Thursday, 29 March 2012


Baltic Dry Index. 922 +05

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

FRANKFURT (MNI) - The purpose of the European Central Bank's two three-year longer-term refinancing operations was to address banks' short-term funding issues and "nothing else," ECB Vice President Vitor Constancio said on Wednesday.

"The sole aim of the LTRO was to cater to the funding stress of euro area banks in general," Constancio said at a colloquium on macro-prudential regulation here. "It never crossed our minds that we were solving the sovereign debt crisis" with these measures.

From more on “the Donald” and Murdoch media, scroll down to Crooks and Scoundrels Corner.

So the truth is finally out, the ECB’s Long Term Refinancing Operation, where the ECB issued low interest 3 year loans to banks against worthless collateral unsellable in the commercial market was just a disguised ECB QE program intended to fool (give cover) to German politicians that the ECB wasn’t breaking its mandate and the law. In the easy come easy go legal attitude that prevails now in Euroland, it doesn’t matter if the QE program worked. This morning it doesn’t look like it worked. In the upside down world that is now Europe, if it didn’t work twice better try it thrice.

While the USA seems to be setting up the stage for another round of backdoor QE around the middle of the year, the ECB must probably move sooner. The European crisis is accelerating again, with a general strike underway today in Spain, and the European voters flirting with punishing mainstream parties. The ECB will soon try another round of Italian magic. Stay long physical precious metals. We are awash in funny money with much more to come.

"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

ECB's LTRO plan flops as banks cut lending

European banks cut lending lines to companies last month, defying the central bank's grand plan to stem the crisis with a flood of more than €1 trillion (£838bn) of cheap loans.

The European Central Bank (ECB) said loans to the real economy fell in February, scotching claims that radical long-term refinancing operation (LTRO) would stem the crisis.

Open Europe's Raoul Ruparel said: "The LTRO has succeeded in avoiding a severe funding crunch...[But] it does not tackle the underlying lending risks which the banks are still keen to avoid, particularly with the looming recession in Europe."

As Spain faces a general strike on Thursday, economists called for the eurozone to use its bail-out funds to support the country's banks.

Finance ministers are under pressure to boost Europe's "firewalls" in Copenhagan on Friday. But Jens Weidmann, Bundesbank president, warned that "just like the 'Tower of Babel' the 'Wall of Money' will never reach heaven".

Italy's premier Mario Monti warned against blaming sinner states: "It was in fact Germany and France that were loose concerning the public deficits and debts," he said. "If the father and mother of the eurozone are violating the rules, you could not expect...[others] to be compliant."


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

Richard M. Ebeling

EU Nears One-Year Boost in Rescue Fund to $1.3 Trillion

By James G. Neuger and Rebecca Christie - Mar 28, 2012 11:00 PM GMT

European governments are preparing for a one-year increase in the ceiling on rescue aid to 940 billion euros ($1.3 trillion) to keep the debt crisis at bay, according to a draft statement written for finance ministers.

The euro-area finance chiefs will probably decide at a meeting in Copenhagen tomorrow to run the 500 billion-euro permanent European Stability Mechanism alongside the 200 billion euros committed by the temporary fund, a European official told reporters in Brussels yesterday

Beyond that, they are also set to allow the temporary fund’s unused 240 billion euros to be tapped until mid-2013 “in exceptional circumstances following a unanimous decision of euro-area heads of state or government notably in case the ESM capacity would prove insufficient,” according to the draft dated March 23 and obtained by Bloomberg News.

The boost to the war chest would come after Chancellor Angela Merkel of Germany, the dominant power in two years of crisis fighting, this week warned of “fragility” in Portugal and Spain. It would also be designed to lure the rest of the world into putting more money into the International Monetary Fund’s arsenal.

Greece May Have to Restructure Debt Again, S&P’s Kraemer Says

By Jennifer Ryan - Mar 29, 2012 12:01 AM GMT

Greece will probably have to restructure its debt again and this may involve bailout partners such as the International Monetary Fund, said Moritz Kraemer, head of sovereign ratings at Standard & Poor’s.

There may be “down the road, I’m not predicting today when, another restructuring of the outstanding debt,” he said at an event in London late yesterday. “At that time maybe the official creditors need to come into the boat.”

Speaking at the same event at the London School of Economics, Poul Thomsen, the IMF mission chief to Greece, said while the country has made an “aggressive” fiscal adjustment, it will take at least a decade to fully complete the country’s restructuring.

Caretaker Prime Minister Lucas Papademos won parliamentary approval on March 21 for a second 130 billion-euro ($173 billion) rescue program. Passage of the legislation moves the country a step closer to elections that may be held as early as next month. Greece pushed through the biggest sovereign debt restructuring in history earlier this month, paving the way for the bailout.

Espirito Santo Among Five Portugal Lenders Downgraded by Moody’s

By Patrick Clark - Mar 29, 2012 12:00 AM GMT

Banco Espirito Santo SA (BES) was among five banks in Portugal to have credit ratings cut by Moody’s Investors Service, which cited asset risks and a “poor economic outlook” in a nation whose own grade was reduced last month.

Espirito Santo, Portugal’s largest publicly traded bank by market value, had its debt rating lowered one level to Ba3, Moody’s said yesterday in a statement. It took the same action for Caixa Geral de Depositos SA and Banco BPI SA. (BPI) Banco Internacional do Funchal was downgraded to B1 from Ba3

Portugal was among six European nations, along with Spain and Italy, to have debt ratings cut by Moody’s Feb. 13 as the region’s government-debt crisis spurs austerity programs that may undermine growth. Yesterday’s moves give the four banks grades on par with or lower than Portugal’s, which fell to Ba3 from Ba2. Banco Santander Totta SA, the Portuguese unit of Spain’s largest lender, was cut two levels to Ba1 from Baa2.

Downgrades of the nation’s lenders were generally driven by “expected further deterioration of banks’ domestic asset quality” and firms’ prolonged difficulty accessing private wholesale funding sources, Moody’s said in the statement. “While none of these pressures are new, in Moody’s view they continue to mount against the backdrop of the ongoing euro debt crisis.”

Shock slowdown in UK growth as GDP contracts 0.3pc

Fears that the UK is double-dipping back into recession rose after statisticians whittled down the economy's growth over nine months of last year.

The UK economy shrank 0.3pc in the final quarter of 2011, rather than the 0.2pc thought, the Office for National Statistics (ONS) said. That meant gross domestic product (GDP) grew just 0.7pc in 2011, rather than the 0.8pc first estimated.

Growth figures for the first and second quarters of last year were also cut. While economists have been predicting the UK will avoid a return to recession – defined as two consecutive quarters in which the economy shrinks – the numbers raised fears that a double-dip will materialise.

"In combination with the poor production and retail sales data, it is more likely than not that the economy also contracted in the first three months of this year, which would put the UK in a technical recession," said Azad Zangana, European economist at Schroders.

The downwards revision to the UK's fourth-quarter figure was driven by transport, communication, business services and the financial sector. However, the downturn was broad based.

Manufacturing output fell 0.7pc, construction dropped 0.2pc and the services sector saw output fall 0.1pc.

Bank of China Seeks to Join World’s Biggest Metals Exchange

By Agnieszka Troszkiewicz - Mar 28, 2012 6:50 PM GMT

Bank of China Ltd. became the first Chinese company to apply for membership on the London Metal Exchange, the world’s biggest metals bourse.

BOCI Global Commodities (U.K.) Ltd. is seeking to become a category 2 member, giving it the right to trade by telephone and electronically, the LME said in a notice today. It won’t have access to the ring, London’s last open-outcry trading floor.

China accounts for about 39 percent of global copper usage, 42 percent of aluminum and 43 percent of nickel demand, according to Barclays Capital. The LME opened its first Asian office in Singapore in 2010 and introduced new contracts with the Singapore Exchange Ltd. last year to attract new investors. The LME is also considering takeover bids for the 135-year-old exchange after trading volume climbed to a record last year.

China is such a big user of the LME,” said Herwig Schmidt, head of sales at Triland Metals Ltd., one of 12 companies trading on the floor of the LME and a unit of Tokyo- based Mitsubishi Corp. “It’s the first step that encourages others to follow.”

The LME’s board will review the application on April 23, said Chris Evans, the exchange’s head of business development.

Tim Price And Don Coxe: "We Have Entered The Most Favourable Era For Gold Prices In Our Lifetime”

-----In Don Coxe's latest and typically excellent letter, "All Clear?", he highlights the opportunity in precious metals mining companies:

"If there were one over-arching theme at the BMO Global Metals & Mining Conference, it was that the gold miners are upset and even embarrassed that their shares have so dramatically underperformed bullion...

"On the one hand, they were delighted in 2011 when it was reported that since Nixon closed the gold window, a bar of bullion had delivered higher investment returns than the S&P 500 for forty years-- with dividends reinvested. But some gold mining CEOs find it an insult that what they mine is more respected than their companies' shares...

"In our view, we have entered the most favourable era for gold prices in our lifetime, and the share prices of the great mining companies will eventually outperform bullion prices."

Gold remains one of the most widely misunderstood assets in the investible world. Indeed, it may be better to refer to it as a means of saving that does not expose the saver to counterparty or credit risk or to the depredations of the monetary authorities.

As Don Coxe makes clear, governments are running deficits "beyond the forecasts of all but the hardiest goldbugs five years ago; central banks are printing money and creating liquidity beyond the forecasts of all but the most paranoid goldbugs a year ago."

The choice for the saver is essentially binary: hold money in ever-depreciating paper, or in a tangible vehicle that has the potential to rise dramatically as expressed in paper money terms.

Gold prices have now softened, offering investors yet another chance to get back on board what is perhaps the most compelling form of money- and portfolio insurance available.


"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

At the Comex silver depositories Wednesday final figures were: Registered 34.84 Moz, Eligible 101.67 Moz, Total 136.51 Moz.

Crooks and Scoundrels Corner

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

Today two of the best scoundrels, but did they over reach themselves and break the law? Are these two American Muppets too big to be subject to law? Time will tell in the weeks and months ahead.

“A rich man is either a scoundrel or the heir of a scoundrel”

Spanish Proverb.

Trump to be investigated by election watchdog over wind farm campaign

Published Mon 26 Mar 2012 14:38, Last updated: 2012-03-26

US tycoon Donald Trump is to be investigated by the UK election watchdog following a complaint over his apparent funding of an anti-wind farm campaign group.

The Trump Corporation last month agreed to finance and support protest organisation Communities Against Turbines Scotland (CATS) as it increased its efforts to derail the roll-out of clean, green energy.

The chair of CATS reportedly revealed that some of the cash would be used to target council election candidates who stand in favour of wind farm developments.

But because the funding is from an overseas donor, the Scottish Greens have now confirmed they have referred the matter to the Electoral Commission for investigation.

They believe the financial support from the US may be in breach of the complex and strict rules governing public elections.

Green MSP Patrick Harvie said: "It’s bad enough that Mr Trump has thrown a hissy fit about the chance that he might be able to see turbines from his golf resort, and has threatened to abuse the planning and legal systems to undermine Scotland’s energy industry.

“But the possibility that a foreign billionaire will seek to use his wealth to influence the local elections is outrageous.

"This is not America, and our political process is not for sale at any price."

New York-based Trump is opposing plans for 11 turbines off the Aberdeenshire coast, near his golf resort on the Menie Estate.


Rupert Murdoch's News Corp faces police investigation in Australia

Rupert Murdoch's News Corporation is facing a police investigation in his native Australia, throwing his attempt to tighten his grip on its powerful regional media into jeopardy.

The Australian government has called for a police inquiry into corporate hacking by the media group, after a newspaper released more than 14,000 emails allegedly showing that the company used a secret unit to sabotage competitors.

The office of Stephen Conroy, Australia's communications minister, said the allegations were "serious" and "should be referred to the Australian Federal Police for investigation".

Experts said a police inquiry would be likely to derail the $2bn bid by Foxtel - the Australian pay-TV operation 25pc owned by News Corp - for rival network Austar.

Claims have been made that NDS, a technology company that was part-owned by News Corp, had a secret unit which encouraged the widespread hacking of competitors. The practice reportedly cost rivals $AUS50m (£33m) a year and helped put at least one out of business.

The Australian Financial Review made the claims this week, as it published thousands of emails from an archive held by Ray Adams, European chief of the unit called "Operational Security" between 1996 and 2002. Pay-TV operators worldwide, including ITV Digital in the UK and Austar in Australia, were subject to a major wave of piracy during the period.

"We are in a world of irredeemable paper money - a state of affairs unprecedented in history."

John Exter

Friday, 23 March 2012

Muppets Sought.

Baltic Dry Index. 902 +06

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

"Ireland is often held up as a success story among high deficit euro area countries, but in practice current policies probably will not succeed in returning the economy to fiscal sustainability."


The Goldmanites are apparently scanning their email records looking for “muppets.” For more on the search for Goldman’s “muppets” scroll down to Crooks and Scoundrels Corner. It will be interesting to see how many muppets the Goldmanites find. We look forward to see them publishing a list as to who made it to muppet status, as opposed to mere denigration like “Herman the German” another apparent term of contempt of a Goldman “client” presumably because he was a German and foolish enough to try to trade with God’s workers.

“Muppets. Bring out your Muppets. Muppets wanted.”

Ebenezer Squid.

Now back to the global slowdown. Up first the Eurozone and Ireland. Poor Ireland should follow Iceland’s lead, renegotiate their banks debt instead of guaranteeing it 100%, and leave the euro before Greece does. Sold out by their politicians for German cash, Ireland will do no such thing. Ireland’s serfs must continue to suffer repeated bouts of Berlin austerity.

March 22, 2012, 11:06 a.m. ET

Euro-Zone Business Activity Shrinks

LONDON—Euro-zone business activity shrank further in March, suffering its biggest contraction in three months and cementing fears the region is officially in recession.

Markit Economics said Thursday that its composite purchasing managers' index for the 17 nations that use the euro fell to 48.7 in March from 49.3 in February. That was under the 50 threshold that indicates growth, and means output fell during the first quarter as a whole, Markit said.

The euro-zone economy shrank 0.3% in the fourth quarter of 2011. A further contraction in the first quarter, as the PMIs suggest, would mean the bloc is now in recession.

Chris Williamson, chief economist at Markit, calculated the downturn in the euro zone economy "is only very mild at the moment," with the PMI pointing to a drop in gross domestic product of about 0.1%-0.2%. But the loss of momentum at the end of the first quarter will heighten fears that the slowdown will be more severe.

"Over the past few months, financial markets have been heralding a recovery in the euro zone. That seems to have been premature," said Peter Vanden Houte, economist at ING Bank. A worsening economy "increases the danger that the debt crisis could come back with a vengeance," he said.


Eurozone 'poster child' Ireland slumps back into recession

Ireland tumbled back into recession at the end of last year, dousing political claims that the "Celtic Tiger" has benefited from its tough austerity programme.

The Central Statistics Office (CSO) said that Irish gross domestic product (GDP) shrank 0.2pc in the fourth quarter after a contraction of 1.1pc in the third quarter, putting the country back into a technical recession.

Worse, the Irish gross national product (GNP) plunged 2.2pc in the fourth quarter after a 1.9pc decline in the previous three months. GNP is regarded by the Irish government as a more accurate barometer of the country's economic performance as it strips out substantial profits earned by multi-national companies in Ireland that are then taken out of the country. The CSO said the Irish economy grew by 0.7pc for the whole of 2011. But it shrank by 2.2pc in GNP terms.

Ireland, which received an €85bn (£71bn) international bailout in 2010, has won plaudits from eurozone members for its implementation of tough spending cuts and austerity measures.

European leaders, including Angela Merkel, the German Chancellor, have held up the country as a poster child for other "sinner states" to copy. At the World Economic Forum in Davos in January, Jyrki Tapani Katainen, the prime minister of Finland, said: "The Irish model [of recovery] is the one we all need. I don't see that we have any choice… there is no short cut to heaven."

By cutting public sector jobs and pay and increasing the state pension age, Ireland turned 10 years of budget deficits into a surplus last year.


Elsewhere, Japan is turning on China safe in the notion that they are in the company of Uncle Sam and German lead Europe. Given Japan’s past history against China and their apparent lack of remorse, an unwise move it seems to me in faraway London. A quick glance at the Atlas confirms to me that both America and Europe are far separated from all of China. Japan on the other hand is right next door. An equally bad idea is getting embolden to tackle China right before a generational leadership change is underway in China. The incoming team are unlikely to meekly roll-over as their first act in power. A few acts of Japan thumping might be in store for the early part of 2013 by China. Our dumbed down modern world seems devoid of what used to be called “statesmen.” Stay long precious metals. We appear headed for interesting times.

March 22, 2012, 12:28 p.m. ET

Japan Turns Bolder on China

TOKYO—Japan's decision to join an international trade action last week against China over rare-earth minerals marks a shift by Tokyo to more openly questioning Beijing and joining hands with allies to counter its influence.

The rare-earth complaint with the World Trade Organization, spearheaded by the U.S., and joined by both Japan and the European Union, is the first time Japan has taken its neighbor and largest trading partner to the international arbiter, a stark contrast with the multiple matters raised by the U.S. and the EU since China joined the WTO in 2001.

Fearing confrontation and retaliation, Tokyo has until now opted to use bilateral channels to settle disputes with China. "We are beginning to feel bilateral talks don't work in some cases," one Japanese government official involved in the filing said. "They have to be dealt with multilaterally." Reflecting the sensitivity Japan feels about the matter, the official spoke only on condition that neither his name nor his government affiliation be identified.

In the U.S., China trade bashing has become mainstream politics. Both Democratic President Barack Obama and Mitt Romney, the Republican frontrunner to challenge him this fall, have made tough talk against Beijing a key plank in their platforms. But Japan has long been more hesitant to tangle openly with China, for a variety of cultural, diplomatic, and economic reasons. As China becomes increasingly assertive in flexing its economic and military might around the region, Japan has slowly become more willing to challenge Beijing and encourage Chinese reforms.

The rare-earth case symbolizes many of those shifting dynamics between Asia's two largest economies.

Global tensions over the matter first emerged in 2010 when China, which produces more than 95% of the world's rare-earth supply, abruptly stepped up its curbs on exports of the minerals. The move raised alarms in Japan, where the minerals have a high symbolic importance as key components in the manufacturing of electronics as well as hybrid-car batteries.

China cited the environmental impact of mining as a reason for limiting exports. But the clampdown intensified at the same time that China and Japan were locked in a diplomatic tiff over an island chain claimed by both countries, and Japanese companies and government officials saw it as retaliation for that dispute. Japanese officials also say they believe the export curb was aimed at encouraging foreign users to shift production to China, thus transferring precious technology as well.


In UK news, the soon to be replaced for incompetence FSA, has woken up to the fact that client money went missing on their watch, and that Lehman Brothers blew up on their watch to their total surprise. The outgoing FSA is now about to investigate how UK financial firms handle client money. It seems pretty obvious to me that they handle it until it’s all gone.

"I want us to do even more to encourage the risk takers"

Gordon Brown. 2004.

“Prime Minister Gordon Brown called yesterday for the Financial Services Authority to start an inquiry, saying he was “shocked” at the “moral bankruptcy” indicated in the suit.”

Gordon Brown. 2010.

FSA to review handling of client monies after MF Global collapse

The Financial Services Authority (FSA) is to review how companies handle client money following the collapse of MF Global, Lehman Brothers and WorldSpreads.

By Jonathan Russell and Jamie Dunkley 9:43PM GMT 22 Mar 2012

The City watchdog said it would look at the “inadequate records, ineffective segregation of client assets and low level of awareness of requirements in this area” as part of its current business plan.

It is also examining options to prohibit former bosses of failed banks from taking other well paid jobs in the City.

The collapse of Lehman Brothers and MF Global have led to questions about which clients should have their funds classed as segregated. The failure of WorldSpreads, put into administration last weekend, is thought to be a separate issue as its collapse has already been referred to City of London Police.

Although MF Global went under with hundreds of millions of funds in segregated client accounts, many of them continued to be held by the administrator until months after its collapse.

The FSA said it would “strengthen our intensive regulatory and supervisory approach for firms holding client money and safe custody assets and increase our knowledge and oversight of the UK market”. It also warned it would increase the visits it paid to firms holding client assets and could look at the legislative framework governing the area.

The decision to examine how companies keep their money separate from their clients’ comes after the UK Supreme Court ruled earlier this month that all Lehman Brothers’ former clients should have access to recovered cash, whether or not the money was held in segregated accounts. It is understood the FSA was waiting for the decision before launching its review into the area.

The FSA warned it would “continue to take regulatory action where firm failings are identified”.


"Finance is the art of hypothecating client money from deal to deal until it finally disappears."

With Apologies to Robert W. Sarnoff

At the Comex silver depositories Thursday final figures were: Registered 35.46 Moz, Eligible 99.18 Moz, Total 134.64 Moz.

Crooks and Scoundrels Corner

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

Today, the great Goldmanite Muppet hunt in the land of the Great Vampire Squids. Will any of the Muppets be offered compensation?

"God, no, we don't club baby seals. We club babies."

Goldmanite, quoted in The Times of London. November 8 2009

Goldman Sachs in hunt for 'muppet' email

Goldman Sachs has started scanning emails for the term "muppet" as the Wall Street bank investigates allegations made in an explosive public resignation letter by a former employee last week.

Greg Smith, who sold European equity derivatives for the bank in London, last week used the New York Times newspaper to publish a resignation letter in which he alleged he had seen managing directors refer to clients as "muppets" five times on internal email. The letter, which was published on the newspaper's opinion pages, also branded the bank's culture as "toxic".

Lloyd Blankfein, Goldman's chief executive, and Gary Cohn, Goldman's president, rejected the characterisation of the bank in a memo to Goldman's 30,000 staff last week, adding that when employees make complaints "we examine them carefully and we will be doing so in this case." The review of internal emails was disclosed to the bank's partners in a conference call this week.

The allegations by Mr Smith, a South African who had worked at Goldman for just over a decade, refocused attention on a bank that has been a lightning rod for public anger against Wall Street since the financial crisis. Goldman paid $500m (£316m) in 2010 to settle allegations from US regulator the Securities and Exchange Commission that it misled clients over the sale of a mortgage-backed security.

The chief executives of other Wall Street firms, including JP Morgan Chase and Morgan Stanley, were last week quick to rally around a bank they compete fiercely with.

Mr Smith, who spent most of his career with Goldman in New York, has gone to ground since the publication of the letter last week. Goldman Sachs has not been able to make contact with him, neither have many publishing executives who are eyeing an insider's account of life at a bank envied by competitors. Although Goldman's shares fell on the day Mr Smith resigned, wiping more than $2bn from the bank's market value, it remains unclear what damage the public relations storm has done.

So, Goldman is a serial arsonist that has turned betting against its clients' interests into a science. The Times article makes it clear that shorting subprime and luring gullible investors into the trap, was standard operating procedure. Goldman's CEO Lloyd Blankfein dismisses the criticism with a wave of the hand saying, "They were sophisticated investors," which is the same as saying "buyer beware". It's worth noting that shorting subprimes exacerbated the pain in housing by creating incentives for originators to issue more mortgages to people with poor credit. This prolonged the housing boom and deepened the recession when the bubble finally burst. The eventual downturn was largely engineered by Wall Street.

Another weekend, and we alter our clocks forwards here in the spring like UK. Everywhere there are signs of the countryside springing back to life. It's lambing time too, here in the south of England, with the fields full of gamboling lambs and their Ewes. Time to take a break and enjoy another of God's great times of the year. Have a great weekend everyone.

The monthly Coppock Indicators finished February:

DJIA: +106 Down. NASDAQ: +108 Down. SP500: +78 Down. If I didn’t know better, I’d say the stock market was rigged. Old indicators no longer reflect the actuality in the market. High frequency front running perhaps? Ebenezer Squid taking candy from babies?

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