be only marginally longer and taller than the current biggest class of vessel, the 160,000-tonne ships will be able to carry nearly 20% more containers than previously because of their width. Maersk has signed a $1.9bn (£1.17bn) contract with Korean shipbuilders Daewoo for the first 10, with an option for 20 more. The first order will be completed in two to four years.

The company hopes to be able to cut the cost of transporting a container from China to Europe by 26%. "These are probably the largest ships you will see built for some years. We could have made them longer but ports would have had to be enlarged. We could not make them wider because port cranes can only reach across 23 or 24 containers," said Maersk chief executive officer Eivind Kolding in London.

But the ships, which are nearly twice as large as the majority of the world's 9,000 container ships, were designed solely for the China-Europe route. Only Felixstowe in Britain, and Rotterdam and Bremerhaven in mainland Europe will have the facilities to handle them, along with Port Said in Egypt and just four ports in the east, including Shanghai and Hong Kong.


In comparison to everything else, what happens next in Libya is all that really matters. If Libya descends into anarchy, the world loses about 1.4 million barrels a day of quality oil exports. A great scramble for replacement oil will get underway. Europe gets a mass migration refugee disaster right in its backyard. America gets an unstable Middle East crisis from Atlantic Morocco all the way out to Bahrain. If a repressive murderous dictatorship like Gaddafi’s can be tossed aside, what hope for the less repressive western Kings and Sheiks’ of the oil producing Middle East? Property in Dubai anyone? Libyan dinars?

"The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."

Hans F. Sennholz

At the Comex silver depositories Tuesday, final figures were: Registered 41.91 Moz, Eligible 60.44 Moz, Total 102.35 Moz.


Crooks and Scoundrels Corner.

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

Today, the view of the Middle East crisis from Moscow. Decades of trouble ahead. Stay long precious metals. If President Medvedev is even halfway right, our western oil security is compromised and our economies built on cheap energy will implode.

"The paper standard is self-destructive."

Hans F. Sennholz

Medvedev sees `fires for decades' in Arab world

By DAVID NOWAK, Associated Press

MOSCOW – Russian President Dmitry Medvedev on Tuesday predicted decades of instability in the Arab world if protesters whom he called fanatics come to power, adding no such scenario will be permitted at home.

Medvedev's words fall in sharp contrast with the European Union, which said in a statement on Monday that it "deplores the violence" and "repression" against the pro-democracy protesters by authorities in one of the troublespots, Libya.

Speaking at a security meeting in the Caucasus city of Vladikavkaz, Medvedev didn't name countries, but he was referring to the crisis in the Middle East and North Africa — which has brought down governments in Tunisia and Egypt and sparked protests in Libya, Yemen, Bahrain, Iran, Morocco and Jordan.

"These states are difficult, and it is quite probable that hard times are ahead, including the arrival at power of fanatics. This will mean fires for decades and the spread of extremism," Medvedev said in televised comments.

Any attempts to repeat the unrest in Russia would be quashed, he said.

"They have prepared such a scenario for us before, and now more than ever they will try and realize it. In any case, this scenario won't succeed," he said, without identifying the people he considers could threaten the Kremlin.

Russia has crushed Islamist separatists in two wars in Chechnya in the last 15 years, and continues to battle a lingering insurgency in the wider Caucasus region. The region is the epicenter of terrorism in Russia, with most of the high-profile attacks in recent years claimed by or attributed to Caucasus rebels.

In the past Medvedev also has warned domestic political opponents that they won't be permitted to "rock the boat," and he has continued the policy of his tough predecessor, Vladimir Putin, in sanctioning the violent dispersal of anti-government protests.

Opposition activists have been beaten and imprisoned under their rule. Putin, who wields greater power despite holding lower rank, warned demonstrators in a September newspaper interview that "you will be beaten upside the head with a truncheon. And that's it."

"If ever there was an area in which to do the exact opposite of that which government and the media urge you to do, that area is the purchasing of gold."

Robert Ringer

The monthly Coppock Indicators finished January:

DJIA: +161 Down 10. NASDAQ: +228 Down 10. SP500: +161 Down 4.

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.

Tuesday, 22 February 2011

Libya-Oil Spike?

Baltic Dry Index. 1295 -06

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

We begin by extending our sympathies to the people of Christchurch, New Zealand following a devastating earthquake.

This morning it’s all eyes on events in Libya. With the Libyan airforce attacking rebel army bases, and the Libyan dictator threatening a fight to the “last man, woman and bullet”, the oil companies are scrambling to get their employees and their dependents out. Civil war seems only days away, unless the military unite to remove Gaddafi. At risk, roughly 1.4 million barrels a day of mostly continental Europe’s daily oil supply.

Bad things happen fast in the global economy if there’s a sudden drop in global supply. Below, yesterday’s increasingly alarming news. Will Saudi Arabia follow Bahrain? Will Italy sink with Libya? Stay long precious metals.

Oil shock fears as Libya erupts

The spectre of full civil war in oil-rich Libya and reports of the creation of an Islamic emirate in country's "Barqa" region has moved the Mid-East crisis into a more dangerous phase, setting off an explosive rise in US crude prices.

By Ambrose Evans-Pritchard, International Business Editor 8:38PM GMT 21 Feb 2011

"This is potentially worse for oil than the Iran crisis in 1979," said Paul Horsnell, head of oil research at Barclays Capital. "That was a revolution in one country, here there are so many countries at once. The world has only 4.5m barrels-per-day (bpd) of spare capacity, which is not comfortable."

US oil contracts jumped $6 a barrel on Monday to over $95, chasing Brent crude, which traded as high as $108, as the global oil system is drawn into the vortex. While Egypt is a minor oil player, Libya's Sirte Basin holds Africa's largest reserves and supplies 1.4m bpd in exports, mostly to Italy, Germany and Spain.

BP, Statoil, Total and ENI have begun evacuating families and non-essential staff from Libya. BP chief Bob Dudley told Sky News that the company has only limited exploration in Libya but "remains committed to doing business" there.

Germans oil explorer Wintershall said it was winding down its Libyan operations, but Italy's ENI has most to lose from its pipeline to Libya. ENI's stock tumbled 5pc in Milan, leading a 3.6pc fall in the MIB index.

Global oil inventories are higher than before the 2008 price spike, and OPEC can raise output if needed. It has refused to act so far despite pleas from the International Energy Agency (IEA) that the supply picture is already "alarming".


Oil Driller Eni at Risk in Libya as Anti-Qaddafi Unrest Spreads

By Alessandra Migliaccio - Feb 22, 2011 12:01 AM GMT

Eni SpA, the Italian oil producer that’s drilled in Libya during the whole of Muammar Qaddafi’s 41-year rule, is the foreign company with most to lose as the regime threatens to unravel.

As the former colonial power, Italy is the biggest investor in Libya and Rome-based Eni is at the forefront of the relationship. Italy’s largest company pumps almost 250,000 barrels a day in the North African country, or about 14 percent of its total production. Eni’s shares dropped the most in 19 months yesterday as unrest worsened

“Italy and particularly Eni are heavily exposed in Libya and stand to lose a great deal if things fall apart,” said Nicolo Sartori, an energy and security researcher at Rome’s IAI Institute for International Affairs. “Eni’s production and exploration interests in the area are considerable.”


Marathon Oil evacuates families of expats in Libya

Feb. 21, 2011, 7:30 p.m. EST

Oil, Bonds Gain on Libya Turmoil; Asia Stocks, Kiwi Dollar Drop

By Shiyin Chen and Saeromi Shin - Feb 22, 2011 8:05 AM GMT

Libya: intelligence agency 'jamming' television signals

Libya's intelligence agency is behind the powerful jamming that has disrupted Al Jazeera television's signal across much of the Middle East and North Africa, the Arab satellite broadcaster said on Monday

12:08AM GMT 22 Feb 2011

"The source of (the) signal blockage has been pinpointed to a Libyan intelligence agency building ... south of the capital Tripoli," said Al Jazeera, whose coverage of a regional political unrest has been watched across the Arab world.

Access to the network's website continued to be blocked in Libya, the Qatar based broadcaster said in a statement.

Ratings agencies downgrade Libya, Bahrain

Feb. 21, 2011, 4:08 p.m. EST

NEW YORK (MarketWatch) — The governments of Libya and the small island kingdom of Bahrain had their credit ratings cut Monday as ratings agencies responded to violent unrest in the Middle East and North Africa.

Fitch Ratings downgraded Libya’s credit rating to BBB from BBB-plus and warned that a further downgrade could be in store without political resolution to a crisis that has reportedly left hundreds dead.

Fitch said the downgrade “reflects the eruption of political risk evidenced by the increasing momentum of the popular uprising aimed at ending Muammar Gadhafi’s 42-year rule,” and also noted that oil-rich Libya is the sole Fitch-rated sovereign that has no government debt.

Separately, Standard & Poor’s lowered the Bahrain government’s long- and short-term sovereign ratings one notch to “A-/A-2.” S&P said its action came after it had reappraised political risks in the kingdom, where the agency said it expected continued demonstrations, despite the government’s use of deadly force to halt the protests.

While the Middle East prepares for democracy, Russia’s Gazprom seeks to take over Europe’s natural gas market. Out of the frying pan and into the fire, perhaps.

Gazprom chief Alexey Miller warns Europe on 'safety' of Middle East oil and gas supplies

Europe needs to reconsider the “stability and safety” of its oil and gas supplies from the Middle East after protests that have pushed the oil price above $105 per barrel, Alexey Miller, the chief executive of Gazprom, has warned.

By Rowena Mason, in Moscow 6:00AM GMT 22 Feb 2011

Mr Miller, the head of Russia’s biggest gas producer and the largest source of European imports, said the events of the past few weeks ought to prompt serious analysis about the stability of imports from the region.

“As far as the Middle East and North Africa is concerned. we need to reconsider the question of reliability and stability of hydrocarbons,” Mr Miller said at the Moscow headquarters of Gazprom.

“I think the question of reliability and stability and safety of supplies from there should be analysed and considered much more importantly than they were before these events.”

His comments show Russia is seeking to capitalise on the turmoil in Libya, Egypt, Bahrain, Algeria and Tunisia to promote itself as a more trustworthy source of gas for European countries.

Mr Miller’s remarks come at a time when Gazprom’s dominance as a gas supplier is being threatened by the emergence of shippable liquid gas supplies from the Middle East and the development of cheap and abundant “shale” gas in the US and potentially eastern Europe. Countries in Europe have also been trying to reduce their dependence on Russian gas after a crisis in winter 2008, when the Kremlin turned off the taps to the main supply route through Ukraine following a spat over transit prices.


At the Comex silver depositories Friday, final figures were: Registered 41.91 Moz, Eligible 60.46 Moz, Total 102.37 Moz.


Crooks and Scoundrels Corner.

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

No crooks today, just another warning that the current sunspot cycle just getting underway, holds out the risk of a devastating solar flare reaching the earth. Thanks to our modern electronic way of life, modern earth has never been more exposed to threat from a massive solar flare. If the internet failed, what would happen to global commerce.

Solar storm 'could cause more damage than Hurricane Katrina'

A powerful solar flare hit the Earth last week – and experts are now warning that the next one could be catastrophic

By Steve Connor, Science Editor, in Washington Tuesday, 22 February 2011

Havoc wreaked by a solar storm – such as the one that occurred last week – could be equivalent to a "global hurricane Katrina" that would cost up to $2 trillion dollars in damage to communications satellites, electric power grids and GPS navigation systems, scientists said yesterday.

Thursday's solar flare was the biggest for four years and ejected billions of tons of matter travelling at a million miles per hour towards Earth.

When it hit our magnetic field it generated magnetic storms and power surges which disrupted communications and grounded flights.

Senior government advisers have warned that the world has never been more vulnerable to the effects of such an events, which buffets the complex and delicate electronic technology that now controls almost all aspects of modern society.

----The approximately 11-year solar cycle is now emerging from one of its quietest periods in 50 years and is expected to reach a solar maximum in 2013, when the number of solar flares on the Sun which generate electromagnetic storms reaches a peak.

----About 10 or 20 hours after the initial blast of electromagnetic radiation, a second burst of high-energy charged particles will hit the Earth.

These have the ability to induce dangerous electric currents in power lines and oil pipelines, Dr Bogdan said. A 14-year-old early-warning satellite is the only way of directly detecting the potential magnitude of the danger this wave of charge particles within a solar storm poses to pipelines and electronic systems on Earth, he said. "Any storm coming from the Sun has to pass over that spacecraft before it hits Earth. If it takes 20 hours to go from the Sun to Earth, it's going to take about 20 minutes to go from that spacecraft to Earth. So our last warning is a 20-minute warning, which will tell us how big, how strong, how nasty that storm might be," he told the meeting.

A Super Solar Flare

May 6, 2008: At 11:18 AM on the cloudless morning of Thursday, September 1, 1859, 33-year-old Richard Carrington—widely acknowledged to be one of England's foremost solar astronomers—was in his well-appointed private observatory. Just as usual on every sunny day, his telescope was projecting an 11-inch-wide image of the sun on a screen, and Carrington skillfully drew the sunspots he saw.

On that morning, he was capturing the likeness of an enormous group of sunspots. Suddenly, before his eyes, two brilliant beads of blinding white light appeared over the sunspots, intensified rapidly, and became kidney-shaped. Realizing that he was witnessing something unprecedented and "being somewhat flurried by the surprise," Carrington later wrote, "I hastily ran to call someone to witness the exhibition with me. On returning within 60 seconds, I was mortified to find that it was already much changed and enfeebled." He and his witness watched the white spots contract to mere pinpoints and disappear.

It was 11:23 AM. Only five minutes had passed.

Just before dawn the next day, skies all over planet Earth erupted in red, green, and purple auroras so brilliant that newspapers could be read as easily as in daylight. Indeed, stunning auroras pulsated even at near tropical latitudes over Cuba, the Bahamas, Jamaica, El Salvador, and Hawaii.

Even more disconcerting, telegraph systems worldwide went haywire. Spark discharges shocked telegraph operators and set the telegraph paper on fire. Even when telegraphers disconnected the batteries powering the lines, aurora-induced electric currents in the wires still allowed messages to be transmitted.

"What Carrington saw was a white-light solar flare—a magnetic explosion on the sun," explains David Hathaway, solar physics team lead at NASA's Marshall Space Flight Center in Huntsville, Alabama.

Now we know that solar flares happen frequently, especially during solar sunspot maximum. Most betray their existence by releasing X-rays (recorded by X-ray telescopes in space) and radio noise (recorded by radio telescopes in space and on Earth). In Carrington's day, however, there were no X-ray satellites or radio telescopes. No one knew flares existed until that September morning when one super-flare produced enough light to rival the brightness of the sun itself.


The monthly Coppock Indicators finished January:

DJIA: +161 Down 10. NASDAQ: +228 Down 10. SP500: +161 Down 4.

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.

Monday, 21 February 2011


Baltic Dry Index. 1301 +09

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

A people contending for life and liberty are seldom disposed to look with a favorable eye upon either men or measures whose passions, interests or consequences will clash with those inestimable objects.

George Washington. 1775

From Morocco to Iran, the Islamic world is in uproar and one or other state of revolt. How it all ends, isn’t predictable at this point, but all our cozy assumptions about energy security are in question. It doesn’t necessarily follow that even successful revolutions, were they to happen in Libya and Saudi Arabia, would lead to a drop in the supply of Arab oil to the world, but no one can say that it wouldn’t. After propping up for years, most of the rulers outside of Libya and Iran, the west is in an awkward position. Democracy is good, except in countries with oil, has been the western line, since Britain and France drew most of the lines on the map back in late 19th century, and in the early 20th century. That age of client monarchs should have ended with World War Two. America skillfully managed mostly to get another 65 years from it. But as a policy for the 21st century, it looks as useful as Marie Antoinette’s “let them eat cake”. Stay long precious metals, this might get a whole lot scarier yet.

The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. It is its natural manure.

Thomas Jefferson. 1787.

Libyan protests reach Tripoli as Gaddafi son warns of civil war

Demonstrators opposed to Colonel Muammar Gaddafi took over large parts of Libya’s second city and were reported to be fighting in the capital Tripoli.

By Richard Spencer, and Nabila Ramdani in Cairo 11:51PM GMT 20 Feb 2011

Saif al-Islam Gaddafi, Col Muammar Gaddafi's second son and heir apparent, last night warned of “rivers of blood” and said Libya was on the brink of a civil war that would burn its oil wealth.

In a televised statement he acknowledged the army made mistakes during the protests, but denied reports that “hundreds” were killed in the violence.

He added that his father, who has only briefly appeared on state television in a pro-government rally, remained in the coutnry and was backed by he army.

He offered to put forward reforms within days that he described as a “historic national initiative”. He said the regime was willing to remove some restrictions and discuss the constitution.

Hundreds of people died over the weekend as forces loyal to Gaddafi, who has ruled for 42 years, used high-velocity sniper rifles, machine guns and even anti-aircraft artillery against protesters.

----- Al-Jazeera television news reported clashes in Tripoli’s Green Square between protesters and Gaddafi supporters. Witnesses claimed tear gas and live ammunition were used against the protesters.

Fighting has also broken out in the eastern cities of Al-Bayda, Ajdabiya, Darnah, and Tobruk. In Darnah, a group of Islamists seized an arms depot, and were holding civilians and soldiers hostage.


Leading article: A new age of uncertainty, with no end in sight

Monday, 21 February 2011

-----The spectre is of the whole region in turmoil: from Morocco in the west to Iran and possibly Central Asia in the east, with the Gulf and the Levant caught up in the maelstrom in between. With earlier protests reaching Jordan, and Morocco the latest country to be affected, even countries that have made efforts to reform may not be immune from the surging revolutionary tide. Change, so long in coming to this part of the world, seems ready to sweep across this vast region all at once.

With so much in flux, there are as yet more caveats than conclusions to be drawn. The first relates to our knowledge of what is really going on. While outsiders were able to follow events in Egypt and Bahrain more or less from minute to minute, Iran and Libya have enforced draconian restrictions on the media, so that the scale of the unrest there is hard to gauge, and it is only thanks to immensely brave individuals that the barest details of the atrocities in Libya, for instance, are becoming known.

The second relates to the double-edged nature of long-standing Western involvement. While it may be true that the urging of the US administration constrained the Egyptian army from using force and prompted the rulers' U-turn in Bahrain, the British rapprochement with Libya appears to have afforded no such leverage on Colonel Gaddafi. The truth is that, in most of these countries, we failed to exert pressure for political reform when we could and should have done. And what is happening now is a harvest that we helped to sow.

Robert Fisk in Manama: Bahrain – an uprising on the verge of revolution

The protesters who are calling for an end to royal rule are in no mood to compromise

Monday, 21 February 2011

Bahrain is not Egypt. Bahrain is not Tunisia. And Bahrain is not Libya or Algeria or Yemen. True, the tens of thousands gathering again yesterday at the Pearl roundabout – most of them Shia but some of them Sunni Muslims – dressed themselves in Bahraini flags, just as the Cairo millions wore Egyptian flags in Tahrir Square.

But this miniature sultanist kingdom is not yet experiencing a revolution. The uprising of the country's 70 per cent – or is it 80 per cent? – Shia population is more a civil rights movement than a mass of republican rebels, but Crown Prince Salman bin Hamad al-Khalifa had better meet their demands quickly if he doesn't want an insurrection.

Indeed, the calls for an end to the entire 200-year-old Khalifa family rule in Bahrain are growing way ahead of the original aims of this explosion of anger: an elected prime minister, a constitutional monarchy, an end to discrimination. The cries of disgust at the Khalifas are much louder, the slogans more incendiary; and the vast array of supposedly opposition personalities talking to the Crown Prince is far behind the mood of the crowds who were yesterday erecting makeshift homes – tented, fully carpeted, complete with tea stalls and portable lavatories – in the very centre of Manama. The royal family would like them to leave but they have no intention of doing so. Yesterday, thousands of employees of the huge Alba aluminium plant marched to the roundabout to remind King Hamad and the Crown Prince that a powerful industrial and trade union movement now lies behind this sea of largely Shia protesters.


We end for the day with yet another failed G-20 meeting. This one was the finance ministers meeting in Paris. Well at least the refreshments and libations were good. Below, the WSJ pretty much sums up the event. No matter what they decided, events in Middle East were trumping their decisions. China, Japan and all of the west are still hostage to oil supply from the middle east

A little rebellion now and then is a good thing and as necessary in the political world as storms in the physical.

Thomas Jefferson. 1787

FEBRUARY 21, 2011

Conflicting Agendas Doom Summits

Last week's effort of the G-20 to bring some sense to the world currency and trading systems reflected a kind of charming persistence. No matter how many meetings fail to do more than set the stage for the next meeting by avoiding a communiqué that says, "We have failed to reach agreement," the world's finance ministers, central bankers, heads of state and of government, and assorted hangers-on—some 90 in all—greet, meet, eat and retreat to their respective homes.

----- But all in all, these meetings have no hope of arriving at some deal between nations running large trade surpluses and those running deficits. In part this is because the issue cannot be confronted in its purest, uncluttered form. There is always some major player, in this case French President Nicolas Sarkozy, who uses the issue of imbalances to pursue a not-so-hidden agenda—in this case pervasive regulation of financial and commodities markets, and the dethroning of the dollar as the world's reserve currency. That frightens off the Americans, and even the Chinese, who share that goal, but have a longer time horizon and a different end point: the renminbi, not the euro, as the dominant currency.


While Europe’s misguided energy policy is largely designed to tilt at the windmill of man-made global warming, its upside has been to reduce dependency on the unstable Middle East and natural gas supply from Russia. Sadly not enough, if Middle East supply gets disrupted. In America the position is just as bad. If a scramble to replace disrupted Arab supply gets underway, America will find itself competing with the rest of the world for the non Arab produced oil. Since the 1979 oil shock we have been living profligately on borrowed time. From London, this morning, it looks as if that time has just run out.

As to the history of the revolution, my ideas may be peculiar, perhaps singular. What do we mean by the Revolution? The war? That was no part of the revolution; it was only an effect and consequence of it. The revolution was in the minds of the people, and this was effected ... before a drop of blood was shed.

John Adams, letter to Thomas Jefferson, Aug. 24, 1815

At the Comex silver depositories Friday, final figures were: Registered 41.91 Moz, Eligible 60.46 Moz, Total 102.37 Moz.


Crooks and Scoundrels Corner.

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

Today, Germany in the dock. Irish voters know what to do this coming Friday. Vote out the bums who sold out Ireland to Germany and the ECB, and then tell both to bail out Europe’s and Germany’s bank bond holders themselves, if that what they want. Irish taxpayers should not be bailing out bondholders, who took upon ludicrous risk. On Friday, Ireland has a chance to go Iceland.

Germany must choose EMU fusion or fission

For the sake of peripheral nations, Mrs Merkel has to stop paying lip-service to monetary union.

By Ambrose Evans-Pritchard 7:30PM GMT 20 Feb 2011

German Chancellor Angela Merkel is teasing Europe and deluding herself.

For all her fiery language in defence of the euro - as if a currency trading so high against the yuan, dollar, and sterling could be under meaningful external attack - Chancellor Angela Merkel has not yet agreed to pay one cent in help to crippled debtor states. Nor has she faced up to the elemental question hanging over monetary union.

Her own Bundesbank argued years ago that EMU is unworkable without fiscal union, and it has been vindicated by the events of the past two years. Either creditor states agree to an EU treasury, 'Transferunion' and debt pool, or EMU will be subject to unending stress and ultimately fracture or shrink to a viable core, or so goes the argument.

This 'Fusion or Fission’ debate has not been settled. Yes, there has been much talk about Eurobonds and rescues. Talk is cheap. The reality of Germany's 'rescue policy' is to extract subsidy from the periphery by lending to Greece and Ireland at rates far above its own borrowing cost, widening the gap between core and periphery yet further.

Ireland is paying 5.8pc for the EU part of its €67bn package, a crippling rate for a country that has been in core deflation and seen a 22pc contraction of nominal GNP. This is not a bail-out. It is not an IMF austerity regime either, since the Fund lends on terms that allow countries to escape from their debt traps.

All that has occurred so far is that Irish and Greek taxpayers have taken on fresh debt so that creditors do not crystallise losses. It remains a disguised rescue for North European banks and insurers. As the Left always warned, monetary union is a “bankers’ ramp”.

Perhaps this bank rescue is necessary to buy time for a fragile financial system. We saw instant contagion through half of Europe when Mrs Merkel called for bondholder haircuts in October. It was she who clumsily set off the final Irish crisis. But if EU banks are so vulnerable, how did so many pass their stress tests in July?


Do people demand a really just system? Well, we'll arrange it so that they'll be satisfied with one that's a little less unjust ... They want a revolution, and we'll give them reforms -- lots of reforms; we'll drown them in reforms. Or rather, we'll drown them in promises of reforms, because we'll never give them real ones either!!

Dario Fo. Accidental Death of an Anarchist

The monthly Coppock Indicators finished January:

DJIA: +161 Down 10. NASDAQ: +228 Down 10. SP500: +161 Down 4.

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.