Friday, 25 October 2013


Baltic Dry Index. 1708 -78

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

Every mile is two in winter.


We open today with a bad omen for the coming northern hemisphere winter. EurAsian snow cover so far, is far above the 1981-2010 mean. That usually triggers a cold snowy winter for North America and Europe. With energy companies in the UK and Europe implementing price hikes of up to ten percent next month, a winter of discontent likely lies ahead to add to all the austerity. Meanwhile the UK and Western Europe are on hurricane watch for Monday, with the storm hitting the UK the highest probability this early on.

In Hertford, Hereford and Hampshire hurricanes hardly ever happen.

Professor Higgins. My Fair Lady.

If New York Freezes in January Blame Siberian Snow Now

By Brian K. Sullivan - Oct 25, 2013 12:01 AM GMT
Snow falling over Siberia is raising the prospect for frigid temperatures in New York come January.

The weather half a world from Central Park can set off atmospheric events that result in icy air descending from the North Pole in December and January, driving U.S. temperatures down and natural gas and heating oil use up, according to Judah Cohen, director of seasonal forecasting at Atmosphere & Environmental Research in Lexington, Massachusetts.

“It’s the best winter predictor that we have,” Cohen said in a telephone interview. “We haven’t made a forecast yet, but we’re watching it closely and the snow cover has definitely been above normal so far.”

The more ground covered by snow across northern Europe and Asia at the end of October, the greater the chances of triggering a phenomenon known as the negative phase of the Arctic Oscillation. That would flood North America, Europe and East Asia with polar air and possibly erect a blocking effect in the North Atlantic that would bottle up the cold in the U.S.

In September, 2.36 million square kilometers (911,000 square miles) of northern Europe and Asia were covered by snow, according to the Rutgers University Global Snow Lab. That compared with the 1981-2010 mean of 1.5 million.

“It’s running well above normal,” said Matt Rogers, president of Commodity Weather Group LLC, a commercial forecaster in Bethesda, Maryland. “Through the last week of September, it’s the highest snow total in Eurasia since 1977.”

----“It works about 60 to 70 percent of the time,” Rogers said. “I use it as a factor in our seasonal outlook.”

The winters of 2009-2010 and 2010-2011 are examples of what can happen when the Arctic Oscillation shifts into its negative phase. A total of 51.4 inches of snow fell in Central Park in 2009-2010 and 61.9 inches in 2010-2011, for the two snowiest years of the century so far, according to National Weather Service records. Eurasian snow totaled 11.55 million square kilometers in October 2009 and 10.81 million a year later, both above the mean of 9.49 million, Rutgers data show.

Hurricane-strength winds to arrive on Monday

Southern England has been placed on "amber alert" ahead of a vicious storm which could bring hurricane-strength gusts of wind to the country on Monday.

The storm, which is currently brewing over the Atlantic, will feature the most violent winds seen in several years with some gusts expected to reach 12 on the Beaufort Scale – a strength typical of a hurricane.

Met Office forecasters warned residents in Cornwall, southern Devon and along the length of the south coast to expect winds exceeding 80mph at times, starting early on Monday morning and continuing for up to 24 hours.

The strongest gusts will have the potential to bring down trees, damage buildings, bring down electricity cables causing power cuts, and spark transport chaos, they said.

People living below a line stretching from Wales to the Humber have been placed on a less severe "yellow alert", which forecasts very strong winds and heavy rain.

But experts conceded the predicted path of the storm is uncertain, and it could potentially hit the north of the country, or pass through France and miss England altogether.

The storm is expected to develop in the western Atlantic on Saturday as two storms currently over the Gulf of Mexico and the North American Great Lakes move out to sea and merge.

This will contribute to an area of exceptionally low pressure, which will be carried by the jet stream over the Atlantic with England and Wales its most likely destination.

----Atlantic storms typically develop much further west, meaning they have lost some of their strength by the time they reach the UK, but this system will reach its maximum intensity on Sunday just before it arrives.

It will still be in its most powerful phase as it tracks across the country on Monday, with a strong jet stream and warm air around the UK adding to its force.

In other European news, America’s NSA spy agency managed to hijack the first day of the EUSSR “Great Leader’s” summit. By tapping the phones of all attending, the NSA probably already has enough dirt on Europe’s dodgy leaders to get America’s way in the EU-USA trade negotiations. Still, after growing up in East Germany, one would think that Chancellor Merkel would be used to the idea of being listened into by now. If one didn’t know that such a thing is impossible, one might think that America had hurt Germans feelings. With day one of the Great Leader’s summit hijacked, they only have today left to meddle, muddle and fudge, and ruin yet more Europeans’ lives.

“The Germans outside looked from America to Russia, and from Russia to America, and from America to Russia again; but already it was impossible to say which was which.”

With apologies to George Orwell and Animal Farm.

Angela Merkel demands action from US to rebuild trust

Furious Angela Merkel accuses US of betraying trust of German soldiers that fought and died alongside American allies on the battlefields of Afghanistan by bugging her phone

German Chancellor Angela Merkel demanded on Thursday that the United States strike a 'no-spying' agreement with Berlin and Paris by the end of the year, saying alleged espionage against two of Washington's closest EU allies had to be stopped.

Speaking after talks with EU leaders that were dominated by allegations that the US National Security Agency had accessed tens of thousands of French phone records and monitored Mrs Merkel's private mobile phone, the chancellor said she wanted action from President Barack Obama, not just apologetic words.

Germany and France would seek a "mutual understanding" with the United States on cooperation between their intelligence agencies, and other EU member states could eventually take part.

"That means a framework for cooperation between the relevant (intelligence) services. Germany and France have taken the initiative and other member states will join," she said.

In a statement issued after the first day of the summit, the EU's 28 leaders said they supported the Franco-German plan.

Angela Merkel condemns US's 'unacceptable behaviour' over phone monitoring claims

Angela Merkel condemned America’s “unacceptable” behaviour yesterday after “firm suspicions” emerged that United States intelligence agencies had monitored her personal mobile telephone for almost four years

The growing row over US spying could threaten negotiations on a transatlantic trade deal between the European Union and America if Germany insists on privacy safeguards and data protection guarantees that Barack Obama will have a hard time delivering from Congress.

The diplomatic row looks likely only to intensify after it emerged that at least 35 world leaders had their communications targeted by the National Security Agency (NSA).

Documents leaked to The Guardian by the fugitive whistleblower Edward Snowden show that the spy agency encouraged other US government departments to hand over their “rolodexes” of foreign contacts to be used for targeting.

“In one recent case, a US official provided NSA with 200 phone numbers to 35 world leaders,” according to one memo. The 2006 NSA document does not name the 35 leaders and concedes that the telephone numbers yielded “little reportable intelligence”

Don’t Let the NSA Kill the Internet

By the Editors Oct 24, 2013 11:39 PM GMT
Thirty, 20 or even 10 years from now, will historians write that the unbridled zeal of the National Security Agency fatally undermined U.S. leadership in the Information Age and the creation of a truly global Internet?

The latest sign this could happen comes from the European Parliament, where legislators have advanced privacy legislation that would forbid the transfer of data generated in the European Union to an outside country unless the subject in question and the EU source country first give their permission. Legislators have revived language that the U.S. previously lobbied against, and upped fines for violations to 100 million euros ($138 million) or 5 percent of turnover, whichever is greater.

They have their reasons. This week, for instance, in the most recent act of former contractor Edward Snowden’s traveling leak show, Le Monde told its readers that the NSA gained access to 70 million calls inside France in one 30-day period. And stung by reports that the U.S. tapped her mobile phone, Chancellor Angela Merkel of Germany has joined the chorus of leaders rapping U.S. President Barack Obama for breach of trust and invasion of privacy.

Here’s a question: Aren’t leaders exactly the right targets for electronic surveillance? And really, what nation’s interests are truly consonant with another’s?

----Unfortunately, the exposure of the NSA’s programs is doing more than giving offense. Accusations that U.S. technology companies have acted in concert with U.S. intelligence agencies have already cast a shadow over their business. One recent estimate said that revelations about a single NSA surveillance program could end up costing the U.S. cloud computing industry as much as $35 billion by 2016; another put the potential revenue lost to IT service providers as high as $180 billion. U.S. companies such as Cisco Systems Inc. (the world’s biggest networking equipment maker) and Symantec Corp. (the world’s biggest maker of computer security software) derive nearly half their revenue from abroad, where competitors have not been shy about stoking their customers’ paranoia. Tensions over the NSA’s activities may also complicate U.S. negotiations with the European Union on a huge trans-Atlantic trade pact.

We end for the day puzzling over China. Is China serious about tightening its money rates? Is it right to remain complacent about China?

China Stocks Fall, Head for Longest Losing Streak Since July

By Bloomberg News - Oct 25, 2013 6:10 AM GMT
China’s stocks fell for a fourth day, the longest stretch of losses in almost three months, after money-market rates jumped and Great Wall Motor Co.’s earnings missed analysts’ estimates.

Great Wall Motor, which plunged 9.9 percent for the biggest drag on the Shanghai Composite (SHCOMP) Index, led declines for consumer companies reliant on economic growth. Sinovel Wind slid 3.9 percent after reporting losses for the first nine months. Shanghai International Port (Group) Co. (600018) and Shanghai Waigaoqiao Free Trade Zone Development Co. plunged more than 7 percent after rallying at least 98 percent since the start of August.

The Shanghai Composite slid 1.1 percent to 2,140.26 as of 1:07 p.m., heading for the lowest level since Sept. 5. The nation’s money rates were poised for the biggest weekly jump since a cash squeeze in June. Investors are cautious this earnings season against a backdrop where the costs of capital are rising, said Dragon Life Insurance Co. fund manager Wu Kan.

----The Shanghai Composite has slumped 2.4 percent this week after money-market rates jumped and smaller companies slumped on concern valuations were excessive. The index’s four-day loss is the longest streak since July 29.

China Crisis Odds Seen Lowered With Reforms From Meeting

By Bloomberg News - Oct 25, 2013 5:53 AM GMT
The odds of a severe slowdown in China or a credit crisis will fall after a Communist Party summit in November as leaders tackle local-government debt and financial reforms, a Bloomberg News survey indicates.

Fifteen of 23 analysts said policies flowing from the meeting will reduce such risks, and a majority said the plans will help China become a high-income economy by 2030. Royal Bank of Scotland Group Plc sees freer interest rates and Barclays Plc says changing officials’ performance benchmarks may help contain local-government spending.

The confidence signaled by the survey contrasts with warnings this year by Societe Generale SA of Ponzi-style corporate financing and short-seller James Chanos saying that China will have a “credit event” within five years. At stake is whether President Xi Jinping and Premier Li Keqiang deliver on expectations for policy shifts to sustain 7 percent growth in the world’s second-biggest economy.

“The economy has reached the stage where reform is the only way to release growth potential and reduce risks, so for sure they will be doing it,” said Chang Jian, China economist at Barclays in Hong Kong, who previously worked at the World Bank. “The risk of too little being done too late is clearly there.”

After removing a floor on borrowing costs in July, authorities have signaled that a deposit-insurance system and an easing of deposit-rate limits will be next. The People’s Bank of China and U.S. Federal Deposit Insurance Corp. said yesterday that they signed an agreement to strengthen communication and policy coordination. Today China started publishing a “loan prime rate” calculated from nine banks, adding a market-based benchmark as part of interest-rate liberalization.

"The most puzzling development in politics during the last decade is the apparent determination of Western European leaders to re-create the Soviet Union in Western Europe."

Mikhail Gorbachev

At the Comex silver depositories Thursday final figures were: Registered 44.07 Moz, Eligible 122.81 Moz, Total 166.88 Moz.  

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

More on the banksters again. In our new lawless age, there’s no honour among thieves anymore. Below, how Monte dei Paschi destroyed itself, all under the watchful eyes of “super” Mario Draghi, the bankster running Italy’s central bank at the time.

“The world is a place that’s gone from being flat to round to crooked.”

Mad Magazine.

Bank Born Out of Black Death Struggles to Survive

By Elisa Martinuzzi & Vernon Silver - Oct 24, 2013 11:01 PM GMT
Siena, the medieval city renowned for its Palio horse races, is home to the world’s oldest bank. Within its aging walls lies a distinctly 21st century tale of devastation wrought by local politicians and global financiers.

Banca Monte dei Paschi di Siena SpA, Italy’s third-largest lender, is struggling to survive as it seeks to repay a second bailout or face nationalization. Its downfall proved a boon to global investment banks. They offered merger and investment advice to executives beholden to politicians that helped wipe out 93 percent of Monte Paschi’s value. Then they sold it complex derivatives that hid, even worsened the losses.

Efforts to rescue the 541-year-old lender have cost Italian taxpayers 4.1 billion euros ($5.6 billion). The investment banks, including Merrill Lynch & Co., JPMorgan Chase & Co. (JPM) and Deutsche Bank AG (DBK), earned more than $200 million in fees from 2008 through 2011, filings and deal memos show.

“These international banks come to exploit, and Italy is vulnerable,” said former Senator Elio Lannutti, who heads Adusbef, a consumer group for Italian bank customers. “On one side, there’s the local incompetence, and on the other side the bad faith of the international investment banks.”

Franco Debenedetti, a former chief executive officer of Olivetti SpA, was even blunter.

“It’s the inevitable consequence of medieval governance falling prey to the fangs of Wall Street,” said Debenedetti, now chairman of Italy’s Bruno Leoni Institute, a pro-free-market research group in Turin.

Monte Paschi’s missteps began with its November 2007 agreement to buy Padua-based Banca Antonveneta SpA, according to accounts of a dozen people and more than 29,000 pages of depositions, e-mails and documents in court files. The Siena lender’s chairman at the time was Giuseppe Mussari, a political appointee with no prior bank-management experience who was in his first year on the job. Seeking to expand Monte Paschi’s reach, he offered 9 billion euros in an all-cash deal just as the global financial crisis was claiming its first victims.

The man he turned to for financial advice was Andrea Orcel, a top Merrill dealmaker. It was someone already familiar with the takeover target: Orcel was working for the other side just days earlier, earning millions of dollars advising Spain’s Banco Santander SA (SAN) on its purchase of Antonveneta, the same bank Mussari now wanted to buy.

The deal was a disaster for Monte Paschi. Pressed by Santander to complete the purchase quickly, Mussari agreed to pay 2.4 billion euros more than what Orcel’s Spanish client spent -- a 36 percent profit in just four weeks for flipping the Italian lender. Mussari never examined the financial books of the company he was trying to acquire, a standard procedure known as due diligence, the documents show.

Orcel rose to global finance’s top ranks and now runs investment banking at UBS AG (UBSN), Switzerland’s biggest lender. For Monte Paschi, paying that high a price in cash hampered its ability to weather losses in the global recession that followed the 2008 bankruptcy of Lehman Brothers Holdings Inc.

That’s when investment bankers stepped in again. They sold Monte Paschi derivatives contracts that ended up obscuring the bank’s mounting losses from regulators and investors. The deals further worsened the bank’s finances.

"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

Another weekend, and I must buy some masking tape to tape up the windows before our “hurricane” arrives. It won’t do any good, of course, but it will scare some of the neighbours and those driving past. Have a great weekend everyone. More on Hurricane Monday, hopefully.

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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