Baltic Dry Index. 2447 -35
LIR Gold Target by 2019: $3,000.
---the US now confronts a dilemma first identified in 1961 by the Belgian economist Robert Triffin.* To supply the world’s risk-free asset, the country at the heart of the international monetary system has to run a current account deficit. In doing so, it becomes more indebted to foreigners until the risk-free asset ceases to be risk-free.
Financial Times. June 29, 2010.
Global stock markets were hammered yesterday, from China to America and all across Europe. Even the Fed’s preferred method of US market manipulation, the high frequency trading programs of the crony great vampire squids, were overwhelmed. A good case can be made that they are they problem now, having become the only game in town on the far side of the Atlantic. Divorced from the reality of underlying cause in the valuation of US stocks, all they do is try to front run the order flow in the supply of liquidation orders or new entry orders, pulling their orders in the opposite direction. Result, a normal liquidation in response to changing economic fundamentals becomes a runaway rout or buying feeding panic of greed, with 90% up or down days by volume, now become the norm in the once great investment markets of America. Until fundamental change comes to the stock casinos of America and universal price discovery and reporting are restored, the US stock markets are no place for the public to be involved, though US stocks in particular, and most stocks in general, are no place to be putting money with the BDI the ECRI Weekly Leading Indicators, and Us consumer confidence numbers all suggesting a US and/or global recession right ahead. Below, Rupert Murdoch’s WSJ does its best to make a silk purse out of a pig’s ear.
“What me worry?”
Mad Magazine.
JUNE 30, 2010
Fear of a Stall Hits Market
Stocks, Bond Yields Dive on Bad News From Consumers, China, European Banks
American stocks and bond yields fell sharply as concerns mounted that the economy might be in for a slowdown.
The Dow Jones Industrial Average fell 2.6% back below 10000 on slumping U.S. consumer confidence, the downward revision of a Chinese economic indicator and worries about the health of Europe's banks. Yields on 10-year Treasury notes fell below 3% to their lowest level since April 2009, a sign investors were seeking out safe investments.
The Conference Board, a non-profit research group, reported Tuesday that consumer confidence dropped in June, wiping out gains from the previous two months. The index fell to 52.9, down sharply from a downwardly revised 62.7 the month before, with an increasing number of households saying jobs were "hard to get."
Earlier in the day, the Conference Board downwardly revised a leading indicator of Chinese economic growth. Investors were also jittery about the expiration of a European Central Bank program to extend 12-month financing to European lenders.
A double-dip recession is still widely viewed as unlikely. But the drop in confidence is just the latest sign suggesting the economy could lose steam in the second half of 2010 and perhaps grow more slowly than in the first half.
----But gathering signs of economic headwinds suggest future job growth could be slim.
Among these headwinds: signs that the housing sector is heading into a new downturn, and financial conditions that have turned less supportive of growth as stock prices decline, the dollar strengthens and credit markets struggle. The global backdrop has grown more uncertain as European governments such as the U.K. and Germany turn their attention to closing budget deficits.
------President Barack Obama expressed optimism about the outlook after a morning meeting with Federal Reserve Chairman Ben Bernanke. Mr. Obama said he and Mr. Bernanke "share the view that the economy is strengthening," noting that the U.S. has gone from losing 750,000 jobs per month last year to five months of job growth.
One thing weighing on the economy is the housing market, which, after stabilizing, is weakening again as government support disappears.
------Fed officials believe the positives are likely to outweigh the worries and keep the recovery on track, putting the Fed in a position to begin raising short-term interest rates some time far down the road. A stumble would pose a dilemma for Fed officials. Interest rates are near zero, so they lack the traditional tool of interest-rate cuts to combat a faltering economy.
The Obama administration is still pushing to advance an extension of unemployment benefits for laid-off workers now frozen in the Senate. House Democrats failed Tuesday in a renewed effort to pass an extension of unemployment benefits.
The housing market has served as a reminder of the potential impact of removing federal support in a fragile economy. In May, after home-buyer tax credits expired, the numbers of new homes on which builders broke ground fell a seasonally adjusted 10%, and new home sales plunged 33% to an annualized rate of 300,000—the lowest level on record.
The loss of stimulus funding is also hitting state and local governments, which are facing a combined budget deficit of some $137 billion this year and $144 billion in 2011. Some states have already gone through most of the federal education funds earmarked for the 2009-1010 and 2010-2011 school years. With no more money forthcoming, they've been cutting services and are firing tens of thousands of teachers.
Who in their right mind would invest in a NYSE stock and directly contribute to Ebenezer Squid’s next telephone number bonus?
Below, China’s stock market look’s over priced relative to growth prospects too. Who needs the squids HFT programs directly picking an investor’s pocket, when the stocks of Beijing’s largely command economy yo-yo to political decisions in Beijing?
Why did I take up stealing? To live better, to own things I couldn't afford, to acquire this good taste that you now enjoy and which I should be very reluctant to give up.
Cary Grant. To Catch A Thief.
No upside to China stocks as credit tightens, strategist says
June 29, 2010, 7:18 p.m. EDT
HONG KONG (MarketWatch) -- Chinese stocks will continue to trend lower in the second half of the year, pressured by tighter lending policies and a gloomy global outlook, according to a leading Hong Kong-based strategist.
Andrew Ferris, senior investment strategist for Asia at BNP Paribas, says the sharp sell-off in Shanghai on Tuesday, which saw China stocks skid to a 14-month low, is in line with the overall weakening trend that's been in place since the start of the year.
He believes asset prices are likely to remain under pressure until Chinese authorities ease up on their current tightening campaign -- something that won't happen for some time.
"They are not going to let go quickly or easily," Ferris said referring to the determination of Chinese authorities to push ahead with recent administrative measures to cool credit growth.
"China will continue to have tight monetary policy until the end of year," he added.
Beijing avoided using interest rates to slow lending and instead lifted the ratio of reserves that banks must set aside as deposits in three separates increases so far this year. Administrative measures to tamp down lending to overheated sectors such as real estate were also enacted.
In Tuesday's action in China, the Shanghai Composite tumbled 4.3% to end 2,427.05, its weakest finish since April 2009. The index had already entered into technical bear-market territory, having already declined 23% year to date before Tuesday's sharp losses.
The Shenzhen Composite Index, tracking China's No. 2 equity market, also sold off Tuesday, dropping 5.4%.
Ferris believes official figures showing China's economy grew at an annualized 11.9% in the first quarter masked an underlying deterioration in the economy -- with the government numbers appearing overly upbeat because of a weaker comparison base in the year-earlier period.
http://www.marketwatch.com/story/no-upside-for-chinese-stocks-as-credit-tightens-2010-06-29
Below, the FT picks up on the BIS report that as good as said many EU banks are toast. In the ever so polite, jargon filled world, in the two handed writings of the BIS, the BIS warns of coming time of unmarketable governmental debt. There goes the EU banking neighborhood in effect. Will the Bundesbank really U-turn and allow the ECB to print and monetise all of Europe’s dodgy banks? The BIS doesn’t think so either, they fret. Stay long precious metals, another Lehman is looming into sight the BIS apparently thinks.
"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."
President F.D. Roosevelt, 1933
Bank fragility means recovery remains precarious
By John Plender Published: June 29 2010 18:09 Last updated: June 29 2010 18:09
After the Group of 20 meeting in Toronto and the passage of the US Financial Reform Bill, global economic recovery ought by rights to be in the bag. Yet the reality is otherwise. Like the fabled plane in the second world war, the global economy is limping along on a wing and a prayer, not least because the world’s debtor and creditor countries cannot agree on the way out of the present bind. In the meantime the financial system remains perilously fragile.
The onset of the Greek sovereign debt drama and the renewed funding difficulties of European banks has taken the crisis into new and challenging territory where, to change the metaphor, there is precious little left in the policymakers’ locker. As the newly published annual report from the Bank for International Settlements points out, Greece highlights the possibility that heavily indebted governments may not be able to act as buyers of last resort to save banks in a new crisis. If the debt of the government itself becomes unmarketable, the BIS adds, any future bail-out of the banking system would have to rely on external help. Yet where will the help come from?
-----The picture of the banking system painted by the BIS is also disturbing. While banks have returned to profit and strengthened their capital ratios, new capital injected into banks has not quite matched losses revealed during the crisis. The profits are overly dependent on poor quality revenue from fixed income and currency trading, while in Europe there are doubts whether all crisis-related losses have been recognised. Meanwhile, the default risk on sovereign debt is not confined to Greece.
The European banking system would need more capital even if there were no uplift in the regulatory capital requirements in prospect from the impending Basel III regime. Yet too many investors, from sovereign wealth funds to conventional institutions, have burned their fingers advancing fresh capital to banks to be willing to put up more for such shaky prospects. Nor will fiscally stretched governments rush to pump more money into the political equivalent of a leper colony.
It is an unfortunate fact that the global economy remains hostage to the bankers. A variety of worthy reforms are now in place in the US and Europe, not all of them relevant to the causes of the crisis, not all of them tried and tested. And policymakers have conspicuously failed to take the measure of the big issue that matters: banks that are too important to fail, in a market that has become even more concentrated because of shotgun marriages and bail-outs.
-----So where does this leave us? In the middle of an unprecedented and unnerving global experiment is the short answer.
------The dollar’s role as the pre-eminent reserve currency is not at issue. Yet as Francis Warnock points out in a paper for the Council On Foreign Relations, the US now confronts a dilemma first identified in 1961 by the Belgian economist Robert Triffin.* To supply the world’s risk-free asset, the country at the heart of the international monetary system has to run a current account deficit. In doing so, it becomes more indebted to foreigners until the risk-free asset ceases to be risk-free.
The end-game to Triffin’s paradox is a global wholesale dumping of US Treasuries.
http://www.ft.com/cms/s/0/81ed90da-839d-11df-b6d5-00144feabdc0.html
We end for today with BP news, BP appears to be dodging a bullet from Hurricane Alex and from Anadarko’s attempt to go totally AWOL on their share of damages. The latest revelations would warm the cockles of even the stoniest US tort lawyer’s heart. Who said there was honour among thieves? Thankfully that’s what lawyers are for. Ominously, hurricane Alex is the first Atlantic June hurricane since 1995. 1995 as I recall, was the year when God managed to line up 4 Atlantic hurricanes at the same time, although thankfully not all of them made landfall. The models show hurricane Alex passing into Mexico slightly south of the US border, as a dangerous but modest category 2 storm. BP finds itself trapped in an off-scale category 5.
Exxon or Shell should buy BP for £88bn, says analyst
BP'S share price fell by a further 2pc, after a prominent City expert suggested it should be bought by US rival Exxon Mobil in the wake of the Gulf of Mexico oil spill.
By Rowena Mason, Energy Correspondent. Published: 10:54PM BST 29 Jun 2010
Fred Lucas, an energy analyst at JP Morgan Cazenove, speculated that Exxon or Shell could swoop on the beleagured British oil giant for approximately £88bn. Exxon is the most financially strong oil company, he said, adding that it could make a cash and stock offer while spinning off $50bn (£33bn) of refining and marketing assets.
"We must emphasise," Mr Lucas adds in the note, "that this is our idea and it is only an idea."
The mooted 473p offer price is 30pc less than the £123bn the company was worth before the Deepwater Horizon rig exploded killing 11 men and triggering a catastrophic leak on April 20.
However, it is substantially more than the current £57bn market value of the oil giant, which has slipped from Britain's biggest company to the fifth behind Shell, HSBC, Vodafone and GlaxoSmithKline.
BP has already spent $2.65bn on the clean-up and committed $20bn to environmental compensation. The cost of additional lawsuits, pay-outs to Gulf Coast residents and punitive fines are likely to add many more billions to these bills.
-----The bad weather is already hampering efforts to capture oil coming from the leak and operations to clean up the growing slick off the southern US coast.
Oil skimming ships were sent back to Louisiana amid strong winds and big waves - although the storm itself will not hit the affected region. On Monday, BP said its plan to increase oil being captured has been delayed, but current equipment piping oil to the surface remains in place.
However, operations continued nearer to shore with a plan to remove up to 800 unhatched turtle eggs to protect the sea creatures from the effects of the oil.
Earlier in the day, a Facebook group calling on people to boycott oil from BP service stations was removed from the social networking website but later reinstated. It grew in size to almost 750,000 members after people thought the site was being censored.
Anadarko approved key BP well designs
By Carola Hoyos in London Published: June 29 2010 22:33 Last updated: June 29 2010 22:33
Anadarko, the US partner to BP in its ill-fated Macondo well in the Gulf of Mexico, approved several key aspects of the UK company’s designs for the project that have been sharply criticised by Washington lawmakers.
Anadarko, which owns 25 per cent of Macondo, also knew of significant operational decisions made by BP that some lawmakers believe could have been a factor in causing the explosion at the well, according to senior executives at both companies.
Anadarko attempted this month to distance itself from BP by saying the oil spill at the well had been preventable and was likely because of the UK company’s “reckless decisions and actions”.
However, both Anadarko and BP have confirmed to the FT that the US company was aware of design choices that lawmakers, who have accused the UK company of cutting corners to cut costs, have criticised.
These decisions include the choices for how it lined the well and how many so-called centralisers – devices that stabilise a well before it is cemented – were used.
-----John Christiansen, Anadarko’s spokesman, said: “What we knew was that the design, the long string and the use of centralisers all met industry standards if executed correctly.
“The problems were caused by BP’s execution of each of these.”
BP, in a statement to the FT, explained that it gave or made available to its co-owners reports and other documents that showed the well design, changes to the well design, and identified major well control events encountered during drilling operations and that personnel from the co-owners engaged in periodic communications with BP personnel about well design and other issues related to the well.
http://www.ft.com/cms/s/0/75cd4c30-83ae-11df-b6d5-00144feabdc0.html
We have reached the end of the second quarter and end of the first half of 2010. Normally we could expect all the “friends of the Fed,” to come in near the close and move the US stock markets sharply higher in accordance with the Fed’s attempt at recreating the Greenspan stock bubble of the 1990s. Unfortunately, barring a dramatic U-turn by the ECB, the ECB is about to pull the plug on the ECB’s largest bank liquidity program ever. Some 442 billion euros, or so they say. Spanish banks are going nuts at the prospect of going quite rapidly bust thereafter. German bankers are looking deathly ill too. In view of the above, the Friends of the Fed might not be quite so willing to do the Fed’s dirty work of rigging US markets higher. Who wants to be long anything except gold, ahead of America’s Independence Day long weekend. If the ECB doesn’t change, Spain will be the new Greece by the end of July.
"We shouldn't pour cold water on everything. We, the eight or nine players in global investment banking, have a very good future."
Deutsche Bank, CEO Josef Ackermann. Davos, January 2007.
At the Comex silver depositories Tuesday, final figures were: Registered 49.58 Moz, Eligible 64.47 Moz, Total 114.05 Moz.
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Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
No crooks today, just alleged Russian spies, although if the court filings are accurate there’s not a lot of doubt that they were Russian agents, even if they seem to have been very loth to actually get on with meaningful spying, rather than just enjoying the American way of life. With very little in the public domain except what the US prosecutors have put there, I expect that this will quickly change in the coming weeks ahead. Below, yet another false British passport was apparently used. Does anyone anymore travel on a real one?
"He alone could have led Russia into the enchanted quagmire; he alone could have found the way back to the causeway. He saw; he turned; he perished. The strong illuminant that guided him was cut off at the moment when he had turned resolutely for home. The Russian people were left floundering in the bog. Their worst misfortune was his birth: their next worst his death."
Winston S. Churchill. On Lenin.
Russian spy 'held fake British passport'
One of the 10 people arrested in the United States for allegedly being a Russian spy held a fake British passport, according to US government papers
Published: 4:14PM BST 29 Jun 2010
The FBI arrested 10 people for allegedly serving for years as secret agents of Russia's intelligence service, the SVR, with the goal of penetrating US government policy-making circles.
It is alleged that they were tasked with gleaning intelligence on nuclear weapons, foreign policy and Congressional politics.
US Department of Justice papers said that Tracey Lee Ann Foley travelled on a "fraudulent British passport prepared for her by the SVR". Foley was arrested in Boston on Monday.
A Foreign Office spokeswoman said: "We have seen the reports and, obviously, we will look into them."
President Barack Obama declined to comment on allegations of Russian spying in the United States.
The 10 arrested are accused of conspiracy to act as unlawful agents of a foreign government. Nine of them also face a charge of conspiracy to launder money.
An 11th suspect named "Christopher R Metsos" was arrested on Tuesday in Cyprus.
It also emerged that one of the 10 was in contact with a subsidiary group of Oxford University.
-----The case echoes revelations earlier this year in which forged British passports were allegedly used by Israeli agents in the killing of Hamas leader Mahmoud al-Mabhouh in Dubai.
Officials in Dublin are also investigating whether a false Irish passport was allegedly to be used by members of the spy ring.
The Irish Government said officials had been warned about a link to the so-called "deep cover" operation.
Court papers claimed one of the defendants, Richard Murphy, was told by his handlers to travel from the US to Rome where he would be given the forged Irish documents.
-----Many of the details of the criminal complains read like an outline of a John LeCarre novel.
A defendant known as "Anna Chapman" allegedly communicated with a Russian official in Manhattan in January as she sat in a coffee shop and he pulled up outside in a van. The FBI alleges that they used a wireless network via paired computers.
Two months later, a similar communication allegedly took place when she was in a bookshop and the Russian official, based at Russia's mission to the United Nations, was outside with a briefcase.
Chapman was later approached by an FBI agent posing as a Russian who told her: "My name is Roman, I work in the consulate."
He told her to give a false passport to another agent and that she was to introduce herself her by saying: "Excuse me but haven't we met in California last summer?" The other agent was to reply: "No, I think it was in the Hamptons."
------Court papers allege that the defendants led ordinary suburban lives, "deepening" their false identities by taking ordinary jobs, living as married couples, having children and even trying to buy homes in the US.
-----Experts have expressed their astonishment at the scale and dedication of the scheme allegedly undertaken by SVR.
Oleg Kalugin, a former KGB general who was a Soviet spy in the United States in the 1960s and 1970s under “legal” cover as a diplomat and Radio Moscow correspondent, said he believed the project was more ambitious than similar attempts by spies during the cold war.
He told the New York Times: “It’s a return to the old days, but even in the worst years of the cold war, I think there were no more than 10 illegals in the U.S., probably fewer.”
Vladimir Kolesnikov, deputy chairman of the security affairs committee in the lower house of Russia's parliament, said the arrests signalled that some quarters of Washington opposed warmer ties with Russia.
"Regrettably, there are people in America burdened by the legacy of the Cold War, the legacy of double standards," he said. "And they react improperly to the warming of relations spearheaded by the presidents. It's a blow to President Obama."
-----He said that US secret agents were active in Russia and suggested that Moscow might respond in kind to Washington's round-up.
"Previously we have quietly evicted some of them," he said. "Now I think we should more actively apply criminal legislation against them."
Russia's foreign minister said Moscow was waiting for a US explanation about the arrests of the 10 alleged Russian spies.
In a statement, Russia’s Foreign Ministry said: “Such actions are baseless and improper.
“It is highly deplorable that all of this is happening against the background of the reset in Russia-US ties announced by the US administration itself.”
Russian spy ring: Barack Obama knew before meeting Dmitry Medvedev
Barack Obama knew about the FBI operation to arrest an alleged spy ring before meeting his Russian counterpart Dmitry Medvedev last week, but did not raise it at the talks, according to the White House.
Published: 12:01AM BST 30 Jun 2010
Robert Gibbs, the White House spokesman, said the revelations, which were condemned by Russia, would not interfere with the effort by both sides to "reset" their relations, which has been pursued ever since Mr Obama became president last year.
The alleged operation was busted just a few days after a warm summit between Obama and Medvedev at the White House at which both sides made an elaborate effort to bury any lingering Cold War tensions.
"I do not believe this will affect the reset of our relationship with Russia," Mr Gibbs said.
"We have made great progress in the past year and a half. I do not think this will affect those relations."
Mr Gibbs said Mr Obama had been briefed on what he termed a law enforcement issue and had known about it before he met Medvedev, but did not raise it at the talks and a joint trip to a burger joint in suburban Virginia last week.
The State Department meanwhile said the 11 alleged Russian agents arrested this week were "vestiges" of "old attempts to use intelligence," but the relationship between the two Cold War foes was still improving.
"We're moving towards a more trusting relationship. We're beyond the Cold War; our relations absolutely demonstrate that," said Phil Gordon, the assistant secretary of state for European Affairs.
That the handling of this roundup is “unusual” is a gross understatement. Since Yeltsin, the “usual” way of handling “spook” cases has been bad publicity, a media expose and immediate expulsion. Does someone have an agenda in undermining Obama-Medvedev détente, or did President Obama really deliberately set out to make President Medvedev look a chump back home ? Did US counter intelligence agents just get tired of a costly, multi-year, multi-agent byzantine operation that appeared to be going nowhere? But if so, why now, why in this manner, and why put so much US counter intelligence tradecraft into the public domain, allowing for all the world’s other intelligence agencies to start to conduct reverse data mining? My guess is that we will soon see a tit for tat response. All the western spooks in Russia must be having a fit. What next, back to termination with ultimate prejudice Berlin and Vienna late 1940s style? Plus, it’s a funny way to go about getting UN cooperation on Iran and North Korea. More, much more to come, I think.
“I believe there is something out there watching us. Unfortunately, it's the government.”
Woody Allen
The monthly Coppock Indicators finished May:
DJIA: +276 UP. NASDAQ: +499 UP. SP500: +304 UP. The great Bull market goes on with the all three continuing higher in positive numbers, but is now under serious pressure.
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Sunspots – A 22 year colder world? (From 2004?)
Spotless Days June 29
Current Stretch:0 days
2010 total: 35 days (20%)
2009 total: 260 days (71%)
Since 2004: 803 days
Typical Solar Min: 485 days
