Baltic Dry Index. 928 +02
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
"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
Forget the Euro for now, the USA seems to be getting ready for action against Iran. How else to explain presenting a nuclear demand to Iran that they know Iran will not meet while building up offensive military assets in the region. Stay long precious metals and keep the car stocked with fuel. Either Iran or America must blink or go to war. With the Middle East region a powder keg waiting to blow, someone seems to want it to blow now. Stay long precious metals. If this all goes wrong, the dollar, the euro and the Pound, may all go down in one fell disastrous folly. Can the Chinese economy survive an oil spike? For more on another Chinese scandal scroll down to Crooks Corner. If another discretionary war blows up the Middle East, which precious metals ETFs will blow up with it?
If all else fails, immortality can always be assured by spectacular error.
John Kenneth Galbraith.
US flexes muscles as it sends aircraft carriers to Persian Gulf
The United States sent Iran a message of intent yesterday by despatching two aircraft carriers to the Gulf region just days before the resumption of negotiations over Tehran's nuclear programme.
The US navy announced the arrival of the USS Abraham Lincoln in the north Arabian Sea and the USS Enterprise, the world's longest naval vessel, in the Gulf of Aden.
A senior official in President Mahmoud Ahmadinejad's government threatened in January unspecified action if American aircraft carriers returned to the Persian Gulf, saying: "We are not in the habit of warning more than once".
Although neither ship has entered the Gulf itself, the deployment will be seen as an unmistakable challenge in Tehran ahead of the beginning of negotiations on Saturday, which President Barack Obama has described as Iran's "last chance" to resolve the nuclear impasse through diplomacy.
In recent weeks Iran has been forced to temper its bellicose rhetoric after American and European Union sanctions against the country's central bank and energy sector began to have serious consequences for its already faltering economy.
In an apparent gesture of reconciliation, Iran offered to resume talks with the international community over the future of its nuclear programme, which it continues to insist is purely for peaceful purposes.
Despite strong Israeli misgivings and deep suspicions in the West, Iran's negotiating partners accepted the offer but have outlined a series of initial steps they expect Tehran to take to prove its sincerity.
These include a demand for the closure of Iran's best protected nuclear facility at Fordow and an immediate halt to the refinement of uranium to a concentration of 20 per cent, a level considered a short step away from weapons grade. All stocks of nuclear fuel enriched to 20 per cent must also be shipped abroad, Western diplomats said.
Iran reacted angrily to the demands yesterday, accusing world powers of an act of bad faith by announcing conditions before the talks, which are to be held in Istanbul, had even begun.
More
Threat of oil price spike is on a par with eurozone debt crisis, ITEM warns
British consumers face a perfect storm of rising inflation, soaring unemployment and a slowing economy if the threat of an oil price spike is realised, a leading group of economists has warned.
The Ernst & Young ITEM Club said that should heightened political tensions in the Middle East push the price of oil to $150 (£94) a barrel from its current level above $120, the Government would also be forced to borrow more and there would be a greater risk of an early interest rate hike.
The risk of a further spike is being taken very seriously by the Bank of England, whose governor Sir Mervyn King has already warned publicly that disruptions to the supply of oil from Iran or Nigeria would likely push inflation up.
Andrew Goodwin, senior economic advisor to ITEM, said the threat posed to the UK economy by an oil price spike was now "on a par" with that posed by the eurozone debt crisis. "The eurozone is still very much a live issue and I certainly wouldn't write it off yet but the oil price spike has been the new threat from the beginning of the year," he said. "Were political tensions in the Middle East to escalate, you could easily see a further oil price spike."
He said that given so much of it is sentiment driven, even the fear that the Strait of Hormuz – which carries a third of the world's oil seaborne cargos – could close would be enough to cause a major spike.
----Mr Goodwin said that in "normal circumstances" such an oil price spike would trigger a recession in the UK, but one-off factors this year would probably see of the threat of a double-dip. He said that any negative impact on growth of the extra bank holiday for the Diamond Jubilee would likely be unwound in the third quarter, in which growth should also receive a boost from the Olympics.
"Without that [in the event of an oil spike] the UK would certainly be likely to see at least two negative quarters of growth."
Unemployment would rise above the psychologically crucial 3m mark to average 3.07m next year, which would "really bring home" to people the severity of the situation. The jobless total currently stands at 2.67m.
April 9, 2012, 10:35 a.m. ET
Greek Dockworkers to Go Ahead With Strike
ATHENS—Greek dockworkers said they will push ahead with a two-day strike starting Tuesday, a move expected to deal a blow to the country's vital tourism sector.
Also Monday, data showed Greek industrial production fell sharply in February on lower demand for local products from abroad, pointing to a further contraction of the recession-ravaged economy.
Austerity measures introduced as part of Greece's initial €110 billion ($144 billion) bailout plan also have taken a heavy toll on economic activity, weighing on consumption and investment.
The dockworkers are protesting social-security changes and plans to deregulate the industry, which contributes 16% to Greece's annual gross domestic product and accounts for roughly 18% of jobs in the country. The planned overhauls are part of austerity commitments to international lenders needed to help clinch a second €130 billion bailout agreed recently.
Elstat, the Hellenic Statistical Authority, said Monday that industrial production fell 8.3% on the year in February, after declining a revised 6% in January and following a 11.9% drop in December. For the first two months of the year, industrial production fell an average of 7.2%.
The slump in output points to a further downturn in the Greek economy, which the European Commission expects to shrink at an annual pace of 4.7% in 2012, its fifth straight year of recession.
----The Panhellenic Seamen's Federation is protesting a government move to merge its supplementary pension fund with a unified auxiliary fund and plans to implement stricter control of health-care spending, arguing it will lead to lower quality of service for recipients.
The Association of Greek Tourism Enterprises, known as SETE, said the union group must understand that such protests "destroy the country."
Separately, local council workers on Monday shut down landfills across Greece in a 24-hour walkout protesting government plans to privatize the sector.
More
April 9, 2012, 7:24 p.m. ET
Irish Economic Crisis Devours Restaurants
Eateries Slash Prices to Draw Penny-Pinching Diners Amid a National Plight That Has Reduced Their Ranks by a Third
GALWAY, Ireland—To see how Ireland is rebalancing its economy without control of its currency, order the nine-ounce steak at Martine's in this costal Irish city.
It goes for €28 ($36.60), down from €35 in 2008.
But don't come for lunch: The cozy Irish restaurant has stopped serving it because no one was coming. Even sharply lower prices weren't enough to entice workday eaters coping with falling wages.
"None of us can see a light at the end of the tunnel at all," says Martine McDonagh, the owner of the restaurant, which occupies an old house near the water in Galway. "We've slashed everything. I don't know how long you can continue to do it."
Ms. McDonagh's restaurant isn't alone. As Ireland trudges through the pain of economic recovery, restaurant owners across the country have been cutting prices to sustain a flow of customers and avoid going out of business.
The result is sector-specific deflation that has brought big drops in revenue not only for Irish restaurant owners but also for hotel proprietors, retailers and most other consumer-linked businesses.
The situation is a peril of the euro. Because they are tied to the common currency, ailing euro-zone countries such as Ireland, Greece and Portugal haven't been able to devalue their legal tender to boost competitiveness and speed recovery. Instead, Europe's prescription has been to lower the prices of their domestic goods, services and wages.
----Average Irish weekly wages have fallen 4.3% since 2008 to €689.54 in the third quarter of 2011, curtailing disposable income among consumers.
It is the result of an epic financial collapse starting in 2008 that halted two decades of economic prosperity in Ireland. The Celtic Tiger, as the country became known, rose out of an export boom, entry into the euro zone and a housing bubble fueled by reckless lending.
More
http://online.wsj.com/article/SB10001424052702304072004577325842988730830.html?mod=WSJEurope_hpp_LEFTTopStories
We end for the day with new signs of trouble in America. I wonder what an oil price spike will bring to the US economy? Time to be out of all unnecessary risk.
Profit Growth Stalls as European Slump Hampers Recovery
By Thomas Black - Apr 10, 2012 5:53 AM GMT
U.S. corporate profit growth stalled in the U.S. last quarter as companies from McDonald’s Corp. (MCD) to 3M Co. (MMM) saw gains in the world’s largest economy eroded by a slump in Europe.
Earnings at Standard & Poor’s 500 Index companies, excluding financials, are seen gaining 0.6 percent in the first and the second quarter from a year earlier, according to analysts’ estimates compiled by Bloomberg, the slowest growth rate since 2009.
The European debt crisis and a slowdown in China are hurting S&P 500 companies, which derive about 40 percent of profits from abroad. At home, where the S&P 500 Index had its biggest first-quarter rally since 1998, consumer confidence is improving along with the job market -- boosting demand for construction companies and retailers.
----Last month, China pared its growth target to 7.5 percent from an 8 percent set in 2005. The 17-nation euro economy is projected to contract 0.4 percent in 2012, with recessions in countries including Greece and Spain.
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"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
F.A. von Hayek
At the Comex silver depositories Monday final figures were: Registered 30.85 Moz, Eligible 109.21 Moz, Total 140.06 Moz. Silver continues to leave the deliverable registered category for the safety of the non-deliverable eligible category. My guess is that it’s fleeing the “allocated” category in London too. If a new discretionary war is coming to the powder keg Middle East, a great precious metals deficit is one likely unintended consequence to surface in London.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Another week, another big scandal in China. One scandal too many it seems to me. Is China’s miracle coming to its Japanese style end? While it’s impossible to know for certain, being out of risk early is better than being out last. It may already be too late for many Chinese businesses. If America v Iran causes an oil spike, China’s fragile economy may be pushed over the edge.
April 9, 2012, 9:22 p.m. EDT
China businessman who built an empire vanishes
Disappearance prompts review of loans made to his conglomerate
DALIAN ( Caixin Online ) — The sudden disappearance of a self-made billionaire in the coastal city of Dalian has unnerved not only bank executives concerned about loans they made to his companies, but also government officials who have lent generous support to the expansion of his business empire.
Xu Ming, chairman of Dalian Shide Group Co. Ltd., has been out of contact with his companies since March 14, a corporation announcement said.
The notification, dated March 31, says: “So far, the corporate group has not received any official notice related to Chairman Xu Ming, nor has any government department or agency launched any investigation against Shide Group and its subsidiary companies.”
Meanwhile, a source close to the matter in the capital said Xu was taken into custody by Beijing authorities for questioning on suspicion of financial crimes. Shide Group’s president, Chen Chunguo, could not be reached.
Cozy ties to banks
In Dalian, banks with close ties to the corporation were among the first to be shocked by Xu’s disappearance. The day after, a number of banks started reviewing the loans they made to Shide Group and its related concerns, Caixin learned.
China Construction Bank’s CN:601939 CICHY preliminary investigation found that the amount of its outstanding loans to Shide Group has steadily declined over recent years, but still stands at roughly 1 billion.
The current loans are “relatively well collateralized and have not been classified as non-performing loans,” said a loan officer from CCB’s Dalian branch bank. He added, however, that there was no guarantee that the loans would be repaid in full because all concerned parties had become extremely wary of making further loans to Shide Group, which could put the corporation in financial distress.
Also hanging in the balance is a 600 million yuan ($95.1 million) debt from a wealth management product CCB issued in 2010 on behalf of Shide Group. The debt comes due in May, but it is unclear how much risk the bank assumed.
Shide Group has had a cozy relationship with CCB that dates back more than a decade. Its first large loan from the bank was made in 1999, when Xu acquired Dalian’s football club. It originally belonged to businessman Wang Jianlin under the name of Dalian Wanda Football Club.
The transaction was worth 120 million yuan. Xu paid Wang 50 million yuan in cash and took over repayment of a 70 million yuan debt Wang had with CCB. Since then, Xu kept borrowing from CCB, at one point boosting the amount of outstanding loans to 1.6 billion yuan. This sum started to shrink after his aggressive expansions alerted the bank’s risk-management officials.
----His business empire developed fast, expanding into areas including the petrochemical industry, home appliances, sports, health care, insurance and property development. But it still relies heavily on revenue from the production of building materials made from petrochemical products. With supply exceeding demand since 2005, it has been increasingly difficult to maintain profits.
----However, Xu’s disappearance and the dark clouds hanging over Shide Group have many in Dalian nervous.
“Until it becomes clear whether the authorities intend to use Shide as a breach to hunt down people behind it, every government official and business person in Dalian feels imperiled,” said a local bank executive, who declined to be named.
More
http://www.marketwatch.com/story/china-businessman-who-built-an-empire-vanishes-2012-04-09
The monthly Coppock Indicators finished March:
DJIA: +97 Down. NASDAQ: +103 Down. SP500: +70 Down. All three indicators remain down but downward momentum is stalling.
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