Showing posts with label QE. Show all posts
Showing posts with label QE. Show all posts

Friday, 30 July 2010

China Blasts Back.

Baltic Dry Index. 1942 +41
LIR Gold Target by 2019: $3,000.

"It's strange that men should take up crime when there are so many legal ways to be dishonest. “

Al Capone

We open today with China’s riposte to Mrs Clinton’s slap at China in last week’s regional security conference in Hanoi. A clash of navies lies ahead if both parties hold their present course. But it’s hard to see how either can now back down without losing prestige and face. Presumably the US military see some advantage in pressing the issue now rather than later. Presumably the US State Department sees the chance to form some sort of local strategic alliance to contain China and force them out of the South China Sea. As the world’s largest debtor to creditor China, the US is now stomping on eggshells. Stay long precious metals. Is China really going to finance the US Navy and Airforce against itself?

If they want peace, nations should avoid the pin-pricks that precede cannonshots.

Napoleon.

China Says Its South Sea Claims Are ‘Indisputable’

July 30 (Bloomberg) -- China declared its “indisputable sovereignty” over the South China Sea and held naval drills in the waters, pushing back against a U.S. role in resolving disputes in one of the world’s busiest shipping lanes.

“China has indisputable sovereignty of the South Sea and China has sufficient historical and legal backing” to underpin its claims, Geng Yansheng, a Ministry of Defense spokesman, told reporters at a military compound outside Beijing today. It opposes efforts to “internationalize” the issue and will resolve differences through “friendly negotiation,” he said.

U.S. Secretary of State Hillary Clinton last week called the sovereignty issue “a leading diplomatic priority.” Chinese Foreign Minister Yang Jiechi subsequently called her comments “virtually an attack on China” and said U.S. involvement “can only make matters worse and more difficult to solve.”

The Chinese government considers the entire South China Sea as its own, dismissing claims from Southeast Asian countries to islands such as the Spratlys, and is building an ocean-going fleet to project power beyond its borders. China told Exxon Mobil Corp. and BP Plc to halt exploration in areas that Vietnam considers part of its territory, according to U.S. government agencies.

China’s military recently held a large-scale naval exercise in the sea using “real weaponry,” Geng said. The exercise, involving warships from three naval fleets, included missile launches at long-range targets and practicing against jet fighters, the state-run China Daily reported today.

North Korea

The exercises coincided with joint U.S.-South Korea naval drills earlier this week in the Sea of Japan designed to deter North Korea. Further drills are planned in the Yellow Sea, off China’s eastern coast, and South Korea plans to hold an anti- submarine drill there next week, Yonhap reported today, citing army spokesman Lee Bung-woo.

“China opposes any planes or warships that engage in activities that will compromise China’s security either in the Yellow Sea or other seas near China,” Geng said today.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=adTydiYviZU8&pos=8

In other US news, the President of the St Louis Fed wants BOE style quantitative easing to prevent US deflation. The death of fiat currency as we know it gets closer by the day.

"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

U.S. close to Japan-style deflation, Bullard says

Expanding purchases of Treasury securities best defense if needed

July 29, 2010, 2:45 p.m. EDT

WASHINGTON (MarketWatch) -- The U.S. is in danger of being pushed into the same price-shrinking economy that has been termed the "lost decade" in Japan, a voting member of the Federal Reserve said Thursday.

"The U.S. is closer to a Japanese-style outcome today than at any time in recent history," said James Bullard, the president of the St. Louis Federal Reserve Bank, in a research paper.

Bullard stressed that the Japan-style deflation was not a done deal. It would take more negative shocks to tip inflation lower.

But the St. Louis Fed president spoke of the risks with more clarity than is customary from Fed officials.

"Bullard touched upon the third rail of economics, that the U.S. is in the vicinity of Japan with respect to the recovery," said Dan Greenhaus, chief economic strategist at Miller Tabak.

In his paper, Bullard argued that the best policy option for the Fed to counter the deflation threat is to buy more Treasurys.

He said the Bank of England's recent policy to buy gilts, or British government bonds, has served to push inflation expectations higher.

The Bank of England has purchased 200 billion pounds, or over $300 billion, of assets, and overwhelmingly those purchases have been gilts. The Fed has purchased over $1.4 trillion in housing-related assets. It bought $300 billion in Treasurys in a program completed last fall.

Bullard argued against another policy option, namely lengthening its existing promise to keep rates low for an extended period.

To respond to the deflation threat with a revised promise to keep rates "low for longer" may be counterproductive because it might simply encourage permanent low interest rates, he said.

http://www.marketwatch.com/story/bullard-says-us-close-to-japan-style-deflation-2010-07-29

In corporate news, and rare metals news, Molycorp’s IPO was less than stellar. China mines and exports most of the rare metals the world consumes, about 95% is the usual figure cited. A one country monopoly that Saudi Arabia can only dream about. Another complication for Mrs Clinton to think about.

Cleantech IPOs still fail to impress as Molycorp misses its goal

July 29, 2010 Camille Ricketts

With the exception of Tesla Motors’ blockbuster public sale last month, clean technology IPOs have been disappointing this year. And the trend continues today with Molycorp Minerals, miner of many of the rare metals used in green technologies, debuting at $13.25 a share — down from the anticipated range of $15 to $17.

All told, the Greenwood, Colo. company raised $394 million, pricing its shares at $14. The stock has performed weakly since this morning, dipping as low as $12.

While it’s not exactly a traditional green technology company, Molycorp does provide the raw materials for advanced batteries (for plug-in vehicles, primarily), wind turbines, and energy-efficient light bulbs. More and more demand for its products is coming from the sector, which means its success relies largely on the shaky and uncertain growth of other green technologies.

This may be a major reason its IPO followed in the footsteps of similar sales by biofuel maker Codexis and solar cell maker Jinko Solar, both of which sold for less and raised less on the public markets than expected. Cylindrical solar module maker Solyndra couldn’t even get its IPO out the door.

Investors just don’t seem to be hot on cleantech stocks. There’s a lot of risk involved in green plays, and returns sometimes don’t come for years.

Molycorp, in particular, is in a sticky spot. The company plans to use the money raised in the offering to jumpstart its mine in Mountain Pass, Calif. that has been defunct since 2002, when radioactive waste from the site contaminated a local lake. The project is more vital than ever, considering China’s growing dominance in the rare earth elements market (it owns 95 percent of global production), and Molycorp’s dependence on its own operations in China.

http://green.venturebeat.com/2010/07/29/cleantech-ipos-still-fail-to-impress-as-molycorp-misses-its-goal/

Molycorp Slumps 8.2% on 1st Day After Rare-Earth IPO

July 29, 2010, 4:16 PM EDT

July 29 (Bloomberg) -- Molycorp Inc., owner of the world’s largest non-Chinese deposit of rare-earth metals, declined in its first day of trading after chopping the size of its initial public offering by 18 percent.

Shares of the Greenwood Village, Colorado-based company lost 8.2 percent to $12.85 in U.S. composite trading. Molycorp sold 28.13 million shares at $14 each after its underwriters failed to attract enough buyers at $15 to $17 apiece, according to Bloomberg data. The mining company’s owners purchased about 8.9 percent of the shares available in the IPO.

Molycorp will use the $394 million in IPO proceeds to fund plans to restart operations at a mine that holds deposits of rare-earth metals used to make magnets for everything from smart bombs to hybrid cars. The producer, which hasn’t made a profit since acquiring the site two years ago, will compete with Chinese companies that currently supply 97 percent of the metals globally, according to its regulatory filing.

“It seems like a lot of money to ask,” said Robert Auer, a manager at Indianapolis-based SBAuer Funds LLC, which oversees about $200 million. “It’s a bet on something so unknown, and in this market where there’s fierce competition for dollars, there may be better buys.”

Morgan Stanley and JPMorgan Chase & Co. in New York led the company’s offering, while Molycorp turned to Jones Day in Cleveland for legal advice.

http://www.businessweek.com/news/2010-07-29/molycorp-slumps-8-2-on-1st-day-after-rare-earth-ipo.html

We end the week with a Canadian corporate success story. Long time readers of the LIR know that I have liked SEMAFO from the first time I read up about its involvement in West Africa almost a decade ago. With the Quebecer’s can-do attitude, they opened up much of North America, readily available mining expertise, and the added benefit of speaking French, the local language of business in the region, successfully developing their gold mines never seemed an issue to me. It also seemed to me that the price of gold had nowhere to go but up. From the mid 90s G-7 governments were pursuing policies all too likely to ruin their currencies. Sadly they still are. Below, Canada’s Financial Post covers a company I still like and expect even more great things from ahead. Best of all, SEMAFO is a mining company with a conscience that besides providing employment in a region that desperately needs employment, works to improve the quality of life in the region too.

The benefactor turns a profit

Peter Koven, Financial Post · Thursday, Jul. 29, 2010

Benoit La Salle built his gold mining powerhouse in the least likely of ways: Through a charitable foundation.

Mr. La Salle, 55, is the chief executive of Montreal-based SEMAFO Inc., a leading mining company in francophone West Africa that leverages the skilled workforce and mining culture of francophone Quebec. But as recently as the early 1990s, he was a self-employed chartered accountant and did not give a second thought to the gold industry.

"I knew nothing about it at all," he says today with a laugh.

The turning point that would change his life came in 1994. He was doing some pro bono work for a charity called Plan that was focused on developing countries, and ended up travelling to West Africa as a francophone spokesperson.

He met with a number of high-level government officials while he was there, including Burkina Faso President Blaise Compaore (who still holds the office today). Mr. Compaore asked Mr. La Salle if he could return to Burkina with a team of people from Canada to study how to develop the country's gold industry.

At the time, there was almost zero activity by foreign mining companies in West Africa. That dated back to the 1950s and 1960s, when those countries were still under French or British colonial rule, and little exploration was being done.

Mr. La Salle saw an opportunity. He soon returned to West Africa with a small team of experts, who starting looking over the land with the best gold potential.

In 1995, he and geologist Jack Gunter obtained permits for some of the most promising land in West Africa through a public shell company. It was renamed SEMAFO, an acronym that stands for Societe d'exploitation miniere d'Afrique de l'Ouest (or West African Mining Company).

Benoit La Salle built his gold mining powerhouse in the least likely of ways: Through a charitable foundation.

Mr. La Salle, 55, is the chief executive of Montreal-based SEMAFO Inc., a leading mining company in francophone West Africa that leverages the skilled workforce and mining culture of francophone Quebec. But as recently as the early 1990s, he was a self-employed chartered accountant and did not give a second thought to the gold industry.

"I knew nothing about it at all," he says today with a laugh.

The turning point that would change his life came in 1994. He was doing some pro bono work for a charity called Plan that was focused on developing countries, and ended up travelling to West Africa as a francophone spokesperson.

He met with a number of high-level government officials while he was there, including Burkina Faso President Blaise Compaore (who still holds the office today). Mr. Compaore asked Mr. La Salle if he could return to Burkina with a team of people from Canada to study how to develop the country's gold industry.

At the time, there was almost zero activity by foreign mining companies in West Africa. That dated back to the 1950s and 1960s, when those countries were still under French or British colonial rule, and little exploration was being done.

Mr. La Salle saw an opportunity. He soon returned to West Africa with a small team of experts, who starting looking over the land with the best gold potential.

In 1995, he and geologist Jack Gunter obtained permits for some of the most promising land in West Africa through a public shell company. It was renamed SEMAFO, an acronym that stands for Societe d'exploitation miniere d'Afrique de l'Ouest (or West African Mining Company).

Read more: http://www.financialpost.com/benefactor+turns+profit/3335177/story.html#ixzz0v8qNum9C

SEMAFO: Corporate Social Responsibility Remains Top Priority

Fondation SEMAFO: Making an Important Difference in West Africa

----During the past year, initiatives in our West African host countries included:

• Construction of 5 schools

• Construction of a health centre

• Establishment of 2 school lunch programs benefitting more than 600 children

• Donation of medical supplies, educational material, clothing, house wares, miscellaneous items

(shipment of 2,600 boxes)

• Donation of agricultural equipment and irrigation systems

• Provided the village of Bossey Bangou, Niger with access to electricity

• Installation and repair of fresh water wells

• Provided financial and moral support to flood victims in Burkina Faso and Niger

• Provided support and guidance in the establishment of shea butter soap manufacturing project

http://www.semafo.com/pdf/Foundation-Update-Apr-2010.pdf

At the Comex silver depositories Thursday, final figures were: Registered 51.98 Moz, Eligible 58.24 Moz, Total 110.23 Moz.

+++++

Crooks and Scoundrels Corner.

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

Today, the NY Times covers the scandal of the Gulf of Mexico. No not BP, bad though their blowout was, The Times covers the scandal of how America looked away and turned the Gulf into a sort of toxic backyard cesspit. Below that, Time Magazine says where’s the oil disaster? Was BP the target of a great vampire squid plot?

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.

Gulf of Mexico Has Long Been a Sink of Pollution

By CAMPBELL ROBERTSON Published: July 29, 2010

-----The BP oil spill has sent millions of barrels gushing into the Gulf of Mexico, focusing international attention on America’s third coast and prompting questions about whether it will ever fully recover from the spill.

Now that the oil on the surface appears to be dissipating, the notion of a recovery from the spill, repeated by politicians, strikes some here as short-sighted. The gulf had been suffering for decades before the explosion of the Deepwater Horizon rig on April 20.

“There’s a tremendous amount of outrage with the oil spill, and rightfully so,” said Felicia Coleman, director of Florida State University’s Coastal and Marine Laboratory. “But where’s the outrage at the thousands and millions of little cuts we’ve made on a daily basis?”

The gulf is one of the most diverse ecosystems in the hemisphere, a stopping point for migratory birds from South America to the Arctic, home to abundant wildlife and natural resources.

But like no other American body of water, the gulf bears the environmental consequences of the country’s economic pursuits and appetites, including oil and corn.

There are around 4,000 offshore oil and gas platforms and tens of thousands of miles of pipeline in the central and western Gulf of Mexico, where 90 percent of the country’s offshore drilling takes place.

At least half a million barrels of oil and drilling fluids had been spilled offshore before the gusher that began after the April 20 explosion, according to government records.

Much more than that has been spilled from pipelines, vessel traffic and wells in state waters — including hundreds of spills in Louisiana alone — records show, some of it since April 20.

Runoff and waste from cornfields, sewage plants, golf courses and oil-stained parking lots drain into the Mississippi River from vast swaths of the United States, and then flow down to the gulf, creating a zone of lifeless water the size of Lake Ontario just off the coast of Louisiana.

The gulf’s floor is littered with bombs, chemical weapons and other ordnance dumped in the middle of last century, even in areas busy with drilling, and miles outside of designated dumping zones, according to experts who work on deepwater hazard surveys.

The likelihood of an accident is low, experts said, but they added that federal hazard mitigation requirements are not strong enough to guarantee the safety of drillers working in the gulf.

Even the coast itself — overdeveloped, strip-mined and battered by storms — is falling apart. The wildlife-rich coastal wetlands of Louisiana, sliced up and drastically engineered for oil and gas exploration, shipping and flood control, have lost an area larger than Delaware since 1930.

----All along the coast, people speak of a lack of regulatory commitment and investment in scientific research on the gulf by state and federal lawmakers.

They note, for example, that over the last decade, the Environmental Protection Agency’s financing for the Chesapeake Bay Program, a regional and federal partnership, was nearly five times the amount for a similar Gulf of Mexico program, and a Great Lakes program was given more than four times as much.

More.

http://www.nytimes.com/2010/07/30/us/30gulf.html?_r=1&hp

The BP Spill: Has the Damage Been Exaggerated?

By Michael Grunwald / Port Fourchon, La. Thursday, Jul. 29, 2010

-----The Deepwater Horizon explosion was an awful tragedy for the 11 workers who died on the rig, and it's no leak; it's the biggest oil spill in U.S. history. It's also inflicting serious economic and psychological damage on coastal communities that depend on tourism, fishing and drilling. But so far — while it's important to acknowledge that the long-term potential danger is simply unknowable for an underwater event that took place just three months ago — it does not seem to be inflicting severe environmental damage. "The impacts have been much, much less than everyone feared," says geochemist Jacqueline Michel, a federal contractor who is coordinating shoreline assessments in Louisiana.

More.
Read more: http://www.time.com/time/nation/article/0,8599,2007202,00.html#ixzz0v9EziDz7

We do not err because truth is difficult to see. It is visible at a glance. We err because this is more comfortable.

Alexander Solzhenitsyn

We end for the weekend with Australia. As national costumes go, Australia’s Sheila’s really dress up for their Bruce. Have a great weekend everyone.

Miss Australia's national costume is a 'travesty'

An outlandish outfit designed to represent Australia at the Miss Universe beauty contest has been branded "a national joke" and "a travesty".

Published: 10:48AM BST 29 Jul 2010

jesinta220-large_1687443f

The costume, which will be worn by Jesinta Campbell at the competition in Las Vegas next month, features high-heeled Ugg boots, a brown one piece swimming costume hand-painted by an Aboriginal artist and a lamb's wool shrug. The ensemble is topped off by a voluminous flamenco-inspired rainbow skirt.

While Miss Campbell, 18, has said that she thinks the costume is "incredible", the pastiche of styles has failed to win many fans in Australia, and has been called eye-catching, but for all the wrong reasons.

Melbourne's Herald Sun newspaper said the costume was "a national joke" and members of the fashion industry have agreed.

http://www.telegraph.co.uk/news/worldnews/australiaandthepacific/australia/7916048/Miss-Australias-national-costume-is-a-travesty.html

A man may be a tough, concentrated, successful money-maker and never contribute to his country anything more than a horrible example

Robert Menzies. Australian Prime Minister

The monthly Coppock Indicators finished June:

DJIA: +269 Down. NASDAQ: +460 Down. SP500: +290 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.

Friday, 16 July 2010

The Double Dip?

Baltic Dry Index. 1700 -09
LIR Gold Target by 2019: $3,000.

In central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly and results far much less.

J. K. Galbraith

Are we on the cusp of a new recession? From London, it has looked for some time that we probably are. Other than resurgent stock markets, where program trading and manipulation are the only games in town, there’s been almost nothing positive to write about for some time. The BDI has fallen 60% since May 26th, never a sign of health in global trade. Now the Fed seems to be acknowledging the same thing. Below, The Telegraph covers the surprisingly downbeat Fed.

You will find that the State is the kind of organization which, though it does big things badly, does small things badly, too.
J. K. Galbraith

Fed's volte face sends the dollar tumbling

Rarely before have a few coded words in the minutes of the US Federal Reserve caused such an upheaval in the global currency system, or such a sudden flight from the dollar.

By Ambrose Evans-Pritchard, International Business Editor

Published: 8:52PM BST 15 Jul 2010

The euro rocketed to a two-month high of $1.29 and sterling jumped two cents to almost $1.54 after the Fed confessed that the US economy may not recover for five or six years. Far from winding down emergency stimulus, the bank may need a fresh blast of bond purchases or quantitative easing.

Usually the dollar serves as a safe haven whenever the world takes fright, and there was plenty of sobering news from China and other quarters on Thursday. Not this time. The US itself has become the problem.

"The worm is turning," said David Bloom, currency chief at HSBC. "We're in a world of rotating sovereign crises. The market seems to become obsessed with one idea at a time, then violently swings towards another. People thought the euro would break-up. Now we're moving into a new phase because we're hearing alarm bells of a US double dip."

Mr Bloom said a deep change is under way in investor psychology as funds and central banks respond to the blizzard of shocking US data and again focus on the fragility of an economy where public debt is surging towards 100pc of GDP, not helped by the malaise enveloping the Obama White House. "The Europeans have aired their dirty debt in public and taken some measures to address it, whilst the US has not," he said.

The Fed minutes warned of "significant downside risks" and a possible slide into deflation, an admission that zero interest rates, $1.75 trillion of QE, and a fiscal deficit above 10pc of GDP have so far failed to lift the economy out of a structural slump.

"The Committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably," it said. The economy might not regain its "longer-run path" until 2016.

"The Fed is throwing in the towel," said Gabriel Stein, of Lombard Street Research. "They are preparing to start QE again. This was predictable because the M3 broad money supply has been contracting for months."

The Fed minutes amount to a policy thunderbolt, evidence of how quickly the recovery has lost steam. Just weeks ago the Fed was mapping out withdrawal of stimulus.

Goldman Sachs said it expects the euro to rise to $1.35 by the end of the year. The yen will appreciate to ¥83, through the pain barrier for most of Japan's big exporters. The new twist is that SAFE, China's $2.4 trillion fund, has begun buying record amounts of Japanese bonds, a shift in reserve allocation away from the dollar.

The signs of a deep and sudden slowdown in the US are becoming ever clearer as the "sugar rush" from the Obama fiscal stimulus wears off and the inventory boost fades. California, Illinois and other states are cutting spending, tightening US fiscal policy by 0.8pc of GDP.

Thursday's plunge in the Philadelphia Fed's July index of new manufacturing orders to –4.3 suggests that the economy may have buckled abruptly, as it did in mid-2008. The Economic Cycle Research Institute's ECRI leading indicator has tumbled, reaching –8.3pc last week. This points to a sharp slowdown or recession within three months.

http://www.telegraph.co.uk/finance/currency/7893238/Feds-volte-face-sends-the-dollar-tumbling.html

With the Fed apparently about to restart quantitative easing, aka monetization, the dollar as a long term store of value is compromised. In fact if a double dip recession does hit in the US, the Fed will go out to try to generate deliberate inflation in the economy to prevent deflation turning the double dip recession into the first US depression since the 1930s. This has forced money managers to start the logical process of trying to protect against dollar value destruction. Below the Houston Chronicle covers one attempt at protecting the long term value of funds. My guess is that this is only the start of a multi year process.

"When paper money systems begin to crack at the seams, the run to gold could be explosive."

Harry Browne

Higher education fund buys gold over economic worries

By R.G. RATCLIFFE and JEANNIE KEVER Copyright 2010 Houston Chronicle July 14, 2010, 9:40PM

AUSTIN — Fearing unstable international financial markets and the possibility of high inflation, Texas' higher education investment managers have bought more than $500 million in gold.

The gold purchases represent only 3 percent of the University of Texas Investment Management Co.'s $22.3 billion in investment funds, but it indicates how deeply the fund managers are concerned about the global financial future.

With the state's endowment funds designed to generate a 5.1 percent distribution each year to the University of Texas and Texas A&M University, it is rare for the investment managers to put large sums of money into a commodity whose value usually only grows through inflation.

"Recently, we've added 3 percent, 3 percent of our portfolio, into gold as a protection against inflation, but even more as a lack of confidence in financial markets due to extraordinary government fiscal and monetary stimulus," UTIMCO CEO Bruce Zimmerman told the University of Texas board of regents Wednesday. "I wish I could tell you the future looked rosy. Unfortunately, that's not our view. At best, we believe the future is uncertain."

Other executives suggested the endowments have begun to recover from the staggering losses of 2008 and 2009.

http://www.chron.com/disp/story.mpl/business/7108909.html

The article didn’t cover the specifics of how UTIMCO made their gold purchase. I can only hope that they arranged to take allocated physical delivery in a secure international vault, at an institution that’s not hopelessly short paper gold. As the fiat currency system unravels in a world of casino capitalism and unrestrained derivatives gambling, I fully expect to see a Comex default of the gold and silver contracts, and to hear of serious problems at some of the precious metals ETFs and their custodians. I have serious doubts that all of the custodian’s metals really exist, or haven’t been pledged to more than one entity.

We end for the day watching weather events in S.E. Asia, where Vietnam’s rice crop is in danger of failing. As the second largest rice exporter in the world, any failure there will have a big impact on rice prices and through them much of Asia’s quality of life for those who haven’t yet made it up to the comfortable middle class. As is now usual in our dumbed down 21st century world, a good article on a seriously disturbing problem gets the full global warming treatment by the “Staff Writers.” Below that, Accuweather covers the latest typhoon heading into already saturated China, that didn’t bring much in the way of relief to Vietnam.

Salty water, parched earth: Vietnam's Mekong paddies dry up

by Staff Writers
Que Dien, Vietnam (AFP) July 14, 2010
The rivers that should nourish his thirsty rice paddies are too salty, and the rains are late this year. Dang Roi does not know if he will be able to salvage anything from this spring's crop.

Vietnam is the world's second-biggest rice exporter and the Mekong Delta, where Roi farms, accounts for more than half of its production.

But Roi's paddy fields in Ben Tre province are burning up during a drought which meteorologists say is the worst in decades.

The dry season should have ended already, but in the yard of Roi's house in Que Dien commune, barrels that collect rainwater for his family's cooking and washing show the desperate situation. They are half-full, or empty.

Experts say Vietnam is one of the countries most threatened by climate change, whose effects are seen in worsening drought, floods, typhoons, exaggerated tides, and rising sea levels.

The country is planning for a one-metre (three feet) rise in sea levels by 2100, which would flood about 31,000 square kilometres (12,400 square miles) of land -- an area about the size of Belgium -- unless systems such as dykes are strengthened, said a UN discussion paper released last year.

It said the threat of floods is greatest in the Mekong Delta, where 17 million people live.

-------Over the past 50 years the sea level has already risen by 20 centimetres (eight inches) along Vietnam's coast, according to the increasingly worried communist government.

While delta farmers cope with drought, they are also challenged by sea water intrusion, which experts also link to climate change.

There is little water in the rivers near Roi's fields "and it's salty so we can't pump it" for irrigation, he says.

Recalling easier times on his 1.2 hectares (three acres), Roi says, "The rice fields weren't dying like this."

The Vietnamese government emphasises the role of climate change in disrupting its agricultural environment, but experts do not rule out an effect from dams upstream in China. That impact could be worsened by the opening of more dams further south in Laos and Cambodia, they say.

"The Chinese dams have made the system fragile, but the impact of the downstream dams will be cumulative," said Marc Goichot, of the WWF.

------China has eight planned or existing dams on the Mekong River, but rejects activists' criticism that the hydropower dams contribute to low water levels downstream.

There are proposals for another twelve dams in the lower Mekong countries.

Vo Tong Xuan, a leading Vietnamese rice expert, said the flow of the Mekong River -- whose long journey ends at the delta -- is "extremely reduced" this year.

He is concerned about the impact of Chinese dams, but also blames Vietnam's increasingly intensive methods of rice growing.

As the delta's population has expanded, farmers have gone from planting one to two and sometimes three rice crops

http://www.seeddaily.com/reports/Salty_water_parched_earth_Vietnams_Mekong_paddies_dry_up_999.html

Conson Aims for South China after Hammering Manila

Jul 15, 2010; 6:45 PM ET

Conson, having dealt Manila a drubbing, will now aim for a late-week landfall in south China.

As of Thursday evening, EDT time, the center of Conson was located over the South China Sea about 200 miles southeast of Hainan Dao, China.

Conson is currently a typhoon with 80 mph winds and stronger gusts. It's possible the storm will strengthen slightly over the next 12 hours.

Conson is predicted to make landfall on Hainan Dao by Friday night, local time. A landfall here would bring flooding rain and damaging winds.

The cyclone had weakened into a tropical storm while moving over southern Luzon, the main island of the Philippines. As of Thursday afternoon, the maximum sustained winds were close to 65 mph with gusts to 80 mph.

---- AccuWeather.com meteorologists say that Conson may contribute, at least indirectly, to further rains and ongoing flooding in the Yangtze River basin of central and eastern China. Here, in the provinces of Anhui, Jiangxi and Hunan, rainfall has already been 100 to more than 300 percent of the normal July amount leading to severe flooding.

The flooded area will continue to have locally excessive rain for at least the next week with rainfall next week potentially getting a boost from dissipating Tropical Storm Conson.

http://www.accuweather.com/blogs/news/story/33963/conson_may_unleash_disastrous.asp

"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."

William F. Rickenbacker

At the Comex silver depositories Thursday, final figures were: Registered 52.47 Moz, Eligible 59.34 Moz, Total 111.81 Moz.

+++++

Crooks and Scoundrels Corner.

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

The cost of God’s work, $550 million. Barely the price of a top squids annual bonus. Today, it’s the Great Vampire Squid again, paying a mere $550 million to make America’s out of their league SEC go away. The cost of “God’s work?” A puny 14 days worth of profits, and less that the stock price surged on news of the settlement. It didn’t take Ebenezer Squid long with his Abacus to see that at 550 million it was easily the bargain of the new century. Besides, what’s 550 million when it ends all the paranoia among friends? Maybe now the top squids can stop wearing wires and trying to record each other. Below, the Journal covers the Squids giving back what for them amounts to just another cost of business. One tiny unseemly detail that was buried in the minutiae, the great vampire squid seems to have to help the SEC serve up Frenchman Fabrice Tourre’s head on a plate. One other minor detail, the SEC apparently gives up pursuing Goldman Sachs on “other mortgage related CDOs” according to MarketWatch. Bernie Madoff must be wondering where he went wrong. Below the Journal coverage, did someone at Goldie or the SEC game the settlement’s announcement near the close? The Fed’s NY fix-it desk perhaps? They wouldn’t do that, would they?

"I'm doing God's Work."

Lloyd Blankfein. CEO Goldman Sachs. November 8 2009.

JULY 16, 2010

Goldman Settles Its Battle With SEC

$550 Million Deal Ends Showdown That Shook Street

In one of the largest penalties in Wall Street history, Goldman Sachs Group Inc. agreed to pay $550 million to settle civil charges that it duped clients by selling mortgage securities that were secretly designed by a hedge-fund firm to cash in on the housing market's collapse.

But the agreement with the Securities and Exchange Commission ends a showdown that had deeply shaken America's most powerful financial firm at a cost that outside observers deemed a bargain.

Goldman conceded it made "a mistake" by not disclosing the role of Paulson & Co. to investors for a deal dubbed Abacus 2007-AC1. The firm vowed to toughen oversight of mortgage securities, certain marketing materials and employees who create or pitch such securities.

Criminal prosecutors still are looking into whether Goldman or its employees committed securities fraud in connection with its mortgage trading, according to people familiar with the matter. Goldman hasn't commented on the criminal probe.

Yet Goldman walked away with several victories that raise questions about the strength of the SEC's case. The company wasn't forced to sacrifice any top executives, including Chief Executive Lloyd C. Blankfein, as some executives had feared. The changes it agreed to won't weaken its profits or standing as Wall Street's mightiest firm. The record-setting penalty is equivalent to just 14 days of profits at Goldman in the first quarter.

"That is a steal," said Michael Driscoll, a visiting professor at Adelphi University and a senior managing director at firm Bear Stearns Cos. before that firm collapsed in 2007. Analysts had expected Goldman to pay at least $1 billion as part of the deal.

Goldman shares surged late in the day on expectation of a pact, and continued to rally in after-hours trading. The stock was up $6.16, or 4.4% to $145.22 in New York Stock Exchange trading in regular hours, and then another $7.13, or 4.9%, to $152.35 after hours.

The firm's traders, investment bankers and other employees expressed relief that the three-month legal ordeal, which erased nearly $20 billion of the company's stock-market value, was over. Executives believe the $550 million payment is tiny compared with the business Goldman could have lost if the case dragged on. Goldman brass told managers to make sure the reaction inside the firm was subdued, fearing that cheering or other celebration would further taint the firm's reputation.

The settlement must be approved by U.S. District Judge Barbara S. Jones in New York.

The SEC said the Goldman settlement represents the largest penalty it has ever extracted from a Wall Street firm. In 1988, Drexel Burnham Lambert Inc. agreed to pay $650 million in fines and restitution, but about half the total went to satisfy civil claims of investors and clients defrauded by Drexel.

----The SEC said Goldman agreed to cooperate in the investigation of Fabrice Tourre, the Goldman trader accused by the SEC of being "principally responsible" for piecing together the bonds and touting them to investors.

Mr. Tourre faces a Monday deadline to respond to the allegations by the SEC in its April lawsuit or seek an extension. Mr. Tourre, who still works at Goldman but is on paid leave, plans to file a response Monday and continue trying to clear his name, according to a person familiar with the matter.

----The settlement includes a $535 million civil penalty and the handover of $15 million in profits Goldman made on the Abacus deal. Goldman will pay $250 million to investors in the Abacus deal, including $150 million to IKB Deutsche Industriebank AG, a German bank that invested the same amount in a slice of the mortgage securities. The U.S. government gets the remaining $300 million.

http://online.wsj.com/article/SB10001424052748704682604575369382547871788.html?mod=WSJEUROPE_hps_LEFTTopWhatNews

Thursday, July 15, 2010

Is the SEC Going to Investigate Insider Trading on Goldman Settlement News?

Goldman’s stock was trading at $140.15 at 3:26 PM today.

It moved more than 4 points in the next ten minutes.

I got wind that the settlement announcement was set for 4:45 PM at around 4:00 PM. I pinged a journalist at a major financial media outlet to find out whether there had been an announcement to the media earlier. His impression was also that the news had hit the wires at 4:00 PM (thus presumably intended for the close of trading).

So….it’s insider trading only if you are an insider…but who let the cat out of the bag at 3:30 PM, and were they an insider? This sort of thing happens all the time, but it’s particularly brazen when it involves and SEC announcement. But how likely is it that the SEC will turn over this rock to see what crawls out from under it?

http://www.nakedcapitalism.com/2010/07/is-the-sec-going-to-investigate-insider-trading-on-goldman-settlement-news.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

“I am not a crook.”

Ebenezer Squid. With apologies to Richard Nixon.

Another weekend and the British Open battles the winds, rain and sun of the links of St Andrews. In the Gulf of Mexico, BP finally seems to be close to a permanent solution to its Macondo blowout. The next 36 hours should tell whether the well’s integrity below the blowout preventer is still sound. More at the weekend and hopefully all good news. Have a great weekend everyone.

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

J. K. Galbraith.