Baltic Dry Index. 1053 -21
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
“There
is no money left to pay for services,” said [Spanish] treasury minister
Cristobal Montoro, calling for years of hard sacrifice. “We have to raise VAT
to stay in Europe. There is no other option. All alternatives are worse. This
has gone beyond ideologies.”
Another Friday. Is this the big one? The Friday night
some of Europe’s Club Med bolt from the dying Euro and re-impose national currencies,
bank holidays and capital controls? Probably not, but this summer has been a
summer of unrelenting rising global stress. America is probably already back in
recession, even as it gears up for a looming war with Iran. No one believes
China’s GDP figures, not even the Chinese government itself. But just how bad
are the real numbers? Thanks to the miracle of fiat currencies, especially the
miracle of quantitative easing and over a trillion euros of ECB largess, Brent
crude oil is back over $107 again, as everyone expects yet more monetisation
and an all-out war in the Middle East. Thanks to the worst US drought since
1956, the international price of maize, wheat, and soybeans is at record highs
or near record highs. More countries are headed for their own version of an
“Arab Spring.”
And then there is the never ending fiasco of Euroland.
France is levying confiscatory taxation on the rich, while the rich are heading
out to Switzerland and London. Greece and Portugal have entered death spirals,
with Italy and Spain about to follow. Sooner or later, one Friday night after
US markets close, one of Europe’s PIIGS will be gone. The pain of transferring
back to a national currency and reviving the economy Iceland style, being less
than continuing German dictated suicidal austerity.
Below, the state
of the world this northern hemisphere, high summer weekend. Stay long physical
precious metals, and a goodly supply of local cash. You never know, this might
be the big weekend. The weekend the great top down, Bilderberger dictated,
United States of Europe died.
Government's view of the economy could be summed up in a few
short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it
stops moving, subsidise it.
Ronald Reagan.
Home Sales to Factories Point to Second-Half Weakness: Economy
By Michelle Jamrisko and
Shobhana Chandra - Jul 19, 2012 9:38 PM
GMT
Sales of existing U.S. homes unexpectedly dropped and manufacturing
in the Philadelphia region contracted for a third month, showing economic
weakness is extending into the second half of the year.
Home purchases slid 5.4 percent in June to a 4.37 million annual rate, an eight-month low, figures from the National Association of Realtors showed today in Washington. The Federal Reserve Bank of Philadelphia’s general economic index was minus 12.9 in July after minus 16.6 the month before. Readings of less than zero signal contraction.
The figures underscore Fed Chairman Ben S. Bernanke’s concerns that growth may be too feeble to reduce unemployment stuck above 8 percent since February 2009. Other reports today showed consumer confidence weakened, claims for unemployment benefits rose and an index of leading economic indicators declined more than forecast.
“We’ll have very slow growth,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York and the best forecaster of U.S. economic indicators in the two years through May, according to data compiled by Bloomberg News. “The excess supply of homes will weigh on housing for quite some time. Manufacturing is starting to suffer a bit. The labor market remains pretty soggy.”
More
http://www.bloomberg.com/news/2012-07-19/sales-of-existing-u-s-homes-unexpectedly-decreased-in-june.html
Spanish Borrowing Costs Surge as Demand Weakens at Debt Sale
By Emma Ross-Thomas - Jul 19, 2012 10:27 AM GMT
Spain sold 2.98 billion euros ($3.66 billion) of notes, in line with its
maximum target, and its borrowing costs surged as demand for the securities
weakened. The country’s bonds fell after the sale. The Madrid-based Treasury sold notes due in 2014 at an average yield of 5.204 percent, compared with 4.335 percent when they were last sold on June 7. It sold five-year notes at 6.459 percent, compared with 6.072 percent on June 21 and seven-year securities at an average yield of 6.701 percent.
Demand for the two-year debt was 1.9 times the amount sold, compared with 4.26 last month and the bid-to-cover for the 2017 securities was 2.06, compared with 3.44 in June, the Madrid- based Treasury said. It set a maximum target of 3 billion euros for the sale.
“Nothing looks good,” Ioannis Sokos, a fixed-income strategist at BNP Paribas in London, said in a telephone interview. “Spanish banks have been much less aggressive in buying domestic bonds” as the effect of the European Central Bank’s three-year loans fades.
More
http://www.bloomberg.com/news/2012-07-19/spanish-borrowing-costs-surge-as-demand-weakens-in-debt-auction.html
Spanish debt crisis returns as Germany nears bailout fatigue
Spanish borrowing costs have surged to euro-era highs despite draconian fiscal cuts and backing from the German parliament for the country’s €100bn (£78bn) bank rescue package.
Yields on
five-year bonds jumped to a fresh crisis peak of 6.46pc at a closely-watched
auction as hopes fade for fresh stimulus from the European Central Bank and
direct recapitalisation of Spanish banks by the EU bailout find, the European
Stability Mechanism (ESM).
“Demand
for Spanish paper is collapsing, even for shorter-dated debt which is very
worrying and raises the spectre of Spain losing market access,” said Nicholas
Spiro from Spiro Sovereign Strategy.
Marchel
Alexandrovich from Jefferies Fixed Income said the markets are already bracing
for second bigger rescue of around €400bn. “A few more weeks like this and
Madrid is going to decide to it has nothing more to lose and call for a full
sovereign bail-out,” he said. “Then we will find out if there really is any
money in the EU kitty.
“If the
ECB goes on holiday without doing anything more, this is going to snowball.
We’re way past point where any country can deliver fiscal measures on its own.
People are not going to buy Spanish and Italian debt right now whatever ever
they do. There has to be a circuit breaker.”
Police fire rubber bullets after huge Madrid protest
Spanish
police fired rubber bullets and charged protestors in central Madrid early
Friday at the end of a huge demonstration against economic crisis measures.
The
protest was one of over 80 demonstrations called by unions across the county
against civil servant pay
cuts and tax hikes which drew tens of thousands of
people, including police and firefighters wearing their helmets.
"Hands
up, this is a robbery!" protesters bellowed as they marched through the
streets of the Spanish capital.
At the
end of the peaceful protest dozens of protestors lingered at the Puerta del
Sol, a large square in the heart of Madrid where the demonstration wound up
late on Thursday.
Some
threw bottles at police and set up barriers made up of plastic bins and
cardboard boxes in the middle of side streets leading to the square and set
them on fire, sending plumes of thick smoke into the air.
Riot
police then charged some of the protestors, striking them with batons when they
tried to reach the heavily-guarded parliament building.
The
approach of the riot police sent protestors running through the streets of the
Spanish capital as tourists sitting on outdoor patios looked on.
French lawmakers abolish tax breaks, boost taxes on rich
French
lawmakers Thursday backed a series of measures abolishing tax breaks and taxing
the wealthy as the new Socialist government pursued efforts to kickstart the
economy with a tax-and-spend programme.
The
measures were part of the first budget bill presented by President Francois
Hollande's government since he unseated right-wing Nicolas Sarkozy in May with
pledges to focus on growth instead of austerity.
The lower
house National Assembly approved the first measure in the early hours of
Thursday, ending a Sarkozy policy dubbed the "work more, earn more"
rule of exempting overtime hours from payroll charges and income tax.
Lawmakers
later voted to back an emergency rise in the ISF wealth tax applying to
taxpayers with a net worth of more than 1.3 million euros ($1.6 million) and
which is expected to bring in an extra 2.3 billion euros in revenues this year.
They also
approved a tightening of the inheritance tax to reduce the exemption ceiling
from 159,000 euros per child to 100,000 euros, the creation of a three percent
surtax on cash dividends and the doubling of a tax rate on financial
transactions to 0.2 percent.
With a
strong majority in the lower house, the Socialists and their parliamentary
allies were able to easily push through the measures despite some fierce
opposition from right-wing and centrist deputies.
----Lawmakers on Tuesday had already voted to scrap a planned increase in the value-added tax pushed through by Sarkozy to compensate for a reduction in payroll charges aimed at boosting competitiveness.
More
fiscal steps promised by Hollande, including a 75 percent tax rate on annual
incomes in excess of a million euros, are expected to be introduced next year.
Worst drought since 1956 threatens world food crisis
America's worst drought in more than half a century is threatening the world with a fresh food crisis.
A month
of scorching temperatures across the country's midwest has sent corn and
soybean prices to record highs, while wheat prices have reached levels not seen
since the last food crisis in 2008.
The
severest drought since 1956 in America's agricultural heartland has dashed the
hopes that were alive just a couple of months ago of a bumper harvest. Traders
and economists warned that the effect will ripple out from the US because it is
the world's biggest producer of corn and a major supplier of soybeans and
wheat.
"This
year we have a rally in prices that is driven by the fundamentals," said
Shawn McCambridge, an analyst at Jefferies Bache. "I really do anticipate
these prices staying strong and producers will have to try to pass the cost
onto consumers."
The
dizzying gain in prices has shocked many in the industry. Corn prices have
surged 51pc over the last month, wheat is up 40pc and soybeans have gained
almost 20pc. The prospect of another bout of food inflation will alarm
governments in developing countries where the run-up in prices in 2008 caused
widespread hunger and revolts. It also presents a new headwind for western
countries trying to kickstart economic recoveries.
For now -
at least - all eyes are on the weather forecast for those US states that have
been hardest hit, including Iowa, Nebraska, Indiana, Ohio and Illinois. While
light rain fell in some parts day, there is little more forecast over the next
two weeks.
July 19, 2012 6:58 pm
World braced for new food crisis
By Jack Farchy in London and Gregory Meyer in New York
The world is facing a new food crisis as the worst US drought in more than
50 years pushes agricultural commodity prices to record highs.Corn and soyabean prices surged to record highs on Thursday, surpassing the peaks of the 2007-08 crisis that sparked food riots in more than 30 countries. Wheat prices are not yet at record levels but have rallied more than 50 per cent in five weeks, exceeding prices reached in the wake of Russia’s 2010 export ban.
The drought in the US, which supplies nearly half the world’s exports of corn and much of its soyabeans and wheat, will reverberate well beyond its borders, affecting consumers from Egypt to China.
“I’ve been in the business more than 30 years and this is by far and away the most serious weather issue and supply and demand problem that I have seen by a mile,” said a senior executive at a trading house. “It’s not even comparable to 2007-08.”
David Nelson, global strategist at Rabobank, added: “Today the [US crop] disaster is real, whereas to some degree the big run-up in prices in 2008 was speculatively driven.”
At the Comex silver depositories Thursday final figures were: Registered 40.38
Moz, Eligible 103.03 Moz, Total 143.42 Moz.
Crooks and
Scoundrels Corner
The bent,
the seriously bent, and the totally doubled over.
Today, another US
listed Chinese stock takes a dive. China’s Bernie Madoff perhaps.
Short-Seller Deals Further Blow to New Oriental
Education services company doesn't own all its schools,
Muddy Waters says, causing stock to tumble to 2007 low
By New York correspondent Ni Weifeng 07.19.2012 17:09
(New York) – Shares of U.S.-listed Chinese firm New Oriental Education &
Technology Group Inc. plummeted by more than one-third on July 18 after a
short-seller's attack.The scathing report, published by Muddy Waters Research, rated New Oriental's shares a "strong sell," citing problems with corporate structure and allegedly inflated cash balances of the top private educational services provider in China.
New Oriental saw its share prices fall by more than 35 percent by the end of day to US$ 9.50, the lowest since early 2007.
This was on top of a similar percentage point drop on July 17 triggered by the U.S. Securities and Exchange Commission's investigation into the company's financial statements. The firm's stock has fallen 57.3 percent in two days.
Muddy Waters said New Oriental lied about all its schools being company-owned, while in fact it had numerous franchises.
The short-seller uploaded an audio clip onto its website of New Oriental's president and CFO, Louis Hsieh, saying in a phone interview that the company fully owns all 650 learning centers across China as a means of quality control.
However, Muddy Waters alleged that New Oriental used "upfront franchise and other fees to inflate its cash balances."
How New Oriental "conducts its business differs materially from what it tells investors," the short-seller said, adding that this was "typical of many of the frauds we have witnessed in China."
The report also says a restatement of New Oriental's historical results was likely and the firm's auditor, Deloitte, which has been involved in the SEC's investigation into several U.S.-listed Chinese firms suspected of accounting fraud, could resign.
The SEC's inquiry into New Oriental mainly concerns an ownership change in the company's Beijing subsidiary firm, which is structured as a variable interest entity (VIE) to circumvent the Chinese government's foreign investment restrictions.
More
Another
weekend, and the British Open to tempt Britain’s rain gods. One week away from
Germany’s hoped for British Olympic’s fiasco. Next weekend might be a very good
weekend to exit the euro for any country seeking an exit. A very good weekend
for exiting London, for those not attending Olympic events. Have a great
weekend everyone.
“I owe a lot to my parents, especially my mother and father”
Greg Norman
The monthly Coppock
Indicators finished June:
DJIA: +63 Down. NASDAQ: +71 Down. SP500: +41 Down. All
three indicators remain down but downward momentum seems stalled.
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