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.

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