Baltic Dry Index. 746 -02
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
“Call
it the Goldman Sachs test. If this is something Goldman would do to its
clients, don't do it."
Felix
Salmon.
Goldman has gone “neutral” on global equities, Wall
Street speak for bearish, as in sell. Does Goldman really mean it, or is it just
another way for Goldman to make money from churning the Muppets? With a
reputation for trading successfully against the positions it sold to the
Goldman Muppets, cui bono is the first thing that comes to mind. What happened
to the Davos Spring?
Things are seldom what they seem, Skim milk masquerades as
cream;
Highlows pass as patent leathers; Jackdaws strut in peacock's feathers.
Highlows pass as patent leathers; Jackdaws strut in peacock's feathers.
Ebenezer Squid’s Muppet disclosure. With apologies to HMS
Pinafore.
While you were ‘Nemo’ watching, Goldman got a little bearish on equities
February 11, 2013, 7:07 AM
----Investors
and traders on the East Coast hit the road early last Friday to get out ahead
of the storm. And while they were trudging home, Goldman Sachs was readying a
stormish-call of its own.
In a note
dated Feb. 8, which surfaced in some in-boxes on Monday, the investment bank
cut its rating on global equities to neutral from overweight on a three-month
horizon, citing some shakiness over the near-term view.
Essentially,
Goldman says the equity market needs time to digest recent gains. Here is the
long-winded version:
“The potential
for a strong rally from here is likely to be limited in the near term as U.S.
equities are trading slightly above our estimates of current fair value
given current economic conditions, and European equities only have upside to
fair value if we assume that bond yields remain at the current very low
levels,” says Goldman.
The
strategists say that over three months, the U.S. fiscal outlook and Europe
sovereign situation remain downside risks.
Morehttp://blogs.marketwatch.com/thetell/2013/02/11/while-you-were-nemo-watching-goldman-got-a-little-bearish-on-equities/
Next, Der Spiegel way
behind the curve on the latest in the new currency war kicked off by Japan. Der
Spiegel sees the ECB nobly standing aloft from the action in the trenches. I
see last week’s ECB action in talking down the euro by Mario Draghi dei Paschi,
as the first step in the ECB entering the new currency war. Stay long physical
gold and silver. No one will win in the fiat currency race to the bottom. A
Great Inflation for most of us lies ahead at some point later in the decade.
Just as deficits didn’t matter until one day they did, this currency war error
in the Great Nixonian Error of fiat currency, won’t matter until one day it
will. Though it’s a very imperfect hedge, people of wealth must use the current
inflation lull to acquire a core reserve position in physical gold and silver.
A
permanent Governor of the Bank of England would be one of the greatest men in
England. He would be a little 'monarch' in the City; he would be far greater
than the 'Lord Mayor.' He would be the personal embodiment of the Bank of
England; he would be constantly clothed with an almost indefinite prestige.
Everybody in business would bow down before him and try to stand well with him,
for he might in a panic be able to save almost anyone he liked, and to ruin
almost anyone he liked.
Walter Bagehot. Lombard Street. 1873
Calls for Cheap Euro: ECB Caught in Currency-War Crossfire
Billionaire investor
George Soros and French President François Hollande, a Socialist, are in
agreement: The world is on the verge of a currency war, and it threatens to
destroy Europe.
The
Europeans should finally enter the fray and do battle with all their might,
says Soros, who made some of his fortune by betting against the British pound.
"Europe is an outsider," the 82-year-old recently said at the Davos
World Economic Forum. He blamed the European Central Bank (ECB), which he
called the last representative of an outdated central bank policy.
Hollande
doesn't put it as clearly, but he means the same thing. "A currency zone
must have an exchange rate policy, or it will end up with an exchange rate that
doesn't correspond to the actual state of its economy," the Socialist told
the European Parliament in Strasbourg last week.
These
remarks were intended for Mario Draghi, the president of the Frankfurt-based
ECB. Hollande's message is that he should protect the euro's exchange rate. The
central bank chief is coming under increasing pressure because he can't quite
bring himself to embrace the concept of quantitative easing, the latest fashion
in the world of finance. It involves central bankers engaging in the
large-scale purchase of bonds issued by their governments and other securities,
thereby injecting huge sums of money into the financial system. In this way,
they hope to stimulate the domestic economy and keep their own currencies
cheap, thereby strengthening exports. Soros believes that this is the only way
countries can grow out of their large debts.
But a
country that artificially pushes down its exchange rate is obtaining
competitive advantages at the expense of others. And if they manipulate their
own currencies, all sides will end up losing out.
Japan has
taken the most aggressive approach so far. Under pressure from the
newly-elected government, Masaaki Shirakawa, the governor of the Bank of Japan,
has announced plans to buy up unlimited amounts of government bonds and
securities in the future. The country is in the process of "boldly
rebuilding" monetary policy, Prime Minister Shinzo Abe declared. Indeed,
the Japanese yen has lost 12 percent of its value against the dollar in the
last two months.
The US
central bank, the Federal Reserve Bank, has also been printing money to a previously
unimaginable extent since the financial crisis. Calling its efforts QE 1 and QE
2, the Fed has pumped more than a trillion dollars into the US economy.
More
Staying with “new beef” Europe, the big bailout for
Cyprus is delayed yet again. According to leaked documents to the Financial
Times, “a
radical new option for the financial rescue of Cyprus would force losses on
uninsured depositors in Cypriot banks, as well as investors in the country’s
sovereign bonds, according to a confidential memorandum prepared ahead of
Monday’s meeting of eurozone finance ministers.
----
The new plan has not been endorsed by its authors in the European Commission or
by individual eurozone members. The memo warns that “the risks associated with
this option are significant”, including a renewed danger of contagion in
eurozone financial markets, and premature collapse in the Cypriot banking
sector.”
Stay
long physical precious metals, yet another euro fix has feet of clay. If tiny
insignificant Cyprus can threaten the whole Bilderberger EUSSR project, what’s
the point of keeping the failed project running? I suspect that Russia will
have a whole lot to say at the coming G-20 finance ministers meeting in Moscow
about forced losses. It might be safer not to drink any of the Russian tea.
Eurogroup: no decision on Cyprus bail-out until March
Eurozone finance ministers said they were discussing “all options” on a bail-out for Cyprus but insiders said any concrete decision was likely to be delayed until after the impending elections.
Jeroen Dijsselbloem, the Dutch new president of the Eurogroup, said the 17 ministers were “looking at the complete package” for a Cypriot rescue plan. He described the crisis in Cyprus as “complicated” because of the size of the island’s banking sector - around 8 times bigger than GDP. He said the ministers “all agree that a solution has to reached” but added: “We’ll try to reach a decision in March.”Cyprus requested financial help from Brussels five months ago. However rescue plans have been delayed amid concerns over the size of the bail-out needed, around €17bn, and its potential beneficiaries. Allegations have been made that Cyriot banks are used by Russian money launderers.
Vassos Shiarly, the Cypriot finance minister, rejected reports that the Eurogroup was working on a so-called bail-in of depositors. “The bail-in of depositors is a grossly exaggerated possibility, unlikely to happen,” he said. “We will not accept it under any circumstances and I don’t think it creates any way forward.”
European leaders have demanded a sell-off of national assets to raise finances - an idea rejected by the current left-wing leaders. Raoul Ruparel from the think tank Open Europe said a Greek-style bail-out was “almost impossible” for Cyrprus because its government does not have comparable legal authority over its sovereign bonds.
Greece was also on the agenda: Athens has a list of “prior actions” it has to complete to secure the February tranche of its bail-out.
More
The more things change, the more they stay the same. What part of the
old, old story did shysters Tony Blair and Gordon “gold bottom” Brown miss?
Below, part of the story of the modern bank called Barclays. Walking away is as
old as the hills. If banksters are going to be bailed out by the taxpayers,
they should be nationalised and run as utilities, it seems to me.
Again, it may be said that we need not be alarmed at the
magnitude of our credit system or at its refinement, for that we have learned
by experience the way of controlling it, and always manage it with discretion.
But we do not always manage it with discretion. There is the astounding
instance of Overend, Gurney, and Co. to the contrary. Ten years ago that house
stood next to the Bank of England in the City of London; it was better known
abroad than any similar firm—known, perhaps, better than any purely English
firm. The partners had great estates, which had mostly been made in the
business. They still derived an immense income from it. Yet in six years they
lost all their own wealth, sold the business to the company, and then lost a
large part of the company's capital. And these losses were made in a manner so
reckless and so foolish, that one would think a child who had lent money in the
City of London would have lent it better.
After this example, we must not confide too surely in long-established
credit, or in firmly-rooted traditions of business. We must examine the system
on which these great masses of money are manipulated, and assure ourselves that
it is safe and right.
Walter Bagehot. Lombard Street. 1873
At the Comex silver depositories Monday final figures were: Registered 36.86
Moz, Eligible 121.25 Moz, Total 158.11 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today yet again, continental
Europe. It’s not their fault they just can’t help themselves. From the people
who brought the world equine beef, the FT tackles the story of the world’s
oldest bank, supervised into the ground by Europe’s leading banker. Would you
really want to remain in a Club like Europe? Lasagne or euros, anyone? Neigh!
February 10, 2013 8:57 pm
What Monte dei Paschi says of banking
By Lucrezia Reichlin
As a thriller the story of Monte dei Paschi di Siena is
hard to beat: corruption, the evils of high finance, and of political influence
in corporate boardrooms are all there. As Italy heads towards a
closely fought general election, it is not surprising that the
story of the Siena-based bank has caught so much attention, and is
being manipulated for partisan purposes in Italy. And yet this drama has
broader significance in terms of what is says about the state of European
banking and the financial crisis.The tale itself is familiar. We have seen versions of it before in regional banks in Spain, Germany and elsewhere. It starts with ambitious expansion in the boom years that peaks with an expensive acquisition. Then the crisis comes and losses mount. With the help of international investment banks, Monte dei Paschi’s management set up derivatives transactions, hiding the losses by deferring or amortising them over many years. A capital injection, demanded by the Bank of Italy, is achieved through the use of derivatives rather than seeking new investors as the controlling Monte dei Paschi Foundation resists a dilution in its stake.
Then in the wake of the sovereign debt crisis, the state encourages Italy’s banks to buy government bonds. Not a happy investment. Despite some financial engineering, losses eventually force the bank to seek new management. The new team discovers the derivatives deals, hidden from regulators and the bank’s own auditors. Cue chaos and recrimination.
Why was this allowed to happen? No doubt the original mistake was poor management and ineffective governance. But at some point, bad judgments turned into unlawful actions. It is now hard to distinguish between incompetence and corruption. At this stage legal responsibilities have not been established. The specific issues are technical, and there is plenty of scope for argument about how blame should be spread.
But whatever the findings of the courts, there are three general lessons.
First, as with the Spanish regional saving banks, the Cajas, and Germany’s state-owned Landesbanks, incompetent management may be responsible for imprudent risk taking, lack of transparency and wrongdoing. But the risk is magnified many times by the dangerous interaction between local banks, which are essentially governed by political bodies, and global investment banks. Details may vary across countries but the financial bubble in Europe cannot be explained without understanding what went wrong at this nexus.
---- Despite being publicly listed and the third-largest
Italian commercial bank, Monte dei Paschi is effectively controlled by the charitable
Foundation, which in turn is controlled by the local government. The Foundation
is a minority shareholder yet dominates the appointment of the bank’s board. In
Italy, many dislike the Anglo-Saxon idea of a board being responsible to all
the shareholders, preferring a hybrid involving public and private sectors to
guarantee stability and long-term returns for the community. The Monti dei
Paschi affair should make them think again.
Morehttp://www.ft.com/cms/s/0/6339447a-6c68-11e2-b73a-00144feab49a.html#axzz2KfSVYPCz
A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done.
Walter Bagehot. Lombard Street. 1873
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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