Wednesday, 2 October 2013

So Far So Good.

Baltic Dry Index. 1994 -09

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

"The international monetary order is more precarious by far today than it was in 1929. Then, gold was international money, incorruptible, unmanageable, and unchangeable. Today, the U.S. dollar serves as the international medium of exchange, managed by Washington politicians and Federal Reserve officials, manipulated from day to day, and serving political goals and ambitions. This difference alone sounds the alarm to all perceptive observers."

Hans F. Sennholz

“So far so good,” said the man who jumped off the Empire State building, as he passed the 90th floor. And that is the reaction in our markets too, as everyone and their dog expect a quick political deal to get the US government up and running again. Looming later, allegedly no later than October 17th, although who knows what is spin and disinformation designed to make the other party cave in and surrender, is the horse trading to raise Uncle Scam’s debt limit. Bad things really happen fast in America, if party politics trumps common sense, and the largest treasury financial instrument market in the world locks up, even if only for a day. America is forfeiting its right to be the world’s leading reserve fiat currency and its right to dictate that global trade gets conducted in dollars. We are long way past the world of 1945.

"Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."

Alan Greenspan. 1966.

In first day of U.S. shutdown, no sign how it will end

WASHINGTON | Tue Oct 1, 2013 8:50pm EDT
(Reuters) - President Barack Obama and congressional Republicans came no closer to ending a standoff on Tuesday that has forced the first government shutdown in 17 years and thrown hundreds of thousands of federal employees out of work.

As police cordoned off landmarks like the Lincoln Memorial and government agencies stopped cancer treatments and trade negotiations, Republicans in the House of Representatives moved to restore funding to national parks, veterans care and the District of Columbia.

An effort to pass the three bills fell short on Tuesday evening, but Republicans plan to try again on Wednesday. They are likely to be defeated by the Democratic-controlled Senate.

The standoff has raised new concerns about Congress's ability to perform its most basic duties. An even bigger battle looms as Congress must raise the debt limit in coming weeks or risk a U.S. default that could roil global markets.

Treasury Uses Final Measures to Avoid Debt Limit Breach

By Kasia Klimasinska - Oct 2, 2013 2:15 AM GMT
The U.S. has begun using the final extraordinary measures to avoid breaching the nation’s debt limit, Treasury Secretary Jacob J. Lew said as he urged Congress to increase borrowing authority “immediately.”

Lew, in a letter addressed to House Speaker John Boehner dated today, repeated that the measures will be exhausted no later than Oct. 17

When that happens, “we will be left to meet our country’s commitments at that time with only approximately $30 billion,” he said, “far short of net expenditures on certain days, which can be as high as $60 billion.”

Lew and President Barack Obama have said they won’t negotiate on the limit, which is tied to obligations the U.S. has already incurred. Boehner, an Ohio Republican, has issued a list of demands before he’ll support raising the ceiling. His conditions include approval of TransCanada Corp. (TRP)’s Keystone XL pipeline, major revisions to the tax code and a one-year delay of the insurance mandate in the Obama health-care law.

Pacific Investment Management Co.’s Bill Gross said the U.S. will avoid a “catastrophic” default on Treasury securities.

“The U.S. Treasury is the center of the global financial complex,” Gross, manager of the world’s biggest bond fund, said during a Bloomberg Television interview with Trish Regan and Adam Johnson. A default would be “unimaginable,” as it would have “catastrophic” consequences on U.S. borrowing costs, and would trigger a “complex series of events worldwide” that would ripple through global financial markets.

Washington braces for prolonged government shutdown

By Karen Tumulty and Lori Montgomery, Published: October 1

Washington began bracing for a prolonged government shutdown on Tuesday, with House Republicans continuing to demand that the nation’s new health-care law be delayed or repealed and President Obama and the Democrats refusing to give in.

There were signs on Capitol Hill that Republicans — knowing that blame almost certainly will fall most heavily on them — are beginning to look for ways to lift some of the pressure.

House GOP leaders pushed a new approach to end the impasse, offering to fund some parts of the government — including national parks, veterans benefits and the D.C. government. The goal was to put Democrats on the spot by trying to make them vote against programs that are popular among their constituents.

Senate Democratic leaders and the White House quickly rejected the piecemeal strategy. And in a series of evening votes, Democrats helped defeat the measures on the House floor.

----At the moment, neither side is feeling a clear imperative to end the shutdown.

Republican leaders prefer keep­ing the government closed to compromising on health care. And, with polls showing that voters overwhelmingly blame Republicans for the stalemate, Democrats, too, are willing to let it drag on.

In snake bit Europe, Italy’s parliament get to vote later today on yay or nay on whether its rickety do little government can stay in office. Right now the betting is that government patronage and the ability to legally bribe parliamentarians, should be enough to ensure it scrapes up enough yay votes. Elsewhere in Europe the ECB meets to do nothing. Greece asks for more urgent debt relief. Club Med looks all too likely to catch pneumonia this coming winter, all the more so if the coming winter is a harsh one, or America’s Fedster’s start talking about “tapering” again. Stay long fully paid up physical precious metals.

"Increasingly, the wealth of the modern world has come to be represented by financial assets rather than real assets, and this to me is a very unhealthy situation, because financial assets are inherently unstable. Financial assets (currencies, bonds, mortgages, stocks, bank credit, etc.) can be quickly and violently reduced in value, or destroyed completely by either inflation or deflation."

Donald J. Hoppe.

Samaras Cautions Europeans Against Procrastinating on Greek Debt

By Sandrine Rastello & Ben Schenkel - Oct 2, 2013 1:38 AM GMT
Greek Prime Minister Antonis Samaras said the European nations that are financing Greece’s bailout should not wait too long before helping the country address its debt burden.

Citing a pledge made in November by euro-area nations to consider further assistance to lower Greece’s debt, Samaras said his country is on track to meet the main condition, an annual budget surplus before interest payments, or primary surplus.

“If Greece indeed does manage to have primary surplus, then the European Union should help and will help Greece,” Samaras said yesterday at the Peterson Institute for International Economics in Washington. “What is important to me is not to procrastinate too much for a solution.”

Greece is in the sixth year of a recession deepened by spending cuts and tax increases linked to a 240 billion-euro ($325 billion) bailout from the euro area and the International Monetary Fund, which now hold most of Greece’s debt after investors took part in the biggest debt restructuring in history last year.

Draghi Seen Putting Words Before Action on ECB Policy

By Stefan Riecher & Jeff Black - Oct 2, 2013 12:01 AM GMT
Mario Draghi is likely to rely on the power of his voice rather than new policies to steer Europe’s banks through the early stages of an economic recovery.

The ECB president will hold off from pumping more cash into the currency bloc’s financial system as long as the threat of action keeps market interest rates under control, according to economists from Berenberg Bank to Nomura International Plc. While Draghi put investors on notice last week that a long-term refinancing operation is possible, other policy makers have played down the likelihood of that for now.

“Communication has clearly been the ECB’s preferred tool for the past few months and it still is,” said Christian Schulz, senior economist at Berenberg in London. “Draghi will keep using words rather than deeds.

He will say that more long-term loans are still on the table and he may even hint at another LTRO being deployed by the end of the year, but I don’t expect any policy action today.”

ECB policy makers meeting in Paris today will keep the benchmark main refinancing rate unchanged at a record low of 0.5 percent, according to all 52 economists in a Bloomberg News survey. (EURR002W) The central bank will announce its interest-rate decision at 1:45 p.m. and Draghi will hold a press conference 45 minutes later

Spaniard becomes voice of country's 'lost generation'

Benjamin Serra Bosch becomes voice of Spain's "lost generation" after online rant about cleaning "s***" in a London cafe for a living despite having three degrees.

A young Spaniard with two bachelor's degrees and a master's has become the poster boy for Spain's "lost generation" after an online rant in which he complained that the only work he can find is cleaning lavatories in London. 

Benjamin Serra Bosch, 25, has garnered thousands of followers on social networks after posting a message about his plight as an overqualified youth unable to find a decent job in his own country. 

"I received a distinction for both my degrees and now I clean S*** in a foreign country," he wrote in a message posted on Facebook and Twitter on Friday. "I've been working in a well known café chain in London since May. And after five months working there, today for the first time I saw it clearly.

"I clean toilets. My thought was 'I received distinction in my two degrees and I clean other peoples s*** in a country that isn't my own.' Well, I also make coffees, wipe tables and wash up cups."

But Mr Serra, from Valencia, insisted that his work did not make him ashamed despite having a degree in Journalism and Advertising and another in Public Relations from the prestigious private CEU Cardenal Herrera University. He also has a Master's degree in Community Management from the IEBS Business School.

"I'm not ashamed of what I do. Cleaning is a very worthy job, What embarrasses me is having to do it because no one has given me an opportunity in Spain. There are many Spaniards like me especially in London."

"We are a plague," he said. "And make no mistake, the youth are not here to learn the language, having an adventure and new experiences. We are IMMIGRANTS.

"I thought I deserved better after so much effort in my academic life. Apparently I was wrong."

His story has struck a chord in Spain where unemployment among the under-25s soared to a record 56 per cent in August and the number of Spaniards seeking work abroad has more than doubled since the start of the economic crisis five years ago.

"It is a socialist idea that making profits is a vice. I consider that the real vice is making losses."

Winston Churchill.

At the Comex silver depositories Tuesday final figures were: Registered 42.41 Moz, Eligible 122.78 Moz, Total 165.19 Moz.  

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

Today, has Brazil’s once richest man gone broke? I sense a Brazilian style Lehman problem surfacing. Send for the IMF, Bernocchio, and sorcerer’s apprentice Draghi. A whole new slew of Latin American banksters will need some more crony socialism.

"We finished the year, and we reported that we had $17 billion of cash sitting at the bank's parent company as a liquidity cushion. As the year has gone on, that liquidity cushion has been virtually unchanged."

Bear Stearns CEO Alan Schwartz. March 12, 2008. Bust March 17, 2008

OGX Misses Debt Payment as Record Regional Default Looms

By Peter Millard - Oct 1, 2013 10:17 PM GMT
OGX Petroleo & Gas Participacoes SA defaulted on $1 billion of bonds after missing an interest payment, accelerating former billionaire Eike Batista’s slide toward Latin America’s largest-ever corporate debt debacle.

The oil company missed a $45 million payment on dollar notes due 2022, Rio de Janeiro-based OGX said in a regulatory filing today. The decision prompted Standard & Poor’s to assign its default rating to the company and the bonds while Moody’s Investors Service and Fitch Ratings said they’d give OGX the 30-day grace period before calling it a default.

Batista, once Brazil’s richest person, is seeking to renegotiate debt and avoid bankruptcy after some offshore deposits he’d valued at $1 trillion turned out to be duds. That triggered a selloff that wiped out $30 billion of his fortune and pushed down bond prices to 16.5 cents on the dollar.

“We do not expect the company to pay the interest due within the five-business-day cure period established by our criteria, and we believe this indicates a general default and that the company will restructure its debt,” S&P analysts Renata Lofti and Luciano Gremone said in a statement today. “This is based on OGX’s virtually null cash flow.”

----Batista fired his chief financial officer and hired his fifth restructuring adviser in the past two weeks. The 2018 notes have tumbled 5 cents since Sept. 20, when it announced the departure of Roberto Monteiro, who had led negotiations with creditors. Four days later, the company hired Lazard Ltd. (LAZ) to work alongside advisers including Blackstone Group LP (BX) in the talks.

If OGX can’t convince creditors or other partners to provide debt relief and an immediate infusion of funds, bondholders may end up with nothing, JPMorgan Chase & Co said.

----As of June 30, OGX had 722 million reais ($327 million) in cash and equivalents and 8.7 billion reais in total debt, including $2.6 billion of notes due 2018. A default of the $3.6 billion international bonds would be the region’s biggest corporate default, according to data compiled by Moody’s. OGX would enter default on the last day of the grace period if no payment is made, Moody’s analyst Gretchen French said in an e-mailed reply to questions.

"There can be no other criterion, no other standard than gold. Yes, gold which never changes, which can be shaped into ingots, bars, coins, which has no nationality and which is eternally and universally accepted as the unalterable fiduciary value par excellence."

Charles De Gaulle                        

The monthly Coppock Indicators finished September:
DJIA: +167 Up. NASDAQ: +213 Up. SP500: +203 Up. All three are back positive again, thanks to continued Fed QE.  High risk speculators will now use any stocks sell-off to go long. After the last Fed meeting and QE U-turn, the Bernocchio put is back on.

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