Baltic Dry Index. 1329 +58
LIR Gold Target by 2019: $30,000. Revised due to QE.
"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium."
Murray N. Rothbard
Due to meetings today, today’s LIR will be brief. Just Greece getting read the Riot Act by an angry ECB threatening the nuke option. ECB and euro suicide if they do. The American economy worryingly starting to wobble again. Finally, continuing trouble with the northern hemisphere grain crops. Higher grain prices look here to stay for this year, and that spells continuing trouble for the importing nations of an already unstable Middle East. Stay long precious metals. If the US wobble continues, QE3 ensues and with it a much weaker dollar and a very large bout of stagflation. We open with Greece and the Riot Act. How long before Greece leaves the ill fated monetary union?
"The paper standard is self-destructive."
Hans F. Sennholz
European Central Bank threatens to pull the plug on Greek lending
The European Central Bank has threatened to stop lending to banks using Greek government bonds as collateral if Athens changes the terms of the debt, a move which could bring down the country's banking system.
By Emma Rowley 6:12PM BST 19 May 2011
The eurozone's central bank has played its "last card" in an attempt to prevent the debt restructuring it fears, said analysts. The cost of insuring Greek sovereign debt rose to more than €1.33m to protect every €10m of bonds as the threat laid bare the divisions in Europe over how to resolve the crisis.
The Mediterranean nation is struggling to carry out the reforms agreed under its €110bn EU/IMF bail-out, prompting fears Athens will not be able to repay its debts, currently totalling about €340bn.
EU officials have been floating the idea of a "soft" restructuring of the debt, whereby the holders of the bonds see the terms extended.
However, Juergen Stark, ECB chief economist, said that if the country altered its repayment terms, the eurozone's central bank would not be able to lend to Greek banks putting up government bonds as collateral.
"A sovereign debt restructuring would undermine the eligibility of Greek government bonds," he said. "A continuation of liquidity provisions would be impossible."
More.
Existing-Home Sales in U.S. Unexpectedly Fall
By Bob Willis - May 19, 2011 3:12 PM GMT+0100
Sales of existing U.S. homes unexpectedly declined in April, indicating the industry is struggling to gain traction as the economy expands.
Purchases of existing homes dropped 0.8 percent to a 5.05 million annual pace last month, the National Association of Realtors said today in Washington. A 5.2 million rate was the median projection in a Bloomberg News survey and the April figure was less than the most pessimistic forecast. The median sales price declined from a year earlier and 37 percent of transactions were of distressed dwellings.
Falling prices and the prospect of more foreclosures entering the market signal more Americans may be hesitant to purchase homes. With unemployment at 9 percent and wages stagnant, any sustained recovery in residential real estate may take years to unfold.
U.S. Index of Leading Economic Indicators Falls
By Alex Kowalski - May 19, 2011 3:43 PM
The index of U.S. leading indicators fell in April after nine months of gains, depressed by a pickup in jobless claims that reflects temporary setbacks including auto-plant shutdowns.
The Conference Board’s gauge of the outlook for the next three to six months decreased 0.3 percent after a revised 0.7 percent gain in March, the New York-based group said today. Economists forecast a 0.1 percent increase, according to the median estimate in a Bloomberg News survey.
A jump in firings that moved opposite to increased hiring last month indicated unevenness in the labor market. At the same time, Federal Reserve policy makers noted during their April meeting that job prospects “continued to improve gradually” and economic growth will persist at a “moderate pace.”
http://www.bloomberg.com/news/2011-05-19/u-s-index-of-leading-economic-indicators-falls.html
Philly Fed factory activity index plunges in May
May 19 (Reuters) - A measure of manufacturing in the U.S. Mid-Atlantic region grew much more slowly than expected in May, a survey showed on Thursday, falling short of even the most pessimistic predictions of a Reuters poll of economists.
The Philadelphia Federal Reserve Bank said its business activity index slumped to 3.9 from 18.5 in April. It was the index's lowest level since October 2010.
Economists had expected a reading of 20, based on the results of a Reuters poll, which ranged from 10.0 to 28.0. Any reading above zero indicates expansion in the region's manufacturing. The index for new orders dropped to 5.4, from 18.8 in April.
"It was, I think, in a word, pretty ugly," said Tom Porcelli, a U.S. economist for RBC Capital Markets in New York. "We're probably past the peak in regard to manufacturing activity, but we don't think manufacturing activity is stopping."
More
http://www.reuters.com/article/2011/05/19/usa-economy-phillyfed-idUSN1916647920110519
MAY 19, 2011
Mideast Staggered by Cost of Wheat
Wheat prices jumped on Wednesday, taking the week's gains to 17%, an ascent that threatens to put fresh pressure on fragile Middle East governments that import the grain to feed their people.
Wet weather in the U.S. and dryness in Western Europe are driving the recent rise. Wheat futures jumped 53 cents, or 7%, to $8.17 per bushel Wednesday, the biggest single-day dollar gain in more than seven months, and are now up 91% in less than a year.
Rising wheat prices jarred global markets last summer, amid a harsh Russian drought, and have stayed high for months. Some analysts worry the bad weather that pushed prices up this week could further curtail supplies and send prices even higher.
That could be a boon to farmers in major exporting countries, but a threat to consumers around the world, and especially in the Middle East. Wheat is the biggest dietary staple in much of the region, providing cheap nutrition in bread, pasta and couscous.
Tunisians eat more wheat than anyone on the planet: 478 pounds per person a year, compared to 177 pounds in the U.S. Egyptians and Algerians also eat more than twice as much wheat as Americans, says the U.N. Food and Agriculture Organization.
Unable to grow enough wheat at home, countries like Egypt and Tunisia buy half or more of what they need from other countries, and pass it along at deep discounts to their impoverished populations.
"It is a situation that a lot of countries in the region are concerned about," said Julian Lampietti, who led a 2009 World Bank study of Arab food security. "This system is not very sustainable."
The added pressure on Middle East governments from costlier wheat could increase the need for Western nations to provide financial aid, as they try to encourage nations to develop market-oriented democracies.
Egypt alone has told donor nations it will need about $10 billion overall in aid in the next 13 months.
Imports in Middle Eastern countries are expected to increase as populations grow. The World Bank study said the region's cereal imports could rise 55% above 2000 levels by 2030.
More
May 20, 2011, 12:01 a.m. EDT
Corn, wheat prices ride torrent of weather shocks
Miss. River floods, Texas drought stymie farmers, surprise traders
----And, after declines in recent weeks on a broad pullback in commodities, corn, wheat and soybeans are poised to finish this week sharply higher, with wheat trading up by over 10% as of Thursday.
Corn and wheat prices had suffered last week after the U.S. Department of Agriculture came out with larger-than-expected ending stocks estimates for 2011-2012, said Todd Hultman, president of DailyFutures.com. “Since then, it seems more likely that those estimates ignored obvious weather problems for both grains that are not going away easily.”
Flooding along the Mississippi River is the first weather-related problem that comes to mind. But there has also been Delta flooding and wet conditions in the Ohio Valley and a drought in Texas, Oklahoma and Kansas.
-----The high river levels and the opening of the Morganza Spillway for flood control may impact nearly 300,000 crop acres, which could translate into $200 million in damages, according to Louisiana State University AgCenter Economist Kurt Guidry.
”Areas that were flooded before they were planted may have to look at alternative crops if the ground ever dries out,” said Darin Newsom, a senior analyst at Telvent DTN.
And “areas that saw early planting now have newly emerged crops standing under water,” he said. “These acres will likely drown, and will either need to be replanted if and when the ground dries out sufficiently, replanted to an alternative crop or abandoned.”
This comes at a key time for corn, soybean, cotton and spring wheat, said Newsom.
“Planting progress has been slowed by rains and flooding over much of the Northern Plains, Midwest Corn Belt and Delta, he said, and the winter wheat crops in the Southern Plains have been irreparably damaged by a drought that started last fall.
“With the world needing the U.S. to have large crops this year, the biggest challenges are coming early,” he said. A “critically” dry situation that’s emerging in parts of Europe where wheat is grown has contributed to a “tough” world situation, so world supplies will not be rebuilt, as expected, by the U.S. crop.
-----In Ohio, for example, USDA data show that 7% of corn has been planted in the state as of the week ending May 15, compared to 83% at this time a year ago.
The amount of corn crops planted that have actually emerged is also strikingly low. In Ohio, only 1% has emerged as of the week ended May 15, compared to 57% a year ago. In Wisconsin, none have emerged, compared to 28% a year earlier.
More.
http://www.marketwatch.com/story/corn-wheat-prices-ride-torrent-of-weather-shocks-2011-05-20
"It is the greenback which is unstable, and not the bullion."
Dr. Franz Pick
At the Comex silver depositories Thursday, final figures were: Registered 32.19 Moz, Eligible 68.74 Moz, Total 100.93 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
No crooks today just yet more fallout from Fukushima. The fix that failed. GE’s venting system for boiling water reactors may have failed, and that means a lot of retro fits for similar reactors worldwide. With each new revelation, it’s starting to look like nothing went according to the emergency plan, and if that’s the case in first world Japan, how safe are the nuclear plants in the developing world?
U.S. Reactor Owners See Retrofits to Avoid Blasts
By Mehul Srivastava, Jim Polson and Rachel Layne - May 19, 2011
Entergy Corp. (ETR), the second-largest U.S. nuclear operator, and Duke Energy Corp. (DUK) said the industry may need to retrofit reactors or bolster safety systems after a pressure-relief system failed in Japan, contributing to the worst nuclear disaster since Chernobyl.
Venting systems at Tokyo Electric Power Co.’s Fukushima Dai-Ichi reactors were designed to allow engineers to release pressurized gas into the atmosphere to avoid dangerous hydrogen explosions. The systems were installed in the U.S. and in Japan after the partial core meltdown at Three Mile Island Unit 2 in 1979.
The vents were built into General Electric Co. (GE) boiling- water reactors, including the stricken Japanese plant that was rocked by at least two blasts blamed on trapped, exploding hydrogen. A conclusion that the vents were at fault may add costs for nuclear-power generators as politicians from Germany to India question the safety of atomic energy.
The hydrogen explosions in Fukushima “call the modification into question,” said Tony Roulstone, who directs the University of Cambridge’s masters program in nuclear technology in England. “If these vents don’t work, then the design looks wrong. Fixing it will take some design work, but won’t be wildly expensive.”
The U.S. Nuclear Regulatory Commission is “looking at effectiveness of containment venting strategies,” Charlie Miller, head of the post-Fukushima safety review, said at a May 12 agency meeting. The vent system is “worthy of a look” after the disaster, he said.
----Entergy “fully expects” the U.S. Nuclear Regulatory Commission to order new equipment installed and new procedures to be adopted as a result of the accident in Japan, said Jim Steets, a spokesman for the New Orleans-based company that owns 11 reactors. Exelon Corp. owns the largest number of U.S. reactors.
Operator error or lack of power at the facility may explain why venting systems didn’t work at Fukushima. “There are multiple explanations for failure of venting systems in Japan to prevent hydrogen explosions,” Michael Burns, another Entergy spokesman, said in an e-mailed statement yesterday.
----It’s still unclear whether Japanese engineers opened the vents to release pressure in the containment building, according to the U.K. report.
“It is certainly possible that inadequacies in the venting routes may have featured in the devastating explosions that were seen in Reactor Units 1 and 3,” the review found. “This may indicate that more attention should have been given in the design and safety assessment to the robustness of the venting routes.”
The hardened-vent systems were designed by a consortium of reactor owners advised by GE. U.S. regulators recommended installation of the systems in a September 1989 letter to owners.
More.
Another weekend, and more than enough global crises to be concerned about. How unlucky can a failing fiat reserve currency system get? Somehow, I think we are shortly to find out. Soon the Fed will be all out of QE2, and the stock market will be all out of new speculative money flowing in. Are the Glencore and LikedIn IPOs the top in the market? Is it all downhill from here? Time for safety I think. More next week. Have a great weekend everyone.
The monthly Coppock Indicators finished April:
DJIA: +182 Up. NASDAQ: +236 Up. SP500: +185 Up.
The Dow and SP 500 and NASDAQ have all reversed from down to up. 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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