Thursday 25 October 2012

The Wheels Fly Off.



Baltic Dry Index. 1109  +72

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

"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

The wheels are flying off Euroland’s manufacturing sector, ironically just as later today the UK’s GDP figures for the last quarter are about to show that the UK has staggered out of its double dip recession, according to a leak in Parliament by Prime Minister Calamity Cameron.  Given the accelerating slowdown across Europe, and rising economic trouble in the USA again, Europe, the USA, China and Japan, are all in deepening economic trouble, despite all of the QE programs, government subsidies, and back door efforts at stimulating the national economies. And all this is before America must reach some sort of compromise after the election to forestall the automatic budget cuts and tax increases due to take effect January 1, opting instead for some version of austerity-lite. Despite the Baltic Dry Index double bottoming in the last quarter and rebounding to yesterday’s new high of 1109, the UK is all too likely to triple dip early next year. 

The world’s top four components of the global economy have accidentally achieved a synchronised slowdown, the exact opposite of what the politicians and central bankers were trying to achieve. Proof positive that there never was a problem that a politician or a central bankster couldn’t make worse.  Stay long physical gold and silver, held out of the reach of Uncle Sam and John Bull. If that’s good enough for Germany, its good enough for me, but for more on that scroll down to Crooks Corner.

Below, the wheels come flying off and the euro is doomed. There’s still time for yet another October stock market crash.

"When paper money systems begin to crack at the seams, the run to gold could be explosive."

Harry Browne

Euro-Area Recession Deepens as Manufacturing Shrinks: Economy

By Stefan Riecher and Simone Meier - Oct 24, 2012 12:04 PM GMT
Euro-area services and manufacturing output contracted more than economists forecast in October and German business confidence dropped to the lowest in more than 2 1/2 years as Europe’s recession deepened.

A composite index based on a survey of euro-area purchasing managers in services and manufacturing fell to 45.8, the lowest in more than three years, from 46.1 in September, London-based Markit Economics said today. Economists had forecast a reading of 46.5, according to a Bloomberg News survey. A separate factory index in China rose. In Germany, the Ifo institute’s business climate index unexpectedly dropped to 100.0 from 101.4 in September.

----“The euro-zone recession is still getting worse,” said Holger Schmieding, chief economist at Berenberg Bank in London. “In a disappointing set of data, the fact that the Ifo expectations index did not decline further offers the only ray of hope. In this sense, the survey results today do not dispel the hope that the euro economy could turn the corner early next year.”

----Germany’s manufacturing gauge dropped to 45.7 from 47.4, while the service indicator slipped to 49.3 from 49.7.

Euro-area governments may find it difficult to reduce deficits and lower their debt burdens, with at least five of the 17 nations using the single currency already in recession.

----“The euro zone has slid further into decline at the start of the fourth quarter,” said Chris Williamson, chief economist at Markit, in the statement. “While gross domestic product may decline only modestly in the third quarter, a steeper fall looks to be on the cards for the fourth.”
More

Germany not immune to eurozone slowdown

Germany is not immune to the contraction in the eurozone, as the European Central Bank's Mario Draghi defends bond-buying and Greece claims an austerity victory.


The depth of the eurozone recession was confirmed by closely-watched surveys which showed the region’s economy contracted at its fastest rate in 40 months, with the malaise spreading to Germany, its economic powerhouse.

The gloomy monthly data came as the European Central Bank defended efforts to stem the region’s debt crisis, while officials denied Greek politicians’ claims it has won more time to enact austerity efforts demanded under its bail-outs.

The currency union’s economy is shrinking rapidly, according to Markit’s purchasing managers’ index (PMI) for the region, which tracks growth in services and manufacturing.

The index dropped from 46.1 in September to 45.8 this month, its lowest since June 2009. Researchers said this was consistent with the region’s economy shrinking by 0.6pc per quarter, a far steeper decline than indicated by official data. The survey has been below the 50 mark that separates growth from contraction since February.

The individual PMI for Germany showed that the eurozone’s biggest economy, is not proving immune to the slowdown. The index tracking Germany’s manufacturing and services signalled another drop in the country’s overall private sector activity, with factories reporting “a sharp and accelerated decrease” in their flow of new orders.

Ford to scrap Belgian plant to stem Europe losses

GENK, Belgium/MADRID | Wed Oct 24, 2012 1:19pm EDT
(Reuters) - Ford Motor Co (F.N) will close a Belgian factory employing more than 4,000 workers, shifting production to Spain as the U.S. automaker scrambles to cut costs and stem European losses.

It was the third time this year that a mass-market carmaker has announced plans to close a plant in Europe as the region's debt crisis, government spending cuts and high unemployment hit consumer budgets and demand for new cars.

Ford said it would shut its Genk plant in eastern Belgium, with the loss of about 4,300 jobs by the end of 2014, transferring the work to a plant in Valencia.

----Ford's British unions were also braced for bad news, after management scheduled a meeting for Thursday and media reports said Ford could also close its Southampton plant where it makes Transit vans and employs just over 500 people.

Ford Europe Chairman Stephen Odell confirmed the meeting but declined to comment further.
Car sales in Europe accelerated their decline in September, shrinking at the fastest pace in the past 12 months. Carmakers have predicted the road to recovery in the region will be a long one, with some not expecting any let-up for two years.

Peugeot gets government rescue as crisis deepens

PARIS | Wed Oct 24, 2012 9:03am EDT
(Reuters) - PSA Peugeot Citroen (PEUP.PA) unveiled a government-backed refinancing deal for its lending arm as the struggling French automaker's financial position deteriorated further, sending its stock to historic lows.

Europe's second-biggest automaker said it was close to an agreement with creditor banks on 11.5 billion euros ($14.9 billion) of refinancing and had won state guarantees on 7 billion euros in further borrowing by its Banque PSA Finance.

In return, the automaker agreed to appoint government and union board representatives, halt dividend payments and scrap stock-option awards to executives.

With its costly domestic production and high exposure to southern European markets, Peugeot is bearing the brunt of the region's slump as unemployment and government austerity weigh on consumer spending.

----The company is scrapping more than 10,000 jobs and a domestic plant to stem losses approaching 200 million euros a month, while developing future vehicles with General Motors (GM.N) to deliver more savings in five years' time.

But its restructuring efforts have proven to be too little, too late to counter the effects of Europe's brutal market contraction.

Reporting a 3.9 percent decline in third-quarter sales, Peugeot warned that net debt would rise to 3 billion euros by year-end from 2.4 billion on June 30, as an asset sell-off fails to keep pace with losses.

----European Union objections to the three-year refinancing "can't be ruled out", Chief Executive Philippe Varin acknowledged, while his finance chief insisted that the plan broke no rules.

"It's not state aid, it's state support," Chief Financial Officer Jean-Baptiste de Chatillon said, adding that Peugeot would pay for the state guarantee. "It's priced at market values.

The German state of Lower Saxony, a major shareholder in European market-leader Volkswagen (VOWG_p.DE), has said it will oppose the package as a possible breach of EU rules.

Firings Reach Highest Since 2010 as Ford to Dow Face Sales Slump

By Chris Burritt - Oct 25, 2012 12:06 AM GMT
Ford Motor Co. (F) and Dow Chemical Co. (DOW) joined a growing number of companies firing thousands of workers as sluggish U.S. growth and Europe’s deepening recession lead to a persisting slump in sales.

North American companies have announced plans to eliminate 62,600 positions at home and abroad since Sept. 1, the biggest two-month drop since the start of 2010, according to data compiled by Bloomberg. Firings total 158,100 so far this year, more than the 129,000 job cuts in the same period in 2011.

Ford is closing its first European car-assembly factories in 10 years, adding to more than 5,500 cuts announced by Dow Chemical, DuPont Co. and Advanced Micro Devices Inc. (AMD) in the past week.
The reductions coincide with a majority of U.S. companies missing analysts’ third-quarter revenue estimates and a focus on jobs in the final weeks of the U.S. presidential campaign.

----So far, out of 204 S&P 500 companies that have released third-quarter earnings, 120 have reported sales that trailed analysts’ estimates, according to data compiled by Bloomberg.

Those results, similar to the S&P 500’s second-quarter performance, signal employers may increase firings over the next two quarters, according to John Challenger, chief executive officer of Challenger, Gray & Christmas Inc., a human resources consulting firm based in Chicago.
More
http://www.bloomberg.com/news/2012-10-24/firings-reach-highest-since-2010-as-ford-to-dow-face-sales-slump.html

Oct. 25, 2012, 12:01 a.m. EDT

Mitsubishi Motors chief sees tough times in China

TOKYO--The president of Mitsubishi Motors Corp. said Thursday that he continues to view the sales situation in China as difficult following the spike in anti-Japanese sentiment over a territorial spat between Tokyo and Beijing.

"The situation remains very severe," Osamu Masuko said at a press conference for the redesigned Outlander sport-utility vehicle.

The SUV is already on sale in Europe and Russia ahead of its debut in Japan.

The territorial spat between China and Japan hasn't altered the car maker's plan to release the remodeled Outlander in China in January.

But the company now expects a slower than initially forecast start to sales for the vehicle, he said.
More
http://www.marketwatch.com/story/mitsubishi-motors-chief-sees-tough-times-in-china-2012-10-25

"The paper standard is self-destructive."

Hans F. Sennholz

At the Comex silver depositories Wednesday final figures were: Registered 36.93 Moz, Eligible 104.89 Moz, Total 141.82 Moz.  


Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over. 

Today, someone in Germany doesn’t trust the Old Lady of Threadneedle Street not to play fast and loose with Germany’s gold. The Old Lady does have past form, as we now know. Back in the 1930s Britain’s gold reserve figures were regularly doctored to impress the rest of the world, as America rose and a World War One bankrupted Great Britain declined.  My take on the article below, Germany took its gold out of London before the Fed ordered it to be “lent” into the gold market. Good luck in trying to claim any gold back from Uncle Sam’s Fed. There’s probably some secret WW2 ending clause that allows the Fed to do whatever it wants with Germany’s gold. Not for nothing are Russia, China and India stockpiling gold. If the mining strikes in South Africa get any worse, 2013 will turn into the year of the great gold rush.

“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”

“Adam Smith” aka George Goodman.

Bundesbank slashed London gold holdings in mystery move

Germany withdrew two thirds of its vast holdings of gold from Bank of England vaults shortly after the launch of the euro more than a decade ago, according to a confidential report that emerged on Wednesday.

The revelation came as Germany's budget watchdog demanded an on-site probe of the country's remaining gold reserves in London, Paris, and New York to verify whether the metal really exists.

The country has 3,396 tons of gold worth €143bn (£116bn), the world's second-largest holding after the US. Nearly all of it was shifted to vaults abroad during the Cold War in case of a Soviet attack.

Roughly 66pc is held at the New York Federal Reserve, 21pc at the Bank of England, and 8pc at the Bank of France. The German Court of Auditors told legislators in a redacted report that the gold had "never been verified physically" and ordered the Bundesbank to secure access to the storage sites.

It called for repatriation of 150 tons over the next three years to test the quality and weight of the gold bars. It said Frankfurt has no register of numbered gold bars.

The report also claimed that the Bundesbank had slashed its holdings in London from 1,440 tons to 500 tons in 2000 and 2001, allegedly because storage costs were too high. The metal was flown to Frankfurt by air freight.

----Peter Hambro, chair of the UK-listed gold miner Petropavlovsk, said the Bundesbank may have withdrawn its bullion in self-protection since it did not, apparently, have its own specifically allocated bars in London. "They may have decided that the Bank of England had lent out too much gold, and decided it was safer to bring theirs home. This is about the identification. Can you identify your own allocated gold, or are you just a general creditor with a metal account?"

The watchdog report follows claims by the German civic campaign group "Bring Back our Gold" and its US allies in the Gold Anti-Trust Committee that official data cannot be trusted. They allege central banks have loaned out or "sold short" much of their gold.

The refrain has been picked up by German legislators. "All the gold must come home: it is precisely in this crisis that we need certainty over our gold reserves," said Heinz-Peter Haustein from the Free Democrats (FDP).

"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

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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