Tuesday, 19 April 2011

G-1 Negative!

Baltic Dry Index. 1284 -12

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

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.

Charles Dickens. A Tale of Two Cities

With partisan politics as usual in Washington, trade friction with the BRIC countries, 1.5 trillion dollar annual deficits forever, and two never ending wars with military spending out of control, the USA is rapidly heading towards losing its triple-A borrowing status. If little changes in the next two years, the likelihood is that the ratings agencies will be downgrading Uncle Sam’s debt. A higher interest rate will be the result, compounding the underlying problem and putting the US on the road followed by Greece. Adding to the US problem, few really expect the Fed to abandon quantitative easing except for a few months. Even then the Fed is expected to cheat, and monetise via the back door through the primary dealers. ZeroHedge suggests that the Fed will be/has been holding the rate curve down by massive selling of puts against the 10 year Note. If true, disaster for the dollar lies ahead when the Fed loses control of US interest rates.

Below, S&P warns the USA. Any other country would long ago have lost its triple-A rating. Stay long precious metals, the rest of the year gets scarier still.

"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

US warned over debts, as S&P cuts outlook to 'negative'

America's ability to tackle its deficit has been given a strong vote of no confidence, after leading rating agency Standard & Poor's said the chances are rising that the country will lose its prized AAA status.

By Richard Blackden, US Business Editor 3:27PM BST 18 Apr 2011

S&P downgraded the outlook for the US government's debt to negative from stable on Monday in a clear shot across the bows of Congress and The White House.

In sharp contrast to every other developed economy, the US has increased its budget deficit in the last year in an effort to accelerate the economic recovery here.

While President Barack Obama and the Republicans have in the last month laid out plans to reduce the deficit, S&P warned that a plan needs to be agreed upon within the next two years for the US to retain its status as a top borrower.

"More than two years after the beginning of the recent crisis, US policymakers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures," said Nikola Swann, an analyst at S&P.


Next the University of Texas puts a little under 5% of its assets in tangible assets, in this case physical gold, stored at HSBC in Manhattan. The first of many in our decade ahead, I think, although it would have been safer to have gone for custody outside of the USA. Uncle Sam has form when it comes to stealing the citizens gold.

"The paper standard is self-destructive."

Hans F. Sennholz

Gold-Shortage Threat Drives Texas Schools Hoarding 664,000 Ounces at HSBC

By David Mildenberg and Pham-Duy Nguyen - Apr 17, 2011 4:00 PM GMT+0100

Dallas hedge-fund manager J. Kyle Bass helped advise the University of Texas Investment Management Co. on taking delivery of 6,643 gold bars, worth $987 million on April 15, now stored in a bank warehouse in New York.

Bass, who made $500 million with 2006 bets on a U.S. subprime-mortgage market collapse, said managers of the endowment, known as UTIMCO, sought board approval to convert its gold investments into bullion this year. A board member, Bass, 41, said he was asked to help with that process.

While Bass, a managing partner at Hayman Capital Management LP, said in an April 16 e-mail that “the decision to purchase and take delivery of the physical gold” was made by endowment staff members, “I helped where I could.” Gold futures touched a record $1,489.10 an ounce April 15 in New York before closing at $1,486.

The Texas fund’s $19.9 billion in assets ranked it behind only Harvard University’s endowment as of August, according to the National Association of College and University Business Officers. Last year, UTIMCO added about $500 million in gold investments to an existing stake, said Bruce Zimmerman, the endowment’s chief executive officer. The fund’s managers sought to take delivery of bullion to protect against demand for the metal overwhelming supply, according to Bass.

Open interest in gold futures and options traded on the Comex typically exceeds supplies held in its warehouses. If the holders of just 5 percent of those contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand, Bass said.

----“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said April 15 in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”


Back in the land of the rising Panda, “we’ve got too much foreign exchange” says China’s Dr Bernanke. Too many fiat US dollars is the sub text. China is now likely to set off on another international spending spree. NAFTA and the EU’s chancers, will now all be booking tickets to spring like Toronto, where China’s sovereign wealth fund has opened its first western office. Time to buy another precious metals and critical metals mines or two? How about BP? Maybe not.

"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

April 18, 2011, 11:36 p.m. EDT

PBoC's Zhou says forex stockpile exceeds needs

HONG KONG (MarketWatch) - China's central banker Zhou Xiaochuan said Monday that China's stockpile of foreign-exchange reserves exceeded the nation's needs and urged efforts to reduce accumulation, according to newswire reports. Zhou, speaking at Tsinghua University in Beijing on Monday, said growing reserves were causing surplus liquidity and the current stockpile exceeded "reasonable requirements". China's foreign exchange reserves rose $197.4 billion in the first three months of the year to $3.0447 trillion at the end of March.


"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

At the Comex silver depositories Monday, final figures were: Registered 41.04 Moz, Eligible 61.78 Moz, Total 102.82 Moz.


Crooks and Scoundrels Corner.

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

Over on the wrong side of the Atlantic, in the continent made for tanks and tyrants, everyone and their dog are lining up to bet against a happy ending in the EU’s sovereign debt crisis. While bailing out Greece, Ireland, and Portugal is just possible if unwise, when Spain follows Portugal, and Gaddafi’s Italy follows Spain, and British joke on the French, Belgium needs a bailout too, pretty soon we’re talking north of 4 trillion Euro. Trying that will take down powerhouse Germany too. Long before then some sanity will occur in the insane asylum known as the European “Union”.

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

Richard M. Ebeling

European sovereign debt crisis worsens as investors bet against Ireland, Portugal and Greece

The European debt crisis worsened as investors ignored Greece's claims it won't need to restructure its debt, Ireland's banks were cut to junk status and Portugal's planned bailout was threatened by a possible veto from Finland

12:28PM BST 18 Apr 2011

The yield on Irish, Greek, Portuguese and Spanish government bonds, or the premium investors charge to hold the debt, all increased, with the yield on Greece's two-year bonds surging to a record 19.4pc.

The huge rise came despite Greece's finance minister, George Papaconstantinou, saying in Washington at the weekend that his country is not in talks to renegotiate the terms of its debt.

Ireland, the second country to receive a European and International Monetary Fund bailout, suffered a further blow to its beleaguered banking sector when Moody's cut its ratings on the country's government-guaranteed banks to junk status.

The credit ratings agency cut its rating on Ireland's sovereign debt to one notch above junk last week.

Portugal, which today starts negotiating the terms of the expected €80bn (£70bn) bailout it requested last month, now finds itself facing a veto from Finalnd, after an anti-euro party won more votes than expected in Finnish elections. There is now a risk that the True Finns party could block the financial aid.


A one size fits all currency union is a political concept completely divorced from economic reality. Driven by vainglorious European politicians on the make, it will go the way of all previous currency unions. Only the timing is unknown. You got to ask yourself, would you buy a used car from Berlusconi? Sarkozy, Merkel, Cameron?

"All of the government's monetary, economic and political power, as well as its extensive propaganda machinery, will be enlisted in a constant battle to drive down the price of gold - but in the absence of any fundamental change in the nation's monetary, fiscal, and economic direction, simply regard any major retreat in the price of gold as an unexpected buying opportunity."

Irwin A. Schiff

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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