Baltic Dry Index. 1115 +16
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
If all else fails,
immortality can always be assured by spectacular error.
John Kenneth Galbraith.
Note,
due to my usual incompetence, I agreed to a very early meeting tomorrow
morning. There won’t be an LIR update tomorrow Wednesday, July 10th.
Japan’s new currency and trade war is all supposed
to be about generating inflation, not increased exports for Japan’s giant mega
export corporations. So far the war has been big on generating export orders as
Japanese companies undercut everyone else, but has provided little in the way
of inflation. Except that is in next door China, where inflation is suddenly surging
again, and this in the widely discredited official figures. Gold surged on this
morning’s inflation figure. Gold will continue transferring from west to east
albeit at an accelerating pace. We no longer live in an Anglo-American centric
world.
Having crashed the Anglo-American hegemonic
economic model in 2007-2008 under the serial excesses of the Greenspan-Bernanke
crony casino capitalism, we have entered the aftermath. A twilight zone somewhat
akin to the one Great Britain entered in the inter war years. A bankrupt hollowed out shell of its former
self, it was in no one’s self interest to declare the Emperor naked and add to
the evils of the Great Depression, but the old pre-1914 status quo was gone
forever. This time round, the rise of the Brics and the fall of the Europeans,
has incentivised Asia to look out for its own best interest. With new money out of nothing forever, and Zirp the only game
in town for the old west, Asia knows only too well how that game ends, just not
the timing nor proximate cause of the ending. Asia will happily trade pictures
of long dead white US Presidents for “money” of long term intrinsic value.
While the Fed is busy bankrupting gold mining companies practically everywhere
in its futile attempt at preserving forever the old Anglo-American hegemonic order,
Asia and the rest of the world, sped on or not, are moving on. Wise westerners
will add to physical gold holdings now that the price of gold has been driven
down below the cost of production for most gold miners. Eventually the west
runs out of deliverable physical gold to transfer east. At that point it’s over
for QE and Zirp I suspect.
"The desire for gold is the most universal and deeply rooted commercial instinct of the human race."
Gerald M. Loeb
Gold Advances Most in a Week as China’s Inflation Accelerates
By Glenys Sim & Phoebe Sedgman - Jul 9, 2013 5:24 AM GMT
Gold rose the most in a week after data showed China’s inflation
accelerated more than estimated in June, boosting demand for the precious metal
as a hedge. Gold for immediate delivery climbed as much as 1.5 percent, the most since July 1, to $1,255.18 an ounce and traded at $1,253.57 by 12:21 p.m. in Singapore. Prices climbed 1.1 percent yesterday as the Dollar Index declined from a three-year high.
China’s consumer price index rose 2.7 percent from a year earlier, the National Bureau of Statistics said today, compared with a median estimate of 2.5 percent in a Bloomberg survey. Bullion slid 23 percent last quarter as some investors lost faith in the metal as a store of value and Federal Reserve Chairman Ben S. Bernanke said the Fed may slow asset purchases this year if the economy continues to improve.
“Gold’s a long-term asset for us and it’s an insurance against stocks and bonds and inflation and the system going amok” Michael Cuggino, who manages about $14 billion of assets at Permanent Portfolio Family of Funds Inc., said in a Bloomberg Television interview. “You’ve got an issue that’s got to be dealt with at some point and that’s why you want to hold gold,” he said referring to inflation.
More
Japan Sold Record U.S. Treasuries in May During Global Bond Rout
By
Candice Zachariahs - Jul 8, 2013 4:30 AM GMT
U.S. Treasury sales by Japanese investors exceeded purchases by a record in May amid the biggest monthly drop for the
securities in more than three years. Money managers in the Asian nation unloaded a net 3 trillion yen ($30 billion) of U.S. government bonds in a fifth straight month of overall sales that was the largest in data from 2005, the Ministry of Finance said today. In June, Japanese investors were net sellers of overseas debt valued at a record 2.96 trillion yen, taking the total to 10.6 trillion yen this year, the data show. That’s on track for the first net annual sales ever.
A more than 20 percent drop in the yen against the dollar over the past year has prompted funds managers in Japan to take profit on their offshore debt holdings. At the same time, the Japanese bond market is being spared a global rout that’s pushed the U.S. Treasury 10-year (USGG10YR) yield to a two-year high as the Bank of Japan buys sovereign debt from the market.
“The Treasury market in the U.S. is in a bear market,” said Steven Mansell, the Sydney-based head of Group of 10 rates strategy for the Asia-Pacific region at Citigroup Inc. “The stock market in Japan is doing quite well, the data is surprising on the upside, so it’s very unlikely that the Japanese are going to start buying large amounts of foreign bonds.”
More
In “here we go again news” from America, happy days
are here again, at least for Japanese and Chinese exporters. Yes already
heavily indebted US consumers are loading up on yet more debt, and in massive
quantities, just as the Bernank has announced the end of a 30 year bear market
in interest rates and the onset of a decades long bull market in interest
rates. No one ever went bust under estimating the willingness of modern
Americans to take on debt. Stay long fully paid for physical gold and silver.
Debt either gets paid off or defaulted on. If interest rates rise, option two
occurs unless the state deliberately takes over the debt and then devalues.
Since this new consumer debt is private debt my money is on a massive default
ahead. The end of the Great Nixonian Error of fiat money.
“...the
process by which wants are now synthesized is a potential source of economic
instability. Production and therewith employment and social security are dependent
on an inherently unstable process of consumer debt creation. This may one day
falter.”
John Kenneth Galbraith
Consumer Borrowing in U.S. Rises $19.6 Billion, Most in Year
By Jeanna Smialek - Jul 8, 2013 8:23 PM GMT
Consumer borrowing in the U.S. climbed in May by the most in a year as
Americans put more purchases on their credit cards and took out more school and
automobile loans. The $19.6 billion increase in credit followed a revised $10.9 billion gain the previous month that was less than initially reported, Federal Reserve figures showed today in Washington. The median forecast in a Bloomberg survey called for a $12.5 billion advance.
The boost to household wealth from recovering property values and higher stock prices is putting Americans in a position to capitalize on lower interest rates and purchase costlier items, such as cars. Confidence to borrow is also being punctuated by faster job and income growth that will help sustain the consumer spending that accounts for about 70 percent of the economy.
“Demand for credit is picking up,” said Kevin Cummins, an economist for UBS Securities LLC in Stamford, Connecticut. “Job gains do suggest that income growth is running at a healthy clip, and we’re likely to see consumer spending pick up in the back half of the year.”
More
In European news, each day just brings on more sign
of accelerating decay. To get its latest pittance from Berlin to pay off German
holders of Greek sovereign debt, Greece must now put to the sword its civil
servants and teachers. The Greek death spiral will merely speed up. Without
reform in France and Italy, austerity in Cyprus, Greece, Portugal and Spain in
in vain. Without reform in France and Italy the whole Bilderberger EMU project
is doomed. Without root and branch reform in the EU, Great Britain is headed
for the EU door marked exit later this decade, with Germany left to finance the
ruins of Europe on its own. Decrepit Euroland as it presently exits is coming
to its end.
In 2012, the far-right Golden Dawn won 21 seats in
Greece’s parliamentary election, the right-wing Jobbik gained ground in my
native Hungary, and the National Front’s Marine Le Pen received strong backing
in France’s presidential election. Growing support for similar forces across
Europe points to an inescapable conclusion: the continent’s prolonged financial
crisis is creating a crisis of values that is now threatening the European
Union itself.
George Soros
Greece gets €4.8bn in staggered bailout payments
Greece will get its next EU-IMF bailout payment of €2.5bn on condition that it implements austerity measures including deeper spending cuts and public sector lay-offs within 10 days.
Last
night's meeting of eurozone finance ministers agreed to pay the scheduled third
quarter bailout instalment of €4.8bn (£4.1bn) but broke it down into three
"disbursements" linked to reforms.
The first
payment of €2.5bn from the eurozone will be paid after July 19 on condition
that of "full implementation of the prior actions", including
legislation that is passing through the Greek parliament over the next week.
"Significant
further work is needed over the next weeks to fully implement all prior actions
required for the next disbursement," said a eurozone statement.
"Especially,
the required reforms of the public administration will need to be carried out
so as to increase the efficiency of the public sector while it is being
steadily downsized, and further efforts are needed to improve tax revenue
collection."
The
second instalment will be €1.8bn from the IMF in August followed by another
€500m from the eurozone in October, which will be linked to privatisation
targets and administrative reform in Greece.
Greece
will also receive, on top of the bailout payments, €2bn on profits from Greek
bonds bought by the European Central Bank under its Securities Market Programme
(SMP).
"Agreement
on Greece was made possible by progress in recent weeks. In many areas, more
determined implementation of reforms now needed," said Olli Rehn, the EU
monetary affairs commissioner.
Following
talks in Athens on Monday morning, the "troika" of the European
Commission, European Central Bank and IMF gave a green light to payments but
linked the aid to controversial healthcare and public sector staff cuts.
More
French business leaders lash out at Francois Hollande
France’s business leaders have launched a blistering attack on President François Hollande, demanding drastic measures to halt the country’s industrial decline and shrink the ballooning public sector.
“The
house is on fire. France is destroying 8,000 jobs a day,” said Pierre Gattaz,
the new leader of business federation MEDEF.
----The
chief executives of top firms including Peugeot Citroën, EADS, Sanofi and
Publicis signed a joint letter to Les Echos, complaining that France is
being suffocated by high taxes and an over-regulated system that is no longer
fit for purpose.
“Unemployment
has reached record levels. The trade deficit is getting worse. Profit margins
are the weakest in the eurozone. This calls for urgent measures. It is a bitter
reality, more so because other countries touched deeply by the crisis such as
the US or Ireland are recovering," the letter read.
The group
called for a radical shake-up of labour markets to let each firm set its own
working hours, and a “coherent” energy policy to bring down costs from current
ruinous levels. Gas prices are three times as high as in the US.
Christophe
de Margerie, head of the energy giant Total, said France’s outdated welfare
model is draining the economy’s life-blood. “The real problem we have in France
is the state. Some 55pc of GDP in the hands of the state, and it is not being
very well run. We live in a nanny culture where people expect the state to take
care of everything.”
France
put off tough reforms during the boom years of EMU, coasting while Germany,
Holland and Scandinavia became lean. It then delayed again after the 2008-2009
crisis and now risks being overtaken by Spain and even Italy, according to the
International Monetary Fund.
The
country is now having to grasp the nettle in a double-dip recession, with
industrial output still 15pc below its 2008 peak. The Observatoire Economique
in Paris says fiscal contraction will be 1.8pc of GDP this year, the biggest
squeeze in half a century.
More
"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.
We end for the day with an ominous oddity. What has gone wrong in the physical gold market. Has one of the Bullion Banks blown up? Has the LBMA run out of hypothecated gold?
"The history of paper money is an account of abuse, mismanagement, and financial disaster."
Richard M. Ebeling
A Historic Inversion: Gold GOFO Rates Turn Negative For The First Time Since Lehman
Today, something happened that has not happened since the Lehman collapse: the 1 Month Gold Forward Offered (GOFO) rate turned negative, from 0.015% to -0.065%, for the first time in nearly 5 years, or technically since just after the Lehman bankruptcy precipitated AIG bailout in November 2011. And if one looks at the 3 Month GOFO, which also turned shockingly negative overnight from 0.05% to -0.03%, one has to go back all the way to the 1999 Washington Agreement on gold, to find the last time that particular GOFO rate was negative.----Indeed, the only other time when both 1M and 3M GOFOs were both negative or almost so (3M touched on 0.05%) was in the aftermath of the AIG bailout following the Lehman collapse in November 2008.
Fast
forward to today, when both 1M and 3M GOFOs just went negative.
And while
both Antal Fekete and Sandeep Jaitly, traditionally two of the most vocal pundits
in the arena of gold backwardation and temporal and collateral gold market
arbritrage, are likely come up with their own interpretations of what may be
causing this historic inversion, the reality is that one can't know for sure
until after the fact. It may be one of many things:
- An ETF-induced repricing of paper and physical gold
- Ongoing deliverable concerns and/or shortages involving one (JPM) or more Comex gold members.
- Liquidations in the paper gold market
- A shortage of physical gold for a non-bullion bank market participant
- A major fund unwinding a futures pair trade involving at least one gold leasing leg
- An ongoing bullion bank failure with or without an associated allocated gold bank "run"
- All of the above
The
answer for now is unknown. What is known is that something very abnormal, and
even historic, is afoot at the nexus of the gold fractional reserve lending
market.
Morehttp://www.zerohedge.com/news/2013-07-08/historic-inversion-gold-gofo-rates-turn-negative-first-time-lehman
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.
Uncle Sam, with apologies to Cary Grant. To Catch A Thief.
At the Comex silver depositories Monday final figures were: Registered 46.85 Moz,
Eligible 118.75 Moz, Total 165.60 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, Uncle Sam tells the Panda, “do as I say, not as I do!” No word yet from the indifferent Panda. President
Obama, who’s not a listed player on team America in the current sessions, is
listening-in in the White House via the NSA, Facebook, Google, Apple et al.
U.S. Downplays Spying Accusations in China Hacking Talks
By Chris Strohm & Nicole Gaouette - Jul 9, 2013 12:00 AM GMT
American officials focused on the hacking of corporate secrets during the
first meeting of a U.S.- China cybersecurity group in Washington,
downplaying their own spying operations exposed by a former government
contractor. The Obama administration officials raised accusations yesterday that the Chinese government is responsible for hacking into companies’ computers to steal intellectual property, according to an official at the meeting who asked to remain anonymous due to the sensitive nature of the discussions.
U.S. accusations against the Chinese government have been overshadowed in recent weeks by leaked classified material from former National Security Agency contractor Edward Snowden, including that the U.S. has hacked computers in Hong Kong and mainland China since 2009.
The American official didn’t say whether Snowden and his allegations were discussed in the meeting.
Chinese officials have demanded an explanation for Snowden’s allegation that the U.S. has hacked computers in Hong Kong and China. Representatives from the Chinese embassy in Washington didn’t respond to a request for comment.
Participants in the bilateral working group had constructive discussions, exchanged views and made proposals to establish transparency and international rules for operating in cyberspace, the U.S. official said.
The working group lets civilian and military officials from both nations discuss international rules for cyberspace, raise concerns and set the tone for future bilateral talks, said a State Department official who wasn’t authorized to speak on the record.
Secretary of State John Kerry and Chinese State Councilor Yang Jiechi announced formation of the cyber working group in April as part of the larger strategic security dialogue the two countries hold every year.
The group is seen as an important mechanism in a broader effort to build cooperation and manage key differences between the U.S. and China, the State Department official said. The chairmen of the U.S. contingent are Christopher Painter, the State Department’s coordinator for cyber issues, and Eric Rosenbach, deputy assistant secretary of defense for cyber issues.
President Barack Obama’s administration has decided to confront China with accusations that it is behind a campaign to hack into U.S. agencies and corporations to steal trade secrets and potentially disrupt computer networks operating banks, power grids and telecommunications networks.
More
The monthly Coppock Indicators finished June:
DJIA: +145 Up. NASDAQ: +146 Up. SP500: +177 Unch The Fed’s
Final Bubble continues, but is struggling. The S&P500 moved sideways. The Dow and
Nasdaq both barely eked out a gain. In current highly volatile conditions and
controversial uncertain policy indecision at the Fed, Speculators would stay
long, investors would exit stocks for now or get fully hedged.
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