Wednesday 16 July 2014

The Hammer of the Scotch.



Baltic Dry Index. 782  -16


LIR Gold Target in 2019: $30,000.  Revised due to QE programs.
"Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money."

Daniel Webster

First the good news, it goes all downhill from here. Of course it’s only really “good news” if you believe China’s official figures, which Chinese officials in Beijing do not. But why should Beijing’s numbers be any more accurate than Washington’s?

 "When I use a statistic," China said, in rather a scornful tone, "it means just what I choose it to mean—neither more nor less."

With apologies to Alice and Lewis Carroll.

China’s Expansion Accelerates to 7.5%

Jul 16, 2014 4:14 AM GMT
China’s economic growth accelerated for the first time in three quarters after the government sped up spending and freed up more money for loans to counter a property slump.

Gross domestic product rose 7.5 percent in the April-June period from a year earlier, the statistics bureau said today in Beijing, compared with the 7.4 percent median estimate in a Bloomberg News survey of analysts. June industrial production and first-half fixed-asset investment exceeded projections.

Premier Li Keqiang’s government has brought forward railway spending, reduced reserve requirements for some lenders and cut taxes to protect an annual growth goal of about 7.5 percent that’s under threat from a plunge in property construction and weaker home-price gains. Even with the support, analysts have forecast China is headed for the slowest full-year expansion since 1990

---- Industrial production rose 9.2 percent in June from a year earlier, topping the 9 percent median estimate of analysts and 8.8 percent in May. Retail sales increased 12.4 percent from a year earlier, compared with the 12.5 percent median estimate.

Fixed-asset investment excluding rural households increased 17.3 percent in the first half from a year earlier, the statistics bureau said. That compared with the median estimate of analysts for 17.2 percent growth, also the pace in the January-May period.
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In other China, somewhat less welcome news. China issues a warning to Uncle Sam, “stay off the grass” in polite terms.

China tells U.S. to stay out of South China Seas dispute

BEIJING Tue Jul 15, 2014 2:54am EDT
(Reuters) - China told the United States on Tuesday to stay out of disputes over the South China Sea and leave countries in the region to resolve problems themselves, after Washington said it wanted a freeze on stoking tension.

Michael Fuchs, U.S. deputy assistant secretary of state for Strategy and Multilateral Affairs, said no country was solely responsible for escalating tension in the region. But he reiterated the U.S. view that "provocative and unilateral" behaviour by China had raised questions about its willingness to abide by international law.

China claims 90 percent of the South China Sea, which is believed to contain oil and gas deposits and has rich fishery resources. Brunei, Malaysia, the Philippines, Vietnam and Taiwan also lay claim to parts of the sea, where about $5 trillion of ship-borne trade passes every year.

China's Foreign Ministry repeated that it had irrefutable sovereignty over the Spratly Islands, where most of the competing claims overlap, and that China continued to demand the immediate withdrawal of personnel and equipment of countries which were "illegally occupying" China's islands.

"What is regretful is that certain countries have in recent years have strengthened their illegal presence through construction and increased arms build up," the ministry said in a statement.

China would resolutely protect its sovereignty and maritime rights and had always upheld resolving the issue based on direct talks with the countries involved "on the basis of respecting historical facts and international law", it added.

China "hopes that countries outside the region strictly maintain their neutrality, clearly distinguish right from wrong and earnestly respect the joint efforts of countries in the region to maintain regional peace and stability", it added, in reference to the United States.
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Now comes that sinking feeling. In bullying France and Russia, spying on more Germans than the Stasi, and trying to force continental Europeans to eat American genetically modified foods, annoying China India and Brazil over IMF reform, Washington’s bullies seem to have gone too far. Instead of talking softly and carrying a big stick, Uncle Scam has been talking loudly like Germans and smashing everyone in sight with his big stick. 
 Unsurprisingly, those on the wrong side of this new policy are less than impressed.

Yesterday the BRICs decided to fight back. Our currency wars are now about to go nuclear. Stay long fully paid up physical gold and silver. Nothing good for the fiat currencies lies in this development. Will the BRICs eventually call time on the IMF and World Bank? From London, this morning, that’s the logical conclusion to draw.

"It's very good jam," said Uncle Scam.
"Well, I don't want any to-day, at any rate."
"You couldn't have it if you did want it," Uncle Scam said.
"The rule is, jam to-morrow and jam yesterday — but never jam to-day."

BRICS Agree on $50 Billion Bank With Something for Everyone

Jul 16, 2014 12:20 AM GMT
Leaders of the five BRICS nations agreed on the structure of a $50 billion development bank by granting China its headquarters and India its first rotating presidency. Brazil, Russia and South Africa were also granted posts or units in the new bank.

The leaders also formalized the creation of a $100 billion currency exchange reserve, which member states can tap in case of balance of payment crises, according to a statement issued at a summit in Fortaleza, Brazi

Both initiatives, which require legislative approval, are designed to provide an alternative to financing from the International Monetary Fund and the World Bank, where BRICS countries have been seeking more say. The measures coincide with a slowing of economic growth in the five countries to about 5.4 percent this year from 10.7 percent in 2007, according to economists surveyed by Bloomberg.

“The BRICS are gaining political weight and demonstrating their role in the international arena,” Brazilian President Dilma Rousseff said after a signing ceremony.
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BRICS set up bank to counter Western hold on global finances

By Alonso Soto and Anthony Boadle FORTALEZA Brazil Wed Jul 16, 2014 12:42am EDT
(Reuters) - Leaders of the BRICS emerging market nations launched a $100 billion development bank and a currency reserve pool on Tuesday in their first concrete step toward reshaping the Western-dominated international financial system.

The bank aimed at funding infrastructure projects in developing nations will be based in Shanghai, and India will preside over its operations for the first five years, followed by Brazil and then Russia, leaders of the five-country group announced at a summit.

They also set up a $100 billion currency reserves pool to help countries forestall short-term liquidity pressures.

The long-awaited bank will be called the New Development Bank.

It is the first major achievement of the BRICS countries - Brazil, Russia, India, China and South Africa - since they got together in 2009 to press for a bigger say in the global financial order created by Western powers after World War Two and centered on the International Monetary Fund and the World Bank.

The BRICS were prompted to seek coordinated action following an exodus of capital from emerging markets last year, triggered by the scaling back of U.S. monetary stimulus.

The new bank reflects the growing influence of the BRICS, which account for almost half the world's population and about one-fifth of global economic output.

"It will help contain the volatility faced by diverse economies as a result of the tapering of the United States' policy of monetary expansion," Brazilian President Dilma Rousseff said.

"It is a sign of the times, which demand reform of the IMF," she told reporters at the close of the summit.
China, holder of the world's largest foreign exchange reserves, will contribute the bulk of the contingency currency pool, or $41 billion. Brazil, India and Russia will chip in $18 billion each and South Africa $5 billion.

---- China's official Xinhua news agency, citing unidentified sources at the Chinese Finance Ministry, said the new bank would give developing countries a greater say in the international financial order, a theme President Xi Jinping struck ahead of the summit.

The new bank "will promote the global system of economic governance to develop in a just and fair direction," the agency said.

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The End of the World Bank?

Jul 15, 2014 2:05 PM EDT
The new international financial institutions that Brazil, Russia, India, China and South Africa are creating this week at their summit meeting in Brazil would have made little sense in the world of Western triumph Francis Fukuyama described in his 1989 article, "The End of History?" That world, however, didn't materialize.

In this one, the BRICS nations' rebellion against Western-run pillars of the global financial system is more than just a political gesture: It is a threat and a bargaining tool.

The World Bank has a subscribed capital of $223.2 billion, paid in or payable by 188 countries. The U.S. is the biggest shareholder with 16 percent. China is the third biggest, with 5.76 percent, which makes its share of the World Bank's capital $12.86 billion. So the $10 billion it agreed to put into the BRICS Development Bank won't be much smaller. Russia, India, Brazil and South Africa, all contributing equally, will pay in more money to the BRICS bank than they do to the World Bank.

The contributions that nations make to the International Monetary Fund -- which has $315 billion in immediately available resources and more than $1 trillion it can get under certain conditions -- are also determined by the relative sizes of their economies. The U.S., again, is the biggest contributor. Russia's IMF quota is $9.19 billion -- roughly half the $18 billion it will provide to the BRICS nations' last-resort pool, the $100 billion Contingent Reserve Arrangement. China is contributing $41 billion to the reserve, almost three times its IMF quota.

These new institutions should not be easily dismissed: They are a big deal for the contributing countries. They will not rival the World Bank and the IMF in size, yet they don't need to: For now, at least, they will be far less global in terms of their responsibilities.

The reasons for building up alternatives to the IMF and the World Bank are in part political. Ukraine, for example, is now the IMF's fourth-largest debtor.

---- The IMF's other big debtors are not ones the five big developing nations care about: Why would they give $23.5 billion to Greece, $22.9 billion to Portugal and $19.4 billion to Ireland if these nations' share in their trade balances are negligible? By helping to bankroll bailouts on the periphery of the European Union, the BRICS countries propped up a global financial system that doesn't necessarily benefit them. The BRICS paid up, but they could easily exist in a world without a euro area. They resent the de facto power the U.S. and EU have over their money.
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In EUSSR news, it’s been a bad year for German sausages and beer. Kartoffelwurst it seems to me. It’s left a whole lot of sour Krauts knackwurst  and poorer.

The Germans are exceedingly fond of Rhine wines; they are put up in tall, slender bottles, and are considered a pleasant beverage. One tells them from vinegar by the label.

Mark Twain.

German sausage cartel caught bangers to rights

Wurst-case scenario for sausage makers after anti-cartel watchdog slaps down record €338m fine for price-fixing
Tuesday 15 July 2014 15.13 BST
It has been quite a year for price-fixing scandals in Germany, but this must be one of the wurst.

Some of the country's biggest food producers have been fined €338m (£267m) for cooking up a plan to fix the price of sausages.

The Federal Cartel Authority (FCA), Germany's competition watchdog, said 21 manufacturers including the country's biggest producer, Zur-Mühlen-Gruppe, had been part of a cartel that had stitched up sausage prices for decades. The Zur-Mühlen-Gruppe has denied the allegations.

"The price-fixing agreements were practised over many years," said the FCA president, Andreas Mund. "The overall amount of fines seems high at first glance but has to be seen in perspective in view of the large number of companies involved, the duration of the cartel, and the billions in turnover achieved in this market."

The fine follows a wave of white-collar crime that has left a bad taste in the mouth of millions of Germans, with sugar producers and brewers also handed large fines for fixing prices.

The sausage cartel has been dubbed the Atlantic Group after the Hotel Atlantic in Hamburg where the sausage producers first met. The sausage inquiry was launched after the FCA received an anonymous tip off.
The bumper fine will be shared among 33 individuals and 21 producers – some of them household names in Germany such as Böklunder, Wiesenhof and Rügenwalder.

The FCA has handed out record fines totalling more than €900m compared with €240m last year. At the start of this year,11 breweries, including Danish brewer Carlsberg, were fined €338m, while the country's three largest sugar producers also received a €280m fine for price fixing.
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We end for the day, with the EC’s new liar-in-chief Juncker, giving the Scottish Nationalists independence campaign, a smashing knockout “Glasgow kiss.” But will anyone believe in anything he says? Who knew that Juncker was a closet Cameronian all along, ready to hammer the scotch?

 To succeed in life, you need two things: ignorance and confidence.

Mark Twain.

Juncker deals blow to Alex Salmond's EU claims

The new European Commission's president says no new states will be given EU membership for the next five years despite the SNP's claims a separate Scotland's membership would be fast-tracked.

Alex Salmond’s claims an independent Scotland would start life in the EU have suffered a major blow after the European Commission’s new president said no new states would be admitted for the next five years.

Speaking shortly before he was formally appointed to the powerful role, Jean-Claude Juncker said the EU would “mark a pause” in its enlargement and “consolidate” with 28 member states.

The intervention has potentially major ramifications for the independence debate as Mr Salmond has argued Scotland’s membership would be negotiated in the 18 months between a Yes vote in September and leaving the UK in March 2016.

But Mr Juncker’s statement suggests Scotland would be outside the EU for at least three-and-a-half years after its independence day.

Although admitting a separate Scotland would not involve a geographical expansion of the EU’s boundaries, it would mean increasing the number of member states above Mr Juncker’s cap of 28.

The new commission president’s warning was deeply embarrassing for the nationalists, coming barely a fortnight after they boasted he was a man they could “do business with” if there is a Yes vote in September.
José Manuel Barroso, Mr Juncker’s predecessor, had angered the separatists by warning it would be "extremely difficult, if not impossible" for a separate Scotland to join the EU.

Mr Salmond today insisted that Westminster represents the most significant threat to Scotland being inside the EU, highlighting the appointment of the Eurosceptic Philip Hammond as Foreign Secretary.

But the pro-UK Better Together campaign and the unionist parties said Mr Juncker was merely the latest in a long list of international figures to warn independence would jeopardise Scotland’s EU status.

Douglas Alexander, Labour’s Shadow Foreign Secretary, said the intervention was a “hammer blow for the nationalists.”

"We need only take our heads out of the sand to see clearly that interventionism not only has failed to provide the promised something-for-nothing, but has led to all sorts of undesirable consequences. Indeed, many are just beginning to realize that we are moving towards disaster even though we have been on a wrong heading for decades."

Leonard Read

At the Comex silver depositories Tuesday final figures were: Registered 56.92 Moz, Eligible 118.00 Moz, Total 174.92 Moz.  

Crooks and Scoundrels Corner

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

Another day in our new lawless age,  another high tech hopium bubble and bust, this time in Spain. The first of many to come, I suspect. Our crooked central banksters pushing QE Forever and Zirp have a lot to swing for when the law eventually catches up with them. Plus Canada’s province of the Biggest Crooks does it again.

It’s morally wrong to let a sucker keep his money.

Ebenezer Squid, with apologies to W. C. Fields.

Gowex Chief Orchestrated Sham Hiding Lies in Plain Sight

By Greg Farrell, Jesse Drucker and Rodrigo Orihuela Jul 15, 2014 2:46 PM GMT
In the end, the most shocking part of Let’s Gowex SA (GOW)’s implosion this month wasn’t that the Wi-Fi company, worth 1.9 billion euros ($2.6 billion) just three months ago, was a fraud. It’s that it wasn’t spotted sooner.

Gowex founder Jenaro Garcia fabricated clients and contracts, listed a defunct company as a holding company for his stake in Gowex, and put numbers in reports that didn’t make any sense, even as matters of basic arithmetic.

It was all so brazen that Gotham City Research LLC, the short-seller whose July 1 report exposed the sham, even began to question whether its conclusion -- that Gowex was overstating revenues -- was off-base.

“We were looking for things that might undermine our view,” Gotham founder Daniel Yu said in an interview last week in New York. “It was like that movie ‘Groundhog Day’ where we’re waking up, expecting to see a different outcome, but each day validates our thesis.”

Garcia owned up to the deeds, resigning from the company on July 5 and saying on Twitter he made a “confession” and would cooperate with investigators. He met privately with a judge yesterday and admitted to falsifying financial accounts as early as 2005, using frontmen to create companies that acted as fictitious clients, and stashing more than 3 million euros in a Luxembourg bank.

Yu and his team spent eight months poring over publicly available information about Gowex. They spoke to Garcia, other company representatives, and competitors. Their conclusions sparked a sell-off in Gowex shares, which fell 60 percent before trading was suspended on July 3. The company filed for creditor protection yesterday.

Authorities are now sifting through the wreckage of the one-time darling of the Spanish tech community and the alternative exchange on which it traded. Meanwhile, investors chasing bigger returns in remote corners of the public markets have another reminder that some entrepreneurs who steer clear of highly regulated exchanges do so for a reason.

Garcia and his lawyer didn’t respond to calls or an e-mail seeking comment. They exited a closed-door meeting with Judge Santiago Pedraz yesterday without speaking to reporters gathered outside the national court. In a statement, Pedraz said charges could include falsifying accounts and the improper use of insider information, which could mean more than a decade behind bars for Garcia.

----Gowex was one of the best performers on the MAB stock exchange, an alternative bourse for small businesses. MAB “is cooperating with all the relevant authorities to clarify the facts,” the exchange said in a statement on its website. “The personal actions and grave irregularities that have been made public with regards to Let’s Gowex cannot cast doubt on MAB.”

“The whole system, from regulators to investors, didn’t work properly,” said Tontxu Campos, director of the Entrepreneurship Center at the Deusto Business School in Bilbao, Spain. “But at the end of the day the core failure is the lack of honesty and ethics by the entrepreneur.”

In retrospect, many clues suggesting earnings manipulation were out in the open, available to anyone willing to examine offer documents, earnings statements and industry research.
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Newsletter author accused of hyping stocks to artificially raise prices

Last updated Tuesday, Jul. 15 2014, 5:27 PM EDT
Investors reading the popular Elite Stock Report newsletter in 2010 learned dramatic news about a largely unknown penny stock called Guinness Exploration Inc.

The company, whose shares traded on the U.S. over-the-counter market, was sitting on one million ounces of recoverable gold in a property in the Yukon, the newsletter reported, and its share price could increase 10-fold within a year. Investors “could be taking your profits out by the truckload,” the report said.

It sounded too good to be true, and it turns out it was.

Colin McCabe, the Abbotsford, B.C.-based author of the investment newsletter, received over $5-million (U.S.) to write stock reports in 2010 that were so glowing they read like “tabloids one might expect to see at a grocery check-out” – and wrote about Guinness without even knowing who was ultimately behind the payments he received, the British Columbia Securities Commission ruled in a decision released Tuesday.

The regulator concluded Mr. McCabe misled investors with his inflated claims and acted “contrary to the public interest” when he wrote promotional articles without doing any apparent research, without verifying facts about the companies he touted, and without relying on any concrete information to support his conclusions.

The hearing panel said he “simply made up a non-existent, but sensational, resource estimate” for the Yukon property, which he called a “discovery so massive it makes Fort Knox look trivial.”

----The hearing panel rejected Mr. McCabe’s arguments that investors knew the articles were paid advertisements that contained statements of “corporate optimism,” ruling the reports were “blatant touting, not mere advertisement.”

Lang Evans, manager of special investigations at the BCSC, said the case casts a harsh light on egregiously promotional newsletters, saying they reinforce perceptions that B.C. is a haven for penny stock frauds.

“It’s a paid-for tout that purports to be research, and it’s not,” Mr. Evans said in an interview. “And it’s not in the public interest, especially from a jurisdiction like B.C. that has had our problems over the years with being a source of suspect promotional activity.”

The promotions ultimately hurt legitimate small-cap companies seeking financing, he added.

“Every dollar that goes into one of these suspect promotions is denied from somebody who is legitimate in their pursuit of their business. This is just the old shell game again -- get your shares cheap, pay somebody to tell the investing public it’s the greatest thing since sliced bread, and then dump into the ensuing demand.”

The commission panel also ruled against Erwin Speckert, alleging he was a middle-man who paid Mr. McCabe for his reports on Guinness Exploration. He contacted Mr. McCabe to order glowing reviews for Guinness without ever telling Mr. McCabe his last name or giving him any contact information except for a fax number. His name came to light later during the BCSC investigation.

Mr. McCabe was paid for his promotional reports by faxing an invoice to a fax number in Switzerland. The BCSC said Mr. Speckert, who runs a marketing company, arranged for funds to be transferred to Mr. McCabe’s bank account in Surrey, B.C., from an offshore account in Switzerland.

Mr. Speckert, who was accused of acting contrary to the public interest, has never disclosed who was behind the payments he funnelled to Mr. McCabe. He refused to tell the BCSC the names of the clients he represented, claiming to do so would violate privacy laws in Switzerland.
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Old Ebenezer Squid had one-way pockets. He would walk ten miles in the snow to chisel an orphan out of tuppence.

With apologies to P.G. Wodehouse and the Duke of Dunstable

The monthly Coppock Indicators finished June

DJIA: +169 Down. NASDAQ: +332 Down. SP500: +241 Down.  The Fed’s final bubble still grows, but …..

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