Thursday 30 May 2013

The End Nears.



Baltic Dry Index. 818 -04 

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

The Federated Republic of Europe - the United States of Europe - that is what must be. National autonomy no longer suffices. Economic evolution demands the abolition of national frontiers. If Europe is to remain split into national groups, then Imperialism will recommence its work. Only a Federated Republic of Europe can give peace to the world.

Leon Trotsky 30/10/1917

Sadly we are living in the last bubble. The deception of a free lunch under the Great Nixonian Error of fiat money is coming towards its end. The Fed’s greatest bubble of all, bonds and now stocks, is racing towards its pin. When this last bubble bursts, all the other Lehman’s come pouring out of the woodwork, with the Fed, the BOE, ECB, BOJ, BOC, largely powerless to repeat 2008-2009. Stay long physical precious metals held safely outside of the banking system and corrupt brokerage houses like MF Global. When we hit reset later this year or next, a precious metals clearing system will become a large part of the return to true capitalism. Though for a while we will all experience a little of Greece’s pain without the sunshine.

Meanwhile 2013s great disconnect continues. Deliberately mispriced money has mispriced stock markets from reality, in the central bankster’s last desperate roll of the dice to make the Davos Spring happen. From the Baltic Dry Index to Dr. Copper, to the HSBC global index of the business cycle, everything suggests the Davos Spring is just a hyped up illusion. But an illusion is never reality. Before this bubble ends, the UK’s next magician has yet to take the stage arriving in July from Canada. The UK will then enter the game of competitive devaluation. The UK’s serfs need gold and dumbed down by their “betters” they mostly don’t even know it. No one at the BBC will ever say it’s time to own some precious metals. No one in Britain’s sick joke of a coalition government will ever say to hedge off some Sterling risk.

We open this morning with the biggest red flag of all. Telescopes up to the blind eye, most pundits, stock spivs, and vampire squids will pretend not to see it. Our last bubble still has a summer off illusion to get through.

No saviour in sight as world credit cycle rolls over

This may be as good as it gets for the world economy. The HSBC index for the global business cycle hit a three-year high around Easter, and has since rolled over.

Any country that has failed to lock in a self-sustaining recovery by now must expect to pay the price for the failings of its policy establishment, and some risk a slide into outright deflation.

“We see building evidence of a cyclical downturn,” said Fredrik Nerbrand, HSBC’s global asset guru. “We find it highly troubling that the eurozone is still marred in a recession at the same time as our cyclical indicators appear to have peaked.”

The bank said there is a market “disconnect” between the world’s gloomy outlook and talk of tapering by the US Federal Reserve, the supposed moment when it starts to wind down its $85bn of monthly bond purchases.

It is surprising to me that HSBC’s leading indicator has taken so long to buckle, since commodities topped in September and the Dutch CPB index of world trade contracted over the February-March period. Rarely has there ever been such an equity boom on such quicksand.

Mr Nerbrand said slowing momentum “should send shivers down the spine of any investors that are long risk”. Yet markets are betting that central banks will come to the rescue yet again if need be. This may be so, but only after they have first struck a blow against moral hazard and demonstrated their distaste for asset bubbles. The central banks take their time. Mr Nerbrand says they will not act until the markets have already priced in a “sub-optimal outcome”, Canary Wharf dialect for a nasty sell-off.

HSBC said it is cutting its holdings of high yield credit, emerging market debt, gold and real estate REITs. It is plumping instead for US Treasuries, the “least rotten apple in the barrow”. An astonishing 42pc of its tactical portfolio is now in US Treasuries.

We have been through these episodes of putative Fed tightening twice since the Lehman crisis. Markets tanked in 2010 and again in 2012 after the Fed turned off the spigot.
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New BoE chief Carney will devalue sterling, Pimco warns

Mark Carney will try to devalue the pound by as much as 15pc after he takes over as Bank of England Governor in July in a last ditch attempt to cement the UK recovery, Pimco, the world’s largest bond house, has warned.

Growth in Britain is going to remain “challenged” for the next three to five years as the Government continues to shrink the public sector and cut the budget deficit.

As banks and households also grapple with their excessive debts, “that leaves one policy tool outstanding, which is basically the currency”, Pimco managing director and sterling bond head Mike Amey said.

George Osborne has pinned his hopes for the economy on Mr Carney, Canada’s central bank boss until the end of the week, living up to his reputation as a monetary “activist” to help ease the transition to an export-focused economy less dependant on consumer spending.

Although economists reckon there is little more central banks can do, Mr Carney has insisted policy is not “maxed out”.

“I think a lot of what Mark Carney is going to do – clearly he’s not going to state this upfront – is to try and keep sterling certainly from going up and, probably, he’s going to want to see it go lower,” Mr Amey said.
“On a trade weighted basis I think another 10pc to 15pc is manageable. Against the dollar we’re trading at $1.50 now. The low in 2009 was $1.37. I think that’s eminently achievable. I don’t think $1.37 is a big ask.”
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Elsewhere in austerity racked Europe, protest and social instability is rising. Continental Europe, as seen from dreary, cool, London, seems to be heading for another “Springtime of Nations,” 1848. “Sell in May” may finally have arrived.

ECB Targeted as Blockupy Protesters Descend on Frankfurt

By Jonathan Morgan - May 29, 2013 11:00 PM GMT
Frankfurt, Germany’s financial capital and the seat of the European Central Bank, is bracing for as many as 30,000 demonstrators to descend on the city for four days of protests against European leaders’ handling of the sovereign-debt crisis.

Activists have set up camp on the outskirts of the trade fair grounds to the west of the city, awaiting the arrival of busloads of people from all over the country as well as from abroad, according to Blockupy, an international group that is organizing the blockades. The biggest action is planned for May 31, when the demonstrators plan to “visibly disturb the usual business of the ECB as well as other actors of the crisis regime,” Blockupy said in a statement on its website.
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At the far end of EurAsia there are giant red flags too, and not just the ones China’s cowed masses must wave before their unelected communist leaders.

China Failure to Grow With $1 Trillion Is Warning to Li: Economy

By Bloomberg News - May 30, 2013 5:01 AM GMT
China’s economy is proving less responsive to credit, escalating pressure on Premier Li Keqiang to strengthen the role of private enterprise.

The government’s broadest measure of credit rose 58 percent to a record 6.16 trillion yuan ($1 trillion) in January-to-March, when gross domestic product gained 7.7 percent, compared with 8.1 percent a year earlier. Each $1 in credit firepower added the equivalent of 17 cents in GDP, down from 29 cents last year and 83 cents in 2007, when global money markets began to freeze, according to data compiled by Bloomberg.

The diminishing returns to lending heighten focus on the need for what the International Monetary Fund said yesterday are “decisive” policy changes in the world’s second-largest economy. Without a refocus away from state-approved projects, Li and President Xi Jinping risk overseeing both a further slowdown in growth and an increase in non-performing loans.
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Ending with China, we note what just might be the first food deal of many still to come. China’s fiat currency is just as good as Uncle Sam’s. But in the land of the free and the pink slime beef burger,  not all are best pleased by China swapping 4.7 billion pictures of George Washington for something with intrinsic value.

China's appetite for pork spurs $4.7 billion Smithfield deal

HONG KONG/NEW YORK | Wed May 29, 2013 5:22pm EDT
(Reuters) - China's Shuanghui International plans to buy Smithfield Foods Inc (SFD.N) for $4.7 billion to feed a growing Chinese appetite for U.S. pork, but the proposed takeover of the world's No. 1 producer has stirred concern in the United States.

The transaction, announced on Wednesday, would rank as the largest Chinese takeover of a U.S. company, with an enterprise value of $7.1 billion, including debt assumption.

As it stands. the deal is the biggest Chinese play for a U.S. company since CNOOC Ltd offered to buy Unocal for about $18 billion in 2005. The state-controlled energy company later withdrew that bid under U.S. political pressure.

Like similar foreign transactions, the Smithfield deal will face the scrutiny of the Committee on Foreign Investment in the United States, or CFIUS, a government panel that assesses national security risks.

And at least one member of Congress said the deal raised alarms about food safety, noting Shuanghui was forced to recall tainted pork in the past.

----In the town of Smithfield, which the local visitors bureau describes as rich in "hams, history and hospitality," officials said they were shocked by the news.

"It was a total shock to us," said Smithfield Mayor T. Carter Williams, who noted that his wife has worked for the company for a decade. "Right now, I don't think anybody here knows what's going to happen...the people in China say nothing is going to change. We would hope so."

The agreement comes after Continental Grain Co, Smithfield's largest shareholder with a 5.8 percent stake, agitated for change, including a call to break up the company. Continental, could not be reached to comment on Shuanghui's proposal.
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My first guiding principle is this: willing and active co-operation between independent sovereign states. Europe will be stronger precisely because it has France as France, Spain as Spain, Britain as Britain, each with its own customs, traditions and identity. It would be folly to try to fit them into some sort of identikit European personality.

Margaret Thatcher

At the Comex silver depositories Wednesday final figures were: Registered 42.85 Moz, Eligible 122.06 Moz, Total 164.01 Moz.  


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

Today, more on the madness of capitalism European style.  Would you pay £10 billion a year to stay in a German run austerity union like this?

"All animals are equal, but some animals are more equal than others"

Angela Merkel, with apologies to Napoleon, and Animal Farm.

Germany wins victory over EU Commission in VW Law case

BERLIN | Wed May 29, 2013 9:56am EDT
(Reuters) - Germany looked set to win victory over the European Commission to preserve state influence at carmaker Volkswagen (VOWG_p.DE) on Wednesday, after an adviser to the EU's highest court rejected the European Commission's bid to overturn the so-called VW Law.

While the final ruling is not expected until later this year, the preliminary advisory decision is a painful setback for the Commission. For years it has been locked in a battle with Germany over the 1960 law that gives the state of Lower Saxony a veto over fundamental decisions at VW such as mergers and acquisitions, even though it only has a 20 percent voting stake.

---Brussels dragged Berlin in front of the European Court of Justice (ECJ) for a second time in 2011, demanding that the last surviving element of the VW Law be repealed - that any shareholder with 20 percent or more of the ordinary voting shares can veto major decisions about the company's future.

But on Wednesday the ECJ's Advocate General, Nils Wahl, said in a written opinion that the judges should dismiss the Commission's demand that Germany be fined for failing to repeal the veto right following an ECJ court ruling in 2007.

That ruling had decided that the combined effect of the 20 percent blocking power in conjunction with a separate 20 percent cap on individual voting rights had violated EU laws, but did not explicitly rule on whether the veto alone was illegal.

Wahl said Germany had thus fully complied with the ECB's 2007 judgment by eliminating the voting cap and Lower Saxony's right to directly appoint two delegates to the company's board.

"The Advocate General further points out that the purpose of the present proceedings is not to determine whether the provision on the blocking minority, considered on its own, infringes EU law, but only whether Germany has complied with the 2007 judgment," the ECJ said in a statement.

Under German corporate law the veto right is usually set at 25 percent but it can be lower. In the case of VW, however, it implicitly granted a blocking minority to Lower Saxony, home to five of the six western German VW manufacturing plants.

Lower Saxony applauded Wednesday's preliminary ruling as "groundbreaking", while VW union leader Bernd Osterloh described it as "a good day for the workers of Volkswagen".

A spokeswoman for Internal Markets commissioner Michel Barnier said Brussels believes Germany still hasn't fully complied and awaits the court's final judgment.

ECJ judges are expected to rule on the case in the next few months. Wahl's opinion is not binding, though the judges follow such recommendations in a majority of cases.
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Pimco warns of eurozone 'zombification'

Eurozone economies will suffer from "zombification" with growth likely to be "very weak" over the next three to five years, according to the world's largest bond fund.

Bond giant Pimco said that, in contrast to stronger growth in emerging markets and a healing US, growth in the eurozone is expected to be "very weak" over the coming horizon.

Mired in recession, regional growth is unlikely to exceed 0.5pc per year over the next three to five years, said Andrew Balls, Pimco's head of European portfolio management and brother to shadow chancellor Ed Balls.

Rather than a collapse of the eurozone, he forsees an ongoing "muddling through – or 'zombification' of the eurozone’s economies and institutions". But he added that weak growth means political and social tensions will continue to build.

The eurozone has been in recession since the end of 2011 and the region's economy shrank an additional 0.2pc in the first quarter of this year - the region's sixth straight quarterly contraction.
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The future will belong to the Germans... ...when we build the House of Europe. In the next two years, we will make the process of European integration irreversible. This is a really big battle but it is worth the fight.

Helmut Kohl 10/1996

The monthly Coppock Indicators finished April:
DJIA: +133 Up. NASDAQ: +139 Up. SP500: +170 Up.  Another Fed bubble underway. But when to jump off before it ends?

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