Tag: european

Market Week Wrap-up

– Leading global equity indices continued floating upwards this week while the inflation drumbeat just kept getting louder. In the US, the January y/y CPI figure hit +1.6%, its highest level since last spring, and some analysts were alarmed by higher food prices creeping into CPI data sooner than expected. China’s January CPI report was lower than expected at +4.9% y/y, but markets panned the figures as heavily massaged by basket revisions. In the UK, the BoE said CPI would likely continue growing at a 4-5% clip over the short term. The World Bank released a report indicating that food prices were up 15% since October 2010 and are now only 3% away from record highs hit in 2008. Commodities moves complicated the story somewhat. While silver has pushed out to 30-year highs, there were signs that inflated soft commodity prices were beginning to unwind, with cotton and grain prices both below recent highs. Crude and gold prices have been impacted by reports that Iran is sending warships through the Suez Canal and bloody protests in Bahrain (next door to Saudi Arabia), although WTI futures were well below recent highs seen in early February. The Obama Administration unveiled its $3.73T budget proposal for 2012, including an all-time high deficit of $1.65T, reflecting the tax-cut agreement reached with Republicans in December. For 2012, the administration sees the imbalance declining to $1.1T, giving the country a record four straight years of one trillion-plus deficits. Bond prices held steady after the details were released, and Congress sharpened its knives for a budget fight. The Feb Empire Manufacturing survey hit its highest level since last June, indicating that the US manufacturing expansion seen over the last several months is continuing. On Friday there was plenty of commentary out of the G20 conference, where leaders tried mightily to achieve some concrete steps in reforming the global monetary system. Fed Chairman Bernanke took a swipe at the Chinese in his policy address to the G20, warning that nations which keep currency values low create imbalances, while the PBoC’s Zhou continued to push for a higher profile for the IMF’s Special Drawing Rights (SDRs). For the week, the DJIA rose 1.0%, the Nasdaq gained 0.9% and the S&P500 was up 1.0%. – John Deere crushed earnings and revenue targets in its Q1 report and nearly doubled its guidance for FY11 equipment sales. The firm hiked its sales guidance for its key agriculture and construction units as well, and said its Q2 revenue would blow out consensus estimates. Later in the week Caterpillar released very favorable dealer metrics for the month of January, with North America machinery sales up a whopping 58% y/y in the month. – Iron ore miner Cliffs Natural Resources reported very strong Q4 profits on a big y/y gain in iron ore pricing. The company expects global steel production to continue to grow in 2011, although it warned that spot iron ore prices are unsustainably high. Reliance Steel also blew out earnings estimates, and said pricing would remain strong at least through the first quarter of 2011. – In tech, Dell’s profit was way ahead of the consensus in its Q4 report, thanks to a big improvement in margins. The company said it believes the corporate IT…

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Raising the Debt Ceiling

Filed in BP, Debt, euro, european union, Gold, GOld juniors, Gold Market, lead, o, obama, silver, stimulus, target by on January 21, 2011 0 Comments
Raising the Debt Ceiling

The United States government seems to enjoy spending our money with the zeal of a rap star. They like it so much, in fact, that they’re going to need a little more from you… Last week, Treasury Secretary Timothy Geithner warned Congress that this year’s statutory limit on federal debt will be reached as early as spring — between March 31st and May 16th. Geithner alerted congressional leaders saying: Even a very short-term or limited default would have catastrophic economic consequences that would last for decades. For these reasons, I am requesting that Congress act to increase the limit early this year, well before the threat of default becomes imminent. I don’t buy it. We’ve already been down this road before… Bush’s TARP and Obama’s Economic Stimulus effectively did the same thing. And look what happened: more than 90% of the money went right to the banks, where it still resides. Bush and Obama did their jobs. They protected the banks at all costs. And that was, of course, the design from the start. To bring confidence back into the U.S. system, we’re simply going to have to cut out the reckless spending. This would point America in the right direction and reduce the risk of a default or devaluation that looms in our near future. Unfortunately, this does not appear to be the road our politicians want to take. ~~SIGNUP_WD~~ The trouble with this train wreck of a debt picture is that rates are going to have to go higher in the near future. That’s because the folks who have been buying our debt over the course of the last 30 years are no longer interested in our new debt offerings at current interest rates. Not only are they not interested in buying our new debt; but they’ve decided to dump the Treasury paper they already have. This puts the U.S. in a tricky situation. To make our obsessive borrowing more attractive, we’ll have to continue to raise rates. This is where things really start to go south… And the whole of society could fail because of unsustainable spending and debt scenarios at every level of government worldwide. This was typical of every other empire our world has ever known before their ultimate collapse: the Spanish, Greek, Roman, and British Empires all came to an end because they spent themselves into oblivion— just as the European Union, England, Japan, and the U.S. are doing today. Just consider how truly desperate some situations have become… Last week, the state of Illinois increased personal income tax by 66% and corporate income tax by 45%. These increases are designed to address a $15 billion state budget deficit that lawmakers said was leading the state into insolvency. How long is it before we start seeing headlines that include “State Bankruptcy”? On its current path, the United States could not possibly meet all of its future obligations. And the end game could mean collapse. That means as an investor, you need to get your ducks in a row. The

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Gold and Silver Prices to Spike Next Week

Gold and Silver Prices to Spike Next Week

Gold and silver prices have remained volatile in both directions since October. But indications from the COMEX show suggest we may see a spike in these precious metals prices next week… As prices moved higher over the past two weeks, strong bouts of profit taking have hit the gold and silver markets in each instance, stalling the next attempt to hit another new high. World Gold and Silver Demand World investment demand for gold has increased 250% in the past ten years. Investment demand for silver has skyrocketed 522% since 2007. Sales of official gold coins (like the American Gold Eagle) have increased 618% since 2007. World governments are hoarding silver; official sales have plummeted 83% in the past three years. Gold demand for ETFs has increased 20,470% since 2002. Above-ground silver supplies dropped 86% last year. Industrial demand for silver has increased over the past decade, despite a 236% increase in prices. On the downside action over the past two weeks, strong buying support has come in as precious metals prices looked like they were going to sell off— thus our current holding pattern in gold and silver prices. This will change to the upside within the next two weeks as major buying of physical metal will need to take place in order to meet contractual obligations on the COMEX before December 31, 2010. Contracts for gold and silver December futures that demand physical metal must be met by then. But there appears to be a significant shortfall in the actual physical metal required to meet these demands — especially in silver… If these contractual obligations are not met by the 12/31/10 deadline, then we could see a default scenario, which would drive the metals prices even higher and cause great instability for other markets as well. This potential default is due to the fact that JP Morgan Chase, the largest fractional stock holder of the Federal Reserve, has been wildly shorting silver and is now caught between a rock and a hard place. Word on the street is that JP Morgan Chase has opted to go massively long copper in an attempt to hedge their losses in silver, which could be enormous. This is…

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Intel (Nasdaq:INTC) Receives US Approval for McAfee (NYSE:MFE) Deal

Filed in euro, european union, Gold Bullion prices, Intel Corp, Mcafee, o, silver by on December 21, 2010 0 Comments

Intel Corp. (Nasdaq:INTC) has received approval from the U.S. Federal Trade Commission to go forward with its acquisition of McAfee Inc. (NYSE:MFE).Now Intel awaits a decision from the European Commission, which, as usual, appears to be holding up another business deal. The antitrust regulator for the European Union has said behind the scenes that they’re concerned over the deal, which implies a

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Investment Management Association Hedge Fund Directive

Filed in BP, euro, european union, Gold Investing, hedge-funds, o by on November 26, 2010 0 Comments

Investment Management Association Head of IMA Condemns EU Hedge Fund Directive The head of the Investment Management Association has come out, perhaps unsurprisingly, against the hedge fund directive passed by the European Union. IMA head Richard Sau…

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Revisiting [The say when you don’t fall on bearish news, you’re not bearish]

Filed in euro, Gold, o, silver, target by on November 25, 2010 1 Comment

This was our article yesterday about Crude and very the first line reads “This certainly then holds true for Crude [At least for NOW] which we have found to be on bid ever since the Saudi King flew to U.S for medical attention”. The API figures were bearish on Tuesday and Energy market [clearly] discounted them altogether as the street finds the API figures “erratic” at [times] however, on Wednesday DOE numbers come and they came and yet absolutely nothing happened to Crude rather on a bearish news as the street was of consensus that inventories would decline they increased as we had anticipated them to increase but Crude took it as a bitter pill, shut close its eyes and then focused on the earlier U.S Economic data of which it had paid absolutely no heed to and shot up like a cannon. Certainly there were no prisoners taken yesterday as all stop orders went and the shorts were forced to be a part of buying frenzy as in order for them to square their trades they had to “Buy” thus further putting a bid on crude. We could compare Crude WTI’s move to that of Gold which took place day before when Gold spontaneously came to life and pushed from $1,365 to $1,382 which is a gain of 1.24% whereas Crude’s move yesterday was 2.92% or 2.35 times stronger than that of Gold. Can we explain this move except that Crude pushed up because North Koreans do not seem to be backing down? Or that Crude pushed higher because the Jobless claims finally have broken the lower side of

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Traders and Investors Selling the Euro

Traders and Investors Selling the Euro

Filed under: International Markets , Currency The eurozone sovereign debt crisis has bubbled to the surface again. This time Ireland is in the cross hairs. Ireland may need aid, primarily to bail out its banks. Ireland says it has enough cash to carry it through next summer, but the key concern is keeping Irish banks afloat during this crisis. So far, Ireland hasn’t requested financial aid from the European Union. This uncertainty has set off a selling spree in the euro. About two weeks ago the euro was trading at $1.42. Since the Irish crisis began the euro dropped to $1.35. Continue reading Traders and Investors Selling the Euro Traders and Investors Selling the Euro originally appeared on BloggingStocks on Tue, 16 Nov 2010 11:00:00 EST. Please see our terms for use of feeds . Read | Permalink | Email this | Comments

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The Coming Suburban Welfare State

Filed in deflation, euro, o, silver, Spot Gold, ubs by on November 10, 2010 0 Comments

Some have predicted that high-energy costs, either due to decreasing supply of oil or costs associated with carbon emission mitigation, will soon push people out of their cars and onto public transportation. But there’s something else happening: people are getting sick of spending time in transit at all, making city living increasingly attractive. We are now increasingly able to infill “scrap-time” during our days with useful activity, and location-based social networks make it possible to maximize personal connections as we move about. We are engineering our own serendipity to generate real value from every moment. Why would we squander that potential by spending time in transit of any kind? In the future, I predict: Air travel will be reserved for trips greater than 500 miles Trains will be used for trips less than 500 miles Bicycles, walking, and local transit will be used within cities Any local trip longer than 20 minutes will be seen as burdensome Cars will be seen as a luxury to be used for road-trips + utility hauling And again, this will not happen due to fuel scarcity alone – it will happen because people demand it; and I’m not talking about you – but your kids and grandkids . Regardless of what happens with fuel prices, we know that roads do fill to their available capacity. And then that’s it. Expansion does not help for long, because roads then fill to whatever capacity is available and development occurs until roads are too broken to use. Roads are also increasingly expensive to build. A major construction project such as the popular-but-doomed Intercounty Connector in Maryland will cost over $2.6Bn to build. Is this a good long-term use of resources? Seems to me we’re throwing a bone to some 55 year-old commuters who have been annoyed with the state of the Washington Beltway since it was built, and this is the only solution they thought could fix it. Enough with the reductionist, idiotic causal thinking already: it’s a dumb idea. I don’t begrudge it, but in the long term, who cares? The idea-driven creative industries that America has hung its hat on can only thrive in cities, where people can get together and trade ideas freely. Any barrier to that exchange lowers the potential net economic value. Put simply, all of this kind of creative work will happen in cities. Period. Because if we don’t do it in cities, we won’t be able to compete with our peers around the world who will be doing this work in cities. So, what of the suburbs? In many European cities, the urban centers have been long reserved for the upper-class elites; poorer immigrants, often Turks and other Islamic communities, tend to inhabit the outer rings of the city – denying them crucial access to economic opportunity. This kind of social injustice is baked into many European cultures; in France, you are simply French or not French, and no amount of economic mobility will allow someone who is not of that world to sublimate into it. This is not the case in America. We are all Americans, and even marginalized citizens are able to fully participate in all levels of our culture – though certainly there is social injustice that must be overcome. Over the next 50-75 years, there will be a net gain of wealthier people in America’s cities and also a net gain of poorer people in our suburbs. This will be a …

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Greek Deputy PM: "Debts exist to be restructured"

Call it a Freudian slip, or perhapsit was one of the first honest statements by a European politician regarding the sovereign debt crisis.According to ekathimerini.com, Greece’s Deputy Prime Minister Theodoros Pangalos spilled what could be…

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Google’s "Double Irish" Costs Billions Here at Home

Filed in earnings, euro, Gold, Gold Market, ubs by on October 21, 2010 0 Comments
Google’s "Double Irish" Costs Billions Here at Home

It’s no secret that big multinational corporations no longer have a sense identity with the country where they originated. Get big enough and it’s easy to forget where you came from. To them it’s about one thing and one thing only: earnings per share . Country, meanwhile, comes in a distant second. Because of it, armies of accountants and lawyers work late at night figuring out new ways to pay a much smaller tax bite. So the big boys move earnings around in gigantic shell game that reduces their tax rates to practically nothing using offshore tax havens. To understand how it all works, there was a great article in Bloomberg this morning that detailed the hoops Google has to jump through to make it all happen. Click the link and read the whole piece. Unfortunately, there’s one little problem with current arrangement: once the money is moved overseas it rarely comes back home… From Bloomberg by Jesse Drucker entitled: Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes “Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda. Google’s income shifting — involving strategies known to lawyers as the “Double Irish” and the “Dutch Sandwich” — helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries. “It’s remarkable that Google’s effective rate is that low,” said Martin A. Sullivan, a tax economist who formerly worked for the U.S. Treasury Department. “We know this company operates throughout the world mostly in high-tax countries where the average corporate rate is well over 20 percent.” The U.S. corporate income-tax rate is 35 percent. In the U.K., Google’s second-biggest market by revenue, it’s 28 percent. Google, the owner of the world’s most popular search engine, uses a strategy that has gained favor among such companies as Facebook Inc. and Microsoft Corp. The method takes advantage of Irish tax law to legally shuttle profits into and out of subsidiaries there, largely escaping the country’s 12.5 percent income tax. (See an interactive graphic on Google’s tax strategy here.) The earnings wind up in island havens that levy no corporate income taxes at all. Companies that use the Double Irish arrangement avoid taxes at home and abroad as the U.S. government struggles to close a projected $1.4 trillion budget gap and European Union countries face a collective projected deficit of 868 billion euros. As a strategy for limiting taxes, the Double Irish method is “very common at the moment, particularly with companies with intellectual property,” said Richard Murphy, director…

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I Think I’m Turning Japanese

I Think I’m Turning Japanese

There is no subtler, surer means of overturning society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction and does it in a way that not one man in a million is able to diagnose. — John Maynard Keynes A fall from grace At one point in the late 1980s, there was a square block of real estate in downtown Tokyo, near the Imperial Palace, that was worth more than all of California. The country was booming… The Japanese led the world in electronics. Every teenager had to own a Sony Walkman. The Toyota Supra and four wheel drive pickup were the two bests car of the decade. Japanese investors bought up American icons like Rockefeller Center, Columbia Pictures, and the Pebble Beach Golf Course. Along the way, Japan also created the 100-year mortgage and had an unassailable cadre of elites that ran the banks, the government, and the corporations. The country was run by one political party— the Liberal Democratic Party — from 1955 to 2009. Stimulating death This political party’s main platform was “spend money and create growth.” It tried stimulus after stimulus… They’ve built bridges in mountainous villages where few people live… They’ve forced banks to take on massive debt, and shuffled other debt to different banks. And after twenty years of spending, Japan has $9.7 trillion in public debt — twice its GDP in 2009. They still have no growth. A few months ago, in the thick of the Greece debt crisis, the Prime Minister warned the Japanese Parliament, “It is difficult to sustain a policy that relies too heavily on issuing debt. As we have seen with the financial confusion in the European Community stemming from Greece, our finances could collapse if trust in national bonds is lost and growing national debt is left alone.” Death spiral Japan has been in a deflationary spiral for 20 years. The nation’s housing bust has still not hit bottom. People hold onto money because they know what they want to buy will be cheaper later. Core consumer prices fell 1.0 percent in August, marking 18 consecutive months of decline. And to top it off, they just aren’t making any more Japanese. Check out the population pyramid: As you can see during the “Economic Miracle” period from 1950 to 1990, Japan was youthful, ambitious, and…

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Geithner’s Comments Oddly Support USD

Geithner’s Comments Oddly Support USD

Treasury Secretary Geithner’s comment helped the sagging USD recover some lost ground during today’s Asian session although the greenback still remains highly volatile. Geithner revealed that USD devaluation was not a national strategy, nor was it effective. He confirmed that the US was in no way engaging in this tactic. It seems that there were more than a few conspirators out there because the USD reaction rally was larger than what it should have been based on Geithner sound bite. Did anyone really expect him to admit that the United States was fully engaged in “currency wars”, had abandoned its historical strong USD policy and was now actively working to destroy its value through rampant quantitative easing (QE)? Of course not – so it begs the question, why such a strong reaction to the comment? Most likely because many macro-traders were thinking just that. They must have believed the US government was aggressively pursuing a weaker dollar – the statement from Treasury that this is not the case and not their goal made shorting the USD less attractive and thus sparked the rally. Clearly Geithner wanted to address the market’s growing concern that further QE will not address America’s stagnate and eroding economic fundamentals but merely further devalue the USD. In regards to China, he observed that “the CNY is significantly undervalued, more so than is true of any major significant emerging-market currency…It’s unfair to all of China’s trading partners, Americans and others, because it just creates a playing field that’s unbalanced.” As we predicted on Monday, going into the G20 meeting this weekend, we will hear more strongly worded rhetoric from all over (today’s calendar is chocked full of speakers including Trichet who surely has a few words of his own). Given that we don’t suspect any consensus or overarching agreement on currency to come out of the G20, we would actively fade as positions as the week goes on. Today the Bank of Canada (BoC) is widely expected to keep policy rates unchanged at 1.00%. BoC Governor Carney has been very transparent about his concern over a probable spillover from the fledgling US economy in Canada which could significantly affect the trajectory of Canadian rates. That said, investors have been steering clear of the CAD when compared to other commodity-bloc currencies and should Wednesday’s Monetary Policy Report confirm that Canada remains in a holding pattern, watch for the CAD to lag further. In Australia, the RBA minutes were not as hawkish as the market had anticipated yet the AUDUSD rallied anyhow – pulling other G10 currencies with it. While the RBA still has a tightening bias, the probability of a near term hike seems remote and the wording was very balanced. Even if Q3 Aussie CPI prints high, it’s unlikely to move the central bank into action in 2010. Today’s Forex market will be…

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