Monday 31 December 2012

A World Turned Upside Down!

Baltic Dry Index. 699 -01 

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

'Venez Londres, mes amis!'

Boris Johnson, Mayor of London.

Stay long physical precious metals. From America, a house divided at war with itself, and already fighting for the spoils of the mid-term elections still two years away, to Asia where Japan and China are set to clash over some disputed uninhabited islands in the East China Sea, now that America has given Japan a “blank cheque” of military support if Japan initiates a war with China over the islands, our world has rarely looked more uncertain and dangerous entering into  a new year. Sandwiched in between, a European Monetary Union that seems determined to undertake an insane “reformation,” reinventing itself as a slow/no growth zone, a form of EUSSR without the KGB. Most of the Eurozone is deliberately setting out to turn itself into an irrelevant global backwater. France has adopted a suicidal  death wish, setting out to drive its rich and its entrepreneurial classes abroad.

As we end 2012 and enter 2013, behold the state of our upside down dangerous world.

"The paper standard is self-destructive."

Hans F. Sennholz

China "highly vigilant" over Japanese fighters flying over disputed islands

BEIJING | Thu Dec 27, 2012 7:24am EST
(Reuters) - China is "highly vigilant" about Japanese jet fighter flights over islands claimed by both countries and Japan must bear responsibility for any consequences, Chinese military and maritime officials said on Thursday.

The officials, speaking a day after a new hawkish Japanese prime minister took office, were responding to Japan sending jet fighters several times in the past two weeks to intercept Chinese patrol planes approaching airspace above the islands.

-----"The Japanese side is using military aircraft to interfere with planes on normal patrol in undisputed Chinese airspace," said Shi Qingfeng, director general of the Administration Office of the State Oceanic Administration, the agency whose ships patrol disputed waters in the South and East China Seas.

"This is highly unreasonable conduct and the Japanese side is consciously trying to escalate the situation," Shi said at a presentation for Chinese media and diplomats. "The Japanese side must assume responsibility for the consequences."

Japan Rebuke to G-20 Nations May Signal Moves to Weaken Yen

By Eunkyung Seo & Masaki Kondo - Dec 31, 2012 7:36 AM GMT
Japanese purchases of foreign bonds to weaken the yen may become more likely as the nation rejects trading partners’ rights to criticize its currency policies.

“Foreign countries have no right to lecture us,” Finance Minister Taro Aso told reporters at a briefing in Tokyo on Dec. 28. He said that the U.S. should have a stronger dollar and questioned whether major Group of 20 nations had stuck to pledges from 2009 to avoid competitive currency devaluations.

Japan’s new Prime Minister Shinzo Abe may accept trade friction as a cost of spurring growth and countering deflation through a looser monetary policy and weaker yen. The currency is set to complete its biggest annual decline in seven years after Abe’s Liberal Democratic Party secured a landslide victory in this month’s lower-house election. During his campaign, Abe said foreign-bond purchases were a possible monetary tool.

“The LDP wants to boost stock prices before the upper- house election in July next year, and the easiest option for them is to weaken the currency,” said Satoshi Okagawa, a senior global-markets analyst in Singapore at Sumitomo Mitsui Banking Corp., a unit of Japan’s second-biggest bank by market value. “The explicit policy to weaken the yen is likely to upset the U.S. and China.”

Merkel Calls for German Patience as Euro Crisis ‘Far From Over’

By Rainer Buergin - Dec 30, 2012 11:00 PM GMT
German Chancellor Angela Merkel said the economic environment will be more difficult in 2013 than this year, and that Europe’s sovereign debt crisis is “far from over,” though progress has been made.

“The reforms that we’ve agreed on are starting to take effect,” Merkel, who faces federal elections in September, said in a New Year’s television speech to the nation, sent today in advance by e-mail.
“Nevertheless, we still need a lot of patience. The crisis is far from over.”

Financial-market tensions have abated after the European Central Bank unveiled its Outright Monetary Transactions bond- buying plan on Sept. 6, pledging to spend as much money as needed to restore confidence in bond markets. The program provides support to debt-strapped nations as long as they sign up to economic reforms.

The European Stability Mechanism, which is helping the Spanish government recapitalize the country’s banks, was established Sept. 27 after Germany ratified the agreement. About 200 of the 17-nation euro area’s biggest lenders will come under direct ECB oversight when the single supervisor becomes operational, targeted for March 2014.

In the meantime, the 500 billion-euro ($661 billion) ESM could aid banks directly using its own procedures and asking ECB supervisors to step in. The fund could act as a resolution mechanism as well as providing capital to ailing banks, as long as certain conditions are met, ECB Executive Board member Joerg Asmussen said Dec. 18 in Frankfurt.

Taxes to Rise for Workers as Budget Deal Still Elusive

By Kathleen Hunter & Roxana Tiron - Dec 31, 2012 5:01 AM GMT
With taxes set to increase for almost every U.S. worker at midnight, Congress hasn’t reached a budget deal that Democrats and Republicans say is necessary to prevent a blow to the U.S. economy.

Private talks between Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell that began Dec. 28 stalled yesterday because of disputes over income tax rates, the estate tax and other issues.

McConnell, a Kentucky Republican, reached out to Vice President Joe Biden in an effort to break the impasse, while staffers worked into the night trading and reviewing offers.

“There’s still significant differences between the two sides but negotiations continue,” Reid, a Nevada Democrat, said on the Senate floor. The Senate will reconvene today at 11 a.m. Washington time and “perhaps” have further announcements then, he said. “I certainly hope so.”

Congress is working to avert more than $600 billion in tax increases and federal spending cuts, the so-called fiscal cliff, set to start taking effect tomorrow. Allowing those changes to take effect would cause a recession in the first half of 2013, according to the Congressional Budget Office.

The only good news: China. But scroll down to Crooks Corner.

China Manufacturing Pickup Shows Rebound Gains Traction: Economy

By Bloomberg News - Dec 31, 2012 7:24 AM GMT
China’s manufacturing unexpectedly expanded at the fastest pace in 19 months in December, boosting optimism that a recovery in the world’s second-biggest economy is gaining traction.

The final reading of a Purchasing Managers’ Index was 51.5 in December, according to a statement from HSBC Holdings Plc and Markit Economics today. That compares with the 50.9 preliminary reading on Dec. 14 and a final 50.5 in November. A level above 50 indicates expansion.

China’s economy may have rebounded after a seven-quarter slowdown as the government increased spending on infrastructure and accelerated investment-project approvals.

----“Momentum is likely to be sustained in the coming months when infrastructure construction runs into full speed and property market conditions stabilize,” Qu Hongbin, chief China economist at HSBC in Hong Kong, said in the statement. Manufacturing output and purchasing accelerated this month, even as new export orders showed a “slight fall” on weak demand in Europe, Japan and the U.S., HSBC said.

"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

At the Comex silver depositories Friday final figures were: Registered 42.06 Moz, Eligible 105.02 Moz, Total 147.08 Moz.  

Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over. 

Today, we present the modern miracle of the worker’s paradise of China.

“The Master said, “The gentleman understands what is right, whereas the petty man understands profit.”


Billionaire Princelings Ruin a Chinese Vision

By William Pesek Dec 27, 2012 10:00 PM GMT
----This week’s Bloomberg News expose on the so-called Eight Immortals is a case in point. Building on a June article tracing the accumulated wealth of the family of Xi Jinping, China’s next president, it described the vast fortunes being amassed by the offspring of the founding fathers who were instrumental in Mao Zedong’s rise to power in 1949. Mao changed the world by meeting U.S. President Richard Nixon, and Immortals such as Deng Xiaoping engineered the economic boom that has unfolded since then.

----What the Immortals hadn’t counted on was how their children would foul things up. By harnessing the trust of the state and top-level political connections, these princelings are reaping outsized benefits from China’s growth. It is an outcome that would shock Deng: After 30 years of explosive growth, opening markets and reducing poverty, inequality levels now echo the pre-Communist era.

Wealth Grab

One of modern history’s greatest wealth grabs isn’t just exacerbating the rich-poor divide, but delaying the reforms needed to roll back the state control that masks underlying economic inefficiency. There is lots of money in the status quo -- an unfathomable amount, in fact. Just three of the Immortals’ dozens of children and their spouses -- among them Deng’s son-in-law and the son of Mao’s economic czar -- founded or run companies with combined assets of $1.6 trillion as of last year. That is equivalent to almost a fifth of China’s gross domestic product.

More than a third of the Immortals’ children and their spouses hold top positions in state-owned enterprises. And then there’s princeling Xi, who will run China for the next 10 years and have the final say over whether his pledge to root out corruption is real or hollow rhetoric. Bloomberg documented how his family accumulated a fortune estimated at $376 million.

The New York Times also had a busy year following the money and connecting the financial dots. The Times reported that the family of current Premier Wen Jiabao has made billions of dollars during his tenure. That’s quite a blow to the carefully honed image of the modest and simple “Grandpa Wen” of the people.

The government’s response has been indignation. It accused the Times, for example, of harboring political motives to destabilize the regime. Yet China has a growing corruption problem on its hands, one that must be addressed in a transparent manner.

----Yet the one that China’s leaders are probably most loath to confront is the sight of Communist Party officials becoming modern-day Rockefellers and Vanderbilts. It surely never occurred to Deng that finding wealth would be China’s undoing. When you follow the money, it’s hard to conclude otherwise.

A happy, healthy and prosperous 2013 to all.

The monthly Coppock Indicators finished November:
DJIA: +103 Up. NASDAQ: +123 Up. SP500: +125 Up.  

Friday 28 December 2012

The Last, Last Chance!

Baltic Dry Index. 699 -01 

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

"This American system of ours, call it Americanism, call it capitalism, call it what you will, gives each and every one of us a great opportunity if we only seize it with both hands and make the most of it”

Ebenezer Squid. With apologies to Al Capone.

With about 3 days 14 hours to go to America toppling over its “fiscal cliff,” President Obama and America’s politicians are taking a leisurely European Union approach to finding a compromise solution. It’s almost as if they’ve studied the last 22 EU summits that forever and all time have “saved” the snake bit monetary union, and decided to adopt European rules in Washington DC. The world can only hope that the Euro-rules work out better in the new world than the old, where most of Europe is trapped in a never ending austerity recession, imposed to pay off the debts of the brain dead, too big to fail European banksters. President BO and congressional leaders from both parties will meet at the White House today at 3 p.m. EST, which by my count leaves them a little over 3 days left to keep horse trading. Stay long physical precious metals. Under European rules any fix is usually worse than problem it was supposed to fix.

"Is it really true that political self-interest is nobler somehow than economic self- interest?"

Milton Friedman

Lawmakers, Obama in last chance talks on "fiscal cliff"

WASHINGTON | Fri Dec 28, 2012 3:14am GMT
(Reuters) - President Barack Obama and lawmakers are launching a last-chance round of budget talks days before a New Year's deadline to reach a deal or watch the economy go off a "fiscal cliff."

Obama and Vice President Joe Biden will meet congressional leaders from both parties at the White House on Friday at 3 p.m. EST (2000 GMT) to try to revive negotiations to avoid tax hikes and spending cuts - together worth $600 billion - that will begin to take effect on January 1.

Members were divided on the odds of success, with a few expressing hope, some talking as if they had abandoned it and a small but growing number suggesting Congress might try to stretch the deadline into the first two days of January.

In order to be ready to legislate if an agreement takes shape, the Republican-dominated House of Representatives convened a session for Sunday.

And House Majority Leader Eric Cantor advised members to be prepared to meet through January 2, the final day before the swearing-in of the new Congress elected on November 6.

Americans blame Republicans more than Democrats for "fiscal cliff": Reuters/Ipsos poll

WASHINGTON | Thu Dec 27, 2012 8:17pm GMT
(Reuters) - Americans blame Republicans in Congress more than congressional Democrats or President Barack Obama for the current "fiscal cliff" crisis, as the deadline approaches for action to avert big tax increases and spending cuts, a Reuters/Ipsos poll showed on Thursday.

When asked who they believed to be more responsible for the "fiscal cliff" situation, 27 percent blamed Republicans in Congress, 16 percent blamed Obama and 6 percent pointed to Democrats in Congress. The largest percentage - 31 percent - blamed "all of the above."

A similar breakdown was found in response to questions about the economy. Asked who was responsible for the national unemployment rate, the poll found 23 percent chose Republicans in Congress, 16 percent said Obama and 7 percent said Democrats in Congress, while 32 percent picked "all of the above."
The U.S. unemployment rate stood at 7.7 percent in November, according to Labor Department figures.

Away in the land of Grimms’ Fairy Tales, Germany’s Finance Minister says that the Euroland sovereign debt crisis is over. Euro serfs can only hope that he’s right, rather than the evidence they see all around them with their own eyes. Club Med has an austerity death wish, with a youth generation consigned to an impoverished scrap heap, for most, for life. France is off following the old socialist Pied Piper, headed off into the economic wastelands, much as Napoleon once headed off towards Moscow. The ECB promises to do whatever it takes to buy up unsellable EU sovereign debt, if only the petitioner will first put on the sackcloth and ashes and bloodletting of the ESM.

Seen from this side of the channel, Europe seems to be suffering yet another bout of Germanic self-delusion. On present Eurozone policy, assuming it were to work, the Eurozone is to turn itself into some giant, undemocratic, sclerotic version of the  defunct USSR. It lasted 1922 to 1991. The western European version will be lucky if it lasts 20 years.

There was once a widow who had two daughters—one of whom was pretty and industrious, whilst the other was ugly and idle. But she was much fonder of the ugly and idle one, because she was her own daughter; and the other, who was a step-daughter, was obliged to do all the work, and be the Cinderella of the house. Every day the poor girl had to sit by a well, in the highway, and spin and spin till her fingers bled.

Germany and Club Med. With apologies to the brothers Grimm.

Worst of euro crisis is over, Germany's Schaeuble says

BERLIN | Thu Dec 27, 2012 6:31pm GMT
(Reuters) - The worst of the euro zone sovereign debt crisis is over, German Finance Minister Wolfgang Schaeuble has said in an interview to be published on Friday.

Schaeuble said governments in heavily indebted countries such as Greece have now recognised that the crisis that began in Athens three years ago will only be overcome by implementing bitter reform measures.

"I believe the worst is past," Schaeuble told the daily newspaper Bild in comments released on Thursday ahead of publication.

ECB will not waver over bond-buying conditions - Coene

BRUSSELS | Thu Dec 27, 2012 11:15am GMT
(Reuters) - The European Central Bank will steadfastly enforce conditions attached to sovereign bond purchases under its programme to help euro zone states cut borrowing costs, ECB Governing Council member Luc Coene said.

In an interview in Thursday's edition of weekly magazine Trends, he also said the chance of Spain seeking international aid had diminished, and that the ECB still had more room to act if economic conditions in the euro zone worsened further.

Spain is considered the most likely first beneficiary of the bond-buying programme, under which the ECB would buy potentially unlimited quantities of a struggling country's bonds.

Despite its borrowing costs having fallen sharply since the ECB announced the scheme in September, Spain is still widely expected to apply for aid in the first quarter of 2013 - thereby triggering ECB bond purchases.
Coene, who is also governor of Belgium's central bank , said any country wanting the ECB's help via the scheme would have to face the consequences.

"If we yield, the ECB will lose all credibility. At a certain moment it will be tough. But this is the line that we have drawn in the sand and we cannot and will not cross it," Coene said.

Under the programme, dubbed outright monetary transactions (OMT), a country would have to apply for aid from Europe's bailout fund before the ECB intervened.

Such aid would come with conditions, such as implementing economic reforms and hitting budget targets, though the ECB would not be technically obliged to buy the country's bonds.

 Mortgage Nightmares

Evictions Become Focus of Spanish Crisis

By Helene Zuber 12/27/2012
After a record number in 2012, evictions in Spain have become the symbol of a crisis that shows no signs of improving. Next year isn't likely to be any better, but with more attention now being paid to those losing their homes, relief in the form of legal reform may soon be on the way.

----Some 400,000 eviction proceedings have been opened in Spain since 2007, with roughly half of the families involved having already lost residential properties due to foreclosures. For most of them, these were their homes. Now, in the fifth year of the financial crisis, the evictions have become an iconic image of the country's economic plight. During the first six months of this year alone, the Consejo General del Poder Judicial, which oversees and organizes the Spanish judiciary, registered 94,502 repossessions -- and the evictions reached a record 532 a day during the first half of 2012.

No End in Sight

What happens to people who lose not only their jobs, but whose homes and hopes for a better future are taken away? There are now 1.7 million Spanish households in which not a single family member still earns a salary. Nearly 4 million people have lost their jobs since late 2007, when the real estate bubble burst. More than half of those out of work in Spain are now considered to be long-term unemployed. The result is that an increasing number of them can no longer service the loans they took to purchase apartments, houses and commercial space during the boom years prior to the crisis.

According to a forecast by the Spanish central bank, the number of foreclosures will increase by another 30 percent in the coming year. And as the year draws to a close, there is no end in sight to the financial crisis. The outlook for 2013 is grim.

Small companies are facing bankruptcy, large companies are announcing additional layoffs and international corporations are pulling out of the country. The Madrid Confederation of Employers and Industries estimates that economic output could drop by a further 1.3 percent in the coming year, with the ranks of the unemployed likely to swell to over 6 million.

Currently, 12.7 million people are already forced to survive on less than 60 percent of the average Spanish income, meaning that 27 percent of the population is living below the poverty threshold. A joint study by UNICEF, Oxfam and Doctors Without Borders concluded that the country will need over 20 years to regain the standard of living it attained in the prosperous, pre-crisis years.

“You have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the government. And, with due respect to these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold.” 

George Bernard Shaw. Irish socialist.

At the Comex silver depositories Thursday final figures were: Registered 42.68 Moz, Eligible 105.06 Moz, Total 147.74 Moz.  

Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over. 

Today, we present the modern miracle of the worker’s paradise of the EUSSR.

"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

Ronald Reagan.

Behind the Scenes in Brussels

EU Summit Reveals a Paralyzed Continent

By SPIEGEL Staff  2/27/2012
What happens behind closed doors at an EU summit, when European leaders are among themselves? SPIEGEL has reconstructed the negotiations at the most recent meeting in Brussels in December based on documents and accounts given by numerous sources. It was a summit of hopelessness.

The haggling is in full swing at this hour -- North against South, rich countries against poor ones, German Chancellor Angela Merkel against French President Fran├žois Hollande. They're stuck on a word, one that would normally have a beautiful, positive sound: common. The word "common" is dividing Europe. This is what it has come to in this night of hard-fought negotiations.

For more than six hours now, the leaders of the European Union have been meeting in Brussels to discuss the future. They are here to agree on a document, and according to item 12 of that paper, there is to be a "common backstop" for the new banking union, a sort of shared resolution fund for worst-case scenarios also referred to more technically as a "shock absorption capacity."

Germany wants the word "common" deleted. So do Sweden, Finland, Denmark and the Netherlands. France wants to keep the word in the document, as do Italy, Spain and Portugal. The northern countries are afraid that they'll be asked to pay even more than they already do, while the south is hoping for more shared responsibility in the crisis. The dispute continues for three-quarters of an hour. The northern countries win the fight and the word "common" is stricken from the closing statement of the most recent EU summit.

This happened on Dec. 13 and 14, during a meeting of the European Council, the powerful EU body consisting of all 27 heads of state and government. They meet behind closed doors, and not even their closest staff members are allowed to attend. During these discussions, secrecy is normally paramount. But as of the last one, that no longer applies.

Months ago, SPIEGEL began opening the doors to this summit. A team of six reporters traveled to European capitals to find sources for a reconstruction of the December meeting. As a result, they were able to obtain reports on the negotiations, during and after the summit, from almost a dozen sources. The reports make it possible to accurately recount the events that unfolded.

----The December summit was seen as an opportunity for Europe to take a big and decisive step in this direction. But it failed on that count, producing an outcome that was tenuous at best.

How could this happen? The days leading up to the summit and the meeting itself show how Europe functions -- or rather, doesn't -- at a key juncture. They show how a big idea can be ruined in ritualized routine. Despite the talk, few leaders are truly advocating further European integration these days.

Another weekend, and the last weekend of 2012. It was at best just, another year of muddle through and monetise like a drunken sailor. All the west got to show for it was another year deeper in unrepayable debt. In Europe, Club Med got hammered by Germany, in the name of keeping a failing monetary system together. No one seems bothered to ask if it’s worth paying the piper any longer for most. In America, an election was held, but settled nothing. Each party claims to have won a mandate to block the other. In Japan a new government just took over promising unlimited monetisation and a new war with China. Thanks to an American “blank cheque” to Japan, a new Japanese war with China is what we are likely to get. Stay long physical precious metals. 2013 looks to be a critical year in the Great Nixonian Error of fiat money.
Under democracy one party always devotes its chief energies to trying to prove that the other party is unfit to rule - and both commonly succeed, and are right. 

H.L. Mencken.

The monthly Coppock Indicators finished November:
DJIA: +103 Up. NASDAQ: +123 Up. SP500: +125 Up.