Baltic Dry Index. 1259 +09
LIR Gold Target by 2019: $30,000. Revised due to QE.
“I believe Costco does more for civilization than the Rockefeller Foundation.”
Proper Charlie Munger.
Up first today, more of the same old story on China. Yesterday the World Bank raised its GDP forecast for China. I suspect that China is in the final stage of an over investment boom. One riddled with malinvestment and unrepayable debt. One geared up to supply goods to a Europe that’s cutting back in an age of austerity programs, to supply a Japan that has many unique problems of its own, and to supply an America that will shortly be cutting back itself. I also suspect that we are about to see inflation go out of control in China, with all of the bad things that brings to bottom 50% in society. For now though, the good times roll endlessly on. The Baltic Dry Index though, suggests some weakness ahead.
World Bank Raises China 2011 GDP Forecast, Urges More Tightening
Published: Thursday, 28 Apr 2011
The World Bank on Thursday raised its forecast of China's economic growth in 2011 for the second time in as many months and said it was too early for Beijing to halt policy tightening, not least because of inflationary risks.
In its latest quarterly update of the world's second-largest economy, the bank slashed its projection of China's 2011 current account surplus to 3.6 percent of gross domestic product — comfortably below the 4 percent ceiling mooted by U.S. Treasury Secretary Timothy Geithner for G20 countries.
Following stronger-than-expected outcomes in the past two quarters, GDP is now likely to expand 9.3 percent in 2011, slower than last year's 10.3 percent clip but still a "healthy" rate, the World Bank said.
It had forecast 9.0 percent in a regional survey in March and 8.7 percent in its previous China update last November.
More
http://www.cnbc.com/id/42793395
Staying with Asia, Japan’s troubles have devastated retail sales. While reconstruction projects will eventually pump cash back into the economy, it takes a long time for that to trickle down into retail sales. Japan’s reconstruction will likely be paid for largely by issuing new debt. But that brings its own problems to the fiat currency Yen. Japan appears headed for a big burst of stagflation. Stay long precious metals for a distinctly troubled H2 2011.
Japanese Retail Sales Slump Most in 13 Years After Quake, Nuclear Crisis
By Aki Ito - Apr 27, 2011
Japan’s retail sales tumbled the most in 13 years last month as the nation’s record earthquake shut stores and discouraged households from spending money.
Sales slumped 8.5 percent in March from a year earlier, the biggest decline since March 1998, according to a statement by trade ministry in Tokyo today. The median estimate of 14 economists surveyed by Bloomberg News was for a 6.1 percent drop.
---- “There is concern that lower confidence could lead to a downward spiral of lower consumer spending, weaker economic activity, and declining pay and employment,” David Rea, a Japan economist at Capital Economics Ltd. in London, said before the report. “As the second quarter unfolds we expect a further deterioration in activity and consumer spending.”
---- Today’s report provides the first official retail-sales figures to reflect the impact of the quake last month.
Confidence among both merchants and households fell the most on record last month, a sign consumers may continue to cut back in the months ahead.
More.
APRIL 28, 2011, 12:56 A.M. ET
Japanese Chip Firm Races to Repair
Renesas Plant Supplying Auto Industry Likely to Be Offline Until June
HITACHINAKA, Japan—A major auto-parts supplier said it is scrambling to restart an earthquake-crippled factory by mid-June but that the plant will run at just 5% of normal capacity at the outset and it is unclear when full output will resume.
Japan's Renesas Electronics Corp., which produces 40% of the chips used to control operations in cars, is working around the clock to restore a plant that was severely damaged by the March 11 quake.
"This is an extremely important plant for us, and we must put all our efforts into getting it back to work," Senior Vice President Tetsuya Tsurumaru said Wednesday. He said the company is making up for lost output by producing the chips at its other plants and outsourcing some orders to other chip makers. "We are making sure that our clients get the chips they need."
The Naka plant in Ibaraki prefecture, north of Tokyo, makes 25% of all of Renesas's automotive microcontroller chips, the brains that control a variety of functions. Given the company's market share, that could translate to a 10% cut in global supplies of the chips. Renesas sells its chips to auto-parts makers, who in turn supply car companies.
The earthquake and subsequent power-supply problems affected eight Renesas plants in Japan. Operations at five of Renesas's 10 factories used in early-stage chip production—where clean rooms require uninterrupted power—were suspended. Many of those plants shut down because of disrupted power supplies, not because of physical damage.
----Renesas expects the Naka plant partly to resume production by June 15. One line at the plant uses 200-millimeter wafers and another uses 300-millimeter wafers. Wafers are the thin slices of silicon that form the base of semiconductors. Only the 200-millimeter line will resume production on June 15, and its initial output will be about 10% of its full capacity, or about 5% of what the plant as a whole produced before the earthquake.
More.
http://online.wsj.com/article/SB10001424052748704099704576288953421406410.html
Today we extend our sympathies to all those affected by America’s terrible burst of tornadoes. The pictures carried in the media are very distressing and suggest it’s time to update new building codes. Below, 3 US nuclear reactors had to be shut down due to the storms. Thankfully, all went to plan and the backup generators worked exactly as intended. Still, after Fukushima lost its backup generators due to the tsunami, all nuclear plants everywhere should be instituting emergency plans for replacement backup generators in the unlikely event of a loss of the first line of backup generators.
Storms knock out TVA nuclear units, power lines
HOUSTON | Wed Apr 27, 2011 7:25pm EDT
HOUSTON (Reuters) - Severe storms and tornadoes moving through the Southeast dealt a severe blow to the Tennessee Valley Authority on Wednesday, causing three nuclear reactors in Alabama to shut and knocking out 11 high-voltage power lines, the utility and regulators said.
All three units at TVA's 3,274-megawatt Browns Ferry nuclear plant in Alabama tripped about 5:30 EDT (2230 GMT) after losing outside power to the plant, a spokesman for the U.S. Nuclear Regulatory Agency said.
A TVA spokeswoman said the plant's output had reduced power earlier due to transmission line damage from a line of severe storms that spawned a number of tornadoes as it moved through Mississippi, Alabama, Kentucky and Tennessee.
The NRC spokesman said early information indicated the units shut normally and the plant's diesel generators started up to supply power for the plant's safety system.
The government owned corporation said crews were working to restore service, but more severe weather was forecast, TVA said in a release.
Most of the damage so far has occurred in the western part of TVA's service territory in Mississippi, Alabama and western Tennessee and Kentucky.
More
"When paper money systems begin to crack at the seams, the run to gold could be explosive."
Harry Browne
At the Comex silver depositories Wednesday, final figures were: Registered 33.32 Moz, Eligible 68.33 Moz, Total 101.65 Moz. We note with rising concern that deliverable registered silver has fallen to about 33% of total Comex depository inventory. While some of the non deliverable eligible class might be moved back into registered easing the tightness somewhat, it seems to me that end users are eager to acquire physical silver for future needs and hold it in the non deliverable category. That’s usually a sign of a physical shortage of silver building up.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, Warren Buffett, Berkshire Hathaway, and fallen heir apparent David Sokol. This weekend’s BH AGM in Omaha looks like being more interesting than the average BH AGM. Seen from the outside, BH’s audit committee report looks a little self serving, white washing the role of the great man himself. The audit committee want to sue Sokol for $3 million in ill gotten gains and damage to the reputation of the company itself. If they do, this looks likely to be a most interesting mud fest. According to disgraced, fallen heir apparent, David Sokol, he did nothing that BH Vice Chairman Charlie Munger didn’t do. This mud fest looks likely to be great fun and very messy. In this billionaire v billionaire mud fest, both sides know where all the skeletons are buried and who buried them.
“There’s danger in just shovelling out money to people who say, ‘My life is a little harder than it used to be, at a certain place you’ve got to say to the people, ‘Suck it in and cope, buddy. Suck it in and cope.’”
Proper Charlie Munger.
Warren Buffett to 'Welcome All Questions' on 'Violations' of Ethical Standards by David Sokol
Published: Wednesday, 27 Apr 2011
Warren Buffett tells CNBC he wants to make his first public comments to shareholders this weekend about tonight's blistering report by Berkshire Hathaway's Audit Committee on David Sokol's Lubrizol trades.
Buffett promises to "welcome all questions" on the Sokol scandal this coming Saturday, when tens of thousands of Berkshire shareholders will be in Omaha for the company's annual meeting.
He'll also answer Becky Quick's questions about the matter when he does his first live interview following the meeting, appearing on CNBC's Squawk Box between 8 AM and 9 AM ET Monday morning.
There's no statement from Buffett in the news release accompanying tonight's release of an 18-page report finding that Sokol violated the company's ethical standards when he bought Lubrizol shares while "serving as a representative of Berkshire Hathaway in connection with a possible business combination with Lubrizol."
Buffett hasn't said anything about the matter since his unusual public letter less than a month ago first revealing Sokol's Lubrizol purchases. At that time, Buffett wrote he would not have anything to say on the matter in the future.
Tonight's report appears to be a response to widespread criticism about Buffett's handling of Sokol's trades and resignation.
More
http://www.cnbc.com/id/42787053
"Thank God For Bank Bailouts"
Proper Charlie Munger.
Due to tomorrow’s Royal Wedding holiday here, the next LIR update will be on Monday, the Worker’s Paradise Bank Holiday, so thoughtfully imposed on Britain by “Sunny” Jim Callaghan, the last Labour Prime Minster to wreck the British economy before Tony Blair and Gordon “Goldfinger” Brown nuked it allowing all Britain’s banks to blow up simultaneously and causing the first UK bank run in 150 years. Have a great weekend everyone. The UK spring countryside is now at its best and well worth a visit. Check with the blog for weekend updates.
"In the long run, the gold price has to go up in relation to paper money. There is no other way. To what price, that depends on the scale of the inflation - and we know that inflation will continue."
Nicholas L. Deak
The monthly Coppock Indicators finished March:
DJIA: +160 UP 06. NASDAQ: +216 Down 01. SP500: +163 UP 6.
The Dow and SP 500 have reversed albeit by tiny margins, while the NASDAQ barely moved down. The Fed’s rigging of the indicators seems to have worked. Note: like all indicators, they were devised for normal markets not markets where the central bank is flooding the economy with new cash. In current conditions where risk is suspended by too big to fail, I doubt any indicators are showing more that where the Fed’s new cash is flowing in our world of casino capitalism.
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