Baltic Dry Index. 740 +03
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. The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."
Hans F. Sennholz
Today is a sort of nonentity in most of the
markets. Those lazy Italians who haven’t
yet bothered to vote in their general election, get until 3 pm UK time to
express their preference in the election that can make or break the European
Monetary Union. Here in the UK, now stripped of its triple-A rating by Moody’s
on Friday, the BOE is likely to be secretly pleased at the added downward
pressure on Sterling. Their currency war continues in their race to devalue
against the dollar and euro. Americans are awaiting Helicopter Ben’s
congressional testimony later this week. Will he tell the truth about just what
the last Fed minutes actually meant? On
Friday, the US faces fiscal-cliff-lite, making the whole week something of a do
nothing week.
Of course, if Italy blows up the euro later today
or early tomorrow, Bernoccio’s Washington testimony will become largely
irrelevant, but the markets are confident that the Italians won’t do it, and
that somehow the status quo will continue. Euroland will die a slow death
rather than a quick stab from a Roman sword. If that turns out to be the case,
then it all comes down to Dr. Bernanke and his explanation of the last Fed minutes.
Is the Fed serious about stopping QE later this year, and if so how does the US
economic recovery ever reach escape velocity. It’s a good day to sit out the
markets in cash, letting the high frequency traders try to steal each other’s
dollar. Beppe Grillo for EU President say I.
Yen & sterling slump, euro eyes Italy elections
TOKYO/SYDNEY |(Reuters) - The yen skidded to a 33-month low against the dollar on Monday as speculation strengthened that the Japanese government is set to name two strong supporters of aggressive monetary easing to top posts at the central bank.
Britain's sterling also lost ground against major currencies, slipping to a 16-month low versus the dollar, following Moody's downgrade of the country's prized triple-A sovereign rating late on Friday.
Tokyo plans to nominate Haruhiko Kuroda, a vocal advocate of aggressive monetary expansion, as Bank of Japan governor and Kikuo Iwata, an academic who has criticized the central bank for not taking bold measures to fight deflation, as one of two deputy governors.
"Kuroda is a fan of a weaker yen and of deflation-bashing," said Kit Juckes, strategist at Societe Generale.
The dollar shot up to 94.77 yen, from 93.39 yen late in New York on Friday, reaching highs not seen since May 2010.
"Iwata is a leading anti-BOJ academic and his appointment was the shocker, prompting aggressive yen selling by foreign speculators," said a trader at a Japanese bank.
----Traders took aim at sterling as well, pushing it to a 31-month low of $1.5073 and a 16-month low of 0.8775 pound per euro. The pound last stood at $1.5124, down 0.3 percent from late last week.
Moody's cut Britain's rating by one notch to Aa1 from Aaa, citing weak prospects for economic growth.
Britain joined the United States and France in having lost its triple-A rating from at least one major agency.
The rating outlook is stable, meaning any further change is unlikely for the next year or so, but the sterling is still seen under pressure because of expectations the Bank of England could expand its quantitative easing further to bolster the fragile UK economy.
More
Protest votes add to uncertainty in close Italy election
ROME |(Reuters) - Italians finish voting in one of the most closely watched and unpredictable elections in years on Monday with a surge in protest votes fuelling concern that the ballot may not produce a government strong enough to pull Italy from its economic slump.
A bitter campaign, fought largely over economic issues, has been closely watched by financial markets, still wary after the debt crisis that took the whole euro zone close to disaster and brought technocrat prime minister Mario Monti to office in 2011.
For the euro zone, the stakes are high. Italy is the third largest economy in the 17-member bloc and the prospect of political stalemate could reawaken the threat of dangerous market instability.
Opinion polls give the centre-left coalition led by the veteran former industry minister Pier Luigi Bersani a narrow lead but the race has been thrown open by the prospect of a huge protest vote against austerity policies imposed by Monti and rage at a wave of corporate and political scandals.
Luigi Bartoletti, a 57-year-old salesman from Rome said he had voted for the anti-establishment 5-Star Movement of comic Beppe Grillo, who has electrified the race with a furious campaign against corruption and privilege in the elite.
"But unfortunately I don't believe there will be a stable government," he said. "The hope is that by voting for these people, even if they're inexperienced, there may be a minimum of checks on the management of public affairs."
The 5-Star Movement, heavily backed by a frustrated younger generation increasingly shut out of full-time jobs, has polled strongly and some believe it could challenge Silvio Berlusconi's PDL party as Italy's second largest political force.
But the 76 year-old Berlusconi has campaigned fiercely at the head of a centre-right coalition, pledging sweeping tax cuts and echoing Grillo's attacks on Monti, Germany and the euro in a media blitz that has halved the lead of the centre-left since the start of the year.
Support for Monti's centrist coalition meanwhile has faded and he appears set to trail in well behind the main parties.
----Voting ends at 3 p.m. (1400
GMT) on Monday with the first exit polls due shortly afterwards.
More
We end for today, awaiting exit polls from the
Italian election that can make or break Euroland, reviewing the latest figures
from North Sea oil investment in the UK sector. Along with the UK just getting
started in the business of fracking natural gas from shale formations, Moody’s
might be restoring the UK’s triple-A rating about 2015.
North Sea oil enjoys surge in investment and higher profile
A "deal" struck by the Chancellor and North Sea oil and gas producers is starting to reap dividends for the economy and the Exchequer. How times change.
Just two
years ago, at his 2011 Budget, George Osborne opted to take another £2bn in
taxes from producers, adding to earlier changes by Labour that were already
damaging investment and confidence.
The
industry responded in an all too familiar way by cutting budgets and putting
investment on hold. Over the last two years production has slumped 30pc,
exploration drilling has tailed off sharply and the Treasury's tax take has
dropped 35pc to £7.4bn.
It might
not all have been down to the Chancellor but the damage was sufficient to push
him into performing something of a U-turn. After talks with the industry trade
body Oil & Gas UK, new incentives and tax allowances were unveiled to
bolster confidence and investment.
The
Chancellor receives a substantial down payment on that decision today with the
annual survey from Oil & Gas UK disclosing that North Sea investment this
year will be the biggest and most extensive for 30 years. Spending is forecast
to be at least £13bn, but with operating costs expected to be running at £8.5bn
and development costs per barrel five times higher than a decade ago, companies
say there is little room for investment mistakes.
Producers
say they are ready to embark on the biggest exploration programme for six
years. Reserves in existing fields or under development are also at their
highest level since 2007 at 7.4bn barrels, adding to the growing belief that
Britain will still be an oil producing nation through to 2040-50.
----Production is forecast to rise by a third to 2m barrels of oil and gas a day by 2017, although by then it will be only back to the 2010 level. Forecasts suggest production this year could be down to 1.45m-1.5m barrels a day.
Mr Webb
says that projects approved in the last two years alone will generate £100bn
for the economy, create thousands of jobs and provide an additional £25bn for
the Exchequer in production taxes.
In the
last six months companies have announced investments worth more than £8bn,
creating around 6,000 new jobs. Licence conditions are contributing to a surge
in exploration with 130 wells planned over the next three years to help replace
the fall of 500m barrels in company reserves because new discoveries failed to
keep pace with production.
More
"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
At the Comex silver depositories Friday final figures were: Registered 37.27
Moz, Eligible 123.54 Moz, Total 160.81 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, the exit?
Stay long gold and silver.
"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
Trade protectionism looms next as central banks exhaust QE
Officials at the US Federal Reserve may be more worried than they have let on about the treacherous task of extricating America from quantitative easing. This is an unsettling twist, with global implications.
A new paper for the US Monetary Policy Forum and published by the Fed warns that the institution's capital base could be wiped out "several times" once borrowing costs start to rise in earnest.A mere whiff of inflation or more likely stagflation would cause a bond market rout, leaving the Fed nursing escalating losses on its $2.9 trillion holdings. This portfolio is rising by $85bn each month under QE3. The longer it goes on, the greater the risk. Exit will become much harder by 2014.
Such losses would lead to a political storm on Capitol Hill and risk a crisis of confidence. The paper -- "Crunch Time: Fiscal Crises and the Role of Monetary Policy" -- is co-written by former Fed governor Frederic Mishkin, Ben Bernanke's former right-hand man.
It argues the Fed is acutely vulnerable because it has stretched the average maturity of its bond holdings to 11 years, and the longer the date, the bigger the losses when yields rise. The Bank of Japan has kept below three years.
Trouble could start by mid-decade and then compound at an alarming pace, with yields spiking up to double-digit rates by the late 2020s. By then Fed will be forced to finance spending to avert the greater evil of default."Sovereign risk remains alive and well in the U.S, and could intensify. Feedback effects of higher rates can lead to a more dramatic deterioration in long-run debt sustainability in the US than is captured in official estimates," it said.
Europe
has its own "QE" travails. The paper said the ECB's purchase of Club
Med bond amounts to "monetisation" of public debt in countries shut
out of global markets, whatever the claims of Mario Draghi.
"We
see at least a risk that the eurozone is on a path to become more like
Argentina (which of course is why German central bankers are most concerned).
The provinces overspend and are always bailed out by the central government.
The result is a permanent fiscal imbalance for the central government, which
then results in monetization of the debt by the central bank and high
inflation," it said.
In
America, the Fed would face huge pressure to hold onto its bonds rather than
crystalize losses as yields rise -- in other words, to recoil from unwinding QE
at the proper moment. The authors argue that it would be tantamount to throwing
in the towel on inflation, the start of debt monetisation, or "fiscal
dominance". Markets would be merciless. Bond vigilantes would soon price
in a very different world.
Investors have of course been fretting about this for some
time. Scott Minerd from Guggenheim Partners thinks the Fed is already trapped
and may have to talk up gold to $10,000 an ounce to ensure that its own bullion
reserves cover mounting liabilities.
More
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9891082/Trade-protectionism-looms-next-as-central-banks-exhaust-QE.html
"For more than two thousand years gold's natural qualities made it man's universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper."Hans F. Sennholz
The monthly Coppock Indicators finished January:
DJIA: +106 Up. NASDAQ: +126 Up. SP500: +140 Up. All three indexes are giving the same signal,
up.
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