Baltic Dry Index. 1570 +52
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"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.
For more on
Herr Rickenbacker’s gold relevance, scroll down to Crooks Corner.
We open with
a white, blue and red flag day in Moscow. To this old dinosaur commodities
trader, it seems to be game set and match to President Putin’s Russia. Russia
gets the Crimea and most of the Ukraine’s offshore oil and gas potential, gets
off the hook in financially supporting virtually bankrupt, corrupt Ukraine. And
best of all, has passed supporting the
bottomless pit aka the Ukraine over to America, the EU, and the IMF.
If
meaningful sanctions are imposed by America and the EU, Russia will likely
retaliate against EU interests, probably by demanding pre-payment for the
Ukraine and Europe’s gas supplies. Possibly by dropping the dollar and freezing
western assets. How high does Europe want youth unemployment to go, merely to
carry out Washington’s edicts, following their botched Coup in Kiev? Sanctions
will have virtually no impact on the US economy. It’s time for some grown-ups
thinking in Washington, London, Brussels and Berlin. It’s highly unlikely to
happen. It’s get even time they think. Stay long fully paid up physical
precious metals.
"In the long run, the gold price has to go up in relation to paper money. There is no other way."
Nicholas L. Deak
Ukraine Military Concedes on Crimea as Russia Takes Hold
Mar 20, 2014 1:04 AM GMT
Ukraine said it plans to
reinforce its eastern border with Russia and withdraw troops from Crimea, ceding control of the
Black Sea peninsula as tensions remained high over Russian moves to annex the
breakaway region. Demilitarizing Crimea “is the best way to de-escalate the situation,” Andriy Parubiy, head of Ukraine’s National Security Council, told reporters in Kiev yesterday. He declined to say when forces would leave, and his announcement came as pro-Russian civilians overran bases in the region and detained Ukrainian personnel, including its navy chief.
----Ukraine’s move to fortify its eastern
border highlights concerns in Kiev that Russia may try to create turmoil in
areas with large pro-Russia populations. The governor of the eastern Kharkiv
region warned this week that Russia had massed forces along roadways about 15
kilometers (9 miles) from the frontier.
----Pro-Russian groups in Crimea
continued to hold Ukrainian military personnel after seizing installations in
the region, which is home to Russia’s Black Sea
Fleet. A deadline for their release set by Ukraine’s acting President
Oleksandr Turchynov expired last night, though talks were under way to secure
their freedom, the president’s office said.
----Even with the standoff over Crimea, Ukraine will meet payments on the $3 billion of Eurobonds it sold to Russia three months before Putin’s military incursion into the Black Sea region, a Finance Ministry official in Kiev said yesterday.
“Ukraine will pay its debts as it has been doing before,” said Denis Khristoforov, an official in the ministry’s sovereign-debt department. “If we do not pay, it will mean de-facto a default. Ukraine doesn’t want that.”
Ukraine’s new government is seeking as much as $15 billion in international support to help it stave off default. The EU, U.S. and International Monetary Fund are in the process of developing assistance packages to shore up Ukraine’s economy.
More
We will hold joint military exercises with Britain and US, says Ukraine
Downing Street plays down announcement, saying Britain had not “committed” itself yet to the exercises
By Bruno Waterfield in Brussels
and Colin Freeman 9:26PM GMT 19 Mar 2014
Ukraine's new government said last night that it would be conducting
military exercises with Britain and the United States, in a move intended to
warn Russia against further seizures of Ukrainian
territory. Kiev said the maneouvres would be conducted under the 1994 Budapest Memorandum, a document signed by Britain, American and Russia to guarantee Ukraine’s territorial integrity after it gave up its share of Soviet nuclear bombs.
However, a Downing Street source said Britain had not “committed” itself yet to the exercises and declined to elaborate on whether they would involve sending British forces to the Black Sea region.
The calls for a show of Western strength come as Europe appeared to be at odds over how to respond forcefully to President Vladimir Putin’s military annexation of Crimea.
While maintaining a united stance in public, the individual responses of Britain, France and Germany are all conditioned by the degree to which their economies are vulnerable to Kremlin retaliatory measures. Britain is keen to minimise damage to the City of London, Germany frets about Russia cutting off gas supplies and France has valuable Kremlin defence contracts.
More
Putin’s Tools of Sabotage Beat Urgency of Ukraine Invasion
Mar 19, 2014 2:42 PM GMT
After annexing Crimea, Russian President Vladimir Putin may not
need to invade the rest of Ukraine to bring it to its knees. Political and
financial sabotage can work just as well. While Putin promised yesterday that Russia isn’t about to send in troops, he has plenty of other tools to undermine the Western-backed Ukrainian government. They include fomenting insurrection by Russian-speakers, waging a cyberwar and crippling Ukraine financially by ramping up natural gas prices and demanding the repayment of billions of dollars in debts.
“Putin has the means to drastically destabilize Ukraine,” Fredrik Erixon, director of the European Centre for International Political Economy in Brussels, said by phone. “The more problems and unrest, the better his chances of getting east Ukraine to exit and join Russia.”
More than two decades after the collapse of the Soviet Union, Ukraine’s pro-Western ambitions represent the biggest challenge for Putin as he seeks to project Russian power in his backyard.
Putin, in a speech to lawmakers yesterday, accused the West of relentlessly encroaching on Russia’s interests since the end of the Cold War as the European Union and North Atlantic Treaty Organization expanded eastward. He described Ukraine, where leaked audio recordings have shown U.S. diplomats discussing how to oust Moscow-backed President Viktor Yanukovych and who should replace him, as the last straw.
“Everything has its limits,” Putin said. “And in the case of Ukraine, our Western partners have crossed the line.”
----As Putin seeks to counter Western
influence in Ukraine, Russia is demanding that its neighbor adopt a new federal
constitution that guarantees political and military neutrality, grants powers
to the regions, and make Russian a second official language. There’s no
indication it would be acceptable to the Ukrainian government, which took power
after Yanukovych was toppled amid protests last month, or to its Western
supporters.
More
In other
news, if it wasn’t for red flags we’d have no flags at all. Not that for now,
anyone is noticing. Red flags, of course, don’t matter until one day out of the
blue, they do. Does anyone remember how to spell crash?
March 19, 2014, 4:13 p.m. EDT
Yellen speaks for hour, market only hears three words
Opinion: Fed chair probably didn’t mean to signal rate hike, but she said it
WASHINGTON (MarketWatch) — Federal Reserve Chairwoman Janet
Yellen spoke for an hour at her press conference Wednesday, but the market only heard
three words: “around six months.”
She was asked how long the Fed would wait after the tapering ends before
it begins to raise interest rates.
Her answer: “So the language that we used in the statement is
‘considerable period.’ So I, you know, this is the kind of term it’s hard to
define. But, you know, probably means something on the order of around six
months, that type of thing.”
She added lots of qualifiers to
that, including the assessment of the labor market and the inflation outlook,
but the markets only heard “around six months.” Markets sold off.
The taper of the Fed’s bond
purchases is on course to end in October or November. Six months after that
would be April or May. So Yellen said the first rate hike could come in April
or May, depending on how the economy is doing.
More
Asia Stocks Drop on Fed; H-Share Index Near Bear Market
Mar 20, 2014 6:19 AM GMT
Asian stocks fell, with a gauge of Chinese shares in Hong Kong
poised to enter a bear market, after the Federal
Reserve signaled it may raise U.S. interest rates
from the middle of next year. Newcrest Mining Ltd. (NCM), Australia’s biggest gold producer, slumped 7.9 percent after bullion dropped the most in three months as the Fed’s announcement curbed demand for havens. China Mobile Ltd. dropped 3.2 percent to head for the lowest close in almost five years in Hong Kong after the world’s largest phone company posted profit that missed analyst estimates. BYD Co., the electric-car maker backed by Warren Buffett’s Berkshire Hathaway Inc., tumbled 10 percent in Hong Kong after projecting lower-than-expected first-quarter profit.
The MSCI Asia Pacific Index fell 1.9 percent to 132.18 as of 1:46 p.m. in Hong Kong, heading for the lowest close since Feb. 6. Almost five shares dropped for each that rose on the gauge. The Fed said yesterday its key rate, currently near zero, would be 1 percent by the end of 2015 and 2.25 percent a year later.
“We’re going to see more follow-through selling in Asia,” Toby Lawson, head of futures, options and cash equities trading for Asia Pacific at Newedge Group SA in Sydney, said by phone. “It’s significant that the Fed fund rate will rise to 1 percent by the end of 2015. We could see capital outflows from emerging markets back into the U.S., especially given residual concerns about China’s economy slowing.”
More
http://www.bloomberg.com/news/2014-03-20/asian-stocks-fall-as-fed-signals-higher-interest-rates.html
Offshore Yuan Bets Losing $3.5 Billion, Morgan Stanley Estimates
Mar 20, 2014 6:02 AM GMT
More than $3.5 billion has been wiped off the value of offshore yuan structured products,
Morgan Stanley estimates, as China’s slowing economy and mounting credit concerns weaken
the currency. Losses on Target Redemption Forwards were probably in the region of $3.5 billion at an offshore exchange rate of 6.2 per dollar, a level breached today in Hong Kong for the first time in almost a year, the U.S. bank said in a research note today. A slide to 6.38 is probable, a level that would lead to losses of $7.5 billion, according to the note.
“It’s inevitable the currency keeps weakening, and the higher-volatility environment implies that the pace will be quicker,” Geoffrey Kendrick, head of Asian currency and rates strategy at Morgan Stanley in Hong Kong, said in a phone interview today. “Data has been weak, and we have some credit concerns coming up.”
The offshore yuan dropped 0.34 percent to 6.2073 as of 1:29 p.m. in Hong Kong, according to data compiled by Bloomberg. That extended its decline this month to 1.4 percent.
TRFs betting on yuan appreciation are losing money as China’s central bank guides the currency lower with weaker fixings and this week’s widening of the trading band allows greater scope for declines. The yuan’s slide comes as economic data has trailed estimates and the nation’s first corporate bond default may foreshadow more to follow. China is targeting growth of 7.5 percent this year, which would be the slowest pace since 1990
More
Yellen Retreat From Policy Thresholds Doubted as Yields Rise
Mar 19, 2014 11:22 PM GMT
Janet Yellen said
the Federal
Reserve wasn’t altering policy when it overhauled the way it signals
changes in borrowing costs. Investors didn’t buy it. In her first press conference as Fed chair, Yellen emphasized that dropping a 6.5 percent unemployment threshold for considering an interest-rate increase “does not indicate any change in the committee’s policy intentions.”
Rather than paying heed to Yellen’s assertion, investors seized on an increase in Fed officials’ own interest-rate forecasts and Yellen’s comment that that borrowing costs could start rising “around six months” after it stops buying bonds. Yields on two-year Treasury notes climbed as much as 10 basis points, the most since June 2011.
More
We end for
the day with justice French style. Too big to fail French banksters are
jailable after all, provided of course, they’re a nobody trader that no one had
ever heard from, until Nick Leason style one day they did hear from.
Jerome Kerviel jailed but rogue trader doesn't have to pay back €4.9bn
Court upholds three-year prison sentence for Jerome Kerviel, while ordering the civil damages case to be retried
8:16PM GMT 19 Mar 2014
France's highest court has upheld
a prison sentence for rogue trader Jerome Kerviel, convicted of carrying out
one of the biggest trading frauds in history, but threw out the €4.9bn in civil
damages he had been ordered to pay back.
Kerviel almost took down his
bank, Societe Generale, seven years ago with €4.9bn euros in losses. Convicted
in 2010, he sees himself as a victim of a system that turned a blind eye to his
illegal trades as long as they made money for the bank.
The case drew attention worldwide
before the 2008 global financial crisis, and a court's ruling that Kerviel was
on the hook to repay the bank's staggering losses struck many as surprising:
The 37-year-old was last reported to be making a few thousand dollars per month
as a computer consultant.
Kerviel is currently in Italy,
walking back to Paris on a pilgrimage after meeting the Pope. In Tuscany, he
appealed to supporters to join him in his "march against injustice"
and said he wasn't on the run:
----The Court of Cassation - the high court
- upheld a lower court's three-year prison sentence for Kerviel, while ordering
the civil damages case to be retried by an appeals court.
----But at his Tuscan hotel, Kerviel said he felt "great relief" that the case appeared to be now turning more against the bank.
"It's a big, big victory
because the foundation of the case has collapsed ... and I'm going to fight so
that the truth comes out," he said, adding that prosecutors had said they
would seek his incarceration quickly. "I'd like Paris prosecutors to stop
being Societe Generale's lawyers, and start being the attorney for society
overall."
The appeals court had upheld
Kerviel's October 2010 conviction for forgery, breach of trust and unauthorised
computer use for covering up bets worth nearly €50bn - more than the market
value of the entire bank. It sentenced him to a five-year prison term - with
two years suspended - and ordered he pay €4.9bn in damages.
An internal report by the bank,
however, found managers failed to follow up on 74 different alarms about
Kerviel's activities.
More
Henry Hazlitt
At the Comex
silver depositories Wednesday
final figures were: Registered 52.76 Moz, Eligible 130.14 Moz, Total 182.90 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, modern Britain, and a warning to all. While social security and health care provision varies country to country, in the developed countries, creeping socialism and aging, longer living populations, are inexorably forcing up the cost of pensions and health care. On a fiat currency basis, where currency debasement is built in to the point of a fiat currency collapse at some point ahead, Britain, the EU, Japan and even America are all on the road to Reykjavik. But it’s now not a road it’s more like a Motorway, [Expressway, Freeway, Autobahn, your local version here.] On QE Forever and ZIRP, a massive pile up lies shortly ahead. Stay long fully paid up physical precious metals. There is not the slightest indication that modern voters are willing to change direction. We are on the unlimited speed motorway to damnation and fiat currency revulsion. Will next decade’s “Graphene Revolution” arrive in time to make a difference?
Below, modern GB and some interesting charts.
“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”
“Adam Smith” aka George Goodman.
Sixty years of spending: How the public purse has changed
20 March 2014 Last updated at 00:11
Former US President Ronald Reagan
said: "No government ever voluntarily reduces itself in size. Government
programmes, once launched, never disappear. Actually, a government bureau is
the nearest thing to eternal life we'll ever see on this earth!"
As far as UK government spending
goes, he was spot on.
As a proportion of our overall
economy the amount the government spends hasn't changed all that much since the
1950s. It has stayed in the region of 42%-48% of our national income. But what
it spends money on has changed dramatically. Politicians and voters in the 1950s
would be astonished at today's priorities.
Just
look at government spending for the financial year of 1953-54 - the year in
which wartime rationing finally ended. The government spent 22% of its money on
defence, compared with roughly half that on social security. Debt payments were
also a large part of government spending as it paid the price for huge
borrowing to finance World War Two.
Note also the biggest slice of
all, the enigmatic "other", which represents spending on areas like
local government, economic development and industry.
Moving forward a quarter of a
century, to the dying days of the Callaghan Labour government and the face of
spending has altered.
More data is available here so
we're better able to break it down.
Debt has crept up and investment
has come down as a percentage of government spending. Defence spending has been
eaten away.
But the big change is a more
interventionist, powerful government, with a well-established welfare state (a
trend repeated all over the developed world). In other words government was
simply doing more.
Note that social security over a
25-year period has already shot up, gobbling up one-fifth of government
spending.
By the turn of the new
millennium, with party poppers exploding everywhere, the public finances
continued their process of transformation.
Twenty-one years on, even after
the attempts by Margaret Thatcher to transform the state, social security and
health have hugely increased their share, between them accounting for some 43%
of all government spending.
To compensate, defence has been
squeezed (although in real terms actual spending hasn't fallen that much, it
has just lost its proportional share), so that it has nearly halved again.
By this time (after an extremely
rare period of a government running a surplus and paying down Britain's debt
stock) debt payments have gone down too, to 4.5% of spending (down some £8bn a
year from the late 70s).
The last complete set of data we
have is for the financial year 2012-13.
It shows that we've come a long
way since the early "austerity" 1950s. Though both are eras marked by
relatively tight public and private spending growth, the stuff that our
government spends money on is really very starkly different.
Defence spending has plummeted to
5.1% of our national income and we now have more admirals than major ships.
In contrast health and social
security account for nearly half of all government spending, something
politicians some 50 years ago would probably have found altogether incredible
(indeed it was a commonplace view that health spending would shrink over time
as people became healthier).
More
"For more than two thousand years gold's natural qualities made it man's universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper."
Hans F. Sennholz
The monthly Coppock Indicators finished February.
DJIA: +203 Up. NASDAQ: +353 Up. SP500: +255 Up.
The new Fed bubble continues, what could possibly go wrong?
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