Tuesday, 5 November 2013

Getting It Wrong. Euro-Beef.

Baltic Dry Index. 1552 +27

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

If all else fails, immortality can always be assured by spectacular error.

J. K. Galbraith.

Below Japan’s Abenomics comes with some unintended consequences. Be careful what you wish for. QE Forever anyone? Stay long fully paid up physical precious metals.

"In economics, hope and faith coexist with great scientific pretension."

J. K. Galbraith.

JGBs Declared Dead by Mizuho as Kuroda Hides Risks: Japan Credit

By Masaki Kondo, Mariko Ishikawa & Yumi Ikeda - Nov 5, 2013 1:03 AM GMT
Mizuho Securities Co. said Bank of Japan dominance has killed the nation’s sovereign bond market, leaving it unable to reflect either the success of stimulus policies or fiscal risks.

Monthly trading of Japanese government bonds among the biggest holders including banks and insurers shrank to 37.9 trillion yen ($385 billion) last quarter, the least on record going back to 2004, according to Japan Securities Dealers Association data. Totan Research Co. and Spiro Sovereign Strategy also said BOJ monetary stimulus is cutting the tie between economic fundamentals and bonds, which yield 0.6 percent for 10 years, the least in the world.

“The JGB market is dead with only the BOJ driving bond prices,” said Tetsuya Miura, the chief bond strategist at Tokyo-based Mizuho, one of the 23 primary dealers obliged to bid at government auctions. “These low yields are responsible for the lack of fiscal reform in the face of Japan’s worsening finances. Policy makers think they can keep borrowing without problems.”

Even with a planned sales-tax increase in April, Japan’s government has yet to present detailed proposals on how to consolidate its finances, the International Monetary Fund said last month.

----The dropoff in trading contrasts with last year, when the monthly average of JGB sales and purchases among lenders, life and casualty insurance companies jumped to a record 98 trillion yen in the second quarter, the JSDA data show.

Finance Minister Taro Aso said on Nov. 1 that declines in bond yields weren’t expected.

More from the command economy of communist run corrupt modern China. If the Goldilocks GDP is 7.2 percent as Prime Minister Li has said, 7.2 or netter is what he will get. Missing the number in this command economy can be very bad for one’s health, besides not even the CPC leaders themselves believe China’s official numbers.

There are some bored foreigners, with full stomachs, who have nothing better to do than point fingers at us … First, China doesn't export Revolution; second, China doesn't export hunger and poverty; third, China doesn't come and cause you headaches, what more is there to be said?

President Xi Jinping. October 2010.

Li Says China Needs 7.2% Expansion to Create Jobs as Party Meets

By Bloomberg News - Nov 5, 2013 4:40 AM GMT
Premier Li Keqiang said China needs 7.2 percent growth to keep unemployment stable and signaled reluctance to widen the budget deficit or ease monetary policy to ensure expansion.

Expansion at that pace would create 10 million jobs a year to maintain the urban registered jobless rate at about 4 percent, Li said in an Oct. 21 speech to the All-China Federation of Trade Unions published yesterday on its website. China’s growth has entered a stage of medium-to-high speed, meaning about 7.5 percent or above 7 percent, Li said.

The comments, consistent with other government statements this year, provide more context for targets in the coming years ahead of the Communist Party’s four-day conclave starting Nov. 9 that will consider reforms aimed at maintaining the pace of growth. Leaders are entering the summit with the economy on an upswing, indexes of manufacturing and services in October show.

“Using the deficit and issuing money to stimulate investment can produce results that year, but corresponding operational room is needed to implement fiscal and monetary policies,” Li said. “More importantly, this kind of short-term stimulus is hard to sustain.”

China President Xi confident about healthy economic growth

Reuters – Sat, Nov 2, 2013 7:08 AM EDT
BEIJING (Reuters) - China President Xi Jinping is confident that China will have healthy economic growth and will not fall into a middle-income trap, he told a group of Chinese and foreign business leaders on Saturday.

"We are currently changing our way of development, adjusting our economic structure, accelerating our new style of industrialization, promoting technology, urbanization and agricultural modernization," state media quoted Xi as saying at the meeting in Beijing.

"The domestic elements supporting China's economic growth are sufficient."

China’s Stocks Fall to One-Week Low as Financial Companies Slump

By Weiyi Lim - Nov 5, 2013 5:31 AM GMT
China’s stocks fell to the lowest level in a week, led by financial companies, amid concern government efforts to reduce industrial overcapacity and contain home prices will curb earnings.

Industrial Bank Co. and Ping An Bank Co. slid more than 1 percent as the banking regulator urged lenders to handle credit risks in industries with overcapacity problems. Poly Real Estate Co. led declines for developers after the 21st Century Business Herald reported Beijing city won’t allow developers to increase home prices before the year-end. China’s top party officials will meet Nov. 9-12 to map out a blueprint for reform as the country heads for its slowest growth in more than two decades.

----The government’s efforts to reduce overcapacity may lead to fewer bank loans and hurt financial industry profits, said Zeng Xianzhao, an analyst at Everbright Securities Co. in Chongqing. China’s new home prices jumped by the most this year in October.

“With a reduction in loans, investors may be concerned about the financial sector’s fourth quarter and 2014 earnings,” Zeng said. “The volume of trade in the market has been declining before the plenum as investors are concerned reforms may be worse than expected.”

Trading volumes in the Shanghai Composite were 38 percent below the 30-day average for this time of day, according to data compiled by Bloomberg. The index has fallen 5.7 percent this year and trades at 8.5 times projected profits for the next 12 months, lower than the seven-year average of 15.3, data showed.

Back in dying Euroland, the rising backlash against Germany is getting nastier, since nothing has changed following the German elections. Club Med has finally reached the end of the Austerity High Street. The message to Berlin is now signal a return to Easy Street and soon, or it won’t just be Italian waiters spitting in your soup. Below, exasperation from Italy’s Mr. Euro. But now Mr. Euro now realises the error of his earlier ways. Too bad for Italy’s dead end youth generation.

Only by a misanthropic, wealth-envy, old socialist Scot, at war with New Labour, England,  and “General” Tony Blair, did Great Britain escape joining the wealth destroying Euro and Italy’s fate. Disgraced General Blair, the “Hammer of the Iraqis”, would have swapped the British Pound for European Presidency in a heartbeat, as NSA tapes can probably prove.

I am not a newcomer, you know, so I want to be judged for what I did when I was prime minister last time in Italy and president of the European Commission for more than five years.

Romano Prodi.

Italy's Mr Euro urges Latin Front, warns Germany won't sell another Mercedes in Europe

By Ambrose Evans-Pritchard Politics and society Last updated: November 4th, 2013
The plot is thickening fast in Italy. Romano Prodi – Mr Euro himself – is calling for a Latin Front to rise up against Germany and force through a reflation policy before the whole experiment of monetary union spins out of control.

"France, Italy, and Spain should together pound their fists on the table, but they are not doing so because they delude themselves that they can go it alone," he told Quotidiano Nazionale

Should Germany persist in imposing its contractionary ruin on Europe – "should the euro break apart, with one exchange rate in the North and one in the South", as he puts it – Germany itself will reap as it has sown. 
"Their exchange rate will double and they will not sell a single Mercedes in Europe. German industrialists know this but all they manage to secure are slight changes, not enough to end the crisis."

----He rightly warns that nothing of substance will change as a result of the Bundestag elections. "German public opinion is by now convinced that any economic stimulus for the European economy is an unjustified help for the 'feckless' South, to which I have the honour of belonging. They are obsessed with inflation, just like teenagers obsessed with sex. They don't understand that the real problem today in deflation, as I have been saying for a year," he said.

This is the nub of the matter. The policy regime has become maniacally restrictive because every decision is filtered through "game theory" calculations, the belief in Berlin that the naughty Latins will somehow cheat unless their feet are held to the fire.

The ECB is playing this game too. It is no longer a central bank. It has become an enforcer of political pressure. The ECB is not even trying to meet its 2pc inflation target. It has abandoned its 4.5pc M3 money growth target and its twin pillar monetary structure.

Why bring up Europe? It will be largely irrelevant five years from now

By the time Britain gets to a referendum, much of the present shouting match over Europe will be rendered meaningless

Back in the early 1980s Sir Terence Beckett – then director-general of the Confederation of British Industry (CBI) and, in a former incarnation, one of the industrialists who had presided over catastrophic decline in the British motor industry – urged business leaders to “take the gloves off and have a bare-knuckle fight” with Margaret Thatcher over her handling of the economy.

There began a pattern. Virtually ever since, the CBI has managed to get it spectacularly wrong on almost all the major issues of the day.

It was wrong about the euro, it was wrong about whether Britain should participate in Europe’s folie de grandeur, and it was wrong to sign up to New Labour’s tax-and-spend policy agenda. That the opposition Tory leadership was equally acquiescent in this ill-fated expansion of the state is scarcely an excuse.

----So we get a load of platitudes to the effect that what Britain really needs to thrive anew is a reformed Europe. Yawn. No, it needs a more competitive economy. Lower taxes, deregulation, obedient inflation, decent education and infrastructure – these are the only things that truly unite business’s Tower of Babel into a single voice. The rest is just noise.

----Yet there is also something faintly irrelevant – given the increasingly global nature of economic activity – about the whole in/out debate. Europe is changing before our eyes. By the time we get to a referendum, much of the present shouting match will be rendered meaningless. Putting numbers on the supposed costs and/or benefits of membership, as the CBI tries to in its call to arms, is a fatuous and largely subjective exercise. It won’t convince anyone.

----What’s for sure is that the EU can no longer be regarded as a shining example of economic and political success. The single currency has been an unmitigated disaster, and the policy response to the turmoil of recent years has proved an utter shambles that has created deep popular hostility to the entire European project.

The show has been kept on the road, just about, but policymakers have also hard-baked a seemingly permanent depression into some of Europe’s proudest economies. On any rational basis, you would not want to be part of such a club. In any case, for most people the economics of EU membership is neither here nor there any longer. It’s the democratic deficit that alienates people, or the imposition by Brussels of bad policy.

----With virtually no assistance from the Continent, the British economy is at last reviving. Rather less fortunately, this is so far an unbalanced recovery – and one, moreover, that seems to require Britain to support ultimately unsustainable levels of internal demand to compensate for the absence of it in large parts of the rest of Europe.

We end for the day with the official global warming computer models all going awry. Man-made or not, the IPCC global warming models are not fit for purpose, unless that purpose is merely to extract ever more useless “green taxation” out of Europe’s hapless serfs, making Germany and Great Britain, the last two major cylinders still firing during Europe’s great decline and fall, and fall and decline, even less competitive in international trade. But readers of the LIR have long known that global warming is a man-made scam for political control reasons. We have far more reason to fear the onset of a new Dalton Minimum in sunspots and global cooling. See http://londonirvinereport.blogspot.co.uk/p/sunspots-global-cooling.html

“There is no way that we can predict the weather six months ahead beyond giving the seasonal average”

Professor Stephen Hawking.

Global warming 'pause' may last for 20 more years and Arctic sea ice has already started to recover

Study says warmer temperatures are largely due to natural 300-year cycles

Actual increase in last 17 years lower than almost every prediction

Scientists likened continuing pause to a Mexican wave in a stadium

The 17-year pause in global warming is likely to last into the 2030s and the Arctic sea ice has already started to recover, according to new research.

A paper in the peer-reviewed journal Climate Dynamics – by Professor Judith Curry of the Georgia Institute of Technology and Dr Marcia Wyatt – amounts to a stunning challenge to climate science orthodoxy.

Not only does it explain the unexpected pause, it suggests that the scientific majority – whose views are represented by the UN Intergovernmental Panel on Climate Change (IPCC) – have underestimated the role of natural cycles and exaggerated that of greenhouse gases.

The research comes amid mounting evidence that the computer models on which the IPCC based the gloomy forecasts of a rapidly warming planet in its latest report, published in September, are diverging widely from reality.

The graph shown above, based on a version published by Dr Ed Hawkins of Reading University on his blog, Climate Lab Book, reveals that actual temperatures are now below the predictions made by almost all the 138 models on which the IPCC relies.

The pause means there has been no statistically significant increase in world average surface temperatures since the beginning of 1997, despite the models’ projection of a steeply rising trend.

According to Dr Hawkins, the divergence is now so great that the world’s climate is cooler than what the models collectively predicted with ‘five to 95 per cent certainty’.

----In similar fashion, a number of cycles in the temperature of air and oceans, and the level of Arctic ice, take place across the Northern hemisphere over decades. Curry and Wyatt say there is evidence of this going back at least 300 years.

According to Curry and Wyatt, the theory may explain both the warming pause and why the computer models did not forecast it.

It also means that a large proportion of the warming that did occur in the years before the pause was due not to greenhouse gas emissions, but to the same cyclical wave.

----But if the pause lasted another ten years, and there were no large volcanic eruptions, ‘then global surface temperatures would be outside the IPCC’s indicative likely range’.

Professor Curry went much further. ‘The growing divergence between climate model simulations and observations raises the  prospect that climate models are inadequate in fundamental ways,’ she said.

If the pause continued, this would suggest that the models were not ‘fit for purpose’.
Happiness does not fall out of the blue and dreams will not come true by themselves. We need to be down-to-earth and work hard. We should uphold the idea that working hard is the most honorable, noblest, greatest and most beautiful virtue.

President Xi Jinping. May 2013.

At the Comex silver depositories Monday final figures were: Registered 44.24 Moz, Eligible 125.13 Moz, Total 169.37 Moz.  

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.

No crooks today, we’re taking a break from criminal banksters and crooked politicians. Today we cover commodities. While the “Euro-Beef” scandal continues apace especially in Holland, with horses missing all across Europe, today we worry about the state of King Cotton. It’s all about China now. Any misstep by China now, and the cotton industry of the Indian sub-continent might go down in flames.

For an update on the Great Euro-beef scandal click on the BBC link below. Euro’s anyone? Goulash?  Half a million euros of horsemeat has apparently just been removed from a Dutch cold storage warehouse.  In the circumstances, it might be a year to pass on Ye Oldie Continental Christmas Market this year.

"Whom the gods would destroy, they first subsidize."                                       

George Roche

Cotton Slumping as Glut Expands Record China Hoard: Commodities

By Whitney McFerron, Luzi Ann Javier & Marvin G. Perez - Nov 5, 2013 4:33 AM GMT
China is hoarding a record amount of cotton to aid farmers as global production exceeds demand for a fourth consecutive year, increasing the risk of a supply surge that would tip prices into a bear market.

The biggest producer and user will have 12.7 million metric tons in inventory by July 31, 62 percent of the global total and enough to make about 71 billion t-shirts, the U.S. Department of Agriculture estimates. The government may end its stockpiling program the following season, Macquarie Group Ltd. says. Prices will drop 8.5 percent to 69.5 cents a pound in a year, according to the median of 12 analyst estimates compiled by Bloomberg

While growers in the U.S. and Brazil pared output as prices tumbled from a record $2.197 in 2011, Chinese farmers boosted production as the state absorbed excess crops. The government bought supply equal to about 85 percent of domestic output last year and the nation will import 2 million tons less this season, accounting for all the contraction in global shipments seen by the USDA. Cheaper cotton boosted margins for Levi Strauss & Co., Hanesbrands Inc. (HBI) and other clothing companies.

“The size of the reserve is one issue, transparency is another issue, and both are contributing to anxiety in the market,” said Terry Townsend, the executive director of the International Cotton Advisory Committee in Washington. “We hope that China embarks on an orderly liquidation over a number of years so the market can reach equilibrium. Everyone is speculating on what the government will do.”

Think what a revolution it will be if we manage to get everyone to pay their taxes.

Romano Prodi. Italian Fantacist.

The monthly Coppock Indicators finished October:
DJIA: +178 Up. NASDAQ: +238 Up. SP500: +217 Up. The Fed’s final bubble continues to grow, until QE Forever isn’t forever.

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