Countries and regions most likely to have armed riots based on the Conflict Intensity Index
When the currency system as we know it dies, some people will become very wealthy. In this special report from the Casey Research/Sprott Inc. Summit "When Money Dies," The Gold Report cornered Global Resource Investments Founder and Chairman Rick Rule, Casey Research Senior Editor Louis James and Casey Energy Opportunities Senior Editor Marin Katusa for a roundtable discussion on the best strategies for thriving during the coming economic transition.
As the U.S.-led Afghan campaign lurches into its second decade, the country’s vast untapped mineralogical resources are again emerging in the Western media, seemingly underpinning the benefits of International Security Assistance Force troops “staying the course” and defeating the insurgency, after which these resources can be tapped, both providing the administration of Afghan President Hamid Karzai with a source beyond drugs for reconstruction and Western companies who develop the reserves a handsome profit. The latest discovery is that Afghanistan is rich in rare earth elements (RREs). China currently has a near monopoly on the global production of RREs, and the price for a ton of unprocessed ore has soared to a dizzying $100,000 a ton. So, what’s wrong with this picture?
A few days ago we brought you the delightful Chinese boat launch straight into the river bottom. Today, we observe the curious case of the JH-7 "Flying Leopard" which during an exhibition airshow decided to show just how effective gravity is at combating those pesky "highly reliable license-built Spey Mk202 engines" which as the AP reports were "considered unlikely that both would have stalled at the same time"...They stalled. "The Chinese-made JH-7 entered service in 2004 and is a mainstay of the country's air force and naval aviation, with more than 100 built." Also, how do you spell oops in Mandarin? "China rarely released information about military accidents, but the public nature of the crash and the rapid spread of images of it happening on the Internet made it impossible to keep secret." Yeah, sorry about that. Next: we can't wait to see the official launch of the first (and only) Chinese aircraft carrier.
- S&P downgraded the long-term sovereign rating of Spain by one notch to AA- from AA with a negative outlook
- Fitch placed five major European commercial banks – namely, Barclays, BNP Paribas, Credit Suisse, Deutsche Bank and Societe Generale - on credit watch negative
- Strong corporate earnings from Google boosted appetite for risk during the European session
- The French/German 10-year government bond yield spread widened to a record level on concerns surrounding the impact of an EFSF leveraging on the French sovereign ratings
- Market participants keep a close eye on the outcome of the confidence vote in the Italian Parliament. In latest news, according to ANSA, Berlusconi has enough votes to win the confidence vote
- China inflation dips to 6.1% in September (FT)
- G-20 Said to Weigh Boosting IMF Lending Power to Stem Europe Debt Crisis (Bloomberg)
- German Bankers Argue Against Capital Plans (WSJ)
- State Revenue Under Forecasts to Produce Cuts From New York to California (Bloomberg)
- Germany’s Banks Said to Prepare for Greece Debt Losses of as Much as 60% (Bloomberg)
- Bank’s Bean says will do more QE if needed (FT)
- Banks’ Paths Vary in Greek Write-Downs (WSJ)
- ECB warns against private role in bail-outs (FT)
- China Inflation Wen’s Scope for Easing (FT)
The Bloomberg ‘Chart of the Day’ shows the proportion of gold in the international reserves of India, Russia, China and Mexico is significantly lower than the rates in the U.S., Germany and France, based on data compiled from the World Gold Council. The lower panel tracks central bank holdings in metric tons and the bullion price since March 2008. Central banks last year were net gold purchasers for the first time in two decades. Central banks, the biggest gold holders, have expanded reserves due to the international financial crisis. Central bank and government-institution buying totaled 192.3 metric tons in the first half of 2011, World Gold Council data show. Gold accounts for 75.4% of the U.S.’s reserves and 72.7% of Germany’s. The ratio is just 1.6% for China and 8.2% for Russia, WGC data show. “Governments in many places like Asia and South America are rapidly embracing gold as a security mechanism,” said Wendt, who expects gold at $2,500 in 2013. “The value of their U.S. dollar foreign reserves has drastically fallen over the past decade.” Thailand, Bolivia and Tajikistan raised reserves in August, according to the International Monetary Fund. Central bank demand is strategic leading to gradual accumulation and it is long term meaning that official sector demand will provide support to prices for the foreseeable future. Thus, continuous suggestions that gold is a bubble today and in recent years and of a gold bubble bursting and prices falling sharply as seen in 1980 is uninformed and misguided. The world of 2011 is very different to that of 1980.
Foreigners Dump $74 Billion In Treasurys In 6 Consecutive Weeks: Biggest Sequential Outflow In HistorySubmitted by Tyler Durden on 10/13/2011 17:06 -0500
Over the weekend, we observed the perplexing sell off of $56 billion in US Treasurys courtesy of weekly disclosure in the Fed's custodial account (source: H.4.1) and speculated if this may be due to an asset rotation, under duress or otherwise, out of bonds and into stocks, to prevent the collapse of the global ponzi (because when the BRICs tell the IMF to boost its bailout capacity you know it is global). We also proposed a far simpler theory: "the dreaded D-day in which foreign official and private investors finally start offloading their $2.7 trillion in Treasurys with impunity (although not with the element of surprise - China has made it abundantly clear it will sell its Treasury holdings, the only question is when), has finally arrived." In hindsight the Occam's Razor should have been applied. Little did we know 5 short days ago just how violent the reaction by China would be (both post and pre-facto) to the Senate decision to propose a law for all out trade warfare with China. Now we know - in the week ended October 12, a further $17.7 billion was "removed" from the Fed's custodial Treasury account, meaning that someone, somewhere is very displeased with US paper, and, far more importantly, what it represents, and wants to make their displeasure heard loud and clear. Whether it is China - we do not know: we may have a better view in two months when the September/October TIC data hits, but even then it will be full of errors, as Direct Bidder purchases by the UK usually end up being assigned to China at the yearly TIC audit. And the sellers know this all too well. What they also know is that over the next few days (or weeks - ZH tends to be a little "aggressive" in its estimates for popular uptake), as soon as the broader population understands what has transpired, concerns about the reserve status of the greenback will start to resurface, precisely as many have been warning. And what has happened is that in six consecutive weeks, foreigners have sold $74 billion, or more government bonds in a sequential period of time than ever before.
It was Washington and the lobbyists who created the system that Wall Street uses to profit. So Occupy Wall Street should move to DC and Occupy the Federal Reserve on the way.
Van Rompuy And Barroso Announce €440 Billion EFSF Fully Functional; Now, How Do They Expand It To €3 Trillion?Submitted by Tyler Durden on 10/13/2011 12:38 -0500
Following the Slovak approval vote earlier, the EFSF is now fully functional, or so say Europe's two unelected leader Herman Van Rompuy and Jose Barroso (full statement here). Which is great, considering it only took Europe 3 months to ratify something that was supposed to be operational 2 months ago, and take over for the ECB's SMP declining bond purchases sometime in mid-September. And now, as Zero Hedge explained back in July, comes the hart part where the Eurozone realizes that the EFSF, which recently has found it has more uses than a Swiss Army Knife and can be used as a central bank, as a guarantor, as an insurance policy, as a CDO squared, cubed, etc, etc, or at least so the rumors go, has to be expanded from $440 billion to €3.5 billion. Recall: "slowly the sell side is coming to the realization that not only will the EFSF have to be expanded (that much was known), but that Germany, and specifically the outright economy, will be on the hook by an unprecedented amount of money. And expanded it will have to be: not by two, not by three, but by a cool four times, to a unbelievable €3.5 trillion which according to Daiwa's Head of Economic Research, Grant Lewis, is an act which will be necessary to convince financial markets of euro area resolve to save Italy and Spain." That was two months ago. Finally, the governments, which back then religiously denied such reporting as scaremongering, are getting on the bandwagon. It was none other than Le Figaro, mouthpiece of the country that has the most to lose from the inability to ringfence a Greek fallout, that said yesterday: "The euro area reflects one of several options to increase by up to five times, or more than 2500 billion euros, the firepower of its relief fund for countries in financial difficulty (EFSF), said on Wednesday AFP European sources." In other words, the target number is now known, and nobody is ashamed to put it out there: between €2.5 and €3.5 trillion. The only question is what form it will take: yesterday it was a bank, today it is an insurance "fund", tomorrow who knows - gotta keep those rumors a surprise after all: they don't call the EFSF the modern version of the Swiss Army Bailout knife for nothing.
The "benefit" of Operation Twist for the long end shone through today as the Treasury priced $13 billion in a 30 Year reopening, which came at a record low yield of 3.12%: this was 4 basis points inside the When Issued of 3.16% so at first sight the auction was a stunning success, confirmed by the second highest Bid To Cover in the auction history of 2.94. Perhaps... The only problem is when one looks at the internals, where just like yesterday, the most prominent observation was the total collapse in the Indirect Bid, which accounted for just $3.7 billion of the take down or 28.7% of the total, less than the Direct portion which despite having plunged in all other recent bond auctions soared to a virtual record 29.5% of the total auction (less than just the 29.6% from March 2010). And now the question again arises: are the Directs merely London-based offshore entities doing China's bidding away from the Indirect bidder spotlight, or, is this some other operation that kicks in every time when a plunge in Indirects is expected, such as over the past two days with China seemingly doing all it can do show it is telegraphing a plunge in interest for US paper. We will know more today when at 4:30 pm the Fed discloses its most recent custodial Treasury holdings for the past week. In the meantime, the Primary Dealers and the Directs have the long-end firmly under control.
Parts of Thailand have experienced terrible flooding lately, and much of the country’s production shut down as a result. Thailand makes everything from tire factories to hard disk drive manufacturers to rice… and given the slowdown in the economy, it couldn’t have come at a worse time. Not to worry, though, the government has a plan to fix it. Let me explain: Thailand’s central bank is sitting on roughly $212 billion in net foreign reserves right now. That’s up 37% from last year and nearly 80% from 2009. Curiously, it all starts with Ben Bernanke.
Jobless Claims 1K "Better" Than Expected 405K, To Be Revised To "Miss" Next Week; Record Trade Deficit With ChinaSubmitted by Tyler Durden on 10/13/2011 07:45 -0500
In today's weekly dose of BS from the BLS, we get the previous week's massive beat of 401K revised to 405K, cutting the 410K estimate beat in half. But what is important is that the expectation for this week of 405K was once again "massively beaten" by a whopping 1K at 404K. Of course, next week this number will be revised to 408K meaning the consensus was missed but no robots will care. As for the non-noise, non seasonally adjusted claims soared by 66,442 in the week from 332,394 to 398,836. Spin cycle to commence imminently. In some modestly good news, the "cliffers", those on EUCs and Extended benefits, which have declined by 1.3 million in the prior year, increased modestly by 2K, meaning those playing Xbox and collecting benefits actually rose for the week. In other news, the Trade Balance came in line with expectations, at a deficit of 45.6 billion. However, last month's number which gave all the banks hope that Q3 GDP was going to be a whopping beat and got so many Lemmings to re-revise their GDP forecast higher, was reduced from -44.8 billion to -45.6 billion, meaning Q3 GDP is right back down where it belongs. Most notably, the Chinese trade deficit hit a politically convenient record, increasing from $27.0 billion in July to $29.0 billion in August. Exports increased $0.2 billion (primarily soybeans, fish and shellfish, and nonferrous metals) to $8.4 billion, while imports increased $2.2 billion (primarily other household goods and toys, games, and sporting goods) to $37.4 billion. Expect Chuck Schumer's head to explode in 5...4...3...
- Political and debt concerns surrounding Italy together with a downbeat ECB’s monthly bulletin promoted risk-aversion
- Gilts received support following a well-received conventional Gilt auction from the UK, together with comments from BoE's Bean in favour of further QE
- The USD-Index gained amid risk-averse trade, which in turn weighed upon EUR/USD and GBP/USD
- The third quarter corporate earnings from JP Morgan beat on the EPS and revenue