Baltic Dry Index. 861 -17
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
"When it becomes serious, you have to lie"
Jean-Claude Juncker. Luxembourg Prime Minister and president of the Euro Group of Finance Ministers. Confessed liar.
They came, the met, they talked, and went home
doing nothing. The ECB now has zero credibility. “Whatever it takes” became
nothing. “The Euro is irreversible,” probably
means exactly the opposite, the ECB is working with others to prepare for the
reintroduction of national currencies for some. Right up to the day that it
happens, the ECB and others will deny it, and issue a mass of outright lies. “Turbo
Tax Timmy’s” European trip seems to have gone over worse than Mitt Romney’s. “Super
Mario Monti,” Club Med’s “Prime Minister,” has crashed back to earth having
fallen for Draghi’s “whatever it takes” wheeze. Last week as the Olympics opened, Mario, Timmy
and Mario were riding high on their great white chargers, one week on and MTM
have transformed into Curly, Moe and Larry. But that is a little unfair to CML,
Curly, Moe and Larry were real comedians after all.
"What
is this you're doing?" "The elevator dance." "Elevator
dance?" "Yeah, there's no steps to it."
Turbo
Timmy and Mario Draghi, with apologies to The Three Stooges. Soup to Nuts.
Markets crumble as Draghi bond plan deemed too vague
The European Central Bank has opened the door to a blitz of bond purchases and fully-fledged quantitative easing in a radical shift of policy, but only once Europe’s leaders have activated their own rescue machinery.
----Market opinion was deeply divided, with critics lining up to berate Mr Draghi for failing to deliver on last week’s pledge to do “whatever it takes” to save the euro.
“This
could accelerate the crisis,” Jacques Cailloux from Nomura said. “We have a
bond crash in Spain and Italy, and the worst financial crisis in European
history and all we get from the ECB is 'guidance’. It is clear that they are
not yet ready to do anything,” he said.
The euro
plummeted below €1.22 against the dollar on the lack of concrete action. The
IBEX stock index in Madrid plunged 5.2pc, while the MIB dropped 4.6pc in Milan.
----Yields on 10-year Spanish bonds punched back above 7pc, though two-year yields fell after Mr Draghi said buying would be concentrated on the “shorter part of the yield curve”.
Mr Draghi
said three teams of ECB experts would draw up plans over the coming weeks for
potentially “unlimited” and “unsterilised” intervention in the bond markets,
implying a net injection of stimulus to shore up the economy as the headwinds
of recession gather force.
The
latest crisis measures will be “very different” from the ECB’s earlier rounds
of bond purchases – €211bn of pin-prick buying failed to cap yields for long in
Greece, Portugal, Ireland, Spain and Italy.
Past
action frightened private bondholders by reducing them to junior status. Mr
Draghi said the issue of ECB “seniority” over other creditors “will be
addressed”.
The
Draghi plan is on hold until eurozone leaders activate the EU’s twin bail-out
funds (the EFSF and ESM), which requires Spain – and perhaps Italy – to request
a formal rescue and sign a memorandum ceding control over fiscal policy. “It is
a necessary condition. Governments have to go to the EFSF. It is up to the
relevant countries,” said Mr Draghi.
----Jefferies Fixed Income said the ECB was “pushing the market into meltdown” by making action contingent on a Spanish bail-out, a fresh Pandora’s Box.
The
Bundesbank has left no doubt it is adamantly opposed to bond purchases, warning
the ECB not to “overstep its mandate”. It is a view widely shared in the
Bundestag.
Frank
Schäffler, finance spokesman for the Free Democrats (FDP), said the ECB had
become a “state within a state, beyond any legal and political accountability”.
Mr Draghi retorted that the new proposals “fall squarely in the list of the
classical monetary policy instruments”.
----Italy’s leader, Mario Monti – forging a Rome/Madrid axis as part of his efforts to give the Latin bloc a full voice in the eurozone drama – said the two leaders “will have to study” whether or not to activate the mechanism.
Hours
earlier he warned that Italy could not wait forever for Europe to put real
muscle behind its rhetoric. “I can assure you that if the bond spreads stay at
these levels for some time, you are going to see a eurosceptic government take
power in Italy.”
08/02/2012
Draghi on the Markets ECB Disappoints Investors with No Euro Action
Investors had been hoping for a clear signal from Mario Draghi that the European Central Bank was ready to take action to prop up the euro. But in his press conference following the ECB monthly meeting on Thursday, all he offered was more promises. Markets plunged as a result.
Anticipation ahead of Thursday's European Central Bank (ECB) meeting was high. Last week, ECB head Mario Draghi had pledged that the bank would "do whatever it takes to preserve the euro." The comments set off a mini rally on stock markets the world over, and even the euro began gaining back some lost ground. Investors were eager to find out what exactly he intended to do.Draghi, it would seem, was unable to live up to their expectations. "The Governing Council … may undertake outright open market operations of a size adequate to reach its objective," the ECB president said. "We will consider further non-standard monetary policy measures according to what is required to repair monetary policy transmission. In the coming weeks, we will design the appropriate modalities for such policy measures."
Markets plunged before he was even finished with his press conference. Germany's blue chip stock index DAX plummeted immediately by 1.88 percent, and the euro cratered in value from $1.24 to below $1.22.
----Furthermore, a final decision on the ESM's participation in bond purchases is not likely to be made before the middle of next month, when European leaders are set to gather once again. And Germany remains opposed to both prongs of Draghi's attack. Germany's central bank, the Bundesbank, has been particularly wary of the bond-buying program, which has already resulted in €211 billion worth of shaky bonds on the ECB's books.
----Hans
Michelbach, the senior conservative member of the German parliament's Finance
Committee, demanded in an interview with the financial daily Handelsblatt
that the ECB be explicitly forbidden from buying sovereign bonds on the
secondary market. "The central bank under the leadership of Mario Draghi
has pursued increasingly adventuresome contortions to get around the
prohibition against state financing," he told the paper.
Alexander
Dobrindt, general secretary of the Christian Social Union, the Bavarian sister
party to Merkel's CDU, likewise criticized Draghi's idea. "If the ECB buys
sovereign bonds, it would be akin to state financing through the back door. The
ECB would be leaving the path of monetary stability," he told the
mass-circulation daily Bild.
More
Gloves Off in Draghi-Weidmann Clash Over Bond Purchases
By Jana Randow and Gabi
Thesing - Aug 3, 2012 12:00 AM GMT
When Mario Draghi took the helm of the European Central Bank nine months
ago, he took care not to alienate Bundesbank President Jens Weidmann. Now the
gloves are coming off. Draghi yesterday announced the ECB is working on a plan to re-enter bond markets and took the unusual step of naming Weidmann as the only policy maker to object to the proposal. While the move would ratchet up the ECB’s response to Europe’s debt crisis, it risks isolating the German central bank, potentially undermining the effectiveness of the new measures.
“That’s why investors are disappointed,” said Alexander Krueger, chief economist at Bankhaus Lampe KG in Dusseldorf. “The ECB can’t just take random measures against the Bundesbank’s will. The country with the largest economy needs to be part of any package.”
----While Draghi’s comments suggest Weidmann has lost the support of traditional allies on the council such as the Netherlands, Luxembourg and Finland, the Bundesbank president may have German public opinion behind him.
The country’s mass-selling Bild tabloid yesterday protested the bond-purchase plan, saying “no more German money for bankrupt states, Herr Draghi!” and threatening to take back the Prussian helmet it gave him to remind him of German virtues.
More
http://www.bloomberg.com/news/2012-08-02/gloves-off-in-draghi-weidmann-clash-over-bond-purchases.html
Before a man speaks it is always safe to assume that he is a fool. After he speaks, it is seldom necessary to assume it.
H. L. Mencken.
At the Comex silver depositories Thursday final figures were: Registered 38.56
Moz, Eligible 99.75 Moz, Total 138.31 Moz.
Crooks and
Scoundrels Corner
The bent,
the seriously bent, and the totally doubled over.
Today, more on the
Knightmare of algo-trading gone amok at Knight Capital Group, in New Jersey. A train wreck all too predictable, as the great
vampire squids gamble billions daily, attempting to front run the order stream of
pension funds, hedge funds and ordinary Muppets, aka clients. Many would say if you live by the
sword you risk dying by the sword, as Knight has just found out. Algo-trading,
far from being God’s work, is a rent seeking parasite feeding off the
capitalist system, and needs to be reined in.
Knight
fought to preserve its business as concern grew about its solvency. Analysts at
CLSA Credit Agricole Securities said bankruptcy was a possibility if it failed
to get financing.
Knight Said to Open Books to Suitors as Loss Pressure Grows
By Zachary R. Mider, Jeffrey
McCracken and Nandini Sukumar - Aug 3, 2012 4:24 AM GMT
Knight Capital Group Inc. (KCG) opened
its books to potential buyers, including private-equity firms and at least one
securities-industry rival, as it seeks an investment or takeover to survive
after a $440 million trading loss, said two people with knowledge of the
matter.
Knight is working with Goldman Sachs Group Inc. (GS) and Sandler O’Neill & Partners LP as advisers in the rescue talks, said one of the people, who spoke on condition of anonymity because the discussions are private. The company is under pressure to strike a deal within days, the people said.
Jersey City, New Jersey-based Knight, one of the biggest American market makers, is exploring strategic and financial alternatives as a software malfunction cost the company almost four times what it earned last year. The firm’s shares lost 75 percent in two days after its computers flooded the market with unintended trades, sending dozens of stocks into spasms.
“You can see how that one black swan event can literally take this company out,” Tim Hartzell, chief investment officer at Houston, Texas-based Sequent Asset Management LLC, which oversees about $350 million, said in a phone interview. “Maybe this is the new chapter for program trading and algorithm trading.
We’ll have to go back and re-evaluate.”
More
Another
summer weekend, and just 17 days away
from another Greek default. At the Olympics, it’s week two of the great commercial
games in east London. In Berlin, its open war with the Italian at the top of
the Frankfurt tower. In Syria, the proxy war goes on, threatening to turn into
our new century’s first religious war. Meanwhile global trade, as reflected by
the Baltic Dry [shipping] Index, has gone into serious retreat. Stay long
physical precious metals, the euro isn’t saveable in its present form, even if
the Three Stooges had acted yesterday. Doing nothing is probably the least
European wealth destructive policy, as we lurch towards the existing euro
breakup. But our elite can’t resist doing something for long. With Spanish
unemployment at 24.6% rising to 53.3% of the 16-24 youth workforce, Spain needs
to leave the euro fast. Have a great weekend everyone.
“Egol and Fabrice were way ahead of their time,” said one of the former Goldman workers.
“They saw the writing on the wall in this market as early as 2005.”
The monthly
Coppock Indicators finished July:
DJIA: +65 Up. NASDAQ: +75 Up. SP500: +48 Up. All
three indicators have reversed from down to up, though only marginally. Last
week’s ECB relief rally probably made the difference.
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continue reading subscribe to the LIR at Currency Countdown.
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