Baltic Dry Index. 735 -03
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
It is
hard to believe that a man is telling the truth when you know that you would
lie if you were in his place.
H. L.
Mencken.
The release of the US Fed minutes yesterday, of its
last meeting quickly, set off confusion and near panic. The Fed is apparently
now willing to end or reduce its QE programs starting as early as next month i.e. March. My bet is
that if they were to try anything so foolish, is that the 1994 bloodbath that
wiped out Orange County, California in the second of many continuing great
derivatives gambling routs, would be as nothing to the rout that will happen in
March 2013. For those with short memories, the first great derivatives gambling
rout was the abject failure of portfolio insurance in the great October stock
market crash of 1987. The minutes quickly replaced greed with fear, reversing
the Davos Spring, and for a short time taking
the EU slumping back into crisis again, off the front page. Without the Fed monetisation, the Goldmanite’s
estimate that the yield on the US 10 year Treasury will jump back to 3%! Wipe out
time on both sides of the Atlantic, were the Fed to let that happen. Stay long
physical gold. The Great Nixonian Error of fiat money is about to come to its
end.
This morning all the talk is about which hedge fund
blew up overnight, and is it about to trigger another MF Global type scandal in
America? Simply put, no one trusts anyone in finance anymore, since all are on
false accounting, hidden central bank life support, with massive closets still
full of off-balance sheet Liebor like skeletons still to, “Monte dei Paschi
style,” get “discovered” by management . Today tomorrow and the weekend should
be interesting. Will the big weekend news be another Bear Stearns type wipe out,
or the return of a Berlusconi run disaster called Italy? Getting out first and
early is the name of the game called survival.
All the perplexities, confusion and
distress in America arise, not from defects in their Constitution or
Confederation, not from want of honor or virtue, so much as from the downright
ignorance of the nature of coin, credit and circulation.
John Adams.
Feb. 20, 2013, 4:30 p.m. EST
Fed, uneasy over ‘QE,’ plans bond-buy debate
One idea: Hold balance sheet even during exit
WASHINGTON (MarketWatch) — Get ready for a rock’ em, sock
‘em debate over quantitative easing in March.
Minutes
of the Federal Reserve’s January meeting released Wednesday reveal that many
Fed officials are worried about the costs and risks arising from the $85
billion–per–month asset-purchase program. And they all seem to have their own
ideas on how to proceed.
Several
Fed officials said the central bank should be prepared to vary the pace of the
asset-purchase plan depending on the outlook or how the program was working.
One wanted to vary it on a meeting-by-meeting basis.
One new
idea backed by a “number” of Fed officials would have the central bank
promising markets that it will not sell its massive holdings of Treasurys and
mortgage-backed securities as quickly as the market now expects.
This could be a substitute for asset purchases, they
argued.
But that
was only one of a flurry of proposals.
“The
minutes ... show a committee that is far less unified than at any other time in
the past few years,” said Millan Mulraine, senior economist at TD Securities.
The Fed
said a review of the program had been set for March. Fed Chairman Ben Bernanke
will hold a press conference at the end of the two-day meeting on March 20.
Without
the Fed’s unconventional program, the 10-year Treasury would yield 3% or more,
according to research published by Goldman Sachs.
More
Fed, liquidation talk, push jumpy markets to 2013 lows
TOKYO |(Reuters) - Most risk assets slid to 2013 lows on Thursday with sentiment rattled by overnight market talk of a hedge fund liquidating big positions in commodities, as well as worries the U.S. Federal Reserve could prematurely wind down its bond buying program.
European markets are seen following Asia lower, with financial spreadbetters predicting London's FTSE 100 .FTSE, Paris's CAC-40 .FCHI and Frankfurt's DAX .GDAXI would open down as much as 0.7 percent. U.S. stock futures were down 0.1 percent to suggest a weak Wall Street start. .L.EU .N
The possibility of an earlier-than-expected end to the super-accommodative U.S. monetary easing scheme, which has underpinned global risk appetite, sparked dollar buying - pushing it to a three-month high against a basket of currencies .DXY.
"Disagreement over the (Fed's) current path is
causing concern for a market that demands certainty," said Ben Taylor,
trader at CMC Markets.
Traders
said the selling sparked overnight by the rumors that a hedge fund was forced
to liquidate substantial commodity positions coincided with the release of the
Fed's January 29-30 minutes which showed policymakers discussed the slowing or
stopping of bond purchases aimed at reducing unemployment.
"We
all heard the hedge fund rumor and price action appeared to back such a rumor,
but nobody has seen hard news," said Yuji Saito, director of foreign
exchange at Credit Agricole in Tokyo.
More
But while the Fed gets busy plotting a March return
of 3 percent and disaster, Europe has a faster disaster in mind. More and more
of Europe isn’t working. More and more the wealth destroying nature of the euro
is apparent.
If at first you don't succeed, try again. Then quit. There's no use being a damn fool about it.
W. C. Fields
Hollande Eyes French Insurers’ EU1.38 Trillion to Spur Housing
By Francois de Beaupuy
- Feb 20, 2013 11:01 PM GMT
Didier
Ridoret has a fix for France’s construction slump: prod Axa SA and other
insurers to plough more of their 1.38 trillion euros ($1.86 trillion) in
domestic life insurance policies into new housing. The chairman of the French Building Federation says President Francois Hollande “should twist the arm of insurers so that they devote a part of their resources on mid-level housing.” Ridoret, who’s taking part in talks between the government, builders and insurers to rekindle housing, said in an interview that “all indicators are on red alert, from housing starts to renovation to non-residential” construction.
Hollande, who faces a slumping economy and joblessness at a 15-year high is under pressure to support construction as households have become reluctant to buy homes with prices near record highs. He said on Feb. 1 that his pledge to build 500,000 homes annually won’t be reached in 2013, and promised to increase affordable lodging with a new law this year aimed at luring more of insurers’ investments into real estate.
More
Bulgaria succumbs to euro deflation curse
Last updated: February 20th, 2013
Another
euro-pegged government defending an overvalued exchange rate bites the dust, a
reminder that the underlying economic and social disaster across the Europe’s
Arc of Depression is still getting worse.
Bulgarian
prime minister Boiko Borisov resigned this morning after days of mass protests
against austerity across the country.
“I will
not participate in a government under which police are beating people. Every
drop of blood is a shame for us,” he said. “Our power was handed to us by the
people, today we are handing it back to them.”
This
follows the defenestration of the free-market finance minister earlier this
week.
Bulgaria
is of course a complicated country, still grappling with the legacy of
communist rule and a police state. It is a stronghold of organised crime,
offspring of the old security services. It went through near hyper-inflation in
the 1990s and does not want to flirt with that again.
The
immediate protests are as much about Mafia control and soaring electricity
prices as about spending cuts.
But
Bulgaria is also in much the same position as Greece, Portugal, Spain, and
Italy, trapped in the ante-chamber of monetary union with a misaligned
currency, forced to undertake an internal devaluation.
The
government has bent every sinew to hold Bulgaria’s euro peg. It has succeeded,
helped by a currency board structure that imposes discipline.
But be careful
what you wish for. The peg itself is a key reason why Bulgaria has failed to
reach its full potential as a catch up economy and will almost certainly
languish in deep crisis for years to come. Output is still 2.5pc below 2008
levels.
More
Cyprus faces 'material' risk of default, warns S&P
Cyprus faces a "material and rising risk" of defaulting on its sovereign debt, especially if international lenders do not approve a vital bail-out package for the country, rating agency Standard & Poor's has warned.
12:55PM GMT 20 Feb 2013
"We
see at least a one-in-three chance that we could lower the Cyprus sovereign
ratings again in 2013, for example if official financial assistance from the
(European bailout fund) ESM and/or IMF is not forthcoming, leaving the Cypriot
authorities few choices apart from to restructure its financial
obligations," S&P's head of EMEA sovereign ratings Moritz Kraemer said
in a report.
Crippled
by its exposure to Greece, Cyprus needs €17bn (£14.9bn) from the eurozone to
recapitalise its banks and to finance the government over the next three years.
S&P's
comments come as the island gears up for a runoff presidential election on
Sunday pitting a conservative in favour of a swift bailout deal against a
Communist-backed candidate who supports a bailout but with fewer harsh
austerity measures.
----S&P currently rates Cyprus at
CCC+, well into non-investment grade "junk" bond territory.
More
On two occasions I have been asked, 'Pray, Mr. Babbage, if you
put into the machine wrong figures, will the right answers come out?' I am not
able rightly to apprehend the kind of confusion of ideas that could provoke
such a question.
Charles Babbage.
At the Comex silver depositories Wednesday final figures were: Registered 37.27
Moz, Eligible 123.75 Moz, Total 161.02 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, how to invest
without paying taxes legally. Do you still pay taxes to support the government?
“We don't pay taxes. Only the little people pay taxes."
Leona Helmsley. Too early
for the hedge fund game.
Paulson Leads Funds to Bermuda Tax Dodge Aiding Billionaires
By Zachary R. Mider - Feb 19, 2013 11:00 AM GMT
Last year, about $450 million belonging to top executives at billionaire
hedge fund manager John Paulson’s New York firm took a quick round trip to
Bermuda. In April, the executives sent the money to a reinsurance company that they’d set up on the island 650 miles off the North Carolina coast. By June, the Bermuda company, which has no employees and sells far less reinsurance than the industry norm, had sent all the cash back to New York, to be invested in Paulson & Co. funds.
By recycling the funds through Bermuda-based Pacre Ltd., the Paulson executives are positioned to legally exploit a little-known tax loophole, reduce their personal income taxes and delay paying the bill for years.
“These types of reinsurance companies are permitting U.S. taxpayers to defer -- indefinitely -- U.S. tax,” said David S. Miller, a tax lawyer at Cadwalader Wickersham & Taft LLP. For some, he said, it’s “an unjustified benefit.”
A decade after the U.S. Internal Revenue Service threatened to crack down on what it said were abuses by hedge-fund backed reinsurers, more high-profile money managers are setting up shop in tax havens. Paulson, SAC Capital Advisors LP’s Steven A. Cohen and Third Point LLC’s Daniel Loeb have started Bermuda reinsurance companies since 2011, following a similar Cayman Islands venture by Greenlight Capital Inc.’s David Einhorn.
Because reinsurers, which sell coverage to other insurers, manage large pools of capital, they’re a handy way to funnel a U.S. hedge fund investment through a tax haven.
At a time when the Obama administration and Congressional leaders of both parties are calling for a corporate tax overhaul that includes eliminating some loopholes, the reinsurance tax dodge is gaining popularity among hedge funds. The three new reinsurers backed by U.S. hedge fund managers put a combined $1.7 billion back into the managers’ hands.
Other top money managers, including some in London, are hiring advisers to explore setting up reinsurance companies in Bermuda, said Timothy Faries, an insurance lawyer at Appleby, one of the island’s largest law firms.
More
"No man in the country is under
the smallest obligation, moral or other, so to arrange his legal relations to
his business or property as to enable the Inland Revenue to put the largest
possible shovel in his stores. The Inland Revenue is not slow, and quite
rightly, to take every advantage which is open to it under the Taxing Statutes
for the purposes of depleting the taxpayer's pocket. And the taxpayer is in
like manner entitled to be astute to prevent, so far as he honestly can, the
depletion of his means by the Inland Revenue"
Lord Clyde, Lord President of the Court of Session. Ayrshire
Pullman Motor Services v Inland Revenue (1929)
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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