Queenbee's Inside the Hive

Monday's STOCK Act Vote Could End a Major Congressional Perk

2012-01-30T18:27:00.002-05:00

CL thanks for bringing this up.

BY KERRI SHANNON, Associate Editor, Money Morning

Members of Congress could be one step closer this week to losing one of their most profitable perks, thanks to the STOCK Act (Stop Trading on Congressional Knowledge Act).

The Senate will hold a procedural vote today (Monday) on a bill that prohibits Congress members from using nonpublic information to make stock transactions - known as "insider trading" when conducted by corporate insiders. Today's vote could put a time limit on passing the bill, which the Senate will continue debating this week.

Congress has faced increasing backlash lately for its growing list of financial advantages over the Americans it represents. A CBS News' "60 Minutes" program in November 2011 exposed Congress insider trading - elected representatives trading stocks related to hot topics being debated in Congress before information had been disclosed to the public.

The show's segment fueled a resurgence of STOCK Act support in Washington. Prior to the televised report, the bill only had four supporters in Congress. That number has grown to 230.

The act also would make illegal Congress tipping off hedge fund managers to information that could affect stocks, and would require detailed disclosure of members' stock transactions within 30 days. Anyone who violated the insider trading ban would be subject to an investigation by U.S. regulatory agencies and the Justice Department. House and Senate ethics committees could also develop penalties and rules regarding insider trading.

Through a radio address to the nation, President Barack Obama this weekend urged Congress to deliver on the matter.

"The House and Senate should send me a bill that bans insider trading by members of Congress, and I will sign it immediately. They should limit any elected official from owning stocks in industries they impact," said President Obama.

STOCK Act a Congressional Must-Have

Peter Schweizer, a fellow at Stanford University's conservative think tank, the Hoover Institution, told "60 Minutes" correspondent Steve Kroft about the deep-rooted issue of Congress insider trading.

http://moneymorning.com/2012/01/30/mondays-stock-act-vote-could-end-major-congressional-perk/

Thank Goodness I Don’t Live in Sweden!

I found recently found the chart below showing world tax rates as a percentage of GDP for the past 40 years. Sweden suffers the world’s heaviest tax burden at 51%, compared to only 27% in the US.

The US has among the world’s lowest tax burdens, which has been falling for the last ten years. Listening to TV pundits, you would think we had the world’s highest tax rates which are about to leap much higher. Germany, home to some of the world’s best run and most profitable companies which make the Fatherland a major exporter, has one of the lowest tax bills. Iceland sits at the bottom and is now bankrupt, thanks to an overdose of free market deregulatory philosophy.

Americans historically have had a very strong resistance to taxation, which you can trace back to the libertarian foundations of the country. The Revolutionary War, in which 17 of my known ancestors fought, was primarily about taxes. The top end of the distribution is packed with European nations, but you never hear them complain about high tax rates. Most believe the cost of the social safety net is worth it. Those that don’t, move to the US, Monte Carlo, Lichtenstein, or the British Virgin Islands.

http://www.madhedgefundtrader.com/thank-goodness-i-dont-live-in-sweden/

Greek Debt Talks Risk Derailing EU Summit Plan

2012-01-29T20:40:00.003-05:00

European Union leaders gather for their first summit of 2012 as a deteriorating economy and struggle to complete a Greek debt writeoff risk sidetracking efforts to stamp out the financial crisis.

EU chiefs arrive in Brussels about 2 p.m. today to put the finishing touches on a German-led deficit-control treaty and endorse the statutes of a 500 billion-euro ($661 billion) rescue fund to be set up this year. Greece and its private creditors said Jan. 28 they expect to complete a deal in coming days after bondholders signaled they would accept European government demands for a bigger cut in their debt holdings.

Efforts to hold the 17-member euro area together with bolstered fiscal rules and a stronger firewall are colliding with stalled progress in Greece, where the crisis began in 2009. To prevent a financial collapse, Greek bondholders have been pushed to cede more ground after agreeing in October to take a 50 percent cut in the face value of more than 200 billion euros ($263 billion) of debt.

“The fact we’re still at the beginning of 2012 talking about Greece is a sign this problem hasn’t been dealt with,” U.K. Chancellor of the Exchequer George Osborne said at the World Economic Forum in Davos, Switzerland.

The summit follows warnings at the gathering that ended yesterday in Davos that it’s time to end the region’s debt crisis and that measures aimed at simply containing the turmoil are no longer enough. The euro economy is set to contract by 0.5 percent this year, according to the median of 19 economist forecasts compiled by Bloomberg.

ECB Loans

The European Central Bank’s unlimited three-year loans to banks have helped buoy sentiment among investors in the euro area. Italian 10-year bonds gained for a third week, while Spanish two-year yields dropped to the lowest since November 2010. The euro gained against the U.S. dollar every day last week, climbing 2.2 percent to $1.322.

“We can say -- with caution -- that we see elements of financial stability in France, in Europe and in the world,” French President Nicolas Sarkozy said in a nationally televised interview in Paris yesterday. “Europe is no longer at the edge of the cliff.”

Attention before the Brussels summit turned to negotiations between the interim government of Greek Prime Minister Lucas Papademos and creditors. The two sides were “close” to an agreement outlined by Luxembourg Prime Minister Jean-Claude Juncker, theInstitute of International Finance, negotiating on behalf of private creditors, said in a Jan. 28 statement after three days of talks in Athens.

Debt Swap

http://www.bloomberg.com/news/2012-01-29/greek-debt-talks-risk-derailing-eu-summit-progress-on-crisis-fighting-plan.html

Citi to Cut Bonuses in Investment Bank About 30%

2012-01-29T10:55:00.004-05:00

What do you think? Instead of bonuses of 1 million the poor suckers will have to get by on 700k.

Citigroup Inc. (C), the third-biggest U.S. lender by assets, cut 2011 bonuses in its investment banking division by about 30 percent on average amid slumping revenue, according to a person briefed on the matter.

Some businesses within the securities and banking unit had bonuses reduced by as much as 70 percent compared with the previous year, said the person, who asked to remain anonymous because the decisions aren’t public. The unit, led by James “Jamie” Forese, includes bond and stock trading as well as debt and equity underwriting.

Chief Executive Officer Vikram Pandit, 55, is firing workers and shrinking costs in the unit as he grapples with declining revenue. The bank said this month that it will cut about 1,200 workers from the division to save $600 million this year and more reductions may follow. The unit’s revenue slipped 21 percent since 2009, while compensation and other operating costs climbed 15 percent.

“Our 2011 revenues in certain businesses in securities and banking were disappointing and unacceptable,” Chief Financial Officer John Gerspach, 58, told analysts this week. “If we do not see meaningful revenue recovery over the course of 2012, we will further restructure securities and banking.”

Danielle Romero-Apsilos, a spokeswoman for New York-based Citigroup, said she couldn’t comment on the firm’s pay plans.

Wall Street firms are reining in compensation. New York- basedMorgan Stanley (MS), Pandit’s former employer, is cutting pay for senior bankers and traders by 20 percent to 30 percent and is capping immediate cash bonuses at $125,000, people briefed on those plans have said.

Credit Suisse

Credit Suisse Group AG (CS), based in Zurich, cut senior-banker pay by 30 percent and may give some bonuses in the form of bonds backed by derivatives, people briefed on the plan said.

Bank of America Corp. plans compensation cuts averaging 25 percent, with cash bonuses capped at $150,000 and base salaries frozen for some bankers at the Charlotte, North Carolina-based firm, people have said. Goldman Sachs Group Inc. (GS) reduced discretionary compensation “significantly more” than the New York-based firm’s 26 percent drop in revenue, Chief Financial Officer David Viniar said Jan. 19.

Citigroup’s fourth-quarter profit fell 11 percent from a year earlier to $1.17 billion. Total revenue fell 7 percent to $17.2 billion, the lowest since the fourth quarter of 2009.

Bank executives have singled out particular units for blame since posting results Jan. 17, including the London-based equities-trading business run by Derek Bandeen. Annual equities- trading revenue plunged by $1.3 billion to $2.4 billion in 2011, Gerspach said on a conference call with reporters that day.

http://www.bloomberg.com/news/2012-01-27/citi-to-cut-bonuses-in-investment-bank-about-30-.html

Brent Cook January 22 at Cambridge House Convention

2012-01-27T16:19:00.000-05:00

It's been a long time since I found a recent video of Geologist Brent Cook.

And David Morgan at the same location

Keep your eyes open in these markets or something like this picture below could happen to you. Sent in by Mammoth so a hat tip to him. QB

Bernanke has "finger on trigger" for new bond buys

2012-01-26T21:17:00.003-05:00

(Reuters) - The Federal Reserve has moved closer to embarking on a new round of its controversial money-pumping after the central bank and its chairman Ben Bernanke highlighted a grim outlook for the U.S. economy.

Bernanke on Wednesday opened the door a bit wider for the Fed to return to buying securities in the months ahead to buttress a weak recovery and keep inflation from slipping too far below its newly adopted 2-percent target.

"It sounds like the finger is on the trigger," said Thomas Simons, a money market economist at Jefferies & Co.

The Fed's announcement that it was unlikely to raise interest rates until at least late 2014, more than a year beyond its previous guidance, immediately pushed down Treasury bond yields and Bernanke's comments to the media raised expectations of a further round of so-called quantitative easing, or QE3.

It remains to be seen if the potential political backlash proves too daunting.

The prospect of the Fed pumping yet more money into the U.S. economy was seized upon by Republican hopeful Newt Gingrich to slam President Barack Obama's record. That highlighted the political pitfalls for the Fed in an election year.

Barring an unexpected pick-up in inflation or the U.S. economy suddenly kicking into a higher gear, Bernanke said it was logical that the Fed should look at ways to do more to help.

"The framework makes very clear that we need to be thinking about ways to provide further stimulus if we don't get improvement in the pace of recovery and a normalization of inflation," he told a quarterly news conference.

"Probably the main take-away from the press conference is the sense conveyed by Bernanke that it would not take much of a disappointment in growth or inflation to get the Fed to start another round of QE," said Michael Feroli, chief U.S. economist at J.P. Morgan.

http://www.reuters.com/article/2012/01/26/us-usa-fed-idUSTRE80N1DQ20120126

Regional Bank SPDR Forms Big Bearish Engulfing

With stocks opening strong and then moving sharply lower, the intraday bearish engulfing scan is filling up quite quickly. Of note, the Regional Bank SPDR (KRE) has a bearish engulfing in play on Thursday afternoon. In fact, notice how the ETF pretty much engulfed the last 11 days of trading and broke below its mid January low.

Melbourne full of empty homes

2012-01-25T19:50:00.005-05:00

RENTERS struggling to find a home in Perth should move to Melbourne.

The southern capital's rental vacancy rate has risen to 4.4 per cent, the result of a surge in apartment building and slowing population growth.

Western Australia's mining boom has kept renters on their toes, with only 1 per cent of rental homes vacant, December figures from SQM Research show. A vacancy rate of 3 per cent usually signals a ''balanced'' market.

Melbourne's high vacancy rate is likely to put downward pressure on rents, particularly in places such as St Kilda Road and Southbank, where apartments and vacancies are peaking.

Rental accommodation remains tight in popular inner-city suburbs such as Fitzroy and Abbotsford, where vacancy rates hover around 1 per cent.

''The north-east suburbs of Melbourne, where there is demand for affordable rental accommodation, have also been holding up better,'' said SQM's Louis Christopher.

Sydney's rental market remains relatively tight, with a vacancy rate of 2 per cent.

Settling into suburbs such as Gordon, Strathfield South and Rhodes has been made easy, with between 8 and 13 per cent of rental properties vacant.

Merkel Makes Appeal for Time to Solve Crisis

German Chancellor Angela Merkel appealed to business leaders at theWorld Economic Forum to give policy makers the space they need to tackle the debt crisis, pledging that Europe will pull together and restore confidence.

“I would like to ask all of you who are here as the representatives of the business community” to recognize how democratic governments work and to “please take the long-drawn- out processes with a degree of acceptance,” Merkel said in a question-and-answer session after opening the forum yesterday in Davos, Switzerland.

Merkel’s comments underscore her shift in approach to taming the debt crisis now in its third year, having ditched rhetoric about conducting a “battle” between markets and politicians. At the same time, Merkel rejected adding any new money to fight the crisis and reiterated the need to curb debt and deficits while boosting competitiveness as the main thrust of her strategy to keep the 17-nation euro area together.

“Europe will become more attractive once we have conquered this crisis, and I’m absolutely convinced that we will be able to master this crisis,” she said. European leaders will discuss measures to raise competitiveness and create growth and jobs at their Jan. 30 summit and again in March, she said.

Private Meeting

http://www.bloomberg.com/news/2012-01-25/merkel-makes-davos-appeal-to-investors-for-time-to-solve-europe-s-crisis.html

No Way Out-Hyperinflation by 2014

with John Williams

Jim welcomes back John Williams from Shadow Government Statistics. John sees no way to avoid hyperinflation, as some of the warning signs are getting worse: rising real inflation rates, massive Fed monetization, foreign nations dumping dollars, and the US losing its triple A credit rating.

IMF seeks $1 trillion to stave off '1930s moment'

2012-01-24T17:54:00.003-05:00

THE world will face a "1930s moment" of the kind that brought on the Great Depression unless money can quickly be found to support nations such as Italy and Spain, the International Monetary Fund says.

Before releasing dramatically downgraded economic forecasts early this morning Australian time the IMF chief, Christine Lagarde, told an audience in Berlin $1 trillion would be needed to support ailing governments and stave off a deeper crisis - half of which would have to come from Fund backers such as Australia.

The Treasurer, Wayne Swan, backed Ms Lagarde, saying without "larger firewalls" to protect embattled European nations the global economy was at risk.

But the shadow treasurer, Joe Hockey, questioned whether such payments were in Australia's national interest.

The IMF has shaved three quarters of 1 per cent off its previous global growth forecast, issued in September. It expects the world economy to grow by 3.25 per cent this year and advanced economies 1.2 per cent. China would grow 8.2 per cent, down from 9.2 per cent. The euro zone would shrink 0.5 per cent before growing weakly next year.

But Ms Lagarde said the world was facing "a 1930s moment, in which inaction, insularity and rigid ideology combine to cause a collapse in global demand".

"This is a defining moment," she said. "It is not about saving any one country or region. It is about saving the world from a downward economic spiral."

The IMF economic update warns of "adverse feedback loops" in which countries that have trouble paying debts cut spending further, depressing their economies even more, making it harder to repay their debts and imperilling financial institutions worldwide.

In Berlin Ms Lagarde attacked the "worrisome tendency to view fiscal policy as a morality play between profligacy and responsibility".

Read more: http://www.smh.com.au/business/world-business/imf-seeks-1-trillion-to-stave-off-1930s-moment-20120125-1qg7z.html#ixzz1kQN0KHW1

Greek Economy on Track to Implode: Hanke

Whether or not Greece is able to reach an agreement on the restructuring of its debt, the country is set to “implode” as the economy contracts, according to Johns Hopkins University’s Steve Hanke.

“The game is completely over,” Hanke, professor of applied economics, said at the Bloomberg Sovereign Debt Crisis Conference in New York hosted by Bloomberg Link. “All the calculations are nonsense and have been since day one. Since the crisis began the money supply has been shrinking and the economy is going to implode, no matter what they do in the short run.”

Money supply is shrinking at an annual rate of about 16 percent in Greece, meaning there won’t be growth needed to support debt payments, Hanke said. Greece is pursuing talks on a debt swap with private creditors that would lower Greece’s debt to 120 percent of gross domestic product by 2020. European governments have sought to fill a deeper-than-expected gap in Greece’s finances by having investors accept a lower interest rate on exchanged bonds.

The International Monetary Fund cut its forecast for global growth today and warned that the European debt crisis threatens to derail the world economy. The fund, in an update of its World Economic Outlook report, lowered its estimate for global growth this year to 3.3 percent from a September forecast of 4 percent.

Regional Bailouts

To avoid a 1930s-style worldwide depression, IMF Fund Managing Director Christine Lagarde yesterday called on other countries to play their part. The IMF, which co-finances loans to Greece, Ireland and Portugal, identified a potential global financing need of $1 trillion in coming years and is seeking $500 billion in new lending resources from its member countries to address potential loan demand.

http://www.bloomberg.com/news/2012-01-24/greek-economy-on-track-to-implode-hanke.html

Apple Profit More Than Doubles on IPhone Demand

Apple Inc. (AAPL) reported quarterly profit that more than doubled as holiday purchases of the iPhone catapulted sales to a record and helped the company steer clear of the consumer-spending slump that has hurt rival companies.

Fiscal first-quarter profit surged to $13.1 billion, or $13.87 a share, Apple said today in a statement. Sales rose 73 percent to $46.3 billion. Analysts surveyed by Bloomberg on average estimated profit of $10.14 a share on sales of $39 billion. Per-share profit for the quarter was more than the company earned in any fiscal year before 2010.

Apple sold 37 million iPhones, up from the previous record of 20.34 million. Customers snapped up the 4S model that went on sale in October, a week after the death of co-founder Steve Jobs. The results mark the first time the company’s quarterly revenue topped Hewlett-Packard Co. (HPQ)’s, underscoring how its focus on sleek touch-screen mobile devices has reshuffled leadership in the industry.

“Those numbers are just unimaginable,” said Michael Obuchowski, chief investment officer at First Empire Asset Management, which has $4 billion under management, including Apple shares. “It’s still an extremely well-managed company and they are showing that the product pipeline is sufficient even now to generate growth rates that are unrivaled.”

Apple shares soared as much as 12 percent to $468.95 in extended trading, surpassing their record closing price of $429.11 on Jan. 18. The stock, up 25 percent in the past 12 months, had closed at $420.41 in New York today before the report.

Higher Forecasts

http://www.bloomberg.com/news/2012-01-24/apple-posts-record-quarterly-profit-sales.html

BofA: Investment Bankers Face 25% Pay Cut

Bank of America Corp., the second- biggest U.S. lender by assets, told its investment bankers to expect compensation packages that average 25 percent less than last year, said two people with knowledge of the discussions.

Executives gave the guidance this month ahead of formal 2011 pay discussions scheduled for this week, said the people, who declined to be identified because the talks are private. The compensation cut includes salary and bonus, the people said. Jessica Oppenheim, a spokeswoman for the Charlotte, North Carolina-based company, said she couldn’t comment.

“Until things really come back, no one should be expecting compensation like they got in the past,” said Jeanne Branthover, a managing director at Boyden Global Executive Search Ltd. in New York. “There are going to be very strong people who will not be compensated as they expected, and they will keep their ears open to move for more money.”

Wall Street firms are curbing pay for investment bankers and traders as the companies succumb to revenue and regulatory pressures. Bank of America Chief Executive Officer Brian T. Moynihan, 52, is scouring the global banking and markets unit for expenses to cut after a 58 percent stock plunge last year.

Typical Pay

http://www.bloomberg.com/news/2012-01-24/bank-of-america-is-said-to-warn-investment-bankers-of-25-compensation-cut.html

IMF Cuts Global Growth Forecast to 3.9% From 4.5%, Sees European Recession

2012-01-24T10:10:00.002-05:00

The International Monetary Fund cut its forecast for the global economy as Europe slips into a recession and growth cools in China and India.

The world economy will expand 3.3 percent this year and 3.9 percent in 2013, compared with September forecasts of 4 percent and 4.5 percent, the IMF said. The euro area may enter a “mild recession” this year and contract 0.5 percent compared with a previous estimate of a 1.1 percent expansion. The U.S. outlook was held at 1.8 percent growth.

“The near-term outlook has noticeably deteriorated,” the IMF said in an update of its World Economic Outlook report. “The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere.”

The forecasts hinge on increased efforts in the 17-country euro area to fight the financial turmoil, which the IMF calls the “most immediate policy challenge.” The report called on European policy makers to increase the size of the region’s rescue fund and for the European Central Bank to continue its support of the region to limit contagion to other countries.

“We need a larger firewall,” IMF Managing Director Christine Lagarde said in Berlin yesterday. “Without it, countries like Italy and Spain, that are fundamentally able to repay their debts, could potentially be forced into a solvency crisis by abnormal financing costs.”

Europe Confidence

Confidence in Europe’s strategy for coping with the crisis was dealt a setback late yesterday in Brussels when European finance ministers pushed bondholders to provide greater debt relief for Greece.

Euro governments sought to fill a deeper-than-expected hole in Greece’s finances by saddling investors with a lower interest rate on exchanged bonds, setting up a confrontation in the runup to a Jan. 30 European Union summit. At the same time, efforts to shore up Greece were flanked by headway on a German-inspired deficit-reduction treaty and indications that a cap on rescue lending might be boosted.

To avoid a 1930s-style worldwide depression, the IMF’s Lagarde yesterday also called on other countries to play their part. The IMF, which co-finances loans to Greece, Ireland and Portugal, identified a potential global financing need of $1 trillion in coming years and is seeking $500 billion in new lending resources from its member countries to address potential loan demand.

Developing Economies

http://www.bloomberg.com/news/2012-01-24/imf-cuts-global-growth-forecast-to-3-9-from-4-5-sees-european-recession.html

I grabbed this link from Jesse's. It is a long video 56 minutes. I haven't even watched it all.

Moyers & Company Show 102: On Crony Capitalism from BillMoyers.com on Vimeo.

Vancouver Is Second-Costliest Housing Market

2012-01-22T17:13:00.000-05:00

Vancouver displaced Sydney as the least-affordable housing market after Hong Kong among large English-speaking cities, as home pricesrose faster than incomes, a study of 325 metropolitan areas worldwide showed.

Vancouver’s median home price of C$678,000 ($686,400) in the third quarter was 10.6 times its median pretax household income of C$63,800, making the city “severely unaffordable,” Demographia said in a report today. A ratio of 3 or less is considered “affordable,” according to the public-policy firm’s survey of markets in Australia, New Zealand, Ireland, the U.K., the U.S., Canada and Hong Kong.

Sydney’s ratio of median home price to income was 9.2, while Hong Kong’s was 12.6, a record for the eight-year-old survey, surpassing the previous high of 11.5 for Los Angeles in 2007. Home prices in Hong Kong, Vancouver and Sydney haven’t plunged as they have elsewhere, such as in Ireland, now the second most-affordable country, after the U.S., the study said.

“Housing affordability generally improved in the surveyed nations, though the most unaffordable markets, Hong Kong and Vancouver, became even more unaffordable,” wrote Wendell Cox, principal of Belleville, Illinois-based Demographia, and Hugh Pavletich, managing director of Pavletich Properties Ltd., a commercial developer and investment company in Christchurch, New Zealand.

Policies limiting lots available for construction drove up land prices, putting homes out of reach for middle-class buyers and younger workers in cities such as Vancouver and Sydney, the researchers said. The median price of a detached house in metropolitan Vancouver reached a record C$900,000 in April 2011, according to the Real Estate Board of Greater Vancouver.

‘Massively Deteriorating’

“The causes of massively deteriorating housing affordability are not a mystery,” Cox and Pavletich said. “They inevitably result from more restrictive land-use regulations adopted by governments with insufficient attention to economic fundamentals.”

The study focuses on the home-affordability ratio, not absolute prices. It doesn’t take into account such influences as falling interest rates, an influx of foreign buyers or the attractions of climate and coastal location.

http://www.bloomberg.com/news/2012-01-22/vancouver-displaces-sydney-as-second-costliest-housing-market.html

Paper and Physical Silver Prices Are Not Decoupling Yet

The good news for silver noobs just starting to get interested in the precious metals and educating themselves (yes, I use that term loosely) online is that there are easy ways to tell which sources have an idea what they are talking about, and which sources are just spouting the same crap that they heard others spout, joining in the groupthink, and living in the land where anyone who doubts that silver is going to $200/ oz in short order is a bankster shill cartel manipulator. You just have to know what to look for.

One such example of this nonsense is the claim that “paper prices and physical prices are decoupling.” They’re not. They haven’t been decoupling, we’ve covered this before, and they’re still not. I just wanted to write another post on this because with the Sprott Physical Silver Trust secondary offering, we have another concrete example of the NON-divergence of “physical” and “paper” prices.

So let’s completely ignore the fact that Eric Sprott himself told you “we can buy silver, basically, at spot,” after all, that was last year – maybe things have changed? No – let’s go to the math. Remember yesterday’s post when I explained how you can approximate the new NAV of PSLV before it was posted on the website? Well, now that the website has updated data, we can do even better – we can calculate the price per ounce $PSLV paid for its silver.
Let’s look at the before and after (the secondary offering, that is) snapshots of the Trust. Before:

http://kiddynamitesworld.com/paper-and-physical-silver-prices-are-not-decoupling-yet/#comment-415765312

Treasuries Off to Worst Start Since 2003

2012-01-21T17:27:00.000-05:00

Treasuries are off to their worst start in nine years amid signs the U.S. economy is strengthening and Europe is moving closer to resolving its sovereign-debt crisis.

Yields on benchmark 10-year notes climbed 16 basis points, or 0.16 percentage point, the biggest weekly increase since the five days ended Dec. 23, as reports showed fewer Americans than forecast filed for unemployment benefits and home sales rose for a third month in December. The refuge appeal of Treasuries eased as Greek officials held debt-swap talks and European bond sales saw increased demand. Policy makers are expected by analysts to say they’ll keep borrowing rates low as the economy gathers momentum when Federal Open Market Committee meets Jan. 24-25.

“The better sentiment out of Europe and the improving domestic economy is weighing on Treasuries,” said Kevin Flanagan, a Purchase, New York-based fixed-income strategist for Morgan Stanley Smith Barney. “Still, there is a lot of uncertainty, and despite the positive signs in the economy we are still at very low rates because there is so much that is unresolved.”

U.S. government securities have lost 0.342 percent this year, the most since a 0.693 percent loss in 2003, according to Bank of America Merrill Lynch Indexes. The benchmark 10-year yieldrose five basis points to 2.02 percent yesterday in New York, according to Bloomberg Bond Trader prices.

Treasuries finished 2003 returning 2.25 percent after the weak start and have posted annual gains every year but one since 2009, when they fell 3.7 percent. U.S. corporate bonds returned 0.5 percent this year and German bunds fell 0.1 percent, the indexes show.

Widening Spread

Initial jobless claims plunged to 352,000 in the week ended Jan. 14, the lowest level since April 2008, the Labor Department said on Jan. 19. A Federal Reserve report on Jan. 18 showed factory output increased.

The difference between two- and 10-year yields widened four basis points to 1.78 percentage points after touching 1.79 percentage points, the most since Dec. 13. The spread was as narrow as 1.47 percentage points on Oct. 4.

“The lack of blowups in European sovereign debt have allowed calm to erupt, and that has weighed on Treasuries,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, which oversees $12 billion in fixed income assets. “Home sales are improving, though from very poor levels, which underlies the improving data we’ve had of late,”

The Citi Macro Risk Index dropped to a five-month low of 0.601 on Jan. 19, showing increased demand for higher-yielding assets.

Labor ‘Traction’

http://www.bloomberg.com/news/2012-01-21/treasuries-off-to-worst-start-since-2003-on-strengthening-global-economy.html

BENSON’S ECONOMIC & MARKET TRENDS

2012-01-20T17:56:00.002-05:00

January 19, 2012

Suppressing Unemployment To Win The Election

Written and published by Richard Benson, www.sfgroup.org

In Presidential politics, when you get beyond the culture wars, wedge issues, religious right, taxing the rich, pro-choice, nuking the gays, the Tea Party Movement, and NIMBY, one election truth holds clear: A sitting President running for a second term has never lost an election when unemployment was low and the economy was good. On the other hand, he’s never won an election when unemployment was high or the economy was ravaged by inflation. This means the unemployment rate can be used as political psychological warfare on the electorate. If the unemployment rate is pushed down, the consensus is that there must be jobs and the President can’t be blamed for the failure to find work. Therefore, to win this election, the current administration has found ways to make people vanish from the labor force to keep the unemployment rate lower than it really is. Let me explain how they have done this.

If the labor force participation rate had not been reduced 4 percent over the past four years, the unemployment rate would be more like 11.5 percent today, not the reported 8.5 percent.
Push those nearing retirement into filing for Social Security Disability (“SSI” Benefits): Firms specializing in coaching people on how to be accepted by SSI are now available to anyone over 50 with debilitating aches and pains from serious medical conditions such as a bad back, diabetes, failing joints, arthritis, high blood pressure, failing heart, etc. Plus, anyone over 50 can claim chronic clinical depression if they’re unemployed and without hope, so eligibility for SSI is legitimate. Even if you have to apply more than once, eventually you will get into this program, which has been transformed into a long-term unemployment program with 8,551,000 recipients. (See Table 2: www.ssa.gov/policy/docs/quickfacts/stat_snapshot/) I think we can expect the Obama Administration to turn a blind eye to eligibility and ramp it up in 2012. Do we hear 9.5 million plus on SSI by Election Day?

Get people to start collecting Social Security early at age 62: As of November 2011, a staggering 60,671,000 are collecting social security and/or SSI disability benefits, and the number keeps rising. If you’re collecting, you’re out of the labor force.
Give out generous government loans and send people back to school: If you’re a young high school grad without any job prospects and not especially gung ho about going to Afghanistan to look for roadside bombs by stepping on them, what can you do? Well, borrowing from Uncle Sam to go to a four-year college, two-year community college or trade school, looks pretty darn good. Indeed, a life of books, late night parties, and cute co-eds, is a pretty nice way to live, and many adults remember it as the best time in their life! Also, for college grads with no decent job prospects going to grad school is a pretty simple decision. Staying in school is a life they already know and love, and, who knows, you might even learn something! For laid-off Wall Street executives, business school or law school looks great. Why not learn some skills and come back when the job market is stronger and the pay is higher.

This back-to-school trend has surprisingly picked up for those in their 30’s and 40’s – if you are too young for disability, and still young enough to hope, going back to school is the new rage. Most importantly, it keeps you out of the labor force! My favorite tee shirt for the other 99 appropriately says “I’m not unemployed, I’m in college”. Since America decided to destroy our factories and move millions of jobs to Asia, good jobs are so scarce that the labor force has turned into “the labor farce”. There are four job seekers for every job opening. And, to make matters worse, over 11 million people can’t move to where the jobs are because they’re trapped in an underwater house.
Today, 20.5 million people are in college either full or part-time, but sending them to school isn’t cheap! Full time college programs for state schools can easily cost $30,000 a year, and full-time programs at private institutions run well over $50,000 a year.

It’s also common to see college grads with $50,000 - $150,000 in debt when they finally enter the labor force. Student debt today at one trillion dollars is greater than all consumer debt. A trillion bucks is a lot of spending on economic activity but with ten percent of student debt in total default, in a few short years it will be triple what it is today and cost the American taxpayer three to four hundred billion in bad debt that can never be repaid.

The reason the debt can’t be repaid is that many students simply do not acquire skills that allow them to make a material increase in their earnings. Not everyone is cut out to be a computer engineer or brain surgeon, and the other skills that remain in demand. The latest statistics show a vast swarm or newly minted law degrees, and virtually no need for new corporate counsels or ambulance chasers. Many English majors can’t even write a coherent article because they only know how to write with their thumbs in cell phone shorthand. Many of today’s students will simply never earn enough to support themselves and pay back their student loans. However, they will be aces at computer games!

At least big student loans help to keep the cost of college soaring! Why? Because no matter how high the cost of education goes, kids can borrow the cost from the government. This Federal largesse helps keep today’s economic spending up while keeping the salaries of professors almost as high as their inflated egos.
(It should be noted that many early Americans came from debtor prisons in England or came over as indentured servants before the American Revolution. After 1776 Australia got settled when England had to find a new place to dump their prisoners. However, life in the modern world in Australia and New Zealand is reported to be like Southern California, but with lots of jobs. So, in a few years, there may be a wave of ex-American students skipping out on crushing debts by emigrating to warm sunny climes “down under” for a fresh start.)

Keep inmates in jail. America has 2.3 million people in jail. You may be surprised to learn that while the US has 5 percent of the world’s population, it has 25 percent of the world’s prison population! The annual cost to keep one inmate in jail can easily exceed $30,000 year. Much of the cost is used to pay for the legions of prison guards, and create valuable jobs like the TSA airport body searchers. In other words, a police-state economy lowers unemployment as it creates jobs for the INS, DEA, TSA and Wall Street snitches. In China, even though they have four times the population of the United States, they have a million less people incarcerated. There, they shoot criminals or put them to work rather than pay for them to be locked up.

Needless to say, these labor force suppression programs cost a bundle but they do put money in people’s pockets and can generate votes on Election Day. However, for those 60 million plus on SS or SSI, their life is as good as it will get because in reality they’re marginalized, and ignored by the economically active. For the inmates in jail, they tend to learn skills from other criminals on how to be a better criminal. For those hiding out in school, it will be a while before they realize they have tons of debt and because federal law prevents them from going bankrupt on the debt, today’s students will become tomorrow’s debt slaves many months after the election.

So, at the end of the day, the real joke is on the American taxpayer who thinks the election is bought by big political donors giving hundreds of millions of dollars for advertising on social issues. In reality, though, the PACs, and Super PACs are spending peanuts compared to the cost of labor force suppression. Who says the Presidency can’t be bought!

Goldman pays out bonuses of £8bn

2012-01-19T19:22:00.000-05:00

Goldman Sachs, the City of London and Wall Street totem, will divvy up a $12.2bn (£7.9bn) pay and bonus pool among its staff, despite public and political anger and in the face of crumbling revenues and profits.

Even though the investment bank said it had cut its remuneration bill – salaries, bonuses and benefits – by more than a fifth, it still came out to about the size of the GDP of Albania and prompted an outcry from unions.

The figures were revealed alongside Goldman's latest annual results, which showed how post-credit crisis regulations and volatility in the eurozone are hurting bank profits. Revenues fell 26 per cent in 2011, the bank said, and profits slumped by 47 per cent to $4.4bn.

Some 42.4 per cent of revenues will go to employees, in the form of salaries, bonuses and benefits, the company said, up from 40.5 per cent last year, though a bank spokeswoman said that an increase in basic pay and benefits was the main reason for the increase.

Year-end bonuses, handed out in the coming weeks, will be down more sharply than revenues, she said.

Goldman also said it diverted $78m from its remuneration pool to fund Goldman Sachs Gives, its charitable organisation.

The bank has shed staff in some of its worst-hit operations and said it expected to save $1.4bn in annual costs once the cuts were fully implemented. It ended the year with 33,300 employees, 2,400 fewer than in 2010. It employs over 5,000 people in London.

The average remuneration for Goldman employees worked out to $367,057 – perhaps the most hotly anticipated single number to come out of the finance industry since the "Occupy" movements turned up the heat on banks. The figure this time last year was $430,700.

http://www.independent.co.uk/news/business/news/goldman-pays-out-bonuses-of-8bn-6291598.html

Aussies warned: Global economic crisis will 'spare no-one'

2012-01-18T17:15:00.000-05:00

World Bank warns world faces deeper crisis than GFC
Says "an escalation of the crisis would spare no-one"
Commonwealth Bank doubles down on borrowers

THE global economy is veering towards a recession potentially more debilitating than the financial crisis, the World Bank has warned.

And the Asian growth nations fuelling Australia's prosperity could be dragged into the mire, the authority says, in a move that would have severe ramifications for the domestic economy, theHerald Sun reported.

The World Bank yesterday slashed its forecast for global growth in 2012 and 2013.

Economists labelled the move a "wake-up call" for nations wrestling with chronic debt woes.

The Washington-based institution says that after six months of slowing economic activity, growth in the global economy is likely to clock in at 2.5 per cent in 2012 and 3.1 per cent in 2013.

Just six months ago it was forecasting 3.6 per cent growth both years.

"An escalation of the crisis would spare no-one," World Bank global macroeconomics manager Andrew Burns said.

"Developed and developing country growth rates could fall by as much or more than in 2008-09. The world could be thrown into a recession as large or even larger.

http://www.couriermail.com.au/news/world-bank-warns-of-deeper-crisis-than-the-global-financial-crisis/story-e6freon6-1226247972536

Thanks Shaza

Mining service groups are starting to rise from ashes of GFC

DURING the global financial crisis, the shares of Brisbane-based mining services groups Sedgman and Ausenco were hammered.

Those who bought in at their nadir in early 2009 have done OK since, although Ausenco shares took another sharp downturn mid-2010 before they resumed their recovery.

The two companies have recovered as resource project development across the globe has got back into top gear.

And with brownfields and greenfields exploration strengthening, their pipelines of future projects should continue, at least medium term, to fill.

Many investors who bought into the groups' floats in late 2006, after which the shares soared Ausenco's spectacularly might remain a little disappointed.

Sedgman's shares floated in mid-2006 at $1 each and rose to $3.95 by mid-2007 and Ausenco's, also sold to the public at $1 and listed on the Australian Securities Exchange in June 2006, rose to a staggering $16-plus within 18 months.

With hindsight, those prices were spectacular examples of the pre-GFC sharemarket bubble and people who didn't take some profits and put them in the bank having seen Ausenco's shares rise 16-fold should perhaps only blame themselves that they're not richer.

It may be a long time before either company returns to those giddy heights, if Ausenco ever does.

But both Sedgman and Ausenco are looking at significantly rising revenues, having rebuilt their order books as projects, put on hold when the GFC hit the world's major miners, have been reactivated.

RBS Morgans' head of research Roger Leaning told The Courier-Mail last week: "Both companies look set for strong growth.

"Ausenco has diversified both by type of work and geographically, and Sedgman is also looking strong.

"Both are back to pre-GFC levels of billable work, suggesting there'll be a lot of growth if Europe's woes don't tip the world economy into recession."

Leaning points to the expansion of other industry service companies, such as Campbell Brothers (in mineral analysis) and a string of drilling companies, saying: "You can look at strength along the whole of the food chain."

http://www.couriermail.com.au/business/mining-service-groups-are-starting-to-rise-from-ashes-of-gfc/story-fnbdkrr9-1226225720233

Technician John Bollinger: “Putting Money Into Bonds Will Be Deeply Regretted”

Also Jim’s Big Picture: “What if it was Thanksgiving and you’re the turkey?” and Ryan Puplava on this week’s market

This is a bio and a link below to an audio commentary QB

Jim welcomes famed technician John Bollinger this week to discuss, among other subjects, the rally no one believes in. In Jim’s first Big Picture topic, "What if it was Thanksgiving and you’re the turkey?" he looks at the rising cost of food. Ryan Puplava also wraps up this week in the markets.

Ryan joined PFS Group in 1995. He holds a B.S. in Business Administration/Finance from San Diego State University. His professional designations include FINRA Series 4, Series 7, and Series 66 Uniform Combined State Law Exam. He earned the Chartered Market Technician's designation in 2007. Mr. Puplava is Senior Trading Manager and works closely with Jim Puplava on PFS Group's Growth investment objective. He also contributes a monthly Market Observation to Financial Sense and co-authors In the Know—a weekly communication for Jim Puplava's clients only—with other members of the trading staff.

John Bollinger is the president and founder of Bollinger Capital Management, an investment management company that provides technically-driven money management services. Bollinger Capital Management also develops and provides proprietary research for institutions and individuals. He is perhaps best known to the public as the creator of Bollinger Bands, which he developed in the mid ‘80s. Over the past two decades, investors and traders worldwide have come to view Bollinger Bands as a most reliable tool for assessing expected price action and the bands are featured on most financial charting software and websites.

http://www.financialsense.com/financial-sense-newshour/big-picture/2012/01/14/01/ryan-puplava-john-bollinger/putting-money-into-bonds-will-be-deeply-regretted

South America Boom Backfiring With Complacency From Commodities

2012-01-17T17:33:00.000-05:00

Venture capitalist Arnon Kohavi arrived in Chile last year aiming to raise $40 million for technology startup investments. Six months later, the Israeli decamped to Singapore, saying the world’s largest copper producer was too addicted to its commodity wealth.

Kohavi’s tale may serve as a warning to the rest of South America, which has done little to reduce its dependence on raw materials during the past decade’s boom, said Colombia’s Mining Minister Mauricio Cardenas. The failure to boost productivity, and tackle longstanding gaps in education and infrastructure, make the region more vulnerable to a global slowdown should demand for its soy, copper and iron-ore exports decline.

“There’s no doubt that with the growth of China, we’ve seen a re-commoditization of Latin America,” said Cardenas, an economist who previously headed the Latin America program at the Brookings Institution in Washington. “Given the region’s track record managing past booms, it’s clear the pessimists have the upper hand in presuming the current one will be misspent.”

As raw-material prices nearly tripled from 2000 to 2010, Latin America’s share of global merchandise trade barely budged at 5.7 percent, and service exports -- a bellwether of economic development -- fell to 3.4 percent from 3.9 percent. It’s easier to do business in Pakistan or Albania than in Brazil, according to the World Bank’s 2012 competitiveness study, which ranked the region’s biggest economy No. 126 out of 183 countries. Across the region, productivity has advanced more slowly than in Asia.

Slipping Forecasts

Now forecasts for raw-material prices are slipping, which means the region’s economies aren’t likely to sustain the high growth seen during the past five years, said Guillermo Calvo, an economist at Columbia University in New York.

Deutsche Bank AG estimates copper prices will average $6,900 a metric ton in the first quarter, down 8.4 percent from the last three months of 2011, as gold declines 4.9 percent to $1,600 an ounce, silver dips 5.8 percent to $30 an ounce and aluminum drops 10 percent to $1,900 a ton. Frankfurt-based Deutsche Bank was the No. 2 precious-metals forecaster in the eight consecutive quarters ended on Dec. 31, 2011, according to Bloomberg Rankings.

‘Sell Into Strength’

http://www.bloomberg.com/news/2012-01-16/booming-south-america-backfires-as-chile-shows-complacency-on-commodities.html

Wall Street rises but off highs as Citi sinks

Stocks advanced on Tuesday, pushing the S&P 500 to its highest since early August, but sharply pared gains late in the session as Citigroup's steep drop in profit gave investors a reason to unload bank shares.

The financial sector, which has outperformed the broader market so far this year, took a hit on investors' disappointment with Citigroup Inc's (C.N)earnings.

Citigroup's stock slid 8.1 percent to $28.25 after it reported weaker-than-expected earnings. The KBW Banks Index lost 1.4 percent. Through Friday, the KBW Banks Index was up about 10 percent for the year, while the S&P 500 was about 2 percent higher.

The banks' sell-off poured cold water on a rally that drove the S&P 500 through 1,300 for the first time since August.

Stocks rallied about 1 percent across the board after data showed China's economic growth was better than expected, even though it expanded at the weakest pace in 2-1/2 years.

"The better numbers out of China this morning got the market off to a better start, but then there wasn't much follow-through, and you have had what looked to be from JPMorgan and Citigroup not very good-looking earnings," said Eric Kuby, chief investment officer of North Star Investment Management Corp., in Chicago.

http://www.reuters.com/article/2012/01/17/us-markets-stocks-idUSTRE7AO0B420120117

Disaster in Italy could send company stock through crucial chart points

[Note: Many thanks to Boot Camper Paul Ho for bringing this chart situation to my attenition.]

I am sure everyone is now familiar with the disaster off the coast of Italy by a Carnival ship — and the despicable safety procedures and possible malfeasance of the crew involved. The company will lose from this disaster — in terms of direct financial liability, bookings and reputation.

Interestingly, the charts for $CCL are also a potential disaster. The weekly chart displays a possible 2-year H&S top pattern. A close below 28.00 would complete this pattern and establish a target of 18.00. [Note: semi-log charts are used for perspective only.]

http://peterlbrandt.com/

A Useful Fiction: Everybody Loves a Melt-Up Stock Market

2012-01-16T19:34:00.003-05:00

From Of Two Minds 1/16/2012

A sudden sharp decline in stocks may not thrill retail investors, but it would be catnip for big trading desks that used the melt-up rally to get short.

One of the more useful Wall Street fictions is the naive notion that big players and small-fry equity owners alike love low-volatility "melt-up" markets that slowly creep higher on low volume. The less attractive reality is that big trading desks find low-volatility "melt-up" markets useful for one thing: to sucker retail buyers and less-adept fund managers into an increasingly vulnerable market.

Beyond that utility, low-volatility "melt-up" markets are of little value to big trading desks for the simple reason that there is no way to outperform in markets that lack volatility. The retail crowd may love a market that slowly gains 4% for the year, barely budging for months, but such a market is anathema to big traders.

It's always useful to ask cui bono--to whose benefit? In this case, highly volatile markets don't benefit clueless retail equities owners, as they are constantly whipsawed out of "sure-thing" positions.

From the big trading desk point of view, this whipsawing provides essential liquidity, as retail traders and inept fund managers trying to follow the wild swings up and down provide buyers.

I have a funny feeling the "smart money" has built up a nice short position here and as a result the market is about to "unexpectedly" decline sharply. The ideal scenario for big trading desks here is a sudden decline that panics complacent retail traders and managers into selling (or leaving their stops in to get hit).

Then, a few days later, as the carnage deepens, presto-magico, the big traders become buyers and the sudden decline ends.

Frankly, the market is looking like it's ready for a "surprise" decline. Various sentiment indicators are suggesting massive, widespread complacency--not bullish euphoria, but bullish complacency that reflects the general belief that the European Central Bank and the Federal Reserve have "fixed" the European credit crisis, and they have the power and will to "backstop" any market decline.

The most telling evidence of this is the VIX volatility index has declined for months and reached a level that typically reflects strong bull markets and widespread confidence. Yet there is abundant evidence that the global economy has rapidly decelerated and is now contracting.

This is only one widening divergence that historic precedence suggests will be settled with violent increases in volatility and sharp "unexpected" declines.

As noted here many times in 2011, "the only trade that matters" is the DXY dollar index, as stocks have long been on a see-saw with the dollar: when the dollar rises, stocks decline, and vice versa. Yet for the past three weeks, stocks have risen along with the the dollar.

This divergence has caused many traders to start looking at currency pairs such as the euro and Australian dollar or the euro and the Japanese yen for guidance as to the next move.

Bulls would have us believe the inverse correlation between the dollar and the stock market has been broken by this 3-week long aberration. That is possible, but a 3-week move burdened by numerous massive divergences simply isn't enough to dissolve a correlation with years of history behind it.

Generally speaking, there is an inverse correlation between "risk assets" such as stocks and "risk-off" assets such as the dollar and U.S. Treasury bonds.

Analyst Tony M. discusses this in a brief entry: "There have been three large divergences between equity and credit since the late 90s and each time credit forced the hand of equity."

Another analyst, M3 Financial Analysis, posted a series of charts of the eurodollar, the dollar and the Treasury bond market. His summary: "Critical Mass approaches as financial system begins to dissolve from within..."

http://www.oftwominds.com/blogjan12/cui-bono-stock-decline01-12.html

Iran warns of consequences if Arabs back oil sanctions

2012-01-15T18:51:00.001-05:00

By Ramin Mostafavi

TEHRAN, Jan 15 (Reuters) - Iran warned Gulf Arab neighbours on Sunday they would suffer consequences if they raised oil output to replace Iranian crude facing an international ban.

In signs of Tehran's deepening isolation over its refusal to halt nuclear activity that could yield atomic bombs, China's premier was in Saudi Arabia probing for greater access to its huge oil and gas reserves and Britain voiced confidence a once hesitant European Union would soon ban oil imports from Iran.

Major importers of Iranian oil were long loath to embargo the lifeblood of Iran's economy because of fears this would send oil prices rocketing at a time - amidst debt and deficit crises and high unemployment - when they could least afford it.

But strong momentum for oil sanctions has been created by a U.N. watchdog report saying Iran appeared to have worked on designing an atom bomb.

A new U.S. law signed by President Barack Obama on New Year's Eve would freeze out of the U.S. financial system any institution dealing with Iran's central bank - which processes its oil revenues.

If fully applied, the law would make it impossible for most countries to buy Iranian oil. Washington is offering waivers to countries to let them keep buying Iranian oil for now, but demanding they gradually cut their imports back.

Leaders from some of the Asian countries that buy the most Iranian oil have begun touring the Middle East to secure alternative supply lines from Arab states. European buyers suggest they will also lean more heavily on Arab oil producers should an EU ban come into effect.

Feeling increasingly encircled, Iran's hardline Islamic clerical elite has lashed back by threatening to block the main Middle East oil shipping route. Since the New Year, Tehran also began to enrich uranium in an underground bunker and sentenced an Iranian-American citizen to death on espionage charges.

Tensions in the Gulf have caused occasional spikes in oil prices in recent weeks. The sanctions are also having a real impact on Iran's domestic economy, causing prices of imported staples to soar and the rial currency to tumble

http://www.reuters.com/article/2012/01/15/iran-idUSL6E8CF0CS20120115

Is risk ready to rock sector?

All The Gold Bugs In China

Many analysts thought a death knell sounded for the gold bull market last month. However, driven by surging investment demand in China, as evidenced by record-high imports from Hong Kong, and the recapturing of the 200-day moving average, the gold price added to its gains from the first week of the year, while silver mounted an even bigger surge.

All this occurred despite a stronger trade-weighted dollar (that normally moves opposite of metal prices). However, credit downgrades late on Friday and an expected further decline for the euro are sure to test the recent enthusiasm for precious metals in the days ahead.

For the week, the gold price rose 1.4%, from $1,616.60 an ounce to $1,639.70. Silver briefly topped the $30 an ounce mark for the first time in a month, before ending slightly below that mark. That's up 3.5% from $28.75 an ounce to $29.77. Gold is now down 14.7% from its high last summer while the silver price remains 39.9% below its early-2011 peak.

Surging Chinese gold demand and soaring premiums in advance of the Lunar New Year were by far the dominant stories for precious metals last week. The Hong Kong Census and Statistics Department reported a record 103 tonnes of gold entered the mainland from Hong Kong in November, up from 86 tonnes in October as shown below via Reuters.

http://seekingalpha.com/article/319777-all-the-gold-bugs-in-china

Europe Crisis Rescue Begins With MIT Men

2012-01-14T15:47:00.000-05:00

As financial turmoil in Europe threatened to overwhelm the region’s banks last November, Bank of England Governor Mervyn King arranged conference calls with the world’s top central bankers to decide what steps to take.

The result: Six leading monetary authorities agreed to make it cheaper for financial institutions outside the U.S. to borrow dollars in emergencies. The funding squeeze on European banks eased and stocks worldwide rallied.

The Nov. 30 plan could be created and announced quickly because “we trust each other,” King told reporters the following day in his role as chairman of the bankers’ group.

For some, that trust has a common source: three of the six banks are led by economists who studied or taught at the Massachusetts Institute of Technology in the late 1970s and early 1980s. Then, as now, the emphasis was on what former MIT professor and now Bank of Israel Governor Stanley Fischer describes as “economics about the real world.”

The MIT central bankers represent “an extraordinary level of policy influence for any one economics department,” said James Poterba, president of the National Bureau of Economic Research, which is responsible for dating the beginnings and endings of U.S. recessions. “I’m trying to think about what was in the water.” He was head of the economics department from 2006 to 2008 and is still a faculty member.

Adjoining Offices

At MIT, King, 63, and then-professor Ben S. Bernanke, 58, had adjoining offices in 1983, spending the early days of their academic careers in an environment where economics was viewed as a tool to set policy. Earlier, Bernanke and European Central Bank President Mario Draghi, 64, earned their doctorates from the university in the late 1970s, Draghi with a thesis entitled “Essays on Economic Theory and Applications.”

Fischer, 68, advised Bernanke’s thesis on “Long-Term Commitments, Dynamic Optimization and the Business Cycle,” and taught Draghi. Greek Prime Minister and former ECB vice president Lucas Papademos and Olivier Blanchard, now chief economist for theInternational Monetary Fund in Washington, earned their doctorates from MIT at about the same time.

Other monetary policy makers who have passed through MIT’s doors include Athanasios Orphanides, head of the Central Bank of Cyprus, Duvvuri Subbarao, governor of the Reserve Bank of India and Charles Bean, King’s deputy in the U.K.

Central banking is filled with former attendees of the Cambridge, Massachusetts, university not just because it was and is one of the world’s top schools for economics.

Collegial Atmosphere

http://www.bloomberg.com/news/2012-01-12/rescuing-europe-from-debt-crisis-begins-with-men-of-mit-as-matter-of-trust.html

Americans Pay Wall St. $20B for Bad Swaps

2012-01-13T21:43:00.001-05:00

Seven months after Hurricane Katrina ripped holes in the Superdome’s roof in 2005, Louisiana State Bond Commission members made what they were told would be “the best of a bad situation” in financing the stadium’s renovation.

Acting against the recommendation of their staff, the commissioners voted for a Merrill Lynch & Co. plan to use debt and interest-rate swaps to pay for the job. While the deal helped keep the National Football League’s New Orleans Saints from leaving town -- and the arena got new scoreboards while 12,000 seats were converted to luxury class -- taxpayers became the losers for supporting a winning team.

The cost of financing the work has reached $42 million, almost a quarter of the $187 million spent on Katrina-related repairs and enhancements and three times as much as expected. The deal became so expensive that the state repurchased the debt sold by the New York investment bank to stop the bleeding.

“It was a flawed idea out of the gate,” said Robert Brooks, who teaches financial management at the University of Alabama in Tuscaloosa.

Scores of public officials, including Michael Bennet, now a U.S. senator from Colorado, and Jon Corzine, the former governor of New Jersey, bought the same Wall Street pitch: So-called auction-rate bonds would lower financing costs by allowing them to pay short-term rates, and interest-rate swaps would protect them if markets moved in the wrong direction.

Move Defended

Corzine didn’t respond to a request for comment. A spokesman for Bennet, Adam Bozzi, defended the move made when the senator was superintendent of the Denver public schools, saying that the financing put the district “in much better financial shape.”

http://www.bloomberg.com/news/2012-01-13/americans-clueless-paying-wall-street-20-billion-for-bad-swaps.html

Falling Oil Prices Help Buoy Markets

2012-01-12T21:47:00.000-05:00

A drop in oil prices and strong bond auctions in Europe drove stocks to a slightly higher close Thursday. The Standard & Poor’s 500-stock index rose for the fourth straight day.

Materials and industrial companies led the gains. Caterpillar and Alcoa rose the most in the Dow. Stocks drove higher in the last hour and a half of trading after oil prices dropped below $100 a barrel for the first time this year. Oil fell on rumors that Europe would delay an embargo on Iranian oil. Crude oil futures for March delivery settled down $1.78 to $99.31 on the New York Mercantile Exchange.

Also pushing stocks were strong bond auctions in Italy and Spain. European markets ended mostly higher after Italy and Spain held highly successful bond auctions, easing worries about Europe’s debt crisis. Italy’s benchmark stock index rose 2.1 percent.

In Italy’s first bond auction of the new year, the country was able to sell one-year bonds at a rate of just 2.735 percent, less than half the 5.95 percent rate it had to pay last month. That’s a signal that investors are becoming more confident in Italy’s ability to pay its debts.

Spain was able to raise double the amount of money it had sought to raise in its own bond sale as demand for its debt was strong. Both auctions were seen as important tests of investor sentiment.

Investors have been worried that Italy and Spain, the third- and fourth-largest countries in the euro area, might be dragged into the region’s debt crisis. Greece, Ireland and Portugal have been forced to get relief from their lenders after their borrowing costs spiked to levels the countries could no longer afford.

The euro rose nearly a penny against the dollar, to $1.28, as worries eased about Europe’s financial woes. The currency, which is shared by 17 European Union countries, fell to a 16-month low against the dollar the day before. An auction of 30-year United States Treasury bonds drew meager interest from investors as cash flowed back into European debt.

The Dow Jones industrial average gained 21.57 points, or 0.2 percent, to end at 12,471.02. It was down most of the day, losing 64 points in the first hour of trading, following a rise in unemployment claims and a weak report on December retail sales.

The S.& P. 500 finished up 3.02 points, or 0.2 percent, at 1,295.50. The Nasdaq composite rose 13.94 points, 0.5 percent, to 2,724.70.

The Treasury’s 10-year note fell 6/32, to 100 21/32. The yield rose to 1.93 percent, from 1.91 percent late Wednesday.

It was the latest day of quiet trading in the stock market. There have been six consecutive days with moves of less than 1 percent in the S.& P. 500.

http://www.nytimes.com/2012/01/13/business/daily-stock-market-activity.html

This is just terrible news Ha Ha!!! QB

JPMorgan profit falls, but sees hope in economy

(Reuters) - JPMorgan Chase & Co's fourth-quarter earnings fell 23 percent, in line with Wall Street expectations, as the European debt crisis depressed trading and corporate deal-making.

But Chief Executive Jamie Dimon said the largest U.S. bank by assets was seeing signs of improvement in loan demand and credit quality as the economy recovers.

The bank's shares fell 2.9 percent in premarket trading. Through Thursday, the shares had climbed 11 percent this year.

JPMorgan is the first major U.S. bank to announce results for the period. Its figures show Wall Street firms such as Goldman Sachs Group Inc and Morgan Stanley are in for a tough quarter as investment banking results suffer.

Others such as Bank of America Corp and Citigroup Inc, which also report results in the coming days, could benefit from the stronger business loan demand that JPMorgan experienced, but they continue to face problems in investment banking and housing loans.

JPMorgan's results "show that there are major headwinds against the banking industry and it requires a strong management team to battle the headwinds," said Rick Meckler, president of investment firm Libertyview Capital Management in New York.

"The bigger negatives tend to be the housing and mortgage situation and investors questioning, 'Have we really hit bottom in this sector or is this just a black hole?'"

JPMorgan said fourth-quarter net income was $3.72 billion, or 90 cents a share, down from $4.83 billion, or $1.12 a share, a year earlier.

http://www.reuters.com/article/2012/01/13/us-jpmorgan-idUSTRE80C0RL20120113

Martin Armstrong: Capital Controls Coming in the US

2012-01-11T20:01:00.003-05:00

Governments will become more desperate as debt piles up

James J Puplava CFP with Martin Armstrong

http://www.financialsense.com/financial-sense-newshour/guest-expert/2012/01/05/martin-armstrong/capital-controls-coming-in-the-united-states

35 minute audio interview or just read the transcript to save bandwidth below.

Click here for transcript

http://www.financialsense.com/node/7291

Jim welcomes back Martin Armstrong of Armstrong Economics for a wide-ranging interview covering the possibility of capital controls in the US, stagflation in the near-term, and why gold is likely to head lower before heading much higher.

ArmstrongEconomics.com offers a collection of research from Martin Armstrong, a world renown economist and the creator of the Economic Confidence Model, the author of theGreatest Bull Market in History, and founder of Princeton Economics. This web site is a resource to stay up to date on Martin Armstrong’s business accomplishments, legal battles, and views on the global economy.

Fitch warns of 'cataclysmic' euro collapse

The European Central Bank should ramp up its buying of troubled euro zone debt to support Italy and prevent a "cataclysmic" collapse of the euro, David Riley, the head of sovereign ratings for Fitch, has warned.

Speaking to investors as part of a European roadshow, Mr Riley said a collapse of the euro would be disastrous for the global economy, and while it is not Fitch's baseline scenario, it could happen if Italy did not find a way out of its debt problems.

"The end of the euro would be cataclysmic. The euro is a reserve currency," Mr Riley said overnight. "What would that do in terms of financial and political stability?"

"It is hard to believe the euro will survive if Italy does not make it through," he said, adding that while many saw Italy as too politically and economically important to be allowed to fail, "one might also argue that it is too big to rescue."

The warning pushed the euro down towards a 16-month low versus the US dollar.

Mr Riley urged the European Central Bank to abandon its current reluctance to scaling up its purchases of troubled euro zone debt such as Italy's and drop its resistance to the bloc's bailout fund, the EFSF, borrowing directly from it.

"Can the euro be saved without more active engagement from the ECB? Quite frankly we think no," Mr Riley said, adding that the bank had plenty of scope to expand its balance sheet without unleashing a wave of inflation across the euro zone.

"Why not have the ECB come out and say 'We are going to cap interest rates', say 'We are not going to allow interest rates to exceed 7 per cent' or whatever level they see is the limit?.. Why not turn the EFSF into a bank so it can borrow from the ECB so it doesn't have to go to the market?"

Greece the joker in the pack

Revolving Door: From Top Futures Regulator to Top Futures Lobbyist
By Matt Taibbi

While America focused on New Hampshire, a classic example of revolving-door politics took place in Washington, going almost completely unnoticed. It’s a move that ranks up there with the hire of Louisiana congressman Billy Tauzin to head the pharmaceutical lobbying conglomerate PhRMA -- at a salary of over $2 million a year -- immediately after Tauzin helped ram through the Medicare Prescription Drug Bill, a huge handout to the pharmaceutical industry.

In this case, the hire involves Walter Lukken, who toward the end of the Bush years was the acting head of the Commodity Futures Trading Commission. As the chief regulator of the commodities markets, it was Lukken’s job to spot and combat speculative abuses and manipulations that might have led to artificial price hikes and other disruptions.

In 2008, the last full year of his tenure, Lukken presided over some of the worst chaos in the commodities markets in recent history, with major disruptions in the markets for food products like wheat, cotton, soybeans, and rice, and energy commodities like oil.

Most notoriously, 2008 saw a historic spike in the price of oil futures, an enormously destructive speculative bubble that peaked in July of that year at the lunatic high price of $146 per barrel (Goldman, Sachs at the height of the mania was telling investors oil might go to $200 a barrel).

It was Lukken’s job to spot the speculative abuses leading to disruptions like that bubble, but he didn’t do it. Instead, he repeatedly insisted that there was nothing untoward going on, most notoriously through testimony before the House and the Senate at the height of the oil boom.

In testimony that summer, Lukken continually insisted that the price surge was due to normal supply-and-demand forces, ignoring the far more obvious explanation of a massive inflow of cash from commodity index speculators.

Despite data showing that the amount of commodity index speculation had grown from $13 billion in 2003 to more than $260 billion as of March 2008 -- in other words, the amount of money betting on a rise in commodity prices had risen by a factor of twenty during that time -- Lukken on May 7, 2008 told the Senate that a more likely explanation for the surge could be found in the growth of industrial demand from places like China, and also, get this, in changes in the weather:

Royal Bank of Scotland Cuts 272 Jobs at U.K. Corporate Bank to Cut Costs

2012-01-11T11:18:00.002-05:00

Royal Bank of Scotland Group Plc, Britain’s biggest government-owned lender, will cut 272 jobs from its U.K. corporate banking unit as slowing growth and rising volatility force Chief Executive Officer Stephen Hesterto shrink the lender.

Employees are being informed of the reductions today, an RBS spokesman said in an interview. The cuts will be made across the U.K. and will include reductions in sales staff, managers and support personnel. RBS’s corporate unit, which lends to businesses, employs about 13,500 people which means the cuts represent about 2 percent of the total.

When the bank reported operating profit down 63 percent to 267 million pounds ($410 million) in the third quarter, Hester, 51, warned of difficult conditions brought on by lower economic growth and continuing market volatility. The bank has cut more than 30,000 jobs since its government bailout in 2008 and 2009. Edinburgh-based RBS will make an announcement about further reductions at the investment banking unit tomorrow, people familiar with the matter said this week, which may result in as many as 5,000 additional reductions.

The bank’s Irish unit, Ulster Bank, is meanwhile preparing its second round of job cuts in four years as part of an effort to save about 50 million euros ($63.9 million), according to two people with knowledge of the plan today.

“Having to cut jobs is a difficult part of our work to rebuild RBS, repay taxpayer support, and challenging market conditions require us to make efficiencies to deliver greater value to customers and shareholders” said spokesman Nigel Owen.

‘Shrink Further’

http://www.bloomberg.com/news/2012-01-11/royal-bank-of-scotland-cuts-272-jobs-at-u-k-corporate-bank-1-.html

Japanese Stock Futures, Australian Shares Rise on U.S. Economic Optimism

2012-01-10T18:59:00.001-05:00

Japanese stock futures and Australian equities rose as optimism about the U.S. economy overshadowed Fitch Ratings’ warning it may downgrade Italy’s credit rating.
American depositary receipts of Toyota Motor Corp. (7203), the world’s biggest carmaker by market value, rose 0.5 percent from the closing share price in Tokyo. Those of Mitsubishi Corp. (8058), a Japanese trading company, gained 0.7 percent after oil and commodity prices advanced. BHP Billiton Ltd., the largest global miner, advanced 1.8 percent in Sydney.
Futures on Japan’s Nikkei 225 Stock Average expiring in March closed at 8,440 in Chicago yesterday, up from 8,420 in Osaka, Japan. They were bid in the pre-market at 8,450 in Osaka at 8:05 a.m. local time. Australia’s S&P/ASX 200 Index (CRY) added 0.5 percent today. New Zealand’s NZX 50 Index gained 0.3 percent in Wellington.
“There are more positive signs particularly on employment and consumer” spending in the U.S., saidStephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The outlook in the U.S. is for modest growth this year, and that’s better than Europe. Expectations are Europe will be in a recession.”
Futures on the Standard & Poor’s 500 Index fell 0.1 percent today. The index rose 0.9 percent in New York yesterday to the highest level since July 29, a week before the U.S. was stripped of its AAA credit rating by S&P.
U.S. Jobs
U.S. employers took on 4.15 million workers in November, 107,000 more than in the prior month, the Labor Department said yesterday. The number of jobs filled in the three months to November was the highest since the period from March to May 2010. Economists expect a report due tomorrow will show retail sales rose 0.3 percent last month, according to the median estimate of economists surveyed by Bloomberg News.
Italy faces a “significant chance” of a credit-rating downgrade by Fitch Ratings, which is reviewing all European sovereign ratings and will make a decision by the end of the month.
“Taking out the crisis premium means a credible firewall,” David Riley, head of the sovereign-debt unit at Fitch, said at a conference yesterday in London. “At the moment, we don’t have that, and that’s a serious concern with respect to Italy,” he said. Speaking on the sidelines of the conference, Riley also said France will probably retain its credit rating unless the European debt crisis worsens.

Chinese Stocks

http://www.bloomberg.com/news/2012-01-10/japanese-stock-futures-australian-shares-rise-on-u-s-economic-optimism.html

From Seeking Alpha

Today In Commodities: Sleeping Giants

It will not likely make headlines because it is not energy or metal but look at the last few days in some of the soft commodities. OJ and cocoahigher by 17%. This is what commodities is all about…timing. The 9 day MA has supported Crude the last three days but unless we make a new high this week I would expect that level to give way. I have advised the sidelines and have told clients to buy the breakout or sell a settlement below $100 in February…trade accordingly. New contract low in natural gas…where is the bottom? I do not see much more downside but I may be talking my clients' position as they are long from 25 cents above current levels. With prices nearing 27 month lows how low do we go to entice buying is the question? Five month highs in securities as we approach the Summer 2011 highs the grind higher should continue. As long as the 9 day MA acts as support expect higher ground.

http://seekingalpha.com/article/318684-today-in-commodities-sleeping-giants

Hildebrand quits Swiss National Bank

2012-01-09T18:21:00.005-05:00

Philipp Hildebrand resigned on Monday as chairman of the Swiss National Bank, after details of email exchanges suggested that he had played a more active role in his wife’s controversial currency trades.

Last week Mr Hildebrand denied any wrongdoing over his wife’s purchase of $500,000, just weeks before the SNB imposed a ceiling on the appreciating Swiss franc in August, sending the currency down sharply. She converted the dollars back into Swiss francs in October, netting a profit.

“I came to the conclusion that it’s not possible for me to deliver a definite proof that my wife requested the currency transaction without my knowledge,” Mr Hildebrand said at a briefing. “Unfortunately, mistakes were made around this transaction.”

Mr Hildebrand said last week that the currency transaction stemmed from the sale of a family ski chalet in early 2011. He maintained he had been unaware of his wife’s currency dealings and reported them to the SNB’s chief lawyer the day after being informed.

“I failed my husband in not considering the perception of a ‘conflict of interest’ created by my purchase of dollars,” Kashya Hildebrand, who met her husband while the two worked at a New York hedge fund, said in a statement.

But in a “Contact Report” dated August 15 and released by the SNB during the briefing, Felix Scheuber, Mr Hildebrand’s banker at Bank Sarasin, wrote that he and the SNB head had discussed “increasing his USD-exposure but he would leave it up to his wife Kashya to so decide”. He also summarised that instruction to the Hildebrands in a subsequent email.

In an August 16 note to Mr Scheuber, Mr Hildebrand wrote: “I am surprised [by the] reference to a dollar transaction in your email. We never discussed any dollar purchases yesterday.” In a reply, Mr Scheuber countered that “I also remember you saying in our yesterday’s conversation that if Kashya wants to increase the USD exposure then it is fine with you”.

http://www.ft.com/intl/cms/s/0/13aeddb2-3ac7-11e1-be4b-00144feabdc0.html

Germany Sells Bills With Negative Yield for First Time Amid Crisis Concern

Germany sold six-month treasury bills at a negative yield for the first time amid demand for the debt securities of Europe’s biggest economy as a haven from the sovereign debt crisis roiling the region.

The government auctioned 3.9 billion euros ($4.98 billion) of securities maturing in July at an average yield of minus 0.0122 percent, the Federal Finance Agency said in an e-mailed statement today. It was the first time it sold the securities at a negative yield, Joerg Mueller, a spokesman in Frankfurt, said in a telephone interview. The Netherlands sold 107-day bills at minus 0.007 percent on Dec. 12.

Some investors are prepared to pay when lending to the most creditworthy governments in exchange for the assurance of getting their capital returned as a solution to the euro-region debt crisis, which forced Greece, Ireland and Portugal to seek bailouts, eludes policy makers. Yields on three-month U.S. Treasury bills fell below zero for the first time in December 2008 after the collapse of Lehman Brothers Holdings Inc.

“It just underpins how nervous the overall market is,” said David Schnautz, a fixed-income strategist at Commerzbank AG in London. “There are investors out there who really worry about the return of their money. That’s why they are OK donating some of their money to Germany, just to make sure they get it back.”

Bill Demand

http://www.bloomberg.com/news/2012-01-09/germany-auctions-bills-with-yield-of-minus-0-01-correct-.html

The Tocqueville Gold Fund
Dear Fellow Shareholder,
During fiscal 2011 ending October 31, the Tocqueville Gold Fund returned 1.84%, compared to -0.05% for the PHLX Gold/Silver Sector Index (XAU) and 8.09% for the S&P 500 Index. The price of gold rose 26.15% during the period. The Fund’s position in physical gold is 6.3% of its net assets; the balance is in shares of companies whose principal business is gold production, mine development, or exploration. The Fund also holds equities of silver-mining companies.

Events over the past fiscal year have served as a tumultuous setting for gold’s record advance to slightly above $1900/oz. before settling back to close the Fund’s fiscal year at $1715/oz. Mounting geopolitical tensions in the Mideast and the natural disaster in Japan earlier in the year added yet more reasons to the list of why to own gold, as investors sought the refuge of a safe-haven asset. However, the ongoing financial crises on both sides of the Atlantic underpin gold’s continued prominence as an investment and the rational justification for ownership.

In the U.S., failures to raise the debt ceiling and enact reasonable reductions to spending have kept the government on credit watch by the credit agencies.
Across the Atlantic, what used to be a problem confined to the PIIGS seems to have spread to the core of the Eurozone.

Most investors expect economic growth to provide some resolution of these problems. However, the prospects for growth are undermined by the contentious political climate. Failing growth, the market seems to hope that another round of quantitative easing will provide the impetus to alleviate global catastrophe. The consequence of such an action would be inflationary, which should continue to drive the bid for gold.

Although gold has continued to perform well in this environment, gold-mining equities have not kept pace with
bullion. Relative to mining equities, investment in the metal is straightforward and clear cut. There is no business risk.

Investing in the business of mining gold demands more complex and specialized analysis. Given the flight to safety in capital markets, it is not surprising that investors flock first to bullion.

However, given the historically wide divergence in performance between the two, we believe gold-mining equities represent an extraordinary opportunity to participate in the bullish secular trend for gold. Mining shares can provide potential sources of additional return compared to bullion: dividends, addition of further ounces through exploration, and the prospect for accretive M&A. As the market normalizes the advances in the bullion price to some sustainable level, it will come to realize that the sector is producing strong and sustainable free cash flows, thus providing tremendous flexibility for the sector to increase its dividend payout ratios.

The Fund outperformed its benchmark for the fiscal year. The top contributors over this period included physical gold, Scorpio Mining, and Richfield Ventures, which appreciated 26.2%, 137.4%, and 243.7% respectively.

Disappointments included Agnico-Eagle Mines, ATAC Resources, and Romarco Minerals, which declined by 43.7%, 46.1%, and 63.2% respectively. Despite the market volatility, we continue to stick by our strategy of investing in promising exploration companies that we see adding value through resource discovery and potentially M&A. During the period, Richfield Ventures was acquired by a producing company looking to bolster its development pipeline.

It is merely one example over the years that continues to affirm our investment strategy. However, in recognition of the valuation gap between bullion and equities and the expectation of increased dividends in the sector, we have selectively increased positions of producing companies to the portfolio as well.

We believe that the current environment represents an excellent entry point for those investors who wish to protect capital from the monetary debasement that, in our view, almost certainly lies ahead.

Sincerely,
John C. Hathaway
Portfolio Manager

Iran's president looks to Latin America as global sanctions grow

2012-01-08T15:59:00.001-05:00

(CNN) -- Beef from Brazil is on Iranian dinner tables. An Iranian-built hospital treats patients near Bolivia's capital. Iranian-funded factories dot the Venezuelan countryside.

Iran has forged hundreds of agreements with Latin American nations and pledged billions of dollars to fund them.

More deals could be in store this week as Iranian President Mahmoud Ahmadinejad embarks on a trip that starts in Venezuela on Sunday and includes stops in Nicaragua, Cuba and Ecuador.

Well before the Iranian leader's arrival in Caracas, his plans for a Latin America tour grabbed global attention as tensions grow between many Western powers and Iran over the nation's nuclear program.

"As the regime feels increasing pressure, it is desperate for friends and flailing around in interesting places to find new friends," U.S. State Department spokeswoman Victoria Nuland told reporters Friday.

But analysts say Ahmadinejad's visit is the latest step in a longstanding, calculated effort to shore up support in the region.

As Iran strives to improve its image, get around stiffening sanctions, dampen America's global influence and secure a stronger foothold in the United States' backyard, relationships with Latin American countries have become increasingly important.

Iran's state-run Press TV described cooperation with Latin American nations as one of the "top priorities of the Islamic Republic's foreign policy" in a recent article about this week's trip.

"Iran has an extremely active diplomatic move afoot," said Larry Birns, director of the Council on Hemispheric Affairs in Washington.

'Cultural ties'

http://www.cnn.com/2012/01/08/world/meast/iran-latin-america-ties/index.html

Speculators Raise Wagers on Price Gains by Most in 17 Months: Commodities

Hedge funds raised their wagers on higher commodity prices by the most since July 2010 after signs of accelerating U.S. growth bolstered optimism that demand for raw materials will strengthen.

Money managers expanded their combined net-long positions across 18 U.S. futures and options by 25 percent to 671,915 contracts (.MMLOSH) in the week ended Jan. 3, Commodity Futures Trading Commission data show. Bullish bets on cotton rose the most since April 2009 and those on coffee doubled. Crude-oil holdings reached a three-week high.

Prices for metals and bulk commodities such as coal rose at least 85 percent of the time since 2004 when global industrial production strengthened, Macquarie Group Ltd. estimates. U.S. unemployment fell to the lowest in almost three years, and it joined China, Australia, Germany,India and the U.K. in reporting manufacturing gains. Almost $253 billion was added to the value of global equities last week on speculation economies will skirt a slump as Europe’s debt crisis deepens.

“You’ve been seeing a risk-on trade across the board, not just in commodities,” said John Bailey, the founder and chief executive officer of Stamford, Connecticut-based Spruce Private Investors LLC, which advises investors holding about $3 billion of assets. “Between a calming in Europe and better-than- expected numbers in the U.S., including employment and housing, that has led to a risk-on attitude among managers.”

Index (MXWD) Gains

The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 2.6 percent last week and reached a seven-week high on Jan. 5. The MSCI All-Country World Index (MXWD) gained 0.8 percent, touching a one-month high on Jan. 4. The U.S. Dollar Index, a measure against six trading partners, added 1.3 percent, and the yield on 10-year Treasuries advanced 0.8 percentage point, Bloomberg Bond Trader prices show.

Thirteen of the 24 raw materials tracked by the GSCI gauge advanced, led by a 5.3 percent gain in Brent crude, a 4.6 percent increase in heating oil, and a 4.7 percent jump in gasoil. Cotton increased 4.4 percent, the third consecutive advance, and gold rallied 3.2 percent, the biggest gain since the week ended Dec. 2.

The U.S. expanded at a rate of 1.8 percent in 2011 and will probably grow 2.1 percent in 2012, according to the median of 70 economist estimates compiled by Bloomberg. Employers added more workers to payrolls than projected in December, Labor Department figures showed on Jan. 6. Manufacturing (NAPMPMI) expanded in December at the fastest pace in six months, the Institute for Supply Management said on Jan. 3.

‘Economy Is Back’

http://www.bloomberg.com/news/2012-01-09/speculators-raise-wagers-on-price-gains-by-most-in-17-months-commodities.html

Gold eases as market digests U.S. payrolls data

2012-01-07T22:01:00.002-05:00

(Reuters) - Gold eased on Friday, snapping a five-session winning streak, but trade was choppy as investors digested a report of better U.S. job growth and the unemployment rate near a three-year low.

The metal still notched its biggest weekly gain in five weeks after it broke ranks with a slumping euro in the last two days. Bullion has now more than recouped last week's losses that briefly sent it into bear market territory.

Trading volume was decent after data showed U.S. nonfarm payrolls increased 200,000 in December and the unemployment rate dropped to a near three-year low of 8.5 percent, offering the strongest evidence yet the economic recovery was gaining steam.

"Gold came under pressure because people are a bit more comfortable with the recovery of the economy, but it is going to remain rangebound until we get some significant news to push it into either direction," said Fred Schoenstein, metals trader at Heraeus Precious Metals Management.

Spot gold fell 0.3 percent to $1,617.19 an ounce by 2:32 p.m. EST (1932 GMT).

It was up 3 percent for the week, its first weekly rise since early December.

"Gold went up after a lot of year-end liquidation last week. Money managers have to put their (gold) position back if they want to have it in their portfolio to show it to their clients," said Schoenstein.

U.S. gold for February delivery settled down $3.30 at $1,616.80.

Trading volume was strong for a fourth straight day, about 10 percent above its 30-day average, preliminary Reuters data showed. Analysts said high turnover signaled renewed buying interest after gold fell sharply in thin holiday volume.

The euro hit a near 16-month low against the dollar and briefly traded below $1.27, the first time since September 2010, on renewed sovereign funding concerns in Europe and worries about a recession there.

Gold had been trading in lockstep with the euro in the past two months when the metal crossed into a bear market. Last week, the precious metal was briefly 20 percent below its record September high.

The 25-day correlation log between spot gold and euro was near a one-year high reached last week, indicating a strong positive link between the two in the last month.

"Although gold seems to be decoupling from the euro...we believe gold's inverse correlation with the dollar and positive correlation with the euro will be re-established," James Steel, HSBC's chief commodity analyst, said in a research note.

ANALYSTS SEE RECORD HIGH

http://www.reuters.com/article/2012/01/06/us-markets-precious-idUSTRE7AK1M520120106

Harder for Americans to Rise From Lower Rungs

2012-01-05T20:59:00.000-05:00

WASHINGTON — Benjamin Franklin did it. Henry Ford did it. And American life is built on the faith that others can do it, too: rise from humble origins to economic heights. “Movin’ on up,” George Jefferson-style, is not only a sitcom song but a civil religion.

But many researchers have reached a conclusion that turns conventional wisdom on its head: Americans enjoy less economic mobility than their peers in Canada and much of Western Europe. The mobility gap has been widely discussed in academic circles, but a sour season of mass unemployment and street protests has moved the discussion toward center stage.

Former Senator Rick Santorum of Pennsylvania, a Republican candidate for president, warned this fall that movement “up into the middle income is actually greater, the mobility in Europe, than it is in America.” National Review, a conservative thought leader, wrote that “most Western European and English-speaking nations have higher rates of mobility.” Even Representative Paul D. Ryan, a Wisconsin Republican who argues that overall mobility remains high, recently wrote that “mobility from the very bottom up” is “where the United States lags behind.”

Liberal commentators have long emphasized class, but the attention on the right is largely new.

“It’s becoming conventional wisdom that the U.S. does not have as much mobility as most other advanced countries,” said Isabel V. Sawhill, an economist at the Brookings Institution. “I don’t think you’ll find too many people who will argue with that.”

One reason for the mobility gap may be the depth of American poverty, which leaves poor children starting especially far behind. Another may be the unusually large premiums that American employers pay for college degrees. Since children generally follow their parents’ educational trajectory, that premium increases the importance of family background and stymies people with less schooling.

At least five large studies in recent years have found the United States to be less mobile than comparable nations. A project led by Markus Jantti, an economist at a Swedish university, found that 42 percent of American men raised in the bottom fifth of incomes stay there as adults. That shows a level of persistent disadvantage much higher than in Denmark (25 percent) and Britain (30 percent) — a country famous for its class constraints.

Meanwhile, just 8 percent of American men at the bottom rose to the top fifth. That compares with 12 percent of the British and 14 percent of the Danes.

Despite frequent references to the United States as a classless society, about 62 percent of Americans (male and female) raised in the top fifth of incomes stay in the top two-fifths, according to research by the Economic Mobility Project of the Pew Charitable Trusts. Similarly, 65 percent born in the bottom fifth stay in the bottom two-fifths.

By emphasizing the influence of family background, the studies not only challenge American identity but speak to the debate about inequality. While liberals often complain that the United States has unusually large income gaps, many conservatives have argued that the system is fair because mobility is especially high, too: everyone can climb the ladder. Now the evidence suggests that America is not only less equal, but also less mobile.

John Bridgeland, a former aide to President George W. Bush who helped startOpportunity Nation, an effort to seek policy solutions, said he was “shocked” by the international comparisons. “Republicans will not feel compelled to talk about income inequality,” Mr. Bridgeland said. “But they will feel a need to talk about a lack of mobility — a lack of access to the American Dream.”

While Europe differs from the United States in culture and demographics, a more telling comparison may be with Canada, a neighbor with significant ethnic diversity. Miles Corak, an economist at the University of Ottawa, found that just 16 percent of Canadian men raised in the bottom tenth of incomes stayed there as adults, compared with 22 percent of Americans. Similarly, 26 percent of American men raised at the top tenth stayed there, but just 18 percent of Canadians.

http://www.nytimes.com/2012/01/05/us/harder-for-americans-to-rise-from-lower-rungs.html

View: Sweden Shows Europe How to Cut Debt

2012-01-04T21:18:00.004-05:00

Sweden faces a difficult year, like every other European economy, but unlike the rest of the European Union, it’s equipped to cope. There are lessons here, especially for the EU’s other non-euro countries.

Scandinavia’s biggest economy will see growth slow to less than 1 percent in 2012, down from an impressive 4.5 percent in 2011, according to the National Institute of Economic Research. Sweden relies heavily on exports to the rest of Europe, and the EU’s protracted economic crisis will set it back.

Shortly before Christmas, the Riksbank cut its benchmark rate for the first time since 2009 to 1.75 percent. The NIER predicts further reductions this year in response to a weaker economy and slower inflation. This prospect underscores the seriousness of the situation -- and how valuable it is at such times to have an interest rate to change.

The value of monetary independence is the first and most important Swedish lesson. Sweden stayed out of the euro system when the currency was introduced in 1999, and in the past several years, the government has used this monetary flexibility to the full.

Firm Fiscal Hand

With most of the EU bound by the European Central Bank’s excessive monetary caution, the Riksbank cut interest rates more sharply than the ECB and (in real terms) the U.S. Federal Reserve from 2007 to 2009. Its inflation-adjusted interest rate fell from 2.25 percent to minus 1.5 percent. The central bank also devised new credit facilities and other unconventional measures to support the Swedish financial system.

Fiscal policy played a smaller role in steadying the economy. This, too, was a legacy of the 1990s, when budget deficits widened and a national consensus formed around the need to curb government spending and stabilize the public finances. Sweden’s subsequent success in doing that is nothing less than remarkable.

Hence Sweden’s second lesson: Fiscal stimulus isn’t a necessary condition for economic recovery. Through the course of the recent recession, the government’s cyclically adjusted budget stayed in surplus. As a result, Swedish government debt stands at less than 40 percent of gross domestic product, among the lowest of any rich country.

Fiscal policy still helped to cushion the recession and support a recovery -- not with discretionary stimulus, but through so-called automatic stabilizers, which are relatively strong in Sweden. (Measures such as consumption taxes and generous unemployment benefits relax fiscal policy in recessions and tighten it in booms, even if policy stands pat.)

In Sweden’s case, a firm fiscal hand, far from stifling the recovery, probably helped it along. Keeping the budget under control buoyed consumer and investor confidence. Surging demand for Swedish debt drove bond prices higher last year; indeed, Sweden’s government pays less to borrow than Germany’s.

Should others follow its example? For one group, the answer is plainly yes. Members of the EU that have not yet adopted the euro are nonetheless committed in principle to doing so. (This includes Sweden; the U.K. and Denmark are two exceptions.) Sweden proves, if further proof were needed, that euro membership is a mistake.

Lacking a currency to devalue and interest rates to cut, members of the euro system would only worsen their recessions if they squeezed fiscal policy as tightly as Sweden did. Beyond the EU, though, Sweden does suggest that sufficiently powerful monetary easing can carry most, if not all, of the burden of economic stabilization.

New Swedish Model

http://www.bloomberg.com/news/2012-01-05/view-sweden-shows-europe-how-to-cut-debt.html

Job Cuts in U.S. Jumped 31% From Prior Year’s Decade Low, Challenger Says

Job cuts announced by U.S. employers increased in December from the prior year’s decade low.

Planned firings (CHALTOTL) rose 31 percent to 41,785 last month from 32,004 in December 2010, which were the fewest since June 2000, according to Chicago-based Challenger, Gray & Christmas Inc. Job cuts totaled 606,082 for all of 2011, up 14 percent from the previous year, the report showed.

Government and financial services accounted for four of every 10 announcements last year, and the areas will probably struggle this year as federal agencies try to reduce budget deficits and the European debt crisis threatens to cut off credit, the report said. At the same time, the year’s total was less than half the recession peak of 1.29 million firings announced in 2009.

“While several other sectors saw increased job cuts, the pace of downsizing in most industries is still well below recession levels,” John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement. “But even as job cuts remain low in most sectors, employers still appear reluctant to add jobs. Job creation is likely to remain slow and steady in 2012.”

Compared with November, job-cut announcements decreased 1.6 percent, dropping to the lowest level since June. Because the figures aren’t adjusted for seasonal effects, economists prefer to focus on year-over-year changes rather than monthly numbers.

Financial institutions led the December job cuts with 7,433 announced reductions, according to Challenger. Industrial goods producers followed with 6,621.