Japan 1 China 4. China Away Win.

Baltic Dry Index. 2461 -23

LIR Gold Target by 2019: $3,000.

History fails to record a single precedent in which nations subject to moral decay have not passed into political and economic decline. There has been either a spiritual awakening to overcome the moral lapse, or a progressive deterioration leading to ultimate national disaster.

General Douglas MacArthur.

Right after America’s leading agency for calling recessions after they happened, the National Bureau of Economic Research, declared America’s latest unexpected recession was over, one of America’s greatest “great vampire squids” said you’ve got to be joking. Yesterday Warren Buffett declared “We are still in recession”. Below, Reuters covers the great man’s shared pearls of wisdom. Better warm up the helicopters on the roof of the Fed.

I think we have more machinery of government than is necessary, too many parasites living on the labor of the industrious.

Thomas Jefferson.

Warren Buffett: "We're still in a recession"

NEW YORK Thu Sep 23, 2010 10:50am EDT

NEW YORK (Reuters) - Billionaire investor Warren Buffett said the U.S. economy remains in recession, disputing this week's assessment by a leading arbiter of economic activity that the downturn ended more than a year ago.

"We're still in a recession," Buffett told CNBC television in an interview broadcast on Thursday. "We're not gonna be out of it for a while, but we will get out."

On Monday, the National Bureau of Economic Research said the world's largest economy ended an 18-month recession in June 2009, but cautioned that its assessment did not mean normal activity had resumed.

Buffett said he defines a recession differently from the NBER, saying it ends when real per capita gross domestic product returns to its pre-downturn level.

----Buffett, 80, runs Berkshire Hathaway Inc, which has roughly 80 operating businesses. "A great majority" of these businesses are "coming back slowly," he said.

Berkshire's operations cover a broad swath of the economy, including the Burlington Northern Santa Fe railroad, Dairy Queen ice cream, Geico auto insurance, and luxury jewelers such as Borsheim's.

Shipments at Burlington Northern are "61 percent of the way back," Buffett said. "Our carpet business, our brick business, our insulation business, they're not back 61 percent, but they are moving back."

On Tuesday, the U.S. Federal Reserve, which has already driven short-term lending rates to near zero, said it is prepared to provide additional stimulus to support economic expansion and avert possible deflation.

"We've used up a lot of bullets," Buffett said. "And we talk about stimulus. But the truth is, we're running a federal deficit that's 9 percent of GDP. That is stimulative as all get out."

http://www.reuters.com/article/idUSTRE68M2TZ20100923?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+reuters/topNews+(News+/+US+/+Top+News)&utm_content=My+Yahoo

Next, stay long precious metals and be prepared for the clash of titans. Both parties are now locked into positions where there can only be one winner one loser, with the collateral damage to the rest of the world economy. Below the NY Times covers yesterday’s dramatic upping the ante by President Obama v China. At least one unnamed Chinese official seems to be misreading America’s position as entirely posturing for November’s mid-term election, according to the NY Times coverage. With a harder line Congress coming no matter who wins the election in November, it’s complete nonsense to think this issue will go away once the election is over.

With Warning, Obama Presses China on Currency

By DAVID E. SANGER Published: September 23, 2010

UNITED NATIONS — President Obama increased pressure on China to immediately revalue its currency on Thursday, devoting most of a two-hour meeting with China’s prime minister to the issue and sending the message, according to one of his top aides, that if “the Chinese don’t take actions, we have other means of protecting U.S. interests.”

But Prime Minister Wen Jiabao barely budged beyond his familiar talking points about gradual “reform” of China’s currency policy, leaving it unclear whether Mr. Obama’s message would change Beijing’s economic or political calculus.

The unusual focus on this single issue at such a high level was clearly an effort by the White House to make the case that Mr. Obama was putting American jobs and competitiveness at the top of the agenda in a relationship that has endured strains in recent weeks on everything from territorial disputes to sanctions against Iran and North Korea.

Democrats in Congress are threatening to pass legislation before the midterm elections that would slap huge tariffs on Chinese goods to undermine the advantages Beijing has enjoyed from a currency, the renminbi, that experts say is artificially weakened by 20 to 25 percent.

----One Chinese official speculated Thursday that Mr. Obama’s insistence on spending so much time on the issue was motivated by pre-election politics, suggesting that the pressure might abate after early November.

While the United States has been pressing China for years to lift the strict controls on its currency, which keep Chinese exports competitive and more factory workers employed, American voters and lawmakers have only recently seized on exchange rates as a potent political issue. Mr. Obama pressed much harder on Thursday than during a visit to Beijing last year, perhaps because a Chinese commitment several months ago to allow the value of the currency to rise has resulted in a change of less than 2 percent.

The meeting with Mr. Wen came as the United States appeared to lean toward its longtime ally, Japan, in an increasingly heated standoff between China and Japan over who has claim on territory near the South China Sea.

http://www.nytimes.com/2010/09/24/world/24prexy.html?hp

The most likely outcome now is the President Obama is forced to deliver something ahead of November’s election. Superficially he’s the winner, Premier Wen the loser. America wins out over China. China, the rising power is seen to have over reached and been slapped down, by the old fading power. If that in fact happens, my guess is that China will get as focused as Russia did after the US fomented the Ukraine’s Orange revolution on Russia’s backdoor.

Below, Japan manipulates its currency. Yet Washington is Japan’s friend in its spat with China over disputed islands that were supposed to be transferred back in the settlement at the end of WW2. Thanks to the Great Nixonian Error of 1971, Washington is now both against and for currency manipulation, in the ever more dysfunctional regime of the fiat dollar reserve standard. Stay long precious metals for the day this insanity ends.

U.S. dollar gains on talk of yen intervention

TOKYO (MarketWatch) — The U.S. dollar edged higher against most other currencies Friday afternoon in Asia, climbing back above 85 yen after speculation that Japanese authorities might have intervened again in foreign exchange markets.

Japanese Finance Minister Yoshihiko Noda declined comment on whether authorities intervened, according to reports.

“Large-lot selling orders” placed after 1 p.m. in Tokyo weakened the yen, and market players were betting that the Bank of Japan intervened in the currency market at the government’s request, Nikkei reported

http://www.marketwatch.com/story/us-dollar-gains-on-talk-of-yen-intervention-2010-09-24

But Japan also quietly caved in to China’s demands and is releasing the Chinese captain held for allegedly resisting arrest by Japan’s navy. Below, the NY Times on recent developments. Anyone think China’s arrests were linked? No I didn’t think so either. Still I wouldn’t want to be short precious metals across the weekend.

Gold still represents the ultimate form of payment in the world.

Alan Greenspan.

Japan Said to Free Chinese Captain Amid Tensions

By KEVIN DREW and IAN JOHNSON Published: September 24, 2010

HONG KONG — Prosecutors in Japan are releasing the Chinese captain of a fishing boat that collided with Japanese coast guard ships this month, Japanese news agencies reported on Friday.

However, in a sign that relations between two of the world’s three largest economies remained tense, prosecutors said they have not yet decided whether to file charges against the captain and that the decision would be based on the future progress in ties between Japan and China, the Kyodo news service reported.

It was not immediately clear whether the captain was still in custody, with some reports saying that he had already been freed.

Chinese analysts said the move could help ease tension between the two economic partners. Wang Xiangsui, a foreign policy analyst at the Beijing University of Aeronautics and Astronautics, said China especially objected to Japan using its domestic laws to deal with the captain. This implied that the territories were Japanese and not subject to negotiation.

http://www.nytimes.com/2010/09/25/world/asia/25chinajapan.html?ref=world

China Arrests Four Japanese Amid Tensions

By IAN JOHNSON Published: September 23, 2010

BEIJING — In what could be another sign of rising tensions between Japan and China, the authorities here said Thursday that four Japanese had been arrested for videotaping military installations.

The terse report by the official Xinhua news agency said four Japanese citizens were detained at a military base near the city of Shijiazhuang, about 190 miles southwest of Beijing.

“Currently, the case is being investigated,” said a statement issued by authorities and carried on the Web site of China Daily, a government-controlled newspaper. Japan’s Foreign Ministry confirmed that four of its citizens were being held, according to Reuters.

It was unclear whether the arrests were linked to tensions set off this month over a Chinese fishing boat that collided with — the Japanese say rammed — two Japanese naval ships near uninhabited islands known as Senkaku in Japan and Diaoyu in China. The islands, northeast of Taiwan, are controlled by Japan but claimed by China.

http://www.nytimes.com/2010/09/24/world/asia/24chinajapan.html?ref=asia

This Act (the Federal Reserve Act, Dec. 23rd 1913) establishes the most gigantic trust on earth. When the President (Woodrow Wilson) signs the Bill, the invisible government of the Monetary Power will be legalized

Charles Lindbergh Sr.

At the Comex silver depositories Thursday, final figures were: Registered 53.90 Moz, Eligible 56.94 Moz, Total 110.84 Moz.

+++++

Crooks and Scoundrels Corner.

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

No crooks today unless like me you count the whole Bilderberger “United States of Europe” project crooked. Today, Ireland and Club Med move closer to default. Ireland’s economy is contracting again, and Germany’s recovery is suddenly slowing. It’s pretty obvious that Ireland and Club Med need to add restructuring of debt, to their arsenal of austerity tools to overcome the near bankruptcy of their economies. With Ireland heading into recession and deflation, in effect it’s now the ECB guaranteeing the depositors in Ireland’s banks. But will the ECB really back stop the Irish government, and if they do, does that mean they’re now going to guarantee the depositors in all Eurozone banks? With what? It might be time to move deposits out of Ireland’s banks.

Democracy is a form of government that cannot long survive, for as soon as the people learn that they have a voice in the fiscal policies of the government, they will move to vote for themselves all the money in the treasury, and bankrupt the nation.

Karl Marx.

Ireland faces double dip, mulls restructuring of junior bank debt

Irish borrowing costs have surged to a post-EMU record after Ireland's recovery buckled over the summer and Dublin said creditors of Anglo Irish Bank may be asked to "share" losses, a warning to bondholders that the dam may at last be breaking on debt restructuring in the eurozone.

By Ambrose Evans-Pritchard Published: 7:24PM BST 23 Sep 2010

The Irish economy contracted at a 1.2pc rate in the second quarter, making Ireland the first country since the Great Recession to face a double-dip downturn. The setback is blow for hopes that Ireland can slowly grow its way out of debt, and may renew concerns that fiscal austerity without other forms of relief risks tipping the economy into a self-reinforcing spiral.

Ireland has been praised for grasping the nettle early in its debt crisis with public sector wage cuts of 13pc, leading the way for other eurozone debtors in trouble. But the reward for good behaviour has yet to come.

Dr Issing said it would be "suicide" for any country to leave the euro, but it could happen anyway if a state finds itself "in such a disastrous situation that extreme parties get a majority". A recent poll by the German Marshall Fund found that 55pc of EU citizens now think the euro is a "bad thing".

The Irish upset came as the PMI purchasing managers index for eurozone fell sharply in August. Manufacturing orders fell to the lowest in 14 months. The German PMI fell to an eight-month low of 54.8, a sign that Germany's mini-boom is losing steam. "This data has marked slowdown written all over it," said Martin van Vliet from ING.

Spreads on Ireland's 10-year bonds have risen to 405 basis points. Gavan Nolan from Markit said credit default swaps measuring bond risks on Irish banks are nearing the levels of Icelandic banks shortly before they defaulted two years ago, reaching 955 for Anglo Irish (senior debt), 615 for Allied Irish and 530 for Bank of Ireland.

Brian Lenihan, the finance minister, sent shivers through debt markets by refusing to rule out a haircut for holders of Anglo's €2.4bn subordinated debt during a hearing of the Dail's finance committee.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8021463/Ireland-faces-double-dip-mulls-restructuring-of-junior-bank-debt.html

Another weekend, and our weather is now decidedly autumn like here in the rural Thames Valley. We even have the slight chance of frost. Getting Chinese, Japanese, American relations back up to merely frosty, would be a big improvement if achieved this weekend. Nothing good comes from the clash of Titans. Our Nixonian world experiment in fiat currency is drawing to its end. As foreseen by 18^th and 19^th century economists, nothing good for most comes from a world of bankster currency. Have a great weekend everyone.

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

John Maynard Keynes.

The monthly Coppock Indicators finished August:

DJIA: +243 Down. NASDAQ: +366 Down. SP500: +243 Down.

The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. August is the third down month in a row and “crash season” approaches.

Technorati Tags: Buffett recession,China v USA,China v Japan,Japan blinks,Ireland double dips,Germany slows,Soveriegn default looms,REEs,HREs,global cooling

Battle of Britain Wednesday.

Baltic Dry Index. 2940 -36

LIR Gold Target by 2019: $3,000.

Date: 15th September 1940

• Weather: Fair with some cloud patches. Fine during the evening.
• Day: Heavy attacks on London, broken up by Fighter Command. Highest German losses since 18 August [185 claimed by the RAF] force a serious rethink by the German High Command.
• Night: Heavy damage to London.

Enemy action by day

The enemy delivered two major attacks on London during the day. Later smaller formations attacked both Portland and targets in the Southampton area.

Our fighters destroyed 176 enemy aircraft (124 bombers and 53 fighters) plus 41 probable and 72 damaged.

AA destroyed 7 enemy aircraft plus 4 probable.

Our casualties are 25 aircraft and 13 pilots killed or missing

First Major Attack

At 1100 hours enemy aircraft began to mass in the Calais/Boulogne area and at 1130 hours the leading wave of about 100 aircraft crossed the coast between Dover and Dungeness, followed by a second wave of 150 aircraft. Objectives appeared to be in the London district.

No 11 Group sent up 16 Squadrons to meet the attack, and No 12 Group provided 5 Squadrons to patrol Debden and Hornchurch.

Approximately 100 enemy aircraft succeeded in reaching Central London.

More.

http://www.raf.mod.uk/Bob1940/september15.html

Seventy years ago today, Great Britain and the Empire won the second World War. Nobody knew it at the time. After two months of trying to destroy the Royal Air Force to allow for an invasion that wouldn’t turn into a German Dunkirk, on Sunday September 15^th 1940, in the blue skies over London and southeast England, German planes were shot out of the sky all day and into the night. The R.A.F. far from being beaten was getting stronger. The Luftwaffe took its largest loss of the blitz. Though the figures were inflated for propaganda purposes, the actual 60 aircrew losses and another 100 crippled planes and crews were just too much for the Luftwaffe to carry on taking. They would never attack in such numbers in daylight again. Great Britain would not be forced out of the war into an ignominious peace, leaving Europe to Hitler’s criminality. Though fighting on alone for another 10 months until the Nazis insanely attacked Russia, seventy years ago today, God and the RAF decided the fate of Europe. By January 1942, the British Empire was joined by Russia and America in starting the decline of Hitlerism. An unsung anniversary that should be celebrated in Europe with a continent sized holiday.

We open this morning with the already black sky in China getting darker. Uncle Sam’s largest creditor is tired of being hustled by its dead-beat debtor. Rather like the Germans getting tough with dead-beat Greeks, many in China think it’s time to do a little hustling back themselves. Below, the Telegraph covers the dispute between the two giants who really can tip the world into a 1930s style depression. Stay long precious metals in case one or both lose the plot. A 1930s style depression will end the fiat currency scam for all time. “The next Lehman’s” will appear in droves.

"I was alarmed at my doctor's report: He said I was a sound as a dollar."

Ronald Reagan.

Chinese think tank warns US it will emerge as loser in trade war

A State Council think-tank in China has warned Washington that the US will come off worst in a trade war if it imposes sanctions against Beijing over the two nations' currency spat.

By Ambrose Evans-Pritchard Published: 6:16PM BST 14 Sep 2010

Ding Yifan, a policy guru at the Development Research Centre, said China could respond by selling holdings of US debt, estimated at over $1.5 trillion (£963bn). This would trigger a rise in US interest rates. His comments at a forum in Beijing follow a string of remarks by Chinese officials questioning US credit-worthiness and the reliability of the dollar.

China's authorities seem split over how to respond to moves on Capitol Hill for legislation to punish Beijing for holding down the yuan. The central bank has ruled out use of its "nuclear weapon", insisting that it would not exploit its $2.45 trillion of foreign reserves for political purposes. "The US Treasury market is a very important market for China," it said.

----- Mr Ding reflects thinking among some in the Poltiburo, who seem convinced that the US is in decline and that China's rise as an exporter of goods and capital give it the upper hand.

"They are utterly wrong," said Gabriel Stein from Lombard Street Research. "The lesson of the 1930s is that surplus countries with structurally weak domestic demand come off worst in a trade war."

He described the implicit threat to sell Treasuries as "empty bluster" because Beijing's purchase of these bonds is a side-effect of its yuan policy. "Bring it on: it will weaken the dollar, which is what the US wants. The interest rate effect can be countered by the Fed."

"Some Chinese officials seem to believe that buying Treasuries underpins US public spending. In fact China's mercantilist policy is forcing the US to run large deficits against its own interest. China should be terrified of a trade war."

http://www.telegraph.co.uk/finance/currency/8002719/Chinese-think-tank-warns-US-it-will-emerge-as-loser-in-trade-war.html

We end today’s travel shortened update, with a repeat of the great Jeremy Grantham’s summer change of heart. He joined the deflationist camp to ride out the next several months. Mid September, and with austerity just about to hit in the UK and increasingly across Europe, and with UK unions now getting bolshie and threatening the weak coalition government with a return to the chaos of the Labour Government 1970s, and tax increases coming next year in the UK and America, bad things start to happen from here onwards fast. Stay long precious metals. In the UK, at least, a weak coalition government is already under pressure from Liberal Democrat MP’s still believing in a free lunch. My guess is that if the unions carry out their threats of coordinated strike action this winter, the UK’s weak government will be toppled. Of course, that won’t do anything about making the UK’s position any better. Exactly the opposite, the unions will be aggravating the UK’s already serious economic problems, and even higher unemployment is the likely outcome. An even weaker Sterling the long term result.

"The leaders of the French Revolution excited the poor against the rich; this made the rich poor, but it never made the poor rich."

Fisher Ames, 1758-1808.

Well, I, for one, am more or less willing to throw in the towel on behalf of Inflation. For the near future at least, his adversary in the blue trunks, Deflation, has won on points. Even if we get intermittently rising commodity prices, which seems quite likely, the downward pressure on prices from weak wages and weak demand seems to me now to be much the larger factor. Even three months ago, I was studiously trying to stay neutral on the “flation” issue, as my colleague Ben Inker calls it. I, like many, was mesmerized by the potential for money supply to increase dramatically, given the floods of government debt used in the bailout. But now, better late than never, I am willing to take sides: with weak loan supply and fairly weak loan demand, the velocity of money has slowed, and inflation seems a distant prospect. Suddenly (for me), it is fairly clear that a weak economy and declining or flat prices are the prospect for the immediate future.

Jeremy Grantham.

http://www.gmo.com/websitecontent/JGLetter_SummerEssays_2Q10.pdf

At the Comex silver depositories Tuesday, final figures were: Registered 53.97 Moz, Eligible 57.51 Moz, Total 111.48 Moz.

+++++

Crooks and Scoundrels Corner.

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

Today, it’s the turn of the 3 whitewash inquiries into the spurious science that pours out of the dodgy scientists at the University of East Anglia’s Climate Research Unit. Below, the loony leftist Guardian, that’s bought into the “man-made global warming from CO2” nonsense, hook line and sinker, covers the story. Even they seem to have finally noticed that they were scammed.

"In the republic of mediocrity, genius is dangerous."

Robert G. Ingersoll

'Climategate' inquiries were 'highly defective', report for sceptic thinktank rules

Review for Lord Lawson's sceptic thinktank says none of the three inquiries into the hacked climate emails affair was objective or comprehensive

Tuesday 14 September 2010 17.32 BST

None of the three official inquiries into the illegal release of climate emails from the University of East Anglia (UEA) showed a "serious concern for the truth", according to a report commissioned by Lord Lawson's sceptical thinktank.

The report, which has been criticised for "bias", contends that none of the inquiries were objective and comprehensive and that public confidence in climate science would not be restored until a thorough investigation is carried out.

Lord Lawson called the three official inquiries, one by the House of Commons science and technology select committee and two commissioned by the university, "highly defective". But he has consistently refused to reveal the identities of the donors behind the secretive Global Warming Policy Foundation (GWPF) which paid for the report.

The inquiry's author, Andrew Montford, criticised the previous inquiries for not investigating the most serious allegations and for failing to ask key questions. For example, Prof Phil Jones, the head of UEA's climatic research unit, had been criticised for writing emails about deleting emails that were apparently the subject of a freedom of information act (FoI) request. He has denied deleting any emails to avoid FoI requests, but the main inquiry into the emails conducted by Sir Muir Russell never asked him or any of the other scientists about this.

Montford, who runs the Bishop Hill climate sceptic blog, also criticised the MPs' inquiry and a third review led by Lord Oxburgh, for failing to address an allegation of fraud relating to a paper that Jones published in 1990.

---- More generally, Montford criticised the inquiries for a lack of impartiality. The report said there had been a "failure to ensure balance and independence", suggesting CRU members and critics had been treated differently. "While CRU justifications and explanations were willingly accepted without any serious probing, critics were denied adequate opportunity to respond and to counter demonstrably inaccurate claims," it said.

http://www.guardian.co.uk/environment/2010/sep/14/climategate-inquiries-lawson-report

"Rarely have so many people been so wrong about so much."

Richard M. Nixon

The monthly Coppock Indicators finished August:

DJIA: +243 Down. NASDAQ: +366 Down. SP500: +243 Down.

The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. August is the third down month in a row and “crash season” approaches.

Technorati Tags: Battle of Britain,China v America,deflation,dodgy climate science,global cooling,sunspots,gold and silver.,REES,HREs

This Time It Will Be Different.

Baltic Dry Index. 2488 +20

LIR Gold Target by 2019: $3,000.

“The report also showed China’s holdings of long-term [US] Treasuries fell for the first time in 15 months to $839.7 billion, a 2.5 percent drop. Its overall Treasury position declined for a second month to $843.7 billion, the lowest since May 2009. The decline represents the first year-over-year decline in China’s Treasury holdings since 2001. The holdings peaked in July 2009 at $939.9 billion.”

After two lost decades, a gazillion of different stimulus packages, and even wheezes as desperate as buying up Japanese stocks, MarketWatch reports this morning that the latest hapless incumbent of the Prime Minister’s office in Tokyo is about to launch another stimulus package. “This time it will be different lads, honest it will. This time it will work, just like in America. Trust me, I’m a Japanese Prime Minister! What could possibly go wrong?”

“I think there is a world market for maybe five computers.”

Thomas Watson, chairman of IBM

Japan PM reportedly mulling another stimulus

Aug. 16, 2010, 7:28 p.m. EDT

SAN FRANCISCO (MarketWatch) -- Japanese Prime Minister Naoto Kan said his government may launch another set of stimulus measures to bolster the economy, according to a report published Monday. The Nikkei business daily reported that the stimulus steps could include extending consumer-spending incentives, programs to support job-seeking graduates and measures to help small businesses. Japan reported "tepid" 0.4% real gross domestic product growth for the quarter ended in June, while the strong yen and poor stock market performance "threaten to derail the economic turnaround."

http://www.marketwatch.com/story/japan-pm-reportedly-mulling-another-stimulus-2010-08-16

Below, follow up to yesterday’s focus on the deteriorating relationship between America and China. The delayed reports timing is purely coincidental, if unfortunate. China seems to be developing its own East Asian version of America’s Monroe Doctrine.

AUGUST 16, 2010

U.S. Sounds Alarm at China's Military Buildup

WASHINGTON—The Pentagon voiced alarm over China's military buildup, saying it was expanding its advantage over Taiwan and investing heavily in ballistic and cruise missile capabilities that could one day pose a challenge to U.S. dominance in the western Pacific.

In its annual report to Congress on Chinese military capabilities, the Pentagon also cited China's advances in electronic warfare. The U.S. government has been the target of cyber intrusions the report says appear to have originated in China and aimed to steal military secrets. "These intrusions focused on exfiltrating information, some of which could be of strategic or military utility," the report said.

Though their two countries are increasingly interlinked economically, ties between the U.S. military and the People's Liberation Army of China have deteriorated since January, when the Obama administration notified Congress of a plan to sell Taiwan up to $6.4 billion in arms.

Defense Secretary Robert Gates has appealed to the Chinese to re-engage to reduce the risk of any military miscommunications. But U.S. officials say they have seen few signs of a thaw.

Washington has long voiced alarm over China's military buildup opposite Taiwan. In this year's report, which was delivered months behind schedule, the Pentagon said China's military edge over Taiwan was continuing to "shift in the mainland's favor," the main argument used by the Obama administration in approving the arms deal.

A particular concern for the U.S. is China's development of an antiship ballistic missile with a projected range of nearly 1,000 miles. The missile is meant to give the PLA the capability of attacking ships, including aircraft carriers, in the western Pacific, the report said.

Some experts say the missile could herald the end of U.S. naval domination. Others say the PLA has yet to conduct any realistic tests of the conventionally armed ballistic missile and has no reliable way of targeting U.S. carrier task forces when they are at sea because China doesn't have enough low-earth-orbit reconnaissance satellites.

----The report referenced cyber intrusions it says appear to have originated within China. It is unclear whether these were conducted by or at the behest of the Chinese military.

The Wall Street Journal reported last year, and U.S. officials recently acknowledged publicly, that the Pentagon's largest weapons program, the Joint Strike Fighter, had been infiltrated. Investigators believe attackers in China were behind the effort to siphon off engineering designs and other information.

http://online.wsj.com/article/SB10001424052748703908704575433933444265178.html?mod=WSJ_hps_MIDDLEThirdNews

We end on China with the UK’s right wing Telegraph kowtowing a little too much to Beijing. The idea was right but the execution horrible. The writer must have missed associate editor Mr. Heffer’s recent missive on the need to maintain standards.

“640k ought to be enough for anybody.”

Bill Gates, Co–Founder and CEO of Microsoft, 1981

China surges ahead

Telegraph View An economic miracle has transformed the country's global standing

Published: 7:31PM BST 16 Aug 2010

The market liberalisation launched by Deng Xiaoping in December 1978, has delivered a remarkable prize. Growth figures published yesterday showed that China has overtaken Japan to become the world's second largest economy. At this rate, it is set to supersede the United States just 20 years from now, to become the world's economic superpower. This prodigious feat has come at a high price. Social tensions have grown as the rural poor have migrated in their tens of millions to the manufacturing megalopolises that flood the West with cheap consumer goods. The dash for growth has also created immense environmental problems, while official corruption is endemic. In short, China is paying the same price for its economic lift-off (magnified many times) as did Western countries during the Industrial Revolution. Intrinsic to its success has been the size of its population and the low-cost labour it offers.

This is beginning to change. The "one child" policy means China has one of the fastest-ageing populations in the world; from next year, the number of 15- to 29-year olds – the core of the workforce – will start to fall. This will not only impose new social costs, but is already emboldening workers to fight for better wages. Last year, the average wage increased by 17 per cent. This may make Chinese products a little more costly in the West but can only be beneficial to its economy because it will help to stimulate domestic demand.

With a population of 1.3 billion, the next phase of China's economic miracle must be the creation of a vibrant internal market, and this will doubtless be achieved every bit as single-mindedly as the trade-led growth that has transformed the country's global standing. What an export opportunity a newly-prosperous Chinese middle class will then present to economies like ours.

http://www.telegraph.co.uk/travel/destinations/asia/china/7948954/China-surges-ahead.html

Dear Colleagues - Simon Heffer
http://londonirvinereport.blogspot.com/p/intraday-news.html

We end today with BP and the now forgotten capped Macondo oil well. Like a bad penny it’s about to return, according to the blogosphere. Both articles are troubling and worth reading. BP’s long suffering shareholders are about to get a white knuckle ride if BP has to remove the cap, the blowout preventer and/or complete the relief well, say the outside experts.

“Airplanes are interesting toys, but are of no military value.”

Marechal Ferdinand Foch, Professor of strategy, Ecole Superieure de Guerre

BP's Deepwater Oil Spill - The Two Options - and Open Thread

Posted by Heading Out on August 16, 2010 - 10:33am

http://www.theoildrum.com/node/6860#more

Relief Wells Delayed ... New Tests Show "Gap" in Oil "Well Column" Causing Loss of Pressure ... Does the Government Have ANY IDEA What It's Doing?

An oil and gas industry veteran with 30 years experience who goes by the alias Fishgrease gave a pretty good recap of BP and the government's record of failure in capping the oil well:

http://www.zerohedge.com/article/relief-wells-delayed-new-tests-show-gap-oil-well-column-causing-loss-pressure-does-governmen

“Everything that can be invented has been invented.”

Charles H. Duell, Commissioner, U.S. Patent Office, 1899

At the Comex silver depositories Monday, final figures were: Registered 50.99 Moz, Eligible 59.51 Moz, Total 110.50 Moz.

Note: I have now added several more rare earths and metals companies to my list of mining companies listed on the page at the top.

http://londonirvinereport.blogspot.com/p/mining-stocks-of-interest.html

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Crooks and Scoundrels Corner.

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

Today, another great vampire squid, goes over the top in his do or die effort to thwart President Obama’s tax plans. In the process he manages to “do a Hayward”, and inadvertently I hope, slight the victims of Hitler, by trivializing the true monstrosity of Hitler. Mr. Schwarzman needs to take time out from counting up his billions and buy a book on Hitler to see that however misguided President Obama may be likening Mr. Obama to Adolf Hitler is grossly offensive and untrue. President Obama is probably too wise to seek damages by suing Mr. Schwarzman in the UK High Court, where such actions are easy to win.

Blackstone chief Schwarzman likens Obama to Hitler over tax rises

The billionaire head of the private equity giant which owns Center Parcs and the London Eye has likened US President Barack Obama’s plans to raise taxes on the private equity industry as being akin to Adolf Hitler’s invasion of Poland.

By James Quinn Published: 9:27PM BST 16 Aug 2010

The comments, made by Blackstone chairman and co-founder Steve Schwarzman in what he thought was a private meeting, reflect the strength of feeling among Wall Street’s private equity chiefs who are being threatened with paying the same levels of tax on their income as ordinary Americans.

In an appearance before the board of an unnamed charity, Newsweek reported that Mr Schwarzman, who is estimated by Forbes to be worth $4.7bn (£3bn), said: “It’s war. It’s like when Hitler invaded Poland in 1939.” The Daily Telegraph has verified that the comments were made and are accurate.

It follows the Obama administration’s consideration of raising the tax on “carried interest” – the share of profits private equity managers receive from the portfolio companies they manage – from 15pc to 35pc.

His remarks are even more noteworthy given that Mr Schwarzman is a practising member of the Jewish faith.

It is not the first time Mr Schwarzman has attacked the Obama administration, and what he appears to increasingly believe are its anti-Wall Street policies.

In a comment piece in The Washington Post in February, he wrote that bank-bashing could destroy the US economy’s fledgling recovery, as banks may become too scared - “under siege”, as he put it - to start lending again.

His new comments caused consternation among the American media, with The New York Times referring to it as his “unfortunate war analogy”, while Salon quipped about “Obama’s invasion of Poland”.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7949062/Blackstone-chief-Schwarzman-likens-Obama-to-Hitler-over-tax-rises.html

An accession of wealth is a dangerous predicament for a man. At first he is stunned, if the accession be sudden; he is very humble and very grateful. Then he begins to speak a little louder; people think him more sensible, and soon he thinks himself so.

Richard Cecil.

The monthly Coppock Indicators finished July:

DJIA: +264 Down. NASDAQ: +427 Down. SP500: +275 Down.

The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. July seems to have confirmed June’s reversal and end of the bull market.

LiveJournal Tags: Japan stimulus,China v USA,BP,Hitler,REEs,HREs,global cooling.

In the Blue Corner…...

Baltic Dry Index. 2468 +31

LIR Gold Target by 2019: $3,000.

"To combat depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection- a procedure which can only lead to a much more severe crisis as soon as the credit expansion comes to an end."

Friedrich Hayek, 1933

We open the week with Asia slowing, and a clash looming between the world’s number one and the world’s number two economies. A clash between the world’s leading debtor and its leading creditor. Nothing good lies this way, but neither Beijing nor Washington seem willing to cut the other some slack. In fact all year long Washington has seemed determined to provoke a clash, something Beijing has been trying desperately to avoid, now Washington may have found the smoking gun it needs to go further, ahead of the vital US mid-term elections in November that the governing party seems likely to lose. Unfortunately, China may have also just found its issue, to stop being Asia’s Mr. Nice to the new world’s Mr. Nasty. Stay long precious metals, nothing good lies this way, just a global depression if not something worse. Up first, developments in China and the falling Yuan. Import tariffs look a temptation to attractive to pass up.

The past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process.

Friedrich Hayek, 1933

US and China to clash over Yuan fall

China is on a collision course with Washington after steering its currency sharply lower to protect its export industries, despite a near record trade surplus of $29bn (£19bn) in July.

By Ambrose Evans-Pritchard Published: 10:35PM BST 15 Aug 2010

The Yuan dropped at the fastest pace in almost two years last week and is now 1.8pc lower against a basket of currencies than in June, when Beijing announced the end to its fixed peg against the dollar.

Western economists had seen Yuan liberalisation as a sign that China is abandoning its mercantilist policy in a step-by-step move towards a floating currency, which was expected to rise. They misjudged China's motives badly.

Beijing still controls the Yuan, so last week's drop reflects a policy decision. It is certain to infuriate hawks in Congress, who have called a hearing on China's currency in mid-September.

Sander Levin, chair of the House Ways and Means Committee, said the US may have to consider retaliatory sanctions. "We must ensure that the international trading system ensures fair rules of competition. There is no real question that China's deliberately undervalued exchange rate is unfair, contributes to global trade imbalances, and costs the US jobs," he said.

Many on Capitol Hill suspect that China fiddled trade data with a "one-off" deficit in March when the Obama administration was preparing its verdict on whether Beijing is a currency manipulator.

The fact that China is willing to defy the wrath of Congress may indicate the degree of concern in Beijing over the sudden slowdown in the Chinese economy as credit curbs bring the property boom to a shuddering halt. Industrial output has slowed abruptly.

Jim O'Neill, chief global economist at Goldman Sachs, said China's exchange policy was becoming a concern. He described its as "most odd" for Beijing to weaken the Yuan at a time when US data has been weak and China's trade surplus has reached the highest in 18 months.

-----Tension between the US and China is escalating on several fronts. China has restricted exports of rare earth minerals by more than 70pc in the second half of this year, cutting off the world supply. China produces 97pc of these minerals, used in a wide range of high-tech industries, from hybrid engines to computers, mobile phones, radar, navigation and precision-guided weapons.

http://www.telegraph.co.uk/finance/currency/7947089/US-and-China-to-clash-over-yuan-fall.html

Next, China responds to a major US provocation. Polite version: it’s 2010 not 1945, 1975, 2005. China’s likely response? My guess is hitting Uncle Sam in the economy and moving with Russia to accelerate moving the world off the dollar. I’m putting Washington on suicide watch.

China PLA warns U.S. over fresh military drill in region China PLA warns U.S. over fresh military drill in region

BEIJING (Reuters) – China's People Liberation Army demanded a tough response to U.S. plans to send an aircraft carrier to naval exercises near its coast, saying that "respect" was at stake.

A commentary in the Liberation Army Daily on Thursday laid bare rancor over Washington's naval exercises with ally South Korea, and over its criticism of Chinese territorial claims to swathes of the South China Sea, where Taiwan and several Southeast Asian states also have claims.

"A country needs respect, and a military also needs respect. 'If someone doesn't hurt me, I won't hurt him; but if someone hurts me, I must hurt him," wrote Major General Luo Yuan in the paper.

"For the Chinese people and the Chinese military, those are by no means idle words."

The angry commentary in the PLA's top mouthpiece, carefully vetted by censors, also underscored Chinese military pressures weighing on Beijing as it crafts policy.

The U.S. and South Korea last month held a joint naval drill in the Sea of Japan off the Korean peninsula, which brought condemnation from China, which answered with its own heavily publicized military exercises.

A Pentagon spokesman, Geoff Morrell, last week said a U.S. aircraft carrier, the nuclear-powered George Washington, which joined in the earlier exercise, would participate in a follow-up drill in the Yellow Sea, between the Korean peninsula and China.

The July drill was also initially scheduled to take place in the Yellow Sea -- closer to China's shore -- but was moved to other side of the Korean peninsula after objections from Beijing.

Morrell did not give a date for the next joint naval exercises, according a transcript on the Pentagon website. (http://www.defense.gov)

The PLA Daily commentary indicated that friction over any fresh U.S. military activities in seas near China would continue to dog relations between the two big economic powers.

-----The United States is "pushing its security boundary to the doorstep of others -- the Yellow Sea, South China Sea and so on," wrote Luo. "In their eyes, the security of other states and peoples is secondary, even meaningless."

Chinese newspapers have carried several harsh commentaries since maritime tensions flared between Beijing and Washington, rekindling friction that unsettled ties earlier this year.

But Luo's strong words in the Chinese military's top newspaper suggest the PLA sees its prestige at stake and wants some response from Beijing.

----Luo is among a group of PLA officers who use blogs and newspapers as platforms to voice tough views on foreign policy issues. In February, he wrote that China could retaliate against U.S. arms sales to Taiwan by dumping its holdings of U.S. treasury bonds.

http://news.yahoo.com/s/nm/20100812/pl_nm/us_china_usa

Below, US based Bloomberg covers China’s doves in the coming clash over the Yellow Sea. My take from far away holiday affected London, Beijing cannot ignore an a provocation in the Yellow Sea between China and the Korea’s, the way it can a provocation in the Sea of Japan or the far away South China Sea. I think Bloomberg is clutching at straws.

China Not Threatened by U.S. Carrier Exercises, Scholar Says

Aug. 16 (Bloomberg) -- China should not feel threatened by planned exercises later this year in the Yellow Sea involving a U.S. aircraft carrier, a scholar at China’s National Defense University said.

The U.S. regularly sent aircraft carriers through the straits separating mainland China from Taiwan in the past “but didn’t dare to do anything against China,” Qiu Hao wrote in an editorial in today’s Global Times newspaper. The future of ties between China and the U.S. “offers more opportunities for cooperation than conflicts,” Qiu said.

“China is quite capable of standing up to all comers and doesn’t need to jump at every possible threat,” Qiu wrote.

Qiu’s position stands in contrast to some members of China’s military, who have argued in recent weeks that the planned U.S. exercises in the sea, which lies between China and the Korean peninsula, are an affront to Chinese sovereignty.

Rear Admiral Yang Yi, the former director of the Institute for Strategic Studies at National Defense University in Beijing, wrote in an Aug. 13 editorial that the U.S. will “pay a costly price” for its “muddled decision” to send a carrier to the Yellow Sea.

http://noir.bloomberg.com/apps/news?pid=20601089&sid=a3cXz3ujAo2M

Elsewhere in Asia, Japan’s rising Yen is sinking the economy. There’s nothing we can do about the Yen, says Japan’s “Mr. Yen”.

Japan Economy Is Overtaken by China as Growth Weakens

Aug. 16 (Bloomberg) -- Japan’s economy grew at less than a fifth of the pace economists estimated last quarter, pushing it into third place behind the U.S. and China and adding to evidence the global recovery is faltering.

Gross domestic product rose an annualized 0.4 percent in the three months ended June 30, the Cabinet Office said today in Tokyo. The median estimate of 19 economists surveyed by Bloomberg News was for growth of 2.3 percent. The data reinforce International Monetary Fund predictions that China will be the No. 2 economy by the end of 2010.

Today’s milestone reflects Japan’s two decades of economic stagnation during which the government racked up the world’s biggest public debt, the Nikkei 225 Stock Average lost three quarters of its value and the population began to shrink. China’s ascent caps off moves begun by Deng Xiaoping more than 30 years ago to transform the country from an agrarian state into the world’s fastest-growing major economy.

-----Japan’s recovery from its worst postwar recession has been hamstrung by the yen’s climb to a 15-year high against the dollar, threatening profits at exporters including Honda Motor Co. and Sony Corp. The economic slowdown may put pressure on the Bank of Japan to expand monetary stimulus as the nation’s record debt constrains the government’s ability to do so.

Export growth slowed and consumer spending stalled last quarter, today’s figures showed. The expansion was weaker than all economists estimated, with their predictions ranging from 0.6 percent to 3.4 percent. Growth slowed from 4.4 percent in the first quarter.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=ajEOHBr3ZnD8&pos=1

‘Mr. Yen’ Says Japan Can’t Stem Currency’s Rise as U.S. Falters

Aug. 16 (Bloomberg) -- Japan’s yen, the best performer among major currencies this year with a 7.9 percent gain against the dollar, may surge further as concern grows that U.S. efforts to boost economic growth may fail.

“What we are seeing is not appreciation of the yen but weakness of the dollar, reflecting concerns that the U.S. economy may falter,” Eisuke Sakakibara, formerly Japan’s top currency official, said yesterday on the Fuji television network. “There is a chance the yen will reach an all-time high and stay at that level for the time being.”

The Japanese government has yet to formulate strategy for stemming a yen surge that threatens the earnings of exporters including Toyota Motor Corp., Honda Motor Co. and Canon Inc. A report today probably will show the nation’s economy grew at the slowest pace in three quarters in the period ended June 30, economists surveyed by Bloomberg News forecast.

The yen reached 84.73 to the dollar on Aug. 11, a high since July 1995. Sakakibara -- known as “Mr. Yen” for his efforts to influence exchange rates through verbal and actual currency market intervention while at the Ministry of Finance in 1997-1999 -- said the currency may match its April 1995 peak of 79.75.

“Japanese companies will feel the pinch of a stronger yen and a weakness in share prices around the end of this year,” Sakakibara said.

---- Sakakibara spoke after Finance Minister Yoshihiko Noda last week refrained from outlining steps to slow the yen’s rise and the Bank of Japan maintained its policy guidance.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=aDHoiIqyn7TY&pos=2

We close today with two speed Europe. While Germany’s exports boom, helped by the depreciating Euro, the PIIGS and Hungary seem destined for restructuring, aka technical default.

“In a sign of what vulnerable countries such as Spain and Portugal can expect as their deficit-cutting measures kick in, Greece contracted nearly 6%, at an annualized rate, in the second quarter, according to calculations based on figures released by Greece's statistics agency.”

WSJ. August 13, 2010.

Hungary’s Recovery Halts as Austerity Stifles Demand

Aug. 13 (Bloomberg) -- Hungary’s economic recovery from its worst recession since 1991 halted in the second quarter as rising exports failed to compensate for austerity measures stifling domestic demand.

Gross domestic product was unchanged from the previous quarter after a revised 0.6 percent growth in the first quarter, according to today’s preliminary estimate by the Budapest-based statistics office. Annual growth accelerated to 1 percent from 0.1 percent in January-March. The median estimate of six economists in a Bloomberg survey was for 0.9 percent annual growth.

The first European Union member to get an International Monetary Fund bailout in 2008, Hungary cut spending to meet the terms of its loan, exacerbating the worst recession since 1991. Prime Minister Viktor Orban, elected on a pro-growth platform in April, is resisting pressure from the creditors to reduce the budget deficit to less than 3 percent of GDP next year.

“The GDP data will be used by Orban as an excuse to play on the weakness of the economy” and argue against the need to cut the budget deficit, London-based Capital Economics Ltd. analyst David Oxley said in a phone interview. “Ultimately though it’s probably unjustified because Hungary’s Achilles heel isn’t the budget deficit but its high debt level.”

----- In the second quarter, Hungary’s rising exports failed to lift the economy in the second quarter as domestic demand continued to falter after five years of austerity.

Agricultural production and the construction industry are set to drop by “double-digits” in the second quarter on an annual basis, statistician Peter Szabo told reporters in Budapest. Exports continued to be the engine of the economy as demand picked up, while the retail industry “also doesn’t show signs of improvement,” he said.

http://noir.bloomberg.com/apps/news?pid=20601095&sid=aDdfG2_xvnMY

AUGUST 12, 2010, 11:44 A.M. ET

Greek Recession Deepens

ATHENS—The Greek economy contracted sharply in the second quarter as government austerity measures bit deeper into incomes, according to government data released Thursday.

The national statics service Ellsta said Thursday that second-quarter gross domestic product fell 1.5% on a quarterly basis, weaker than forecasts of a 1% drop and the 0.8% fall in the first quarter.

Jobs data for May, meanwhile, revealed persistently high unemployment, which ticked higher to 12% from 11.9% in April.

"The measures imposed by the International Monetary Fund and the European Union were expected to impact the economy substantially, so the figures are not a shock even if slightly worse than expected," said Diego Iscaro, senior international economist at IHS Global Insight.

In May, Greece agreed to tough, three-year austerity and deficit-slashing programs along with politically difficult structural reforms in exchange for a €110 billion ($141.71 billion) bailout from the IMF and EU.

Economic activity in Greece has been slowing since the beginning of 2008. For 2009 as a whole, the Greek economy shrank 2%, worse than the government's forecast of a 1.5% contraction. However, the austerity and cutback policies have aggravated the recession and on an annual basis, GDP fell 3.5% in the second quarter after a 2.3% decline in the first, according to a flash estimate by the Ellstat.

Recent indirect tax increase and cuts to public-sector wages and pensions, as well as a sharp reduction in public consumption are acting as a drag on growth prospects. Persistently high inflation is further eroding consumers spending appetite and power.

----For 2010 as a whole, the government is forecasting a GDP decline of 4%, while the EU estimates a 3% drop.

"The full impact of the measures will be felt in the third quarter on a quarter-on-quarter basis, so we expect a full year GDP contraction of 3.6% to 3.8% for the year," said Nick Magginas, senior economist at National Bank of Greece.

The contraction is expected to fuel a jump in unemployment especially after the summer months when the tourist season ends.

http://online.wsj.com/article/SB10001424052748704407804575425061136187950.html?mod=WSJEUROPE_hps_MIDDLETopStories

"A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional and orthodox way along with his fellows, so that no one can really blame him. It is necessarily part of the business of a banker to maintain appearances, and to confess a conventional respectability, which is more than human. Life-long practices of this kind make them the most romantic and the least realistic of men."

John Maynard Keynes. "The Consequences to the Banks of the Collapse in Money Values", 1931

At the Comex silver depositories Friday, final figures were: Registered 51.06 Moz, Eligible 59.51 Moz, Total 110.56 Moz.

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Crooks and Scoundrels Corner.

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

Back to the great vampire squids again today, they just can’t stop themselves from doing God’s work on earth. Strangely that includes turning the Sisters of Charity of Jesus and Mary into the Poor Clare’s. God’s work is a banksters mystery wrapped up in an enigma. Below, some squid’s fight tooth and nail over a sum Ebenezer Squid would be embarrassed to hand out as squid’s bonus in New York. Happily for Ebenezer, these squids ply their trade in the vampire squid’s second division.

"I don't know what to do!" cried Morgan Squid, laughing and crying in the same breath; and making a perfect Laocoon of himself with his stockings. "I am as light as a feather, I am as happy as an angel, I am as merry as a schoolboy. I am as giddy as a drunken man. A merry Christmas to every squid! A happy New Year to the bankster world!

With apologies to Ebenezer Scrooge and Charles Dickens.

Nuns accuse banks in $5m lawsuit

Germany's Deutsche Bank and US investment bank Morgan Stanley are facing a $5m lawsuit led by a group of Irish nuns.

By Harry Wilson, Financial Services Correspondent Published: 8:56PM BST 11 Aug 2010

No banker is likely to risk describing what they do as "God's work", but they might hope at least not to get on the wrong side of His earthly followers.

Unlucky then for Germany's Deutsche Bank and US investment bank Morgan Stanley, who are facing a $5m (£3.2m) lawsuit led by a group of Irish nuns.

The Sisters of Charity of Jesus and Mary, the Holy Faith Sisters and the Irish Veterinary Benevolent Fund are among a group of 88 Irish individuals suing the two banks.

The nuns allege Morgan Stanley profited at their expense by failing to redeem an investment linked to the debt of German financial group Dresdner Bank and in so doing cost them millions of pounds.

In 2005 the nuns and other Irish investors bought euro-denominated notes worth €5.88m (£4.8m) linked to Dresdner Bank bonds, but accuse Morgan Stanley of failing to deliver on a contractual pledge to redeem the debt after the German bank's credit rating was cut below an agreed point.

Instead, Morgan Stanley is alleged to have postponed redeeming the notes until the value of Dresdner Bank debt had recovered to a level whereby the US bank would incur no losses, but which the nuns say ended up costing them $4.7m, as well as $718,734.80 in lost interest payments.

Morgan Stanley is alleged to have made an estimated $11.2m gain by delaying the redemption of the notes.

A spokesman for Morgan Stanley declined to comment and said the bank had yet to be served with legal papers by the claimants. Deutsche Bank, which acted as custodian for the notes, didn not comment.

Irish stockbrokers, Bloxham, which sold the notes to the nuns and other investors has not been named as a defendant in the case.

The nuns and other claimants, say that they bought the Hybrid Structured Euro constant maturity swap notes soley on the basis of a term sheet prepared by Morgan Stanley and distributed by Bloxham.

Dresdner Bank debt declined in value as the company was hit by the financial crisis in 2008, which led to it merging with German rival Commerzbank.

A separate lawsuit filed by other investors in the Dresdner notes names Bloxham alongside Morgan Stanley as a defendant.

In February Bloxham joined Morgan Stanley in a lawsuit brought by the Solicitors Mutual Defence Fund relating to an investment in the notes, which named several partners at the stockbroker as defendants in the case.

Bloxham was not available to comment.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7939646/Nuns-accuse-banks-in-5m-lawsuit.html

Regulation of derivatives transactions that are privately negotiated by professionals is unnecessary."

Alan Greenspan, July 30, 1998.

The monthly Coppock Indicators finished July:

DJIA: +264 Down. NASDAQ: +427 Down. SP500: +275 Down.

The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. July seems to have confirmed June’s reversal and end of the bull market.

LiveJournal Tags: China v USA,Yuan devaluation,Japan stalls,Yen rallies,Greece and Hungary depression,Hayyek,God's work bankrupts the poor,Squid's in,mining stocks,Rees,Hres.,global cooling