Baltic Dry Index. 1049 -02
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
“It is best to read the weather forecast before praying for
rain.”
Mark Twain
The week’s big story is likely to be Hurricane
Sandy and its impact on the economy of the northeast USA. The supporting story
is likely to be its impact, if any, on the US election, now just a week away.
Dysfunctional Europe will likely get a break from top billing, unless Greece
decides to opt out this week, which is unlikely, though the right thing to do.
With the US election just over a week away,
my preferred trading strategy (bet) would be to put on a few purchased short
dated synthetic stock index double options. The logic behind the punt: if
President Obama wins, Wall Streeters will reel at the prospect of an unleashed
Obama settling scores in the next 4 years, plus “the fiscal cliff” looms. If Mr
Romney wins, Wall Street will probably hype the arrival of “the new bull market,”
and a compromise vanquishing “the fiscal cliff.” Of course the downside is nothing happens
whoever wins, and you lose the bet, but the odds on that are only 1 in 3.
Sadly, as seen from London, one of these two has to win.
Below, America gets ready for the arrival of
Hurricane Sandy. It hasn’t hit yet, but already is having a big negative
economic affect.
“Everyone talks about the weather, but no one does anything
about it.”
Mark Twain.
U.S. Stock Trading Cancelled as New York Girds for Storm
By Nina Mehta and Nikolaj
Gammeltoft - Oct 29, 2012 4:43 AM GMT
The U.S.
securities industry canceled equity trading on all markets today, moving to
protect workers as Hurricane Sandy barreled toward New York City with
70-mile-per-hour winds and the threat of an 11-foot sea surge.
The
shutdown, announced by the Securities and Exchange Commission, may extend
through Oct. 30 and followed an earlier decision by the New York Stock Exchange
to close floor trading. Risks posed by the storm, expected to come ashore
tomorrow in southern New Jersey and potentially affect 60 million people, were
deemed too great to require workers to travel.
----Exchanges from the NYSE and Nasdaq
Stock Market to those run by Direct Edge Holdings LLC in Jersey City, New
Jersey, and Bats Global Markets Inc. in Lenexa, Kansas, will suspend operation.
U.S. equity trading is spread across 13 exchanges and dozens of private venues
run by brokerages.
-----Options trading will also be closed, according to Gail
Osten, a spokeswoman for CBOE Holdings Inc., which operates the largest equity
derivatives market, and Joseph Christinat, a spokesman at Nasdaq OMX.
More
New York Flight Upheaval Disrupts Air Travel Throughout U.S.
By Victoria Stilwell - Oct 29, 2012 4:01 AM GMT
Hurricane Sandy’s grounding of more than 6,800 commercial flights, including
all departures and arrivals at metropolitan New York’s three major airports,
will disrupt air-travel networks throughout the U.S. and beyond. Scrubbed flights include about 1,200 yesterday and more than 5,500 today, said Daniel Baker, chief executive officer of Houston-based FlightAware, a flight-tracking company. Airlines will begin cancelling flights for Oct. 30 and Oct. 31 as the weather forecast becomes clearer, he said.
While carriers are halting operations at LaGuardia, John F. Kennedy and Newark Liberty airports, flights to and from other areas will also be affected. New York’s airports together represent a linchpin in the U.S. network, serving more than 52 million departing passengers last year and outstripping the world’s busiest airport, Hartsfield-Jackson in Atlanta.
More
Markets braced for 'Mexican standoff' over US fiscal cliff
"Quite simply, the US is the closest shark to the boat right now,” says Russ Koesterich, the chief investment strategist at iShares.
The shark Koesterich is referring to is the bitter fight for the White House. After two years of watching European leaders traipse from one debt crisis summit to the next, investors in the City of London and around the world are now preparing to get knee-deep in the weeds of US politics.Presidential elections always put financial markets on edge. This time round nerves risk getting especially frayed. The opinion polls have President Barack Obama and Mitt Romney, his Republican challenger, tied as the contest enters its final days. The tightness of the race reflects genuine divisions among Americans over the role of government and how best to strengthen the economic recovery.
Ideological differences led politicians to the brink of catastrophe last summer, when a fight over lifting the country’s debt ceiling raised the spectre of the US government defaulting on its $16 trillion (£9.9 trillion) of debt for the first time.
It is the prospect of these divisions hardening after the election that is really rattling investors. At the start of next year, the US faces a series of tax rises and spending cuts that have been dubbed the “fiscal cliff”. The Congressional Budget Office, a leading independent forecaster in Washington, has warned that the US will plunge back into recession if all the tax rises and spending cuts are allowed to happen. Although most observers remain hopeful the cliff will be skirted, much will depend on who is in the Oval Office and whether it is the Democrats or Republicans who control the House of Representatives and the Senate after votes are cast on November 6.
“The worry is you get the Mexican stand-off that we did last summer over the debt ceiling,” says David Blake, a fund manager in London at Jupiter Asset Management. As polling day nears, Wall Street has produced a wave of predictions over which outcome is most likely to ensure the cliff is avoided, and which increases the chances that the world’s largest economy goes over it.
Honda cuts FY profit forecast as China backlash hits
TOKYO |(Reuters) - Japan's Honda Motor Co (7267.T) cut its full-year net profit forecast by a fifth after sales in China, the world's biggest autos market, were hit by a popular backlash against Japanese products in a dispute over East China Sea islands.
The substantial cut makes it likely that rivals Toyota Motor (7203.T) and Nissan Motor (7201.T) will follow suit when they report quarterly earnings early next week.
"It's likely Toyota and Nissan are going to cut forecasts in the same way. A cut was to be expected because the problems with China weren't factored into forecasts," said Fujio Ando, managing director at Chibagin Asset Management.
Demand for Honda, Toyota and Nissan cars slumped in China amid violent protests in September over the territorial dispute, with South Korea's Hyundai Motor (005380.KS) and Germany's BMW (BMWG.DE) picking up market share.
Sales by Honda and its China joint ventures dropped 40.5 percent last month. China is Honda's second-biggest market after the United States, accounting for 17 percent of 2011 sales.
Germany rattled as taxpayer losses loom in Greece
The EU-IMF Troika of inspectors in Greece has called on European bodies and official creditors to write off a chunk of their loans, opening the way for first taxpayer losses since the sovereign debt crisis began.
A draft version of the Troika report obtained by Spiegel magazine said EMU governments and the European Central Bank must accept their share of losses in order to bring Greece’s public debt back to 120pc of GDP by 2020, deemed the sustainable level.Greece must carry out a further 150 reforms, some involving a drastic loss of sovereignty. Troika payments will be held frozen in a special account under creditor control.
The Troika will have power to raise taxes automatically. There must be new laws to make it easier to fire workers and adjust the minimum wage.
In exchange, Greece should be given two extra years until 2016 to meet budget targets, costing up to €38bn.
----Public
sector losses are politically explosive in Germany. Chancellor Angela Merkel
has told her own people that bail-out loans to southern Europe entail no risk,
and have been profitable to date.
She would
have to account for any losses to the Bundestag. This would poison debate on
further loans for Portugal, Spain, Cyprus, or Slovenia. The fast-growing
eurosceptic camp in Germany would claim vindication.
Until now
all losses from debt restructuring in Greece have been concentrated on a
diminishing pool of pension funds, insurers, and banks, which have suffered an
implied `haircut’ of 75pc. They have been squeezed dry.
October 28, 2012, 3:05 p.m. ET
Coalition Threat Shakes Up Italy
ROME—Days
after saying he would take a back-seat in Italy's political scene, Silvio
Berlusconi was back into the spotlight this weekend, threatening to pull
support for Prime Minister Mario Monti's government and ranting against what he
called German-induced austerity.
In a
90-minute televised news conference, Mr. Berlusconi said he wouldn't seek again
the premiership job he has held for nine of the past 20 years. But he urged compatriots
to vote for a party that would lower taxes, change the justice system and
introduce looser rules on the use of cash.
Rome's
current policies have been "imposed by Signora Merkel…and lead just to
recession and pain," Mr. Berlusconi said, saying Germany had undermined
confidence in Italy's sovereign bonds.
Greece to vote on key austerity measures
The Greek government will put labour market reforms proposed by foreign lenders to a vote in parliament next week, its finance minister has confirmed.
The Greek
government will put labour market reforms proposed by foreign lenders to a vote
in parliament next week, as a series of crunch meetings takes place next week.
The
parliament will vote, despite a refusal to back the proposals by a junior
coalition partner's refusal to back them, the finance minister said on
Saturday. The 2102 budget law, which will bring a range of new austerity
measure into the statute books, has been demanded by foreign creditors, will be
presented on Wednesday.
A
separate bill with new labour market reforms will be put to the vote later in
the week, Yannis Stournaras, Greece’s finance minister said.
Greece is
expected to run out of money in the middle of November and the government needs
to get through a series of austerity measures to unlock the next tranche of
aid.
At the Comex silver depositories Friday final figures were: Registered 36.97 Moz,
Eligible 104.85 Moz, Total 141.82 Moz.
Crooks and
Scoundrels Corner
The bent,
the seriously bent, and the totally doubled over.
Today,
Europe’s Alice in Wonderland energy policy. Is Royal Dutch Shell talking up
their book, of course, but that doesn’t mean they’re not right to be
criticising Europe’s failed crazy energy policies. Thanks to cheap US shale gas
replacing relatively expensive US coal in electric power generation, the export
price of US coal makes it the cheapest resource for making Europe’s
electricity, easily beating LNG and heavily subsidised green energy. Despite
producing electricity from cheap American coal, Europe’s electricity and gas
prices are rising to the hapless consumer, allegedly due to the high price of LNG
and oil. Both in turn driven higher by commodity speculation fuelled by central
banks QE programs to rescue the banksters and goose the stock market. It’s a
funny old world once bureaucrats start interfering
with markets via central planning.
Shell attacks 'ridiculous' effects of European energy policy
Royal Dutch Shell has attacked the “ridiculous” impact of European energy policy, warning that governments are erasing the environmental benefits from expensive renewables by allowing coal use to increase.
Andrew Brown, one of Shell’s most senior executives, also warned that shale gas would not have the same impact in the UK as it has in the US, where is has been heralded as a new era of cheap energy.In an interview with The Daily Telegraph, Mr Brown, Shell’s upstream international director, said the UK and Europe were “missing a trick” in their policies.
“There are a lot of subsidies going towards renewables. Gas and coal are having to compete to be taken into power generation,” he said.
Because cheap gas is reducing coal demand in the US, there is “a lot of cheap coal in the marketplace”. As a result, Europe is burning more coal, while demand for gas – which emits much less CO2 than coal – is declining.
“You have this ridiculous situation where cash-strapped Europe is putting a lot of money into renewables to reduce CO2, meanwhile allowing ... the power generators to take much more coal and back out gas,” he said.
“All the
benefits you’re getting from the renewable energy are being counteracted by far
too much coal.”
Mr Brown
said the EU’s Emission Trading Scheme (ETS), designed to reduce emissions by
placing a price on carbon, “doesn’t work”. “CO2 is priced at such a low level
it’s meaningless,” he said. “We want a higher CO2 price. Power generators would
then make the right economic decision for Europe, for gas. Renewables and gas
work very well together.”
Germany
is one of the most high profile cases of a country that has invested heavily in
renewables to curb carbon emissions – but is now burning increasing volumes of
polluting coal.
The UK
has also seen an increase in coal-fired generation as the economics have become
more attractive than burning gas – although many of the most polluting coal
plants will be forced to close over the next three years.
Many
within Government are enthusiastic about gas and believe UK shale gas will
ensure cheap supplies. The Chancellor has said he is mulling shale gas tax
breaks “so Britain is not left behind as gas prices tumble on the other side of
the Atlantic”.
But Mr
Brown cautioned: “There is potential here but it won’t change the UK gas market
as has happened in America.” Shale gas could however “play an important role in
helping the UK with its energy security”, he said.
The
Government is expected to allow controversial “fracking” for shale gas in the
UK to resume within weeks.
"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
The monthly
Coppock Indicators finished September:
DJIA: +66 Up. NASDAQ: +88 DOWN. SP500: +85 Up. All
three indicators had reversed from down to up, but now the NASDAQ has reversed
again to down. While not unprecedented, it is a warning sign a that the July
reversal from up to down is about to fail.
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