Tuesday 25 June 2013

Where’s Snowy?



Baltic Dry Index. 1027 Friday.

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

They seek him here, they seek him there, Those Yankees seek him everywhere
Is he in heaven, is he in hell. Or is he in a Putin waterboarding motel?

With apologies to The Scarlet Pimpernel.

For more on the missing Snowy, scroll down to Crooks Corner.

Up first, bye bye the incompetent Euro Marios. Bye bye, Berlusconi and the Bilderberger imposed, unloved, corrupt, fiat currency of the EUSSR. As goes Italy as goes France. Let’s see how Germany bails out Europe number two and number three dead in the water economies. Stay long physical precious metals held outside of the revisiting 2008 banking system.

“It’s not just an instance of bad justice, it’s an offense to all Italians who believed in me,” Berlusconi said in an e-mailed statement. “I intend to resist this persecution because I am absolutely innocent and I don’t want to in any way abandon my battle to make Italy a truly free and just country.”

Italy could need EU rescue within six months, warns Mediobanca

Italy is likely to need an EU rescue within six months as the country slides into deeper economic crisis and a credit crunch spreads to large companies, a top Italian bank has warned privately.

Mediobanca, Italy’s second biggest bank, said its “index of solvency risk” for Italy was already flashing warning signs as the worldwide bond rout continued into a second week, pushing up borrowing costs.

“Time is running out fast,” said Mediobanca’s top analyst, Antonio Guglielmi, in a confidential client note. “The Italian macro situation has not improved over the last quarter, rather the contrary. Some 160 large corporates in Italy are now in special crisis administration.”

The report warned that Italy will “inevitably end up in an EU bail-out request” over the next six months, unless it can count on low borrowing costs and a broader recovery.

Emphasising the gravity of the situation, it compared the crisis with when the country was blown out of the Exchange Rate Mechanism in 1992 despite drastic austerity measures.

Italy’s €2.1 trillion (£1.8 trillion) debt is the world’s third largest after the US and Japan. Any serious stress in its debt markets threatens to reignite the eurozone crisis. This may already have begun after the US Federal Reserve signalled last week that it will begin to drain dollar liquidity from the global system.

Italian 10-year yields spiked to 4.8pc, up 100 basis points since the Fed began to toughen its language in May. But Mediobanca is particularly concerned about the gap that has emerged between yields on short-term bills (BOTs) and longer-term bonds (BTPs) near maturity that expire at the same time. BOTs retiring on July 31 are trading at a yield of 0.48, while the equivalent BTP is trading at 0.74pc. The reason is that BOTs are protected from debt restructuring.

“The bills never get a haircut, so people are fleeing bonds instead as positions gets squeezed,” said one City trader.

Sovereign debt strategist Nicolas Spiro said “taper terror” is jolting eurozone investors out of their complacency, though safe-haven Swiss and German bonds have also sold off sharply in the rout. Yields on 10-year UK Gilts closed at a two-year high of 2.53pc.

Yields punched to 5.1pc in Spain, and 6.7pc in Portugal. This is sending a secondary shock wave through their corporate debt markets, choking recovery.
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Berlusconi’s Sex Conviction Raises Tension in Letta’s Government

By Andrew Frye - Jun 24, 2013 11:00 PM GMT
Italian Prime Minister Enrico Letta is facing discord among parliamentary supporters after his coalition partner, Silvio Berlusconi, was convicted of paying a minor for sex and sentenced to seven years in prison.

The verdict, announced yesterday by Judge Giulia Turri in Milan, was criticized by Deputy Prime Minister Angelino Alfano and Renato Brunetta, chief whip of the second-biggest party in the lower house of parliament. Letta’s own Democratic Party said it would respect the judge’s decision. Berlusconi, a 76-year-old billionaire and former premier, has said he is innocent and remains free as he prepares his appeal.

The appeals process could take years, and Berlusconi may be spared prison because offenders over the age of 70 are often given house arrest if their verdicts are upheld. Still, the legal battle is exposing fault lines in the coalition of convenience that Letta assembled just two months ago.

“Letta’s going to have to fight very hard to keep his boat on course,” said James Walston, a professor at the American University in Rome. The ruling “makes the Berlusconi supporters all the more hyped up and angry, and they’re going to be a lot tougher on completely irrelevant issues.”

Alfano, also interior minister, said the verdict went against common sense and caused “deep bitterness and immense pain” to the People of Liberty party he leads with Berlusconi. Health Minister Beatrice Lorenzin called the sentence “unbelievable.” Brunetta said in an e-mailed statement that People of Liberty, or PDL, would fight the decision alongside Berlusconi.

One member of Letta’s government, Deputy Foreign Minister Bruno Archi, was dragged further into court proceedings yesterday. Archi was among the more than 30 witnesses against whom Turri urged prosecutors to seek perjury charges.

----Berlusconi’s legal problems may continue to disturb the government as Letta, 46, seeks to build lawmaker consensus around a set of tax cuts and spending reductions to help pull Italy from recession. Berlusconi is preparing appeals for tax-fraud and wiretapping convictions in two separate, unrelated cases, and Naples prosecutors announced in February he was under investigation on suspicion of corruption in parliament.

Yesterday, Berlusconi was also convicted by the Milan court of abuse of power.

“Mr. Letta’s government was a conflict-ridden one from day one and Mr. Berlusconi’s conviction only accentuates the divisions within the cabinet,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in an e-mail. “The government has been suffering from an acute case of fiscal schizophrenia for some time and is looking shakier by the day.”

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In other news, the Bernocchio Fed has suddenly decided to play Russian Roulette with the US and global economy. Uncle Sam and John Bull, already in the dog house for spying on everyone, and blackmailing those in high office that won’t play the part of Uncle Sam’s poodle, are about to get sent to global Coventry if Bernocchio blows this call and plunges the world back into 2008-2009 turmoil on steroids.

We appear to have run out of road. There’s no more road to kick the can down. The Fed either blinks and grovels and continues with money printing for all, or the world goes cold turkey and takes its chances that we all become Turkey and Brazil in social turmoil. Either the SHTF or there’s no fan, that’s the Fed’s gamble. We are about to find out, but I’m betting that there’s an Everest of fans and that Bernocchio blinks. Once on QE forever, it’s impossible to stop without bringing on the event that QE was initiated to prevent. We are all Italy now. If Bernocchio blows this call, it’s the end of the world as we knew it.

Happily for Wall Street and the Great Vampire Saints tirelessly and unaccountably doing “God’s work,”  the Fed’s backbone is made of chalk. After less than a week of Ebenezer Squid’s fire, the Bernocchio Fed seems to be retreating faster than Napoleon at Waterloo. But in the chaos and smoke of the Fed’s 21st century warfare, who really knows. Who really speaks for the Fed? In the final act of the Great Nixonian Error of Fiat Money, the stage seems to have several plays all being presented at the same time. Stay long precious metals for the aftermath. Trust no one, especially on the phone or in an email.

"Gold bears the confidence of the world's millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history. There is no reason to believe it will lose the confidence of people in the future."

Oakley R. Bramble

The Bernanke Fed is playing with deflationary fire

By Ambrose Evans-Pritchard Economics Last updated: June 24th, 2013
I hope the Fed knows what it is doing.

It has chosen to tighten monetary policy even though core PCE inflation is actually lower right now than it was when the Fed previously thought it dangerous enough to launch further QE. America is one shock away from a slide into outright deflation, and the eurozone is half a shock away.

Anyone who still thinks the Fed has not just tightened significantly – or that markets have overreacted – should read this lament by St Louis Fed chief James Bullard in the Washington Post:

This was tighter policy. It’s all about tighter policy. You can communicate it one way or another way, but the markets are saying that they’re pulling up the probability we’re going to withdraw from the QE program sooner than they expected, and that’s having a big influence.

Here is M1 money to cheer you up:

And here is M1 velocity to cheer you up further:

Now, short-term M1 money data is very volatile, and can often flash wild signals. Nevertheless, I am frankly flabbergasted by the actions of the Bernanke Fed at this point.
They are gambling that the US economy will shake off the effects of fiscal tightening of 2pc to 3pc of GDP this year, arguably the biggest squeeze in half a century. It may indeed do so, but it may not, and the costs of making a mistake before the US recovery is safely established are asymmetric.
More
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100024980/the-bernanke-fed-is-playing-with-deflationary-fire/

Two Fed Presidents Emphasize Stimulus to Persist After QE Taper

By Joshua Zumbrun, Aki Ito & Steve Matthews - Jun 25, 2013 5:00 AM GMT
Two Federal Reserve presidents who differ over the need for more stimulus emphasized that monetary policy remains accommodative, less than a week after a timeline to reduce bond purchase jolted financial markets.

“What we’re talking about here is dialing back,” Richard Fisher, president of the Federal Reserve Bank of Dallas, said in London yesterday. “The word ‘exit’ is not appropriate here,” said Fisher, who doesn’t vote on policy this year and has been critical of the Fed’s easing policies.

Minneapolis Fed President Narayana Kocherlakota, who has called for easier policy, said yesterday the Fed must emphasize in its statement that policy will remain accommodative “for a considerable time” after the end of quantitative easing. “We have to bring that forward and hammer it every time we talk about policy,” Kocherlakota, who also doesn’t vote this year, said to reporters in a conference call.
More
http://www.bloomberg.com/news/2013-06-24/two-fed-presidents-stress-policy-to-stay-accommodative-after-qe.html

Banks’ money-printing has leased us all out, but where’s the alternative?

Central banks frequently prove such a menace that like the US Congressman Ron Paul, it’s tempting to think we’d be better off without them. Their function is to provide monetary stability, but all too often they seem only to generate the reverse.

Having helped to stoke the boom, they initially reacted reasonably and appropriately to the bust by flooding the system with new money. But the negative real interest rates thereby induced have gone on an awfully long time now, and have predictably begun to have some very negative side-effects.

Overly-indebted households, businesses and governments have been supported at the expense of savers, asset bubbles have re-emerged, and capital is again being misallocated on a dangerously destabilising scale.

In what Sir Mervyn King, Governor of the Bank of England, has called “the paradox of policy”, we seem to be right back where we started in fighting the bust with the same mix of easy money and careless disregard for the future that led to the crisis in the first place.

Mindful that they may be recommitting past blunders, central banks have therefore started looking for the exit. The bigger their balance sheets get, the more nervous they become; they want “normality” restored as soon as possible.

Yet in hinting at this possibility, the US Federal Reserve has prompted a bond market rout that threatens to stifle the recovery and push the economy back into recession. As if to prove the old maxim that there is no mess that official intervention won’t make worse, the Fed seems already to be stumbling towards another, historic mistake.

PBOC Opaque Stress Test Catches Funds in Crossfire

By Fion Li & Alan Wong - Jun 25, 2013 4:38 AM GMT
China’s lack of transparency during a stress test on the nation’s banks became a cause of worldwide concern as it rocked bond and commodity markets and helped wipe out $4.5 trillion in global equity value.

While the Federal Reserve is signaling plans to pare stimulus that has kept U.S. overnight rates close to zero, the People’s Bank of China made no change to its goal of “prudent” monetary policy as borrowing costs whip-sawed. Chinese overnight rates jumped to a record 12.85 percent on June 20 amid speculation policy makers want to expose banks with mismatched financing and loan maturities. Asian emerging market stocks had their steepest weekly loss in 13 months, while their currencies dropped the most in almost two years.

China shares extend bear slump, pull down rest of Asia

TOKYO | Tue Jun 25, 2013 2:38am EDT
(Reuters) - Chinese shares tumbled deeper into bear market territory on Tuesday, dragging down other Asian bourses, as worries spread that a cash squeeze could threaten China's economic growth and take the shine off an emerging U.S. recovery.

European stocks were seen choppy, with financial spreadbetters predicting London's FTSE 100 .FTSE, Paris's CAC-40 .FCHI and Frankfurt's DAX .GDAXI would open between a 0.1 percent rise and a 0.4 percent drop.

U.S. stock futures swung between negative and positive territory, pointing to another uncertain Wall Street open. .L.EU.N

Shanghai shares slumped more than 6 percent at one point to their lowest since early 2009, briefly pulling Hong Kong into the red, with losses accelerating for mid-sized banks as mainland inter-bank rates started climbing again.

"This is a market in capitulation, it's not worth trying to catch any technical rebound. We have seen this movie before, look at how much the market tanked in 2008," said Hong Hao, chief strategist at Bank of Communication International Securities.

India Rupee Trades Near Record Low as Fed Risk Slows Inflows

By Jeanette Rodrigues - Jun 25, 2013 5:54 AM GMT
--- Global funds have cut rupee debt holdings by $5.4 billion since May 22, when Federal Reserve Chairman Ben S. Bernanke first signaled stimulus could be scaled back, and are set to end 12 months of net buying of Indian stocks, exchange data show. The shortfall in India’s current account widened to an unprecedented 5 percent of gross domestic product in the year through March, the government estimates before data due June 28.

A Fed stimulus cut poses a risk not just to India’s capital account, especially given its current-account gap, but is also a “big negative for the rupee as flows dwindle further,” Religare Capital Markets Ltd. analysts including Mumbai-based Tirthankar Patnaik wrote in a report today. “We see the pain on the rupee continuing for now, with some short-term support provided by lower gold imports in June.”

"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

At the Comex silver depositories Monday final figures were: Registered 41.40 Moz, Eligible 123.70 Moz, Total 165.10 Moz.  


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

Today, where’s Snowy? Did Putin render him unto Obama and Guantanamo, or is President Putin an unlikely St George in the cause of freedom from the tyranny of America’s NSA and the UK’s GCHQ? Is Snowy in Moscow revealing all to the FSB’s goons, with or without Uncle Sam’s GWB approved waterboarding? Why does America’s Obama kettle keep calling China’s cyber pot black? Be very afraid. They know what you’re writing, viewing, saying, thinking, spending, associating with, hiding taxes, donating to, campaigning for.  They know where you live and can empty your bank account in seconds. A Mother Teresa Saint? We can post child porn on your computer in a heartbeat. Just because you’re honest doesn’t mean we can’t get you. Chief Justice Roberts, we know all about you, come in for a chat over coffee. Welcome to our new lawless age.

The illegal we do immediately. The unconstitutional takes a little longer.

Henry A. Kissinger. (I thought it was supposed to be a joke.)

China's state newspaper praises Edward Snowden for 'tearing off Washington's sanctimonious mask'

State-run People's Daily says whistleblower has exposed US hypocrisy after Washington blamed Beijing for his escape
Tuesday 25 June 2013 07.56 BST
China's top state newspaper has praised the fugitive US spy agency contractor Edward Snowden for "tearing off Washington's sanctimonious mask" and rejected accusations Beijing had facilitated his departure from Hong Kong.

The strongly worded front-page commentary in the overseas edition of the People's Daily, the official newspaper of the Chinese Communist party, responded to harsh criticism of China from the US for allowing Snowden to flee.

The Chinese government has said it was gravely concerned by Snowden's allegations that the US had hacked into many networks in Hong Kong and China, including Tsinghua University, which hosts one of the country's internet hubs, and Chinese mobile network companies. It said it had taken the issue up with Washington.

"Not only did the US authorities not give us an explanation and apology, it instead expressed dissatisfaction at the Hong Kong special administrative region for handling things in accordance with law," wrote Wang Xinjun, a researcher at the Academy of Military Science in the People's Daily commentary.

"In a sense, the United States has gone from a 'model of human rights' to 'an eavesdropper on personal privacy', the 'manipulator' of the centralised power over the international internet, and the mad 'invader' of other countries' networks," the People's Daily said.
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Analysis: Questions turn to U.S. competence in Snowden saga

WASHINGTON | Mon Jun 24, 2013 8:37pm EDT
(Reuters) - The Obama administration has spent the past few weeks arguing it can wield power responsibly after Edward Snowden unveiled its sweeping spying programs. Now the administration must prove it can wield power effectively.

As the 30-year-old leads the world's lone superpower on a global game of hide and seek, U.S. government officials faced questions about whether they had botched the effort to extradite Snowden from Hong Kong to face charges related to his leak of classified information.

The latest wrinkle in the Snowden saga poses a different set of questions for an administration that has spent weeks fending off questions about whether it has abused its power to collect taxes, investigate criminal activity and fight terrorism.

On Monday, administration officials said they had done all they could to bring Snowden to justice. Chinese defiance, rather than bureaucratic bungling, had allowed the 30-year-old former contractor to slip out of Hong Kong as officials there weighed Washington's request for extradition, they said.

"This was a deliberate choice by the government to release a fugitive, despite a valid arrest warrant," White House spokesman Jay Carney said at a briefing.

Carney said early Monday afternoon that it was the U.S. assumption that Snowden was still in Russia after fleeing Hong Kong for Moscow over the weekend.
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Behind Snowden's Hong Kong exit: fear and persuasion

HONG KONG | Mon Jun 24, 2013 5:08pm EDT
(Reuters) - Hunkered down in a small apartment in Hong Kong, Edward Snowden was running out of options.

The United States had charged him with felonies under the Espionage Act and demanded that Hong Kong authorities arrest him. His trio of high-powered local lawyers had warned the former U.S. spy agency contractor he might be stuck in legal limbo for years - and possibly detained - if he stayed put and requested asylum in the city-state of Hong Kong, where authorities answer to China's central government in Beijing.

Snowden, the former National Security Agency contractor accused of leaking secrets of U.S. electronic surveillance, already had spent nearly two weeks in hiding. He ventured out rarely, and only at night, according to a portrait of Snowden's stay in Hong Kong from an interview with one of his lawyers - Albert Ho, a former chairman of Hong Kong's Democratic Party.

Over pizza and chicken wings with his lawyers on Friday, his 30th birthday, Snowden agreed he had no choice. He would flee, and seek protection from the U.S. justice system elsewhere. He bought a plane ticket for Saturday night.

But he hesitated, according to Ho, even with a message via a third party that Snowden should feel free to leave.

It took another day for Snowden to decide he had no choice but to get on a plane. On Sunday, he flew out of Hong Kong, bound for Moscow - and kicked off a global pursuit that continued to unfold, with as many twists and turns as a spy novel.

The mystery of Snowden's precise whereabouts continued on Monday. He appeared to have purchased a ticket for a flight from Moscow to Cuba, but someone else occupied his seat. However, before the plane left, a white van approached and police stood by as a man in a white shirt climbed the stairs. This man could not be identified by reporters watching in the transit area.
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No sign of Snowden as Aeroflot plane lands in Havana

HAVANA | Mon Jun 24, 2013 10:41pm EDT
(Reuters) - An Aeroflot flight from Moscow that was being closely tracked by media organizations in case Edward Snowden, the former security contractor who revealed details of U.S. surveillance programs, was on board, landed in Cuba uneventfully on Monday.

Russian reporters on board the flight and foreign press gathered at Havana airport reported no sightings of Snowden or any unusual security.
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Too bad ninety percent of the politicians give the other ten percent a bad reputation.

Henry A. Kissinger.

The monthly Coppock Indicators finished May:
DJIA: +142 Up. NASDAQ: +144 Up. SP500: +177 Up.  The  Fed’s Final Bubble continues. But hurricanes and tornadoes appear. Getting out first beats getting out last.

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