Monday 22 April 2013

The Great Gold Heist.



Baltic Dry Index. 888 +03

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

"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."

Henry Hazlitt

For more on last week’s attempted Great Gold Heist, that now seems to increasingly be going wrong, scroll down to Crooks Corner. If the ECB tries to order Italy, Portugal and Spain to dump their gold like Cyprus, all three will likely dump the ECB first. Why hold a fire sale of Europe’s  gold at $500, only to see it transfer out to China, India and Russia, and the rebound to $2,500? Cui bono, as we wrote early last week. Our new lawless age gets more lawless with each passing week.

Today, the high euro in the new currency wars is condemning the Eurozone to a slow death, says Russia’s 16th richest oligarch. He thinks the Eurozone will survive leaving most of Euroland trapped in the German straightjacket. That’s where I disagree. Youth unemployment rates of 50 to 60 percent, condemn a nation to high emigration and an eventual failure of their welfare and pensions systems. I think that sooner rather than later even the dullest politicians will see that growth and redemption can only come from leaving the Eurozone. Preferably before the ECB tries to steal all their gold holdings.

"Sooner or later both the Greek population and international creditors will tire of fighting a losing battle, leading to a break-up of the currency union as Greece pulls out, probably followed by other countries"

Douglas McWilliams, chief executive of the Centre of Economics and Business Research.

High euro is crippling growth, says Oleg Deripaska

The euro is trading at an inexplicably high rate to the dollar, preventing eurozone nations from finding growth, says Russian billionaire Oleg Deripaska.

With European policymakers and politicians increasingly split over whether to relax austerity measures, Mr Deripaska, who controls Rusal, the world’s biggest aluminium producer, said that the turmoil and high value of the euro meant his business would steer clear of investing in the eurozone.

“We need to be practical,” he says in an interview with The Daily Telegraph. “With the high euro and the state of the markets in Europe, it wouldn’t be reasonable to go anywhere near buying something significant in Europe at this moment.”

Mr Deripaska, who is estimated to be worth $8.5bn (£5.58bn) in the latest Forbes rich list, making him Russia’s 16th richest man, says he fails to comprehend what makes the euro 45pc more valuable against the dollar than it was at launch in 2002.

The euro traded at 90 US cents at launch but rocketed to a peak of $1.59 in July 2008. It has since fallen to $1.31, but Mr Deripaska believes that is still too high.

“I can’t understand why the euro is so high,” he says. Has Europe become more productive or created more innovation? I just can’t see it.

“It doesn’t present much opportunity for south Europe and industrial parts of Europe in France and Italy to benefit.

----Sixteen months ago, Mr Deripaska said some European nations were operating “like socialism”, spending above their means, given the tough economic climate. He still feels Europe has major problems.

“I think Europe is missing an opportunity now,” he says. “The more that European countries stay in the eurozone, the more difficult it will become for them.

“How Europe maintains its high standards of living conditions and expectations of social welfare, I really [don’t know].”
More

Up next, details from the dis-united G-20 meeting just held. Never mind that the original deficit research that lead to all the European austerity programs is now as discredited as the man-made, CO2 global warming hysteria of the last decade, Europe is to press on with German imposed austerity programs, until either Chancellor Merkel gets re-elected or the last young unemployed worker exits Club Med for the New World and Australia.

"Can't anybody here play this game?"

U.S. Treasury Secretary Jacob J. Lew, with apologies to Casey Stengel.

Austerity on Trial With U.S. Versus Europe Amid New Evidence

By Simon Kennedy, Rebecca Christie & Stefan Riecher - Apr 22, 2013 12:15 AM GMT
Global policy makers and economists are staging a retrial of austerity as new evidence arises.

Facing another slowdown in the world economy, the U.S. and International Monetary Fund are pitched against the euro area and U.K. over whether axing budgets and debt is the recipe for recovery or recession. In academia, professors Kenneth Rogoff and Paul Krugman remain at odds.

The dispute, which led to finger-pointing and a fight over setting new debt targets at weekend talks of finance chiefs in Washington, is getting a re-airing as economic data from the U.S. to Europe undershoot estimates. Research co-written by Rogoff that has been used to justify cuts has come under scrutiny.

“Delaying necessary adjustments would further aggravate risks for the prospects of a lasting and fundamentally sound global recovery,” German Finance Minister Wolfgang Schaeuble told the fund’s 188 member nations. IMF Managing Director Christine Lagarde told Bloomberg Television that “for some of them there’s no reason to rush into up-front, heavily loaded fiscal consolidation.”

---- Agreeing that “much more is needed” to reinforce what they called a “weak” world economy, Group of 20 finance ministers and central bankers still proved unable to bridge ideological differences over budgets. A discussion over debt targets ended with a promise to revisit how to replace 2010 goals most failed to meet before scrapping last year.

A U.S. Treasury official, speaking to reporters after the meeting, said that the U.S. wanted to avoid hard targets and convinced participants to keep the focus on addressing issues such as unemployment in parts of Europe rather than setting fiscal benchmarks.

Still suffering from more than three years of debt turmoil, the Europeans defended their push to rein in fiscal positions, arguing that even with 19 million unemployed it would eventually prove the best route to recovery and that they were showing greater flexibility than realized.

---- The counter argument, as presented by the IMF in a reversal from its austerity prescriptions of the 1990s, is economies should be wary of cutting back too fast for fear it will backfire in even weaker economic growth and higher debts.

“It’s a question of how much and how quickly,” Lagarde said.

That view is shared by U.S. Treasury Secretary Jacob J. Lew. Making his G-20 debut, he said stronger European demand is “critical to global growth” and signaled countries with trade surpluses such as Germany should do more to ease “austerity fatigue” elsewhere.
More

We end for the day with a glimpse into how the 1 percent really live. Not to worry if Deutsche Bank lose. The ECB and Bundesbank will make good on the losses via the German taxpayer. What’s a mere $2.5 billion among friends.

Banks are an almost irresistible attraction for that element of our society which seeks unearned money.

J. Edgar Hoover

Deutsche Bank Margin Call on Vik Turns Into $2.5 Billion Dispute

By Kit Chellel - Apr 22, 2013 1:01 AM GMT
Alexander Vik went to Deutsche Bank AG (DBK)’s London office in October 2008 to meet account managers who congratulated the Norwegian entrepreneur on how well his Sebastian Holdings Inc. investment fund was doing.

Within a month, as global markets tumbled into crisis, the same bankers demanded about $530 million against the fund’s currency bets and began to liquidate its positions.

Vik, 58, will argue at a 12-week trial starting in London today that the bank’s actions resulted in losses and missed profits totaling about $2.5 billion. A judge will have to decide whether Sebastian’s calculation of lost trading gains is accurate, said John Day, a lawyer at London-based litigation firm DaySparkes.

“Quite apart from the spectacular sums at stake, one of the key questions for the court will be whether the losses that Sebastian is claiming following the closing out of its positions were too speculative,” said Day, who isn’t involved in the suit. “This case could well have potentially far-reaching implications for the wider banking community.”

The Sebastian trial is one of a host of legal and regulatory challenges that could effect the profitability of Germany’s biggest lender. Deutsche Bank raised its litigation reserves by about a third to 2.4 billion euros () in March, to cover costs linked to U.S. mortgage lawsuits and other regulatory probes, while it also faces probes into carbon-credit trading and interest-rate manipulation.

---- Vik, the captain of the Harvard College golf team while studying there in the 1970s, declined to comment through his lawyer, Jonathan Leslie.

The London trial will focus on investments made by Klaus Said, a former Credit Suisse Group AG (CSGN) banker hired by Vik in 2006 as a foreign-exchange trader. Sebastian, whose sole director and shareholder is Vik, said in court documents from 2011 that Deutsche Bank allowed Said to breach pre-agreed trading limits and rack up losses of about $750 million on “exotic” currency derivatives.

Sebastian Holdings relied on the bank to manage its risk and report losses, the investment fund said in the lawsuit.

“The bank at least suspected, and more probably was consciously aware, that Mr. Said was not acting with” Vik’s authority. As a result, Sebastian said, the October 2008 margin calls weren’t valid.

Said, now head of foreign exchange at CRT Capital Group LLC in New York, said he wouldn’t testify at the trial and declined to comment when reached by phone.

Vik said in a 2006 interview that he operated the fund from Monaco, dividing his time between the principality and a mansion in Greenwich, Connecticut. He made more than $250 million with his brother selling stock in Xcelera Inc., an Internet firm they founded together, according to a Boston class action filed against the company in 2001 after its value plummeted. That lawsuit was dismissed in 2008.

Deutsche Bank argued in court documents that it acted properly in requesting the margin payments, transferring money from a separate equities trading account and liquidating positions. The lender is seeking about $246 million from Sebastian as well as damages for breach of contract.
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"Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money."

Daniel Webster

At the Comex silver depositories Friday final figures were: Registered 39.73 Moz, Eligible 126.52 Moz, Total 166.25 Moz.  


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

Today, gold. One week on and the great gold rig seems to have gone disastrously wrong for the paper gold shorts. After triggering panic among the leveraged “paper gold” futures holders, and a massive sell-off, the opposite in happening in the real world of unleveraged physical gold. The great paper market gold sell-off has triggered massive new buying of physical gold, and where not subject to the EU’s value added taxes on purchases, silver. But those behind the great paper sell-off seem to have made yet another longer lasting error.  Many of the world’s mining companies are already in deep costs trouble, facing rising energy costs, and in Africa rising labour costs. Smashing the price of paper-gold, greatly adds to their difficulty. Projects will get scaled back, marginal mines closed, unemployment in places like unstable South Africa rise. 

We seem to have forgotten the lessons from the 19th century of the danger of letting gambling speculation drive the real world.  Anarchy, chaos, and criminality, result. But in our new lawless 21st century age, don’t expect anyone to investigate  central bank criminality. In or new lawless age, it’s now every man for himself.

Why did I take up stealing? To live better, to own things I couldn't afford, to acquire this good taste that you now enjoy and which I should be very reluctant to give up.

Comex, with apologies to Cary Grant. To Catch A Thief.

Hedge Fund Gold Wagers Defy Worst Slump in 33 Years: Commodities

By Joe Richter - Apr 22, 2013 1:55 AM GMT
Hedge funds increased bets on gold rallying after prices plunged the most in 33 years, underscoring billionaire John Paulson’s view that bullion will rebound.

Fund managers and other speculators increased net-long positions in gold by 9.8 percent to 61,579 futures and options in the week ended April 16, U.S. Commodity Futures Trading Commission data show. Investors turned bullish on silver for the first time in three weeks. Wagers on higher prices across 18 U.S.-traded raw materials climbed 5.1 percent to 453,467 contracts, the first gain in three weeks.

A two-day, 13 percent drop in gold through April 16 drove prices to a two-year low, erasing $560 billion from the value of central-bank reserves since the metal peaked in 2011. Official- sector purchases and demand in Asia will support bullion, Paulson & Co. said in a letter to clients last week, joining BlackRock Inc. (BLK), the world’s biggest money manager, in predicting a rebound. The U.S. Mint’s sales of American Eagle gold coins surged eightfold this month from a year earlier.

“Given the price action, this rise in holdings was pretty surprising,” said Dan Denbow, a fund manager at the $1 billion USAA Precious Metals & Minerals Fund in San Antonio. “People may have been looking to get back into the market and are taking advantage of the price to do so. There are people who still have a long-term belief in it. Physical buyers have also stepped up.”

---- Since reaching $1,321.50 on April 16, the lowest since January 2011, bullion rebounded 5.6 percent. The China Gold Association said retail sales surged April 15 and 16. Imports by India may jump by 36 percent in the three months through June compared with a year earlier, the Bombay Bullion Association Ltd. said April 18. The U.S. Mint sold 167,500 ounces so far in April, heading for the biggest monthly total since May 2010.

Central-bank stimulus will “eventually lead to inflation,” Paulson & Co. said in a letter to clients obtained by Bloomberg News, reiterating a bullish outlook for bullion. The hedge fund is the biggest shareholder in the SPDR Gold Trust, the largest exchange-traded fund backed by the metal. The price plunge was a “panic event,” Catherine Raw, a fund manager in London at BlackRock, which oversees about $3.8 trillion, said in an interview April 16 on Bloomberg Television.

More

Below, a must read perspective on last week’s events.

Unintended Consequences Are Increasing World Demand for Gold

Can the price remain this low with tightening supply?
by Chris Martenson Wednesday, April 17, 2013, 5:26 PM

With the financial experts claiming, some gleefully, that gold has "lost its safe haven status" in the aftermath of its biggest tumble in 30 years, many commentators  thought (hoped?) that the dramatic price drop would steer people away from gold ownership. To my eyes, the past week has all the earmarks of a high-gloss propaganda campaign complete with well-placed anti-gold stories in the media and the careful use of language aimed at sowing doubt about gold's ability to be a store of wealth.

But for those who consider gold a store of value, the recent gold slam is a gift: an invitation to purchase more sound money with fewer units of paper currency. In other words, a sweet deal.  Gold and silver on sale and the world is taking advantage.

I predicted this last Friday, when I wrote, "[k]nowing the lower prices will only exacerbate this West-to-East flow [of gold], I therefore thought that the bullion banks and central banks would not have dared push that dynamic any further."

Well, by all accounts, the flow of gold from West to East is now accelerating.
Much, much more.

It’s morally wrong to let a sucker keep his money.

Comex, with apologies to W. C. Fields.

The monthly Coppock Indicators finished March:
DJIA: +119 Up. NASDAQ: +132 Up. SP500: +157 Up.  Another Fed bubble, but now it’s challenged.

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