Thursday, 26 September 2013

USA v EUSSR – Who’s Worse?

Baltic Dry Index. 2127 +106

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

“Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it.”

Mark Twain.

It is debatable on both sides of the Atlantic, who has the dumbest politicians, Europe or the USA. Lately, as with the Americas Cup, the USA has managed an unlikely win. Are American politicians really daft enough to trigger multiple Lehman’s over what is essentially a marginally important accounting statistic? It doesn’t really matter, at this late stage of the Great Nixonian Error of fiat currency, what the debt level ceiling becomes. What matters is that the US politicians get US spending back under control so that it rises far slower than the growth of US GDP. Without that happening in the decade ahead, the USA and the world are headed towards uncontrolled fiat currency revulsion.
As we head towards October and crash season, understandably speculators and high frequency, front running, theft trading systems are starting to get nervous. Maybe, just maybe, US politicians are actually as daft as they sound. Stay long fully paid up physical precious metals. While Euroland gently drifts towards a Club Med and French bankruptcy, US politicians have the accelerator firmly pressed to the floor.

“Reader, suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself.”

Mark Twain.

Sept. 25, 2013, 4:59 p.m. EDT

S&P 500 tallies longest losing streak this year

Wal-Mart shares hit, leading blue-chip losses

NEW YORK (MarketWatch) — U.S. stocks dropped on Wednesday, with the S&P 500 index recording its longest decline since December, as a possible government shutdown overrode better-than-forecast economic reports.

“It’s been a very good year for the stock market, but people are pausing to worry about what is going on in Washington. One of the few things you can say about the stock market is it hates uncertainty,” said David Kelly, chief market strategist at J.P. Morgan Funds.

Down for a fifth session, the Dow Jones Industrial Average DJIA -0.40% lost 61.33 points, or 0.4%, at 15,273.26. The S&P 500 SPX -0.27%   also fell for a fifth session, closing down 4.65 points, or 0.3%, to 1,692.77, with health care losing the most and financials the best performing among its 10 major industry groups. The loss streak is the longest since Dec. 28, a time that had Wall Street fretting as politicians argued over combined spending cuts and tax hikes dubbed the “fiscal cliff.” The index is up nearly 19% for the year.

The Senate voted 100-0 on Wednesday to pass a stopgap spending measure, with Democrats planning to get rid of language from the House version that would remove funding of the 2010 Affordable Care Act. Without an accord to hasten Senate consideration of the bill, a vote on its passage could come as late as Sunday, giving the House one day to move before spending authority lapses. Separately, Treasury Secretary Jacob Lew told legislators that he’ll run out of options to avoid hitting or surpassing the debt limit by Oct. 17 or sooner.

If all else fails, Obama will raise debt ceiling himself: analyst

September 25, 2013, 12:48 PM
If Congress fails to raise the debt limit by Oct. 17, could President Barack Obama step in and raise the ceiling by executive action?

Greg Valliere, chief political strategist for Potomac Research Group, says Obama would do so, if faced with the prospect of a certain default on paying the nation’s creditors.

“I am not flat out saying that [executive fiat]  is the end game, but it has to be on the table if a default looks imminent,” Valliere said in an interview with MarketWatch.

During the last debt ceiling showdown in the summer of 2011, there were scholars and senators who suggested Obama did have such a silver bullet — the 14th Amendment to the Constitution.

None other than former President Bill Clinton agreed.

----In an interview with The New York Times in 2011, Clinton said Obama should invoke the 14th Amendment “without hesitation” to raise the debt ceiling and “force the courts to stop me.”

The provision in question, Section 4 of the amendment, says that the validity of the public debt “shall not be questioned.”

Laurence Tribe, a noted professor of constitutional law at Harvard, tried at the time to throw cold water on such arguments.

In an op-ed in the Times, Tribe said that only Congress has the power to borrow money on the credit of the United States. Arguments that the president may do whatever is necessary to avoid default “has no logical stopping point,” Tribe noted.

In addition, a legal cloud would hang over any newly issued bonds, Tribe said, because of the risk that the government might refuse to honor those debts as legitimate.

Today, more on our new lawless age. We focus today on “recovering” Spain. Would you buy a bond from Club Med.

"We don't pay taxes. Only the little people pay taxes"

Leona Helmsley. A woman ahead of her time.

Rajoy Says He Knows Nothing of Evidence Tampering in Graft Probe

By Sara Eisen, Ben Sills & Esteban Duarte - Sep 25, 2013 11:00 PM GMT
Spanish Prime Minister Mariano Rajoy said he has no knowledge of whether party officials working for him destroyed evidence sought by the National Court as part of a corruption investigation.

Speaking in an interview with Bloomberg Television, Rajoy answered questions for the first time about a probe into a possible coverup, after the party failed to hand over hard drives required by a judge investigating graft allegations.

“I don’t know if they were there, if they had been there, or if someone removed them,” Rajoy, 58, said in New York yesterday. “I absolutely do not know.”

Rajoy is facing a slump in his popularity and calls from the opposition to resign as the court investigates whether officials from the governing People’s Party, including the premier, received payments from a secret slush fund. He has repeatedly refused to answer questions from lawmakers on the main corruption probe since Aug. 1, when he denied the accusations in Parliament

Judge Pablo Ruz last week asked a lower court to begin a separate criminal probe into the possible coverup. Ruz is leading the broader investigation, in which former Party Treasurer Luis Barcenas, who is now in jail on remand, told the National Court he helped run the slush fund.

Barcenas said the computers he left at the party headquarters contained evidence to bolster his allegations, according to documents from the judge. When the court received the laptops, their original hard drives were missing, the Sept. 18 document showed.

Rajoy also denied using funds illegally raised by Barcenas to finance the election campaign that brought him to power in 2011

Messi in Court Shows Tax Collectors Set to Pursue Star Athletes

By Oliver Staley & Alex Duff - Sep 26, 2013 5:01 AM GMT
Lionel Messi, one of soccer’s biggest stars, has gotten rich by avoiding tackles on the field -- and taxes off it.

----As athletic royalty, Messi makes an estimated $41 million a year, about half from sponsors. His endorsement income has drawn the attention of Spanish tax authorities.

Messi, 26, the four-time global player of the year, and his father are due in a Barcelona court tomorrow to face a complaint that they evaded 4.2 million euros ($5.7 million) in taxes on payments from Adidas AG (ADS), PepsiCo Inc. (PEP), Procter & Gamble Co. and other companies. According to court documents, the Messis diverted 10 million euros to tax havens Belize and Uruguay from 2007 through 2009.

The government is pursuing the case even after the Messis paid 5 million euros -- the amount prosecutors say they evaded, plus interest -- on Aug. 15. The hearing Friday is to determine whether to charge them with criminal tax evasion. If charged and convicted, they could be fined as much as 21 million euros and given a 1-year suspended prison sentence.

The case against Messi, who holds dual citizenship in Argentina and Spain, is part of an aggressive push by Spain, U.K. and other deficit-ridden governments to tackle tax evasion in Europe’s 19.4 billion-euro soccer industry. After decades of coddling Europe’s most popular -- and politically influential -- sport, authorities are pursuing players and teams that collectively owe billions of euros in unpaid taxes.

----The Messi case “is definitely a statement of Spain today,” said Alistair Spence Clarke, a British accountant who works in Marbella, Spain. “Spain has introduced some pretty nasty tax avoidance regulations. It’s really becoming very aggressive.”

Revealed: Santander has the weakest internet security of Britain's High Street banks, according to Which? investigation

Spanish giant Santander has been ranked as having the weakest internet security of any of Britain's High Street banks.

An investigation by consumer group Which? awarded it less than half marks. The probe examined a range of online security issues, including safety when logging in, changing account details or transferring cash.

Which? said Santander kept the customer logged into their online banking account, even if they clicked the forward or backwards button on their browser to move off the page.

This made the consumer group fear users who forgot they were logged in could have their accounts raided by a new user of the computer.

Santander says it has taken steps to address the issues raised by Which?. A spokesman says: 'Customer security and safety are of paramount importance to us, whether customers bank with us online, in branch or by phone.


We end for today with jam tomorrow, 2019 to be precise. The trick is how to get from here to there, while the gambling banksters bet on everything under the sun and then some. Derivatives anyone?

Top banks have $155 billion capital shortfall, most in Europe

LONDON | Wed Sep 25, 2013 7:49am EDT
(Reuters) - The world's biggest banks would need to boost their capital by 115 billion euros ($155 billion) to comply with tougher rules and more than 60 percent of that shortfall is in Europe, where lenders have been slower to strengthen.

The capital shortfall fell by 83 billion euros during the second half of last year as banks retained more of their profits and raised capital, although the pace of improvement was not as quick in Europe as elsewhere.

The Basel Committee of global regulators said on Wednesday the shortfall at top international banks was based on a target to hold a minimum core capital level of 7 percent, plus capital surcharges required for the biggest banks. Its finding was based on their balance sheets at the end of last year.

Some 70 billion euros of the shortfall was at banks in the European Union, representing 61 percent of the global deficit. The shortfall at EU banks was cut by 29 billion euros in the second half of last year, according to a European Banking Authority (EBA) estimate.

----Basel roughly triples how much capital banks must hold compared with before the financial crisis, when many undercapitalized lenders had to be rescued by taxpayers.

It requires banks to have a core capital buffer equivalent to at least 7 percent of their assets on a risk-weighted basis by January 2019.

----Under tougher rules which are coming in, banks must also have separate buffers of cash and government debt, known as a liquidity coverage ratio, to survive market shocks of up to a month unaided.

The rules apply to all banks, but there are capital surcharges for the big global banks deemed systemically important, such as HSBC, JP Morgan, Citigroup and Deutsche Bank.
Early 17th Century
1634-1637 Tulip Mania in Holland
Fortunes are lost in after a speculative boom in tulip futures burst.
Late 17th Century
Dojima Rice Futures
In Japan at Dojima, near Osaka a futures market in rice is developed to protect sellers from bad weather or warfare.
19th Century
1868 Chicago Board of Trade
Trading in wheat, pork belly and copper futures starts.
20th Century
Late 1960s - Black and Scholes begin collaboration
Fischer Black and Myron Scholes tackle the problem of determining how much an option is worth. Robert Merton joins them in 1970.
April 1973 The Chicago Board Options Exchange opens.
May/June 1973 The Black-Scholes Model is Published.
It appears in the Journal of Political Economy, one of the journals that had previously rejected it.
1994 Metallgesellshaft loses $1.5 billion on oil futures.
1995 Barings Bank goes bust.
Nick Leeson loses $1.4 billion by gambling that the Nikkei 225 index of leading Japanese company shares would not move materially from its normal trading range. That assumption was shattered by the Kobe earthquake on the 17th January 1995 after which Leeson attempted to conceal his losses.
1997 Nobel Prize in Economics awarded to Robert Merton and Myron Scholes.
1998 Long Term Credit Management Bailout
The hedge fund is rescued at a cost of $3.5 billion because of worries that its collapse would have severe repercussions for the world financial system.
1999 The Flaming Ferraris
Some traders at CSFB are sacked following allegations of illegal trades in an attempt to manipulate the Swedish stock market index.
21st Century
2001 Enron goes Bankrupt
The 7th largest company in the US and the world's largest energy trader made extensive use of energy and credit derivatives but becomes the biggest firm to go bankrupt in American history after systematically attempting to conceal huge losses.
2002 AIB loses $750 million
John Rusnak uses fictitious options contracts to cover loses on spot and forward foreign exchange contracts.
2003 Terrorism Futures Plan Dropped
The US Defense Department had thought that such a market would improve the prediction and prevention of terrorist outrages.
January 2004 NAB admits losing A$180 million
Four foreign currency dealers at the National Australia Bank are said to have run up the losses in three months of unauthorised trades.
August 2004 Citigroup bear raid
Citigroup traders led by Spiros Skordos made €15 million by suddenly selling €11 billion worth of European bonds and bond derivatives, and buying many of them back at a lower price.
November 2004 China Aviation loses $550m in speculative trade
This loss is the largest amount a company in Singapore has lost by betting on derivatives since the case of Nick Leeson and Barings.
October 2005 Refco suspends trading
One of the world's largest derivatives brokers is forced to freeze trades.
September 2006 Amaranth Advisors loses $6 billion
the US-based hedge fund suffered enormous loses trading in natural gas futures.
January 2008 Société Générale loses €4.9 billion in unauthorised futures trading
A rogue trader is blamed for the world's largest banking fraud up to that date.
July 2009 A rogue trader causes havoc in the oil market
Steve Perkins, a futures broker with PVM Oil, was blamed for unauthorised trades that could have cost the firm £400m if they had not been discovered and closed.

A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done.

Walter Bagehot. Lombard Street. 1873

At the Comex silver depositories Wednesday final figures were: Registered 43.70 Moz, Eligible 120.21 Moz, Total 163.91 Moz.  

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

Today, more on the madness of Club Med member Spain. Would you build an unneeded opera house in a dried-up river bed that occasionally floods, with 150 seats with obstructed views, just because you could borrow money at the time at near German rates?

Architecture is the art of how to waste space.

Philip Johnson

A Star Architect Leaves Some Clients Fuming

Santiago Calatrava Collects Critics as Well as Fans

Published: September 24, 2013
VALENCIA, Spain — For a while, this sprawling Mediterranean city embraced Santiago Calatrava’s architecture with gusto. In a dried-up riverbed, Mr. Calatrava built and built, eventually filling 86 acres with his radical, and some say awe-inspiring, designs.

But these days, even as Mr. Calatrava’s eye-catching PATH station creeps toward completion in Lower Manhattan, he is often cast as a villain here in Valencia. One local politician runs a Web site called Calatravatelaclava, which loosely translates as, “Calatrava bleeds you dry.”

Originally budgeted at 300 million euros (about $405 million), the riverbed complex, called the City of Arts and Sciences — the world’s largest collection of Mr. Calatrava’s work, which includes a performance hall, a bridge, a planetarium, an opera house, a science museum, a covered walkway and acres of reflecting pools — has cost nearly three times that much, money the region never had.

Ignacio Blanco, the member of the provincial Parliament who started the Web site, has unleashed a flood of information about the complex during the past year, concluding that Valencia still owes 700 million euros (about $944 million) on it.

Mr. Calatrava was paid approximately 94 million euros (about $127 million) for his work. How could that be, Mr. Blanco asks, when the opera house included 150 seats with obstructed views? Or when the science museum was initially built without fire escapes or elevators for the disabled?

“How can you make mistakes like that?” asked Mr. Blanco, a member of the small opposition United Left party here, who said millions were spent to fix such errors. “He was paid even when repairing his own mistakes.”

Along with Frank Gehry, Richard Meier, Renzo Piano and Norman Foster, Mr. Calatrava swept to prominence in an era of showstopping architecture. Across the globe, he has designed dozens of structures, almost invariably white, including the Liège-Guillemins railway station in Belgium; the Turning Torso skyscraper in Malmo, Sweden; and the Milwaukee Art Museum, with its mechanical roof.

----But in numerous interviews, other architects, academics and builders say that Mr. Calatrava is amassing an unusually long list of projects marred by cost overruns, delays and litigation. It is hard to find a Calatrava project that has not been significantly over budget. And complaints abound that he is indifferent to the needs of his clients. Just last month a Dutch councilor in Haarlemmermeer, near Amsterdam, urged his colleagues to take legal action because the three bridges the architect designed for the town cost twice the budgeted amount and then millions more in upkeep since they opened in 2004. Mr. Calatrava is already in court over a footbridge in Venice, a winery in the Álava region of Spain and a massive exhibition and conference center in Oviedo, Spain.

In Bilbao, Spain, there have been problems with a bridge and an airport.

-----In Bilbao he designed a footbridge with a glass tile surface that allowed it to be lighted from below, keeping its sweeping arches free of lampposts. But in a city that gets a lot of rain and occasional snow, pedestrians keep falling on the slippery surface. City officials say some 50 citizens have injured themselves, sometimes breaking legs or hips, on the bridge since it opened in 1997, and the glass bricks frequently crack and need to be replaced. Two years ago the city resorted to laying a huge black rubber carpet across the bridge.

“It loses the beauty, ” said Ibon Areso, the acting mayor of Bilbao. “But we can’t keep paying people who slip and fall.” In a recent storm the carpet flipped up, knocking several people off their feet.

On the outskirts of Bilbao, Mr. Calatrava was commissioned to build an airport terminal that has been nicknamed La Paloma because of its resemblance to a dove taking flight. But when it opened in 2000, the airport lacked an arrivals hall. Passengers moved through the customs and baggage area directly to the sidewalk where they had to wait in the cold. The airport authorities have since installed a glass wall to shelter them.

"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."

William F. Rickenbacker

The monthly Coppock Indicators finished August:
DJIA: +162 Down. NASDAQ: +189 Up. SP500: +194 Down.

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