Thursday, 17 February 2011

Downwardly Mobile.

Baltic Dry Index. 1271 +35

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

We open today with the always provocative investigative journalist Matt Taibbi, covering Wall Street’s finest as they inflict “God’s Work” on the downwardly mobile former members of the developed west’s once wealthy middle class. Banksterism rules, OK? Below that, Europe at its finest. Never work if you can steal, and Germany’s defence minister seems to have taken that to heart.

Why Isn't Wall Street in Jail?

Financial crooks brought down the world's economy — but the feds are doing more to protect them than to prosecute them

By Matt Taibbi February 16, 2011 9:00 AM ET

When I ask a former federal prosecutor about the propriety of a sitting SEC director of enforcement talking out loud about helping corporate defendants "get answers" regarding the status of their criminal cases, he initially doesn't believe it. Then I send him a transcript of the comment. "I am very, very surprised by Khuzami's statement, which does seem to me to be contrary to past practice — and not a good thing," the former prosecutor says.

Earlier this month, when Sen. Chuck Grassley found out about Khuzami's comments, he sent the SEC a letter noting that the agency's own enforcement manual not only prohibits such "answer getting," it even bars the SEC from giving defendants the Justice Department's phone number. "Should counsel or the individual ask which criminal authorities they should contact," the manual reads, "staff should decline to answer, unless authorized by the relevant criminal authorities." Both the SEC and the Justice Department deny there is anything improper in their new policy of cooperation.

----All of this paints a disturbing picture of a closed and corrupt system, a timeless circle of friends that virtually guarantees a collegial approach to the policing of high finance. Even before the corruption starts, the state is crippled by economic reality: Since law enforcement on Wall Street requires serious intellectual firepower, the banks seize a huge advantage from the start by hiring away the top talent. Budde, the former Lehman lawyer, says it's well known that all the best legal minds go to the big corporate law firms, while the "bottom 20 percent go to the SEC." Which makes it tough for the agency to track devious legal machinations, like the scheme to hide $263 million of Dick Fuld's compensation.

"It's such a mismatch, it's not even funny," Budde says.


German Defense Minister Accused of Plagiarism

Guttenberg's Printing Press 02/16/2011

He has long been Germany's most popular politician. But now, Defense Minister Karl-Theodor zu Guttenberg is facing trouble on several fronts. And on Wednesday, a German newspaper reported that he may have plagiarized part of his Ph.D. dissertation. Chancellor Merkel's cabinet could lose a doctor.

German Defense Minister Karl-Theodor zu Guttenberg has proven himself to be a veritable Houdini when it comes to political escape acts. When questions arose about the Defense Ministry's handling of the 2009 Kunduz air strike -- a bombing which killed several, possibly dozens, of civilians -- Guttenberg fired the head of the German military and a senior Defense Ministry official. When a scandal developed late last year surrounding the naval training ship Gorch Fock, Guttenberg relieved the captain of his duties.

This time around, however, there isn't anybody to fire. This time, Guttenberg himself has been accused of wrongdoing. According to the Munich daily Süddeutsche Zeitung, Guttenberg may have plagiarized large passages of his doctoral dissertation. And if the accusation is proven, he could be stripped of his Ph.D.

The copying concerns came to light when Andreas Fischer-Lescano, a law professor at the University of Bremen, sat down last Saturday evening to begin writing a review of Guttenberg's dissertation, which was published in 2009. He told the Süddeutsche that in reviewing works such as that by Guttenberg, he has made it a habit to plug passages into Google to check for potential problems.

When he did that last Saturday, he immediately found an article from the Swiss newspaper NZZ am Sonntag, large passages of which were to be found one-to-one in Guttenberg's work -- without citation. Further searches found other passages apparently copied-and-pasted out of other articles and sources -- some slightly altered, but most faithfully reproduced, word for word. Several pages of the 475-page work appear to have been borrowed without adequate citation.

"The text duplications can be found throughout the entire work and covering a range of subjects," Fischer-Lescano told the Süddeutsche. In several places, he says, the dissertation reveals "brazen plagiarism."


In commodities news, it’s more of the same. Prices continue to rise. More global instability is likely to follow.

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

Richard M. Ebeling

Copper substitution gathering pace

Copper prices are becoming "unacceptable" and substitution of the metal is gathering pace in some uses, UK copper products distributor Cubralco said after the metal hit a record high $10,190 a tonne on Tuesday. Copper for three-months delivery on the London Metal Exchange this year breached $10,000 a tonne for the first time, extending a rally that has lifted prices more than 200 percent since late 2008 and stoked worries about demand destruction.

"$10,000 is a big milestone," said Chris Egginton, managing director of the supplier of copper tube, coils and fittings for domestic, industrial and engineering applications. The threat of substitution of copper in building products remained, he said. "For areas where there is possible substitution, it is gathering pace."

Aluminium and plastic, both cheaper than copper, are major beneficiaries of substitution of the metal used in power and construction. Aluminium, currently trading at around $2,500 a tonne, is a quarter of the price of copper.

In copper's defence, however, the metal's unrivalled conductivity means it can be all but irreplaceable in some electrical applications.

Copper applications most under threat, Egginton said, were plumbing tube, roofing and uses in the refridgeration and airconditioning installation industry, which he said were all being substituted out quite strongly now.

Oil rises to $104 a barrel

The price of oil flirted with two-and-a-half year highs amid fresh concerns about tensions in the Middle East.

By Ben Harrington 11:07PM GMT 16 Feb 2011

Brent crude rose above $104 a barrel after Avigdor Lieberman, the Israeli foreign minister, said two Iranian warships planned to sail through the Suez canal en route to Syria.

Mr Lieberman called the move the latest "provocation" by Iran, which Israel sees a major threat due to the OPEC nation's nuclear arms programme.

However, the Suez Canal Authority´s head of traffic, Ahmed El Manakhly, speaking by telephone, said yesterday that he hadn´t been informed of any Iranian warships planning to pass through the waterway.

El Manakhly said military ships passing through the canal must first obtain permission from the Ministry of Defence and the Ministry of Foreign Affairs.

---- The last time Iranian warship passed through the canal was in 1979.

We end for the day with the Old Lady of Threadneedle Street issuing a warning. Interest rates will soon have to rise, says the BOE. Britain’s age of austerity is about to get much worse. Stay long precious metals. The BOE’s warning applies equally on the other side of the Atlantic. No one likes being downwardly mobile and revolution is now abroad in the world. To me, it seems, our post war age of affluence and civility is fading fast. A dark age of anarchy and social disorder seems to loom. Will society recoil in time?

"The fate of the nation and the fate of the currency are one and the same."

Dr. Franz Pick

Britons must prepare for interest rate 'squeeze', warns Bank of England's Mervyn King

Households should start preparing for interest rate rises, the Bank of England Governor, Mervyn King, said on Wednesday, as he warned that the “squeeze on living standards is going to happen one way or another”.
By Philip Aldrick, Economics Editor 5:17PM GMT 16 Feb 2011

Mervyn King’s comments came after the Bank published its February Inflation Report, in which it lowered its forecast for economic growth this year from 2.6pc to around 2pc and confirmed that inflation could reach 5pc before June – more than double its 2pc target for the consumer prices index (CPI).

Under the Bank’s “central projection”, which Mr King stressed was not a “pre-announcement” of policy, rates will rise a quarter point to 0.75pc in the next four months and to 1pc by the end of the year. By the end of 2012, rates will be at 2pc and at 3pc by the end of 2013.

“It is clear that at some point Bank rate will have to go up,” Mr King said. “Anyone making long-term financial decisions should not expect Bank rate to be at these low levels indefinitely.”

Simon Ward, chief economist at Henderson, said the data “suggest that either rates will rise very soon or the Committee’s commitment to achieving the 2pc target over the medium term has weakened”.


Mid year brings the next major date in the Armstrong Cycle (June 13, +/- one or two days.) Bottoms or tops, or changes in mass sentiment, have been uncannily linked to his cycle, even though there is little logical explanation why this should be. Our second decade of the new century seems set to change our old familiar world, as much as the Great War did in the last century. Stay long precious metals.

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

At the Comex silver depositories Wednesday, final figures were: Registered 41.92 Moz, Eligible 60.61 Moz, Total 102.53 Moz.


Crooks and Scoundrels Corner.

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

No crooks today, just the continuing strange case of a US Latin American “hostage rescue training exercise” gone wrong. How many doses of morphine does a police “training exercise” normally require in the USA? I suspect that both sides aren’t yet giving us the truth, the whole truth, and nothing but the truth. In an age where state torture is back in fashion again, Britain and America do shabby deals to release Arab murderers, and rule of law depends on who you are and what you’re accused of, there is little international trust in our WikiLeaks age.

“Tis all one as if they should make the standard for the measure we call a foot, a Chancellor’s foot; what an uncertain measure would this be? One Chancellor has a long foot, another a short foot, a third an indifferent foot: ‘tis the same thing in a Chancellor’s conscience.’”

John Selden. 17th century jurist.

FEBRUARY 15, 2011

Argentina Holds Confiscated U.S. Air Force Cargo

Argentina's relations with the U.S. took a sharp turn for the worse Monday as the country continued to hold military equipment it confiscated last week from a U.S. Air Force C-17 transport plane sent as part of a training course for local police.

U.S. Assistant Secretary of State for Western Hemisphere Affairs, Arturo Valenzuela, called on Argentina to return the property without delay.

"It's absolutely necessary that they immediately return that material. It makes no sense for it to have been confiscated this way. This material was intended for a joint exercise in training people to rescue hostages," Mr. Valenzuela said Monday on CNN en Espanol.

Argentine Foreign Minister Hector Timerman quickly rebutted Mr. Valenzuela and called on the U.S. to apologize for violating Argentine law.

"I told him, 'Arturo, we have to be careful about this. The laws are made to be followed here and in the U.S. We all need to follow them,'" Mr. Timerman said on CNN en Espanol.

Mr. Timerman accused the U.S. of using the plane to smuggle undeclared firearms, surveillance equipment and "various doses of morphine" into the country for ulterior motives.

He also said that U.S. officials have refused to offer any explanation about the seized material, something State Department officials adamantly deny.

"They refuse to collaborate with us," he said, adding that Argentina has lodged a formal complaint with the U.S. government and will return the cargo only after investigators say they no longer need it.

Mr. Timerman personally supervised the seizure of the cargo at Argentina's Ezeiza International Airport as perplexed U.S. officials looked on.

A State Department official familiar with the seizure told Dow Jones Newswires most of the material, which was intended for use in a hostage-rescue course, had been properly declared and previously approved by Argentine authorities.

FT: If America doesn’t actively take part in this sort of renegotiation of global finance, what will happen? What’s your nightmare scenario?

George Soros: Well, the Chinese will go bilateral. They already do it. They already have a clearing arrangement with Argentina and I think they’re working on one with Brazil, and you will find that there will be more and more bilateral arrangements. So the dollar will remain the main international currency, but its use will decline. So I think that a world of bilateral relations is less desirable than a continuation of a multilateral system. But the system we have now has actually broken down, only we haven’t quite recognised it and so you need to create a new one and this is the time to do it.

Published: October 23 2009

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.

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