Baltic Dry Index. 865 +18
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
The only function of economic forecasting is to make astrology
look respectable.
J. K. Galbraith.
For more on Richard Russell turning bullish
of US stocks scroll down to Crooks’ Corner.
We open today with what may be very good energy
news, bad energy news, or just turn out to be energy news offering false hope
for the future. Japan has discovered a way to extract methane from the methane
hydrates locked under the seabed. On first take this appears to offer cleaner
energy hope for the not too distant future. Who said that I never cover good news.
Japan cracks seabed 'ice gas' in dramatic leap for global energy
Japan has extracted natural "ice" gas from methane hydrates beneath the sea off its coasts in a technological coup, opening up a super-resource that could meet the country's gas needs for the next century and radically change the world's energy outlook.
The
state-owned oil and gas company JOGMEC said an exploration ship had
successfully drilled 300 metres below the seabed into deposits of methane
hydrate, an ice-like solid that stores gas molecules but requires great skill
to extract safely.
"Methane
hydrates available within Japan's territorial waters may well be able to supply
the nation's natural gas needs for a century," said the company, adding
that the waters under exploration also contain large reserves of rare earth
metals.
Government
officials said it was the world's first off-shore experiment of its kind,
though Japan been working closely with the Canadians. The US and China have
their own probes underway.
The US
Geological Survey said methane hydrates offer an "immense carbon
reservoir", twice all other known fossil fuels on earth (illustrated in
pie chart below). However, it warned that the ecological impact is
"very poorly understood".
The immediate discoveries in Japan's
Eastern Tankai Trough are thought to hold 40 trillion cubic feet of methane,
equal to eleven years gas imports. The company described the gas as
"burnable ice", saying the trick is free it from a crystaline cage of
water molecules by lowering the pressure. Tokyo hopes to bring the gas to
market on a commercial scale within five years.
The
breakthrough comes after 17 years of research and several hundred million
dollars of investment. It could be the answer to Japan's prayers, ending its
reliance on expensive imports of fuel to meet almost all energy needs.
The
country's trade surplus has vanished since the government shut down all but two
of its 54 nuclear reactors after the Fukushima disaster in 2011 and switched to
other fuels, mostly liquefied natural gas (LNG).
---- Environmentalists are deeply alarmed by new focus on ice gas, fearing that it will set off a fresh energy race in the fragile eco-systems of the oceans and may cause landslides on the seabed.
The risk
of methane leakage into the atmosphere could be a major snag. The US Geological
Survey says the gas has ten times the global warming impact of carbon dioxide.
More
Now
back to the usual form on dysfunctional Europe. Abandon hope all ye who enter here.
The wealth destroying euro was a bad idea whose time has passed. The euro
simply isn’t working for most Europeans. But with no new world to discover and
populate, euro-serfs have nowhere to move to defusing social tensions. An
explosion of social discontent lies ahead if Europe continues on with German
imposed austerity. The days of the Bilderberger imposed EUSSR are over. The
Italian election has forever changed the direction of the EUSSR and who will
sit in the driving seat.
"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
Italy's companies face slow 'death' as credit crunch deepens
Italy's industry chiefs have warned that the country faces a "full credit emergency" as thousands of companies run out of critical funding, threatening a slide into deeper depression.
Confindustria,
the business federation, said 29pc of Italian firms cannot meet
"operational expenses" and are starved of liquidity. A "third
phase of the credit crunch" is underway that matches the shocks in
2008-2009 and again in 2011.
In a
research report the group said the economy was caught in a "vicious
circle" where banks are too frightened to lend, driving more companies
over the edge. A thousand are going bankrupt every day.
Franco
Bernabè, the head of Telecom Italia, echoed the warnings, lamenting that firms
are literally "dying from lack of liquidity". He called on the Bank
of Italy to take bolder action to head off disaster. "The Italian economy
is being suffocated. The country must intervene rapidly to reinject funds into
the economy", he said.
Fulvio
Conti, head of the energy group Enel, exhorted Rome to give the economy an
immediate shot in the arm by paying €48bn in state arrears to companies,
arguing that this can be done without breaching EU deficit rules. This would
amount to fiscal stimulus of 1.5pc of GDP.
Late
payments have become a chronic problem across the board in Italy, with 47,000
official complaints last year. The research group CGIA di Mestre said half of
small companies cannot pay their staff on time.
The pleas
for action come as a new report by Standard & Poor's warns that default
rates in Europe have reached the highest level since the global crisis in 2009,
with most of the carnage concentrated in the Club Med bloc.
S&P
said the default rate for Italian non-investment grade bonds jumped to 9.5pc
last year from 5.7pc in 2012 as local banks shut off funding. It was even worse
in Spain, doubling to 14.3pc.
The
default rate in France rocketed from 0.8pc to 8.7pc, the latest in a blizzard
of bad news from the country as the delayed effects of tax rises, fiscal
tightening, and the strong euro do their worst. Britain and Germany bucked the
trend, falling slightly to 5.4pc and 4.4pc.
The
combined effect of a worsening credit crunch and political paralysis in Rome is
becoming a dangerous cocktail, with the risk of social revolt increasing as the
months drag on. Analyst say fresh elections are unlikely to solve anything in
this economic climate.
Spain
still has a solid government but the unemployment rate is already 26pc and
lay-offs are continuing at an alarming pace. Labour specialists AML Afi-Asempleo
said the economy would shed 300,000 jobs over the first three months of this
year.
More
Italian Billionaire Says Bankers Must Follow Lawmakers Out Door
By Flavia Rotondi & Andrew Frye - Mar 13, 2013 12:00 AM GMT
Italian billionaire Diego Della Valle, head of shoemaker Tod’s SpA (TOD), welcomed the wave of public disgust that
swept established politicians from parliament last month and said it’s time to
dislodge some top bankers as well. “It’s clear that people said, ‘That’s enough, it’s time to change, show us a decent country,’” Della Valle said March 6 in a Bloomberg Television interview. “That also has to happen in the world that we represent, finance and business and the civil society that guides the country.”
Della Valle, 59, is picking fights with finance executives as banks curb lending and Italy slides deeper into recession. His own wealth has grown, with the market value of Tod’s more than tripling since the end of 2008, as Della Valle boosted sales in Italy and abroad. In the interview, he renewed his campaign to prod Intesa Sanpaolo SpA (ISP) Chairman Giovanni Bazoli, 80, to retire, saying Italian firms need lenders with a global vision.
“These are people who put in their time without producing anything interesting for a serious country,” Della Valle said, speaking from Sant’Elpidio a Mare, where Tod’s is based. “We have to take the situation in hand and start saying with a nice, big chorus of voices capable of breaking through to these people: ‘Stop it, please, step aside because you have already caused enough trouble for the country.’”
More
Hungary, defying EU, limits powers of top court
BUDAPEST
| Tue Mar 12, 2013 11:24am EDT
(Reuters)
- Hungary defied the European Union on Monday and changed its constitution to
limit the powers of its constitutional court, one of the few institutions that
has stood up to Viktor Orban, the combative prime minister.
Parliament,
dominated by Orban's party, voted for a set of government-backed constitutional
amendments, despite warnings from the European Union, the U.S. government and
human rights groups that the changes could undermine Hungary's democracy.
"There
are no longer any doubts whether there is a constitutional democracy in Hungary
- there isn't one," said Marta Pardavi, co-chair of the Hungarian Helsinki
Committee, a human rights organization.
European
Commission President Jose Manuel Barroso's office said the amendments
"raise concerns with respect to the rule of law", which Hungary needs
to address with Brussels.
Brussels
sees the vote as the latest move to assert power over other branches of the
state by Orban, a charismatic former youth democracy activist who took power in
2010 with a super-majority that lets him amend the constitution.
In the
past three years he has pushed through changes that opponents say undermine the
independence of the media, central bank, judiciary and other institutions.
Orban's
supporters deny infringing on democracy. They say criticism of the
constitutional changes has been whipped up by international businesses
angry that Orban's government has made foreign
electricity firms cut charges to Hungarian households.
---- The dispute underscores the
limited ability of the European Union to rein in its members, even when
Brussels believes they risk breaching the EU's founding principles of rule of
law and respect for human rights.
----
The constitutional amendments were backed by 265 lawmakers in the 386-seat
chamber, with 11 votes against and 33 abstentions.
More
We close for the day with more of the same old
casino capitalism so beloved by fallen guru Greenspan and his “Tonto”
Helicopter Ben Bernocchio. This ending will only be another repeat of 2007-2009
only bigger.
Moral principle is a looser bond than pecuniary
interest.
J. K. Galbraith.
Kyle Bass Warns "The 'AIG' Of The World Is Back"
Submitted by Tyler Durden on
03/12/2013 22:37
Kyle Bass, addressing Chicago
Booth's Initiative on Global Markets last week, clarified his
thesis on Japan in great detail, but it was the Q&A that has roused
great concern. "The AIG of the world is back
- I have 27 year old kids selling me one-year jump risk on Japan for less
than 1bp - $5bn at a time... and it is happening in size." As he
explains, the regulatory capital hit for the bank is zero (hence as great a
return on capital as one can imagine) and "if the bell tolls at the end of
the year, the 27-year-old kid gets a bonus... and if he blows the bank to smithereens,
ugh, he got a paycheck all year." Critically, the bank that he bought the
'cheap options' from recently called to ask if he would close the position - "that happened to me before," he
warns, "in 2007 right before mortgages cracked." His
single best investment idea for the next ten years is, "Sell JPY, Buy Gold, and go to
sleep," as he warns of the current situation in markets,
"we are right back there! The brevity of financial memory is about two
years."
More
Nothing is so admirable in politics as a short memory.
J. K. Galbraith.
At the Comex silver depositories Tuesday final figures were: Registered 42.64
Moz, Eligible 119.42 Moz, Total 162.06 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
With the Fed pumping in 85 billion dollars a month of new money from nothing half into bonds, the rest has been increasingly showing up in stock speculation. Now one of the greatest stock newsletter writers of all time has turned bullish. “Don’t fight the Fed,” he suggests, hold your nose and go long the SPDR Dow Jones Industrial Average ETF Trust (DIA.) It’s a high risk trade for high risk traders, rather than an investment it seems to me. At some point ahead, probably later this year, reality is likely to intrude into the Fed’s great stock market party. If it isn’t the euro self destructing, or a new war with Iran, the a new currency war started by Japan may be what triggers the next Lehman. Then of course there’s always that coming clash between China and Japan or the rapidly escalating new trouble spot in the Koreas.
At some point too, the Bernanke Fed says it’s going to stop QE forever, and after that “normalise” US interest rates and “unwind its balance sheet.” While I think all that is just deliberate Fed deception, were they to try it would generate the next gigantic bear market in stocks, triggering the next Lehman along the way. Stay long physical precious metals for the long run. If I’m right, the Fed’s real exit strategy is simply waiting for all the global QE programs to trigger the Great Inflation, and then stay seriously behind tightening.
How bear Richard Russell stopped worrying and learned to love the DIA
March 12,
2013, 4:29 PM
There’s been some news coverage Tuesday that legendary newsletter writer
Richard Russell has finally turned bullish. But is that really the
case?Russell, who’s been publishing newsletters since 1958, turned heads Tuesday after he suggested to investors in his March 11 newsletter they buy an exchange-traded fund connected to the Dow Jones Industrial Average, the SPDR Dow Jones Industrial Average ETF Trust (DIA)
Why the bullish
signal? Russell channels his old friend Marty
Zweig with a version of “Don’t fight the Fed,” saying that while
Federal Reserve Chairman Ben Bernanke is determined to keep the market
inflated, why not join in the fun and “place yourself on the cheerleaders side
of the U.S. markets.”
“Yes, I know that this market is uncorrected during its long rise from the 2009 low, and I know that there are risks in buying an uncorrected advance that is becoming uncomfortably long in the tooth, but my suggestion is that my subscribers should take a chance (after all, Columbus took a chance) and take a position in the DIAs,” Russell wrote in his note. “If you buy the DIAs, I suggest that you place a mental stop loss 8% below your purchase price.” King World News published an online version of Russell’s March 11 dated note.
While Russell suggests buying shares in the DIA, which are sometimes referred to as the Dow diamond, it’s not the first time he’s done so.
Back in July 2010, he recommended investors buy the DIA after a Dow Theory bull signal.
“The guy’s made a
number of bullish noises in recent months,” said Mark Hulbert, a MarketWatch
columnist who has followed Russell’s newsletters since 1980.
More
"We need only take our heads out of the sand to see clearly that interventionism not only has failed to provide the promised something-for-nothing, but has led to all sorts of undesirable consequences. Indeed, many are just beginning to realize that we are moving towards disaster even though we have been on a wrong heading for decades."
Leonard Read
The monthly Coppock Indicators finished February:
DJIA: +111 Up. NASDAQ: +129 Up. SP500: +148 Up. All three indexes are giving the same signal since
January, up, but surprisingly February’s
move in all three was weak, suggesting that the indicators are topping
out. Will sequestration turn March into a
down month? So far so good.
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