Baltic Dry Index. 2018 -109
LIR Gold Target by 2019: $3,000.
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.
George Papandreou, with apologies to Cary Grant. To Catch A Thief.
While the Baltic Dry Index fell for the 31st consecutive day yesterday, something completely ignored by global stock markets everywhere, busy betting that the BDI is not signaling a trade slowdown ahead, Dutch bank ING released a report on Euroland’s Frankenstein currency. The Euro, according to ING, is simply “too big to fail.” Like it or not, and most German taxpayers don’t like it at all, hardworking taxpaying German milch cows are now learning the truth about their new European one size fits all currency, they are trapped in it forever, according to ING. Germans will just have to get used to working harder for longer, to support the Club Med way of high life. With banks issuing dire reports like this, does anyone really think that Club Med countries will really stick to their austerity programs for years to come, transforming themselves into little Bavaria’s along the way? Just by coincidence, the Greeks are revolting again today. Yet another reason to stay long precious metals. Poor Eurolander’s are now mere pawns of their elitist overlords in seriously crooked Brussels, home of magical unauditable accounting.
"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."
Henry Hazlitt
EMU break-up risks global deflation shock that would dwarf Lehman collapse, warns ING
A full-fledged disintegration of the eurozone would trigger the worst economic crisis in modern history, devastate every country in Europe including Germany, and inflict a deflationary shock on the US. There would be no winners, warns the Dutch bank ING in a new report "Quantifying the Unthinkable".
By Ambrose Evans-Pritchard Published: 6:55PM BST 07 Jul 2010
"Complete break-up would have effects that dwarf the post Lehman Brothers collapse. Governments would find themselves having to bail out banks again, worsening already fragile government finances. The risk of at least a temporary break-down in payments systems would be enormous, " said the report by Mark Cliffe, Maarten Leen, and Peter Vanden Houte.
"Initial trauma is sufficiently grave to give pause for thought to those who blithely propose EMU exit as a policy option," it said, a rebuke to those German politicians and economists who have talked openly of shaking out weaker members.
The new Greek drachma would crash by 80pc against the new Deutschemark. The currencies of Spain, Portugal, and Ireland would fall by 50pc or more, causing inflation to soar into double-digits. "The impact is dramatic and traumatic," it said.
ING has attempted to unpick the complex consequences of break-up scenarios, concluding that even a surgical exit by Greece alone would hurt everybody, and be suicidal for Greece. Both weak and strong states would suffer violent downturns if EMU unravelled altogether, though each in very different ways. "In the first year, output falls by between 5pc and 9pc across the various former member states," it said.
The German sphere would face a "deflationary shock". The US dollar would rocket to 85 cents against the euro equivalent, with a "temporary overshoot" to near 75 cents. This would tip the US into acute deflation, threatening North America with a double-dip recession. East Europe would contract 5pc in 2011 alone.
Safe-haven flows to core debt markets would drive down yields on 10-year US, German, and Dutch bonds to near 0.5pc, by far the lowest ever. Club Med yields would decouple brutally, rising to between 7pc and 12pc, "capital controls, notwithstanding."
This is the picture of a world falling apart. It is an outcome that Angela Merkel, the German Chancellor, now seems determined to avoid, after dragging her feet over the Spring. The Bundestag has backed Germany's share of the €110bn rescue for Greece, and the €750bn EU-IMF bail-out for future casualties should they need it. The Bundesbank has lifted its de facto veto on purchases of Club Med bonds by the European Central Bank.
-----The markets perhaps sense that the bail-out battles in Germany are not yet over. There are four complaints lodged at the German constitutional court arguing that the rescues breach EU treaty law and therefore German basic law. While the court has refused an immediate injunction to block aid, it has not yet ruled on the cases.
A group of five professors has just expanded its original complaint against the Greek rescue to cover the EU's €440bn Stability Facility, describing the methods used to ram through the measures as "putschist" and anti-democratic. "This course is leading Germany to ruin," they said.
------ING's global strategist Mark Cliffe said any Anglo-Saxon Schadenfreude at a euro break-up would be short-lived. The UK economy would shrink by 4.5pc from 2011-2012. "It would be a very unpleasant experience," he said.
Safe-haven flows pouring into Britain would drive sterling through the roof. Eurozone demand for UK exports would contract viciously. Pension funds would suffer fat losses on eurozone assets. UK lenders would face havoc again though a web of cross-border linkages.
The Dutch bank does not make any judgement on the merits of EMU, or on whether it is an 'optimal currency area', nor does it explore half-way options such as a split into a hard Teutonic euro and a weak Latin euro.
The report said break-up talk is "no longer just a figment of fevered Anglo-Saxon imaginations". It has spread into top policy-making circles in the eurozone and must now be analysed as a serious tail-risk.
My guess is that ING and the 40 Brussels thieves notwithstanding, the whole Euroland fiat currency scam will still collapse at some point ahead, undone by the EU’s never ending expansionist policy, and the willingness of most socialist EU political parties to endlessly seek re-election by bribing the voters with other people’s money.
The trouble with socialism is that eventually you run out of other people’s money.
Margaret Thatcher.
Below, Club Med’s leader Napoleon Bling, hits the headlines again for all the wrong reasons. A legend in the Elysee Palace, the big man of France was second only to the UK’s former Prime Minister Tony Blair in fawning over billionaires and US Presidents for freebies. Note, this writer has no idea or not, whether Ms Bettencourt did or did not avoid paying French tax, nor whether she arranged to send over bungs to the Elysee Palace to help with the grocery bill.
"We don't pay taxes. Only the little people pay taxes."
Leona Helmsley.
French public anger grows at government sleaze allegations
When a poll this week found two thirds of French people consider their politicians "mostly corrupt", many were surprised at how low the figure was.
Peter Allen, in Paris Published: 9:45PM BST 07 Jul 2010
Suspicions about financial irregularities have plagued Nicolas Sarkozy's administration since he came to power in 2007 and immediately awarded himself a 140 per cent pay rise.
It prompted Arnaud Montebourg MP to say: "You get the feeling that the political class is helping itself while the French people are abandoned on the edge of the pavement."
Within days of being elected, Mr Sarkozy was enjoying a holiday on the luxury yacht of Vincent Bolloré, the wealthy businessman.
For an egalitarian conservative whose campaign slogan had been "Work more, to earn more" the cruise certainly sent out all the wrong messages.
A whirlwind romance and then marriage to heiress Carla Bruni – one of the richest women in Paris thanks in part to the fortune built by her Italian industrialist father – did not help to improve Mr Sarkozy's image either.
While the French may just about be able to tolerate Mr Sarkozy's high-living, glitzy family and friends, it asks questions about the source of his own money which lies at the centre of the latest allegations against him, and his colleagues.
Mr Sarkozy does not come from a moneyed background. His father, Pál, was a Hungarian immigrant who was penniless when he arrived in Paris after the Second World War. After divorcing from Mr Sarkozy's mother, he left his family with very little money.
As a schoolboy in Paris, the future president said he frequently felt inferior to his wealthier classmates, and later admitted: "What made me who I am now is the sum of all the humiliations suffered during childhood."
But he has since earned a reputation as a "Bling Bling" statesman whose government is known for its links to billionaires and love of the good life.
It recently emerged that Christian Blanc, the minister for Paris, spent 12,000 euros of taxpayers' money on cigars.
Alain Joyandet, the International Development Secretary, meanwhile spent 116,500 euros on a private plane to take him to the Caribbean for a meeting about the Haiti earthquake.
Both resigned. However, questions remain about employment secretary Eric Woerth, who is facing allegations he "assisted" L'Oreal heiress Liliane Bettencourt in avoiding tax.
Mr Woerth is also said to have helped collect cash payments from Mrs Bettencourt to fund Mr Sarkozy's presidential election campaign.
While Mr Sarkozy recently announced cutbacks on ministers' perks, including official homes and cars, accusations that he personally received envelopes stuffed full of cash himself have plunged him into the deepest scandal of his presidency.
In other EU news, was the latest news from Germany a blip or the start of something more? Either way, stock markets ignored it yesterday, but I suspect they will come to regret it ahead.
German Factory Orders Unexpectedly Fell in May
July 7 (Bloomberg) -- German factory orders unexpectedly fell for the first time in five months in May as demand for goods made in Europe’s largest economy waned across the 16- nation euro region.
Orders, adjusted for seasonal swings and inflation, declined 0.5 percent from April, when they rose a revised 3.2 percent, the Economy Ministry in Berlin said today. Economists had forecast a 0.3 percent gain for May, according to the median of 30 estimates in a Bloomberg News survey. From a year earlier, orders increased 24.8 percent.
Europe’s sovereign debt crisis has pushed the euro down 17 percent against the dollar since late November, making exports to countries outside the currency bloc more competitive just as the global recovery gathered pace. With governments cutting spending to convince investors that budget deficits are under control, growth in the euro area, Germany’s biggest export market, may slow.
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=axrasGogNr0g
In also ignored US news:
US shopping center vacancy rates rose in 2nd qtr
Wed Jul 7, 2010 12:01am EDT
* U.S. strip mall vacancy hits 10.9 pct
* U.S. mall vacancy reaches 10-year high
* Recovery expected to be weak and prolonged
By Ilaina Jonas
NEW YORK, July 7 (Reuters) - Retailers shuttered more stores in U.S. shopping centers during the second quarter, further delaying a rebound in the struggling retail real estate market, according to research firm Reis Inc.
Shopping centers and strip malls have been pounded harder than other types of real estate, hurt by weak consumer spending, anemic job growth and an oversupply built to serve new housing that never materialized.
"Until we see stabilization and recovery take root in both consumer spending and business spending and employment, we do not foresee a recovery in the retail sector until late 2012 at the earliest," said Victor Calanog, Reis director of research.
For U.S. strip centers, the vacancy rate in the second quarter rose 0.10 percentage point from the first quarter to 10.9 percent, slightly below the 11 percent in 1991 during the prior real estate bust, according to the Reis quarterly report, released on Wednesday.
http://www.reuters.com/article/idUSN0610302020100707
We end for the day with two of the best “informed” opinions around. Like the rebounding stock markets, canny Dutchman Willem Buiter, now chief economist dancing for his supper at Citigroup, doesn’t see a double-dip recession ahead.
Below that, “Investment Biker” Jim Rogers holds court with The Telegraph on his investment view from Singapore.
Willem Buiter: double-dip recession won't happen despite worry of 'noisy' market
Willem Buiter, chief economist at Citigroup and a former Bank of England policy-maker, said he does not believe there will be a global double-dip recession.
By Angela Monaghan Published: 9:31PM BST 07 Jul 2010
He said that the process of fiscal tightening planned in many countries was necessary but unlikely to tip economies back into contraction.
In recent weeks mounting fears of a double-dip have driven markets down, despite the fact economists widely believe that it is unlikely.
Mr Buiter said: "I view the markets as noisy children. You have to pay attention to them but you shouldn't take them too seriously. Markets have predicted eight of the last three recessions."
Referring to the UK, he said it would be "unwise" to close the Bank of England's Special Liquidity Scheme without putting something else in its place. The scheme provided the banks with £185bn of emergency funding in total, and comes to an end in 2012. Mervyn King, the Governor of the Bank of England has insisted in the past that the scheme would not be extended.
The Bank's Monetary Policy Committee is expected to leave interest rates on hold at 0.5pc on Thursday, as it weighs the fragility of the recovery against above-target inflation. It is also expected to maintain its quantitative easing target at £200bn of asset purchases.
http://www.telegraph.co.uk/finance/markets/7877937/Willem-Buiter-double-dip-recession-wont-happen-despite-worry-of-noisy-market.html
Jim Rogers: 'I don't have investments in the UK'
Legendary investment guru Jim Rogers set up one of the world's first hedge funds with George Soros in 1970.
By Justin Harper Published: 1:47PM BST 06 Jul 2010
After co-founding the famous Quantum Fund he has since amassed millions with his contrarian investment strategies.
The maverick investor started putting money into the Chinese economy long before it became popular with today's fund managers.
----- Do you still hold the view that the UK is finished?
Well, I don't have investments in the UK. I am put off by the gigantic debts built up in the last few years by the previous government. The numbers are truly staggering.
And the UK has had a balance of trade deficit for the last 25 years which has been growing over the years. It used to rely on North Sea oil to bolster its international earnings coupled with the City of London being a financial centre. But as these have declined I don't see anything replacing this revenue stream. I think the balance of trade and debt levels will get worse.
------Are you as downbeat about the rest of the world's economies?
I have not been buying stocks for at least a year and a half. Lying ahead I see more currency turmoil and the world economies' problems have still not been sorted out. I moved to Asia as I see massive opportunities here compared to Europe and the US.
Many Asian economies have been powering ahead while the rest of the world suffered. But Asian economies can't pull the world out of its hardships. Even with China and India booming these can't save the day for the rest of us. As Europe continues to have its problems everybody else is affected.
So do you see the balance of power shifting to Asia?
In the 1920s and 30s there was a shift in economic power from the UK to the US and the same thing is happening now to Asia. Few people realised it at the time and the same is true now. But the continent has some of the largest creditors in the world – Korea, China, Japan, Taiwan, Singapore etc all have surpluses while other major economies are massively in debt.
------But you've been buying the euro recently?
When no one wants something that should be a signal to buy it. Everyone has been selling the euro so I bought some, if only for the rally.
This doesn't mean that I think European governments have got their act together. Far from it. But the euro could go up from a rebound rally so that's why I'm interested.
But generally I think paper money is flawed. Nearly every currency in the world is flawed, the euro just happens to be less flawed than others.
I've also been buying the Danish Kroner and the Swedish Kronor but I'm not buying any more now.
So if you're not investing in equities where else are you putting your money?
There are lots of alternatives. I own gold and it is reaching an all-time high but that doesn't mean I'm about to sell it. While now might not be the best time to buy gold there are other precious metals that are well off their all-time highs.
Foe example silver is about 60pc off its all-time high so could be a buying opportunity. Anything that is so far off its all-time high gets me interested. Platinum and palladium are also nowhere near their historic highs.
-----And what lies in store for your homeland?
The US has similar problems to the UK with massive debt levels. In fact it is the biggest debtor the world has ever seen. So I have no investments there either.
But what really worries me is that some states, counties and cities have been or are on the verge of going bankrupt. California is much larger than Greece and we've seen the fallout from the Greek debt crisis.
A lot of promises have been made in these cities and states from both the public and private sector and these have been papered over. Greece has been going on about its debt for a decade and people weren't paying attention. The same is happening across the US. The Fed has already bailed out the banks and I wonder how its finances will cope once more bankrupt states and cities approach it.
At the Comex silver depositories Wednesday, final figures were: Registered 52.54 Moz, Eligible 61.36 Moz, Total 113.90 Moz.
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Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
No crooks today, just a British senior civil servant exonerating the British dodgy climate science scientists, at the probity challenged Climatic Research Unit of the iffy University of East Anglia. Phew, for a while there we thought it was going to be a whitewash and cover up! So that’s alright then, makes one proud to see British fair play in action.
While giving evidence at the trial of Stephen Ward, charged with living off the immoral earnings of Keeler and Rice-Davies, the latter made a famous riposte. When the prosecuting counsel pointed out that Lord Astor denied an affair or having even met her, she replied, "Well, he would, wouldn't he?"
'Climategate' review clears scientists of dishonesty over data
'Rigour and honesty' of scientists not in doubt but Sir Muir Russell says UEA's Climatic Research Unit was not sufficiently open
David Adam, environment correspondent Wednesday 7 July 2010 13.02 BST
The climate scientists at the centre of a media storm were today cleared of accusations that they fudged their results and silenced critics to bolster the case for man-made global warming.
Sir Muir Russell, the senior civil servant who led a six-month inquiry into the affair, said the "rigour and honesty" of the scientists at the world-leading Climatic Research Unit (CRU) at the University of East Anglia (UEA) are not in doubt. They did not subvert the peer review process to censor criticism as alleged, the panel found, while key data needed to reproduce their findings was freely available to any "competent" researcher.
The panel did criticise the scientists for not being open enough about their work, and said they were "unhelpful and defensive" when responding to legitimate requests made under freedom of information (FOI) laws.
The row was sparked when 13 years of emails from CRU scientists were hacked and released online last year. Climate change sceptics claimed they showed scientists manipulating and suppressing data to back up a theory of man-made climate change. Critics also alleged that the scientists abused their positions to cover up flaws and distort the peer review process that determines which studies are published in journals, and so enter the scientific record. Some alleged that the emails cast doubt on the findings of the Intergovernmental Panel on Climate Change (IPCC).
Announcing the findings, Russell said: "Ultimately this has to be about what they did, not what they said."
He added: "The honesty and rigour of CRU as scientists are not in doubt ... We have not found any evidence of behaviour that might undermine the conclusions of the IPCC assessments."
The review is the third and final inquiry into the email affair, dubbed "climategate", and effectively clears Professor Phil Jones, head of the CRU, and his colleagues of the most serious charges. Questions remain over the way in which they responded to requests for information from people outside the conventional scientific arena, some of whom were long-standing critics of Jones.
http://www.guardian.co.uk/environment/2010/jul/07/climategate-review-clears-scientists-dishonesty
“The appellant made the general answer that this was a free country and a man can do what he likes if he does nobody any harm.... It cannot be too clearly understood that this is not a free country, and it will be an evil day for the legal profession when it is. Citizens of London must realize there is almost nothing they are allowed to do… and least of all may they do unusual actions "for fun". People must not do things for fun. There is no reference to fun in any Act of Parliament. It is not for me to say what offence the appellant has committed, but I am satisfied that he has committed some offence, for which he has been most properly punished."
Lord Light, the Lord Chief Justice. "Is It a Free Country?" A.P. Herbert.
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. Given the weakening BDI, and the ECRI leading indicators signaling recession ahead, it is probably safer to assume that the great stock market bounce has ended and that we are entering a new bear market, or alternately, resuming the old one after a bear market rally.
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Sunspots – A 22 year colder world? (From 2004?)
Spotless Days July 07
Current Stretch:0 days
2010 total: 35 days (19%)
2009 total: 260 days (71%)
Since 2004: 803 days
Typical Solar Min: 485 days
The long minimum seems to have ended, or has it? Despite the record and near record heat waves sweeping the northern hemisphere, I’m beginning to think our new Dalton Minimum of arriving global cooling, might turn out in fact to be a much longer more severe Maunder Minimum. More in the next few days on the Sunspot page on the website.
