Baltic Dry Index. 934 +04
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise."
Jerome F. Smith
Stay long physical precious metals, law and order is breaking down. While Europe’s Club Med continues its slide towards bankruptcy, and ultimately an exit from the now dysfunctional monetary union, international trade anarchy has suddenly broken out in India and Argentina. The established rule of law system that has underpinned global progress since the 1970s, this morning is suddenly under attack. The Indian Finance Bill has introduced retrospective taxes, some deals affected could date all the way back to the 1960s. Argentina has sent banks a letter threatening criminal and civil action in Argentine courts, if they fund or even write research notes on companies engaged in the Falklands oil sector. The banks all know what kind of justice lies in an Argentine court. Stay long precious metals, add international trade anarchy now, to growing international resource nationalism.
With India, the international community is already coalescing into an India vs the rest of the world fight. Argentine attempted blackmail for political ends, threatens to set a very nasty precedent if it succeeds. As we enter the usually slow trading Holy Week, more than just Club Med needs a miracle if India and Argentina prevail.
"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
International business attacks retrospective Indian tax law
The international business community has launched a stinging attack against the Indian government and its decision to introduce a retrospective a tax law.
By Jonathan Russell 10:00PM BST 01 Apr 2012
The changes, which could crystallise a £1.4bn tax charge for Vodafone, threaten an exodus of international investment from India according to some of the world’s most powerful trade bodies.
A letter to Indian Prime Minister Manmohan Singh from organisations such as the CBI, the US National Foreign Trade Council and Japan Foreign Trade Council warns the changes have “called into question the very rule of law, due process, and fair treatment in India.”
The letter comes as the Chancellor George Osborne’s begins a visit to India. He is expected to raise the tax issue with ministers.
“We are writing to express deep concerns about many of the tax provisions proposed in the Finance Bill 2012,” the letter states. “If enacted, these proposals will significantly alter the Indian taxation of our member companies with retroactive effect extending back for as much as half a century.
“Some of our member companies had already begun re-evaluating their investments in India due to increasing levels of controversy and uncertainty regarding taxation.”
The letter has elevated the tax issue from a bi-lateral dispute between Vodafone and the Indian government to a multilateral row that could end up in the international courts.
As well as Vodafone, companies such as SAB Miller and Kraft are among those that have carried out deals involving Indian companies which could fall foul of the revised law.
The Indian Finance Bill introduced a measure that means deals involving Indian companies dating back to the 1960s could be taxed, irrespective of where the deals were carried out. India is currently struggling to close a 4.94 trillion rupee (£60.6bn) budget deficit.
Vodafone has been fighting to overturn a £1.4bn tax claim arising from its 2007acquisition of Hutchinson Whampoa’s Indian business.
Indian courts have twice ruled in Vodafone’s favour, most recently at the Supreme Court.
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Argentina threatens to sue banks helping Falklands oil explorers as trade war with Britain escalates
A group of British and American banks have been threatened with legal action by the Argentine government for advising and writing research reports about companies involved in the Falkland Islands’ £1.6bn oil industry.
In what amounts to the start of a new trade war between the UK and Argentina, the banks - understood to include the Royal Bank of Scotland, Barclays Capital and Goldman Sachs - have been warned they face criminal and civil action in the Argentine courts.
The threats were made in a series of letters sent to as many as 15 banks by the Argentine embassy in London over the last ten days.
The letter, a copy of which has been seen by The Sunday Telegraph, warns the institutions that even merely writing research notes on exploration companies involved in the Falklands constitutes “a violation of the applicable domestic and international rules”.
The news - coming a day ahead of the 30th anniversary of Argentina’s invasion of the Falklands which sparked the 1982 conflict - is likely to worsen tensions between the two countries. The Argentine government is continuing to push for sovereignty.
The two-page letter, to which a schedule of legal declarations about the Falkland’s ownership are attached, is intended to warn off the banks from any further involvement in the South Atlantic oil industry.
----The letters were sent to the individual banks by the Argentine embassy in London on March 20 and were not signed, but contained the crest of the Ministry of Foreign Affairs and Worship.
The document appears to be aimed at cutting financial support to the five London-listed exploration companies - together worth a combined £1.6bn - which are active in the Falkland’s basin, of which Rockhopper Exploration is the largest by market capitalisation.
The recipients of the letters fall into two separate categories - those who are advising the five oil companies and those who have written research notes either on the subject of Falklands oil or on specific companies.
The banks and stockbrokers which have undertaken advisory and fundraising roles for the five which are believed to have received the letter include RBS, Credit Suisse, Barclays, and Oriel Securities. Those institutions whose research teams have written on the subject and have been targeted by the Argentine government are believed to include Goldman Sachs, Jefferies and Edison Investment Research.
It is not thought that the letters have been dispatched to the oil exploration companies themselves at this time.
Juliet Blanch, partner and head of the international dispute resolution at law firm Weil, Gotshal & Manges, believes the legal threat could be a ploy by Argentina to try and cut off funding to the oil companies rather than having to resort to a protracted legal battle.
"Gold bears the confidence of the world's millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history. There is no reason to believe it will lose the confidence of people in the future."
Oakley R. Bramble
Euro Was Flawed at Birth and Should Break Apart Now
Since the launch of the euro in January 1999, Germany and the Netherlands have experienced a growth slowdown and loss of wealth for their citizens that would not have happened had they never joined the euro.
We know this to be true, because we can compare the progress of these two Northern European economies with that of Sweden and Switzerland, which kept their freely floating currencies in 1999 and continued to grow as before. Indeed, over the period of the euro’s existence, the German and Dutch economies have grown significantly more slowly than those of the U.S. and the U.K., despite the debt crisis now engulfing the “Anglo-Saxons.”
Sweden and Switzerland grew as fast or faster in 2001-11 as they did in 1991-2001. The German and Dutch economies, by contrast, not only slowed down in 2001-2011 (to 1.25 percent from 3 percent in the case of the Netherlands), they also suppressed wage growth to adjust for the effects of the euro. As a result, real consumer-spending growth fell to a feeble one quarter of a percent a year in these countries. A recent report on the Netherlands’ experience in the euro calculated that if growth and consumer spending had followed the pattern of Sweden’s and Switzerland’s in the decade from 2001, Dutch consumers would have been 45 billion euros ($60 billion) a year better off.
No wonder the Germans and Dutch are angry. But their anger should be directed at the governments that took them into the euro, not at the hapless citizens of Mediterranean Europe, who now are also suffering the effects of the common currency.
----So 13 years later, where are we? Greece, if you look at the government’s monthly cash figures rather than the massaged numbers of the troika, now has a budget deficit of more than 11 percent of gross domestic product, a 4 percent to 5 percent primary deficit (excluding interest), and total debt of 135 percent of GDP net, 168 percent gross. The austerity program the Greeks are following -- their only option, given that without control of their own currency they cannot devalue -- has made both the deficit and debt ratios greater. Austerity has caused deflation of nominal spending and incomes, which have fallen by more than 5 percent, cutting tax revenue. Government debt will surge under any scenario within the euro: If Greece stays in, the correct “haircut” for its debt is 100 percent. But it could well be forced to leave later this year.
On current prospects, Italian net government debt, which is now 100 percent of GDP, according to the Organization for Economic Cooperation and Development, will be 110 percent by the end of 2013. There is no prospect of improvement, owing to Italy’s negligible growth trend within the euro. Other euro-area economies are in worse shape.
More
http://www.bloomberg.com/news/2012-04-01/euro-was-flawed-at-birth-and-should-break-apart-now.html
April 1, 2012, 8:27 p.m. ET
EU Lenders Kick Troubles Down Road
LONDON—Even as the European banking crisis shows signs of easing, lenders across the Continent are engaging in a variety of maneuvers to avoid, or at least delay, coming to terms with potential problems lurking on their books.
Some banks are concocting unorthodox structures designed to improve all-important capital ratios, without raising new capital or moving unwanted assets off their balance sheets. Others are engaging in complex transactions with struggling customers to help temporarily avoid loan defaults—but possibly exposing the lenders to future problems.
Banks now have greater flexibility to pursue such tactics because of the roughly €1 trillion ($1.33 trillion) of cheap three-year loans that the European Central Bank recently handed out to at least 800 lenders. The program, known as the Long-Term Refinancing Operation, or LTRO, is widely credited with averting a possible catastrophe as banks struggled to pay off their maturing debts.
But by granting the new lease on life, the ECB program also has enabled the industry to delay its cleanup process, according to some bankers, investors and other experts.
"The LTRO has allowed for an extension of the period before which bank reconstruction is embraced, and the damage for the euro area could be material," said Alastair Ryan, a banking analyst with UBS.
The tactics are most prevalent in Spain, where banks are awash in ECB loans but also are buckling under the increasing weight of bad real-estate loans. Lenders are making accommodations to small- and medium-size borrowers that take immediate heat off their customers, but possibly only kick problems to a later date.
----Elsewhere in Europe, banks are getting increasingly creative at finding ways to boost their capital ratios without dumping unwanted assets or selling new shares—two of the methods that most regulators and other experts agree are key to fundamentally strengthening the sector.
Some banks are parking portfolios of assets, typically commercial real-estate loans, in newly created off-balance-sheet vehicles. The banks then hire outside advisers such as private-equity firms to manage the vehicles. In some cases, the bank agrees to absorb the first wave of losses on the assets, but the losses or profits after that are divvied up between the bank and the vehicle's manager.
Spain Record Home Price Drop Seen With Bank Pressure
By Sharon Smyth - Apr 1, 2012 11:00 PM GMT
Spanish home prices are poised to fall the most on record this year, leaving one in four homeowners owing more than their properties are worth, as the government forces banks to sell real-estate holdings.
Home prices will decline 12 percent to 14 percent, according to research and advisory company R.R. de Acuna & Asociados, after Economy Minister Luis de Guindos in February gave lenders two years to make 50 billion euros ($67 billion) of additional provisions and capital charges for losses linked to real estate. That’s the most since the National Statistics Institute started tracking values in 2007. Standard & Poor’s forecasts borrowers with negative equity may rise to 25 percent this year from 8 percent in 2010, based on an analysis of 800,000 mortgages.
“There will be more serious price drops this year because of the government decree,” said Fernando Rodriguez de Acuna Martinez, a partner at the Madrid-based firm. “Banks are now prepared to incur big losses on real estate to shift all they can.”
----The government’s Feb. 2 decree on real-estate provisions is already leading to reduced sales prices. In the week after the plan was announced, more than 10,000 homeowners who use Idealista.com, Spain’s largest property website, lowered their asking prices. That’s 30 percent more than the weekly average during the previous month.
Banco Santander SA (SAN), Spain’s largest lender, and CaixaBank SA (CABK), the fourth-largest, are offering homes at discounts of as much as 50 percent on their Altamira and Servihabitat property websites. Bankia SA (BKIA), the No. 3 bank, went even further on March 15 by announcing that the company aimed to sell 9,000 properties this year at discounts of as much as 60 percent.
“What we can see from these 2011 figures is that there were two main factors driving the results: Asian growth and optimism on the one hand and western desire to protect assets against uncertainty on the other. Looking particularly at Asia, there was a major boost to the overall figures from the increase in Chinese demand, which is a trend that we see continuing over the next year. It is likely that China will emerge as the largest gold market in the world for the first time in 2012 demand terms. What is certain is that the long-term fundamentals for gold remain strong, with a diverse and growing demand base, coupled with constrained supply side activity.”
Marcus Grubb, Managing Director, Investment World Gold Council.
At the Comex silver depositories Friday final figures were: Registered 34.04 Moz, Eligible 103.03 Moz, Total 137.07 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, more on the growing scandal shaking China. The fall of Bo Xilai, the Communist Party chief in Chongqing. There is growing suspicion that Bo and his allies were plotting to seize power later this year, when the Chinese Communist Party undergoes a generational power handover. Has the “liberal” wing of the Chinese Communist Party just crushed the “Red” faction that sought a return to mor Maoist ways? Can the Red faction fight back? Below, normal TV service to resume from today in Chongqing.
Chinese TV channel to drop 'red' programming
A Chinese television channel is to axe shows extolling Communist ideals, state media has said, just over a year after they were introduced in a "red" drive led by ousted local leader Bo Xilai
11:00AM BST 26 Mar 2012
The official Global Times said the government-backed satellite broadcaster in Chongqing – a sprawling and fast-growing metropolis – would revert to its previous staple of popular sitcoms from April 2.
The moves comes just weeks after Mr Bo, famed for his populist "red revival" campaign that included airing shows promoting Communist-era songs and classic revolutionary tales, was removed as party chief of the southwestern metropolis.
According to a report on the city's cqnews.net website, Chongqing Satellite Television is also set to screen a series of new entertainment shows and resume airing commercial advertisements.
Staff from the broadcaster were not available to confirm the TV programming change when contacted by AFP.
Bo was a rising star and his downfall earlier this month – the biggest and most public political drama to hit China in years – dashed his ambitions to join the nation's most powerful decision-making body later this year.
His sacking came weeks after his former right-hand man and Police Chief Wang Lijun reportedly tried to defect to the United States in a dramatic event that remains shrouded in mystery.
Analysts have said Bo, the son of the late revered Communist revolutionary Bo Yibo, had implemented the "red revival" campaign in Chongqing to advance his rise nationally within the party.
The campaign – which also includes sending officials to work in the countryside and pushing workers to sing revolutionary songs – was eyed with concern by more liberal elements of the party.
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"The international monetary order is more precarious by far today than it was in 1929. Then, gold was international money, incorruptible, unmanageable, and unchangeable. Today, the U.S. dollar serves as the international medium of exchange, managed by Washington politicians and Federal Reserve officials, manipulated from day to day, and serving political goals and ambitions. This difference alone sounds the alarm to all perceptive observers."
Hans F. Sennholz
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. Time to rig the market higher?
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