Europe Saved! Again!


Baltic Dry Index. 989  -10

LIR Gold Target by 2019: $30,000.  Revised due to QE programs.

It has been suggested by some people in this country that I and my Government will be a ‘soft touch’ in the Community. In case such a rumour may have reached your ears, Mr Chancellor, it is only fair to advise you frankly to dismiss it, as my colleagues did long ago! I intend to be very discriminating in judging what are British interests and I shall be resolute in defending them.

Margaret Thatcher 05/1979  At a dinner with Helmut Schmidt.

For the second time since the start of June, the unhappy countries that make up the Eurozone have been saved from the four horsemen of the Apocalypse by yet another leaders summit. Salvation last time lasted just as long as it took Europe’s dodgy leaders to reach home and start talking about what exactly they had agreed. It quickly turned out back then, that there were as many different agreements as there were dodgy leaders. It remains to be seen exactly what has been agreed this time round, by whom, and who’s going to get the bill, and this being Europe, there will be a bill for some of the dupes in the unhappy European Monetary Union.

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Below Europe’s “leaders” agree to an aspirational euro-area bank supervisor, to be in place by the end of this year and fully operational by January 1, 2014. Greased lightning by Europe’s standards, with the real fighting to come when this unfortunate supervisor suggests anything affecting banks in France, Germany and probably Italy. Riff-raff banks in the lesser vassal states can expect the full rigor of German style bank supervision allied to strict austerity. No word yet about how much this new bank supervisor will cost, nor how it’s going to be paid for. My guess is that Euroland’s banks will get stiffed for the bill, with this extra cost getting passed straight through to their unfortunate depositors. On to day two of the Great Leader’s summit, the best thing to hit Europe since Attila the Hun.

“a company for carrying out an undertaking of great advantage, but nobody to know what it is”.

London 1720. Brussels 2012.

EU Aims For Euro-Area Bank Supervision To Start In 2013
By Rebecca Christie and Jim Brunsden – Oct 19, 2012 3:35 AM GMT
European leaders committed to their goal of establishing a euro-area bank supervisor by year-end, opening the prospect of direct aid to Spain’s banking sector.

The EU will seek to agree on a framework that makes the European Central Bank the main supervisor by Jan. 1, according to conclusions released early today after leaders met at a summit in Brussels. The new system, intended to break the link between banks and governments at the root of the region’s financial crisis, will phase in over the next year and could cover all 6,000 euro-area banks by Jan. 1, 2014.

—-German Chancellor Angela Merkel, underscoring a go-slow approach, said before direct aid, the bank-oversight system needs to reach “practical completion.”

“Our goal is banking supervision that’s worthy of the name, because we want to create something that’s better than what we currently have,” Merkel told reporters.

The so-called banking union dominated talks at leaders’ 20th crisis-fighting European summit.

—-Spanish and Italian bond yields need to fall further, French President Francois Hollande told reporters. He declared that “the worst has passed” for Europe’s sovereign debt crisis. Leaders didn’t discuss additional assistance for Spain, he said.

The EU has struggled to maintain momentum on a June plan to spur investor confidence by putting the ECB in charge of lenders across the euro area. Divisions have flared over the scope of the ECB’s authority and how losses would be shared.

EU leaders said they’ll consider a “single resolution mechanism” for nations that participate in the bank supervisor once work concludes on existing proposals that affect all 27 EU nations.

—-The leaders’ decisions don’t settle the question of when the European Stability Mechanism will be able to recapitalize banks directly. The plan calls for the supervisor to take charge of big banks and bailed-out institutions first, while also saying direct assistance requires “effective” supervision in place.

Elsewhere in tax and work shy Europe, life went on as before.  After being bailed out once by Italy earlier in the year, 2 billion euros if I remember right, the world’s oldest bank is looking sickly again. You don’t have to be old to bank with the world’s oldest bank, but it’s a good idea to be daft.

World’s oldest bank Monte dei Paschi di Siena cut to ‘junk’ by Moody’s
The world’s oldest bank has been cut to “junk” by Moody’s, as the rating agency warned that there was a “material probability” that the lender may need another cash injection from the Italian government.
2:27PM BST 18 Oct 2012
Monte Paschi was the only Italian lender to fail the European Banking Authority’s stress tests and is the first of the five main Italian banks to fall below investment grade.

In a statement, Moody’s said that there remained “a material probability” that the bank will need to seek further external support over the rating horizon.

“Given the weak growth prospects for Italy’s economy and the EU operating environment, there is a strong probability that the bank would not be able to generate sufficient capital internally to maintain regulatory capital levels,” it added.

The downgrade from Baa3 to Ba2 means some investment funds that hold Monte Paschi bonds will be forced to sell them, making it even harder for the bank to raise funds.

“Unless there’s the express request from the investor we can’t buy junk status bonds. And if we have them in our portfolio we have to sell,” said Roberto Lottici, fund manager at Ifigest. “For shares, there will be a discussion in the investment committee.”

Yesterday we were only too happy to join in the good news spin on China’s latest GDP figures, even if it was impossible to square them with China’s electricity figures. Today, happy hour over, we return to reason to doubt all yesterday’s happy spin.

Oct. 19, 2012, 1:44 a.m. EDT
China official sounds caution on exports
HONG KONG (MarketWatch) — China’s Ministry of Commerce sounded a note of caution on the nation’s export sector Friday, saying there’s no conclusive sign of a recovery in place, while data on foreign direct investment inflows showed an ongoing decline in September.

Commerce Ministry spokesman Shen Danyang told reporters Friday that the trade situation was “steadily progressing,” but stopped short of calling a recovery, according to separate reports by Dow Jones Newswires and Reuters

The doubt contrasts with upbeat trade statistics released last week that showed September’s exports jumped 9.9% from a year earlier, or nearly double expectations of analysts polled by the newswires.

Data released Friday showed foreign direct investment inflows dropped sharply in September, rounding out a down-trending pattern for the first nine months of the year.

China attracted $8.43 billion in foreign investment in September, down 6.8% from a year earlier, while January through September inflows totaled $83.4 billion, down 3.8% from the same period a year earlier, according to Ministry of Commerce.

The contraction in monthly FDI inflows ranks as longest seen since the financial crisis, according to Reuters.

While we await Europe’s great and the not so good leaders to finish up their mutual admiration session later today, and then return home to spill the beans about what really happened, and who did what to whom, we end for the day with renewed sparring between China and Japan over the Diaoyu Islands, known by the Japanese and almost no others as the Senkaku Islands. Japan better hope that they’re still marked “Senkaku” on US Navy maps.  Below, China’s outgoing old guard tightens the screw. The incoming youngsters are being given a clear signal not to let up on Japan, the Diaoyu’s are worth fighting for, rather like the UK’s Falkland Islands, if smaller, closer, and uninhabited.

China to conduct exercise in East China Sea
ZHOUSHAN, Zhejiang, Oct. 18 (Xinhua) — The Chinese navy will conduct a joint exercise in the East China Sea with the country’s fishery administration and marine surveillance agency on Friday, navy sources announced on Thursday.

A total of 11 vessels from the Donghai Fleet of the People’s Liberation Army (PLA) Navy, the fishery administration and marine surveillance agency will take part in the exercise along with eight aircraft, according to a statement from the fleet.

The exercise is aimed at improving coordination between the navy and administrative patrol vessels and sharpening their response to emergencies in missions to safeguard territorial sovereignty and maritime interests, the statement said.

When carrying out missions in disputed waters, patrol vessels of the fishery administration and marine surveillance agency have been stalked, harassed and even intentionally interfered with by foreign vessels, greatly challenging their duties, it added.

Chinese navy’s Diaoyu Islands activities legitimate: defense ministry
BEIJING, Oct. 16 (Xinhua) — China’s Ministry of Defense said on Tuesday that its navy vessels’ activities around the Diaoyu Islands are legitimate, condemning Japanese military aircraft’s presence there.

“Chinese navy vessels’ routine training and navigation in the waters in question is justified and legitimate,” said the ministry’s bureau for press affairs in a statement.

The statement came in response to a report by Japan’s Fuji TV saying that a number of Chinese navy vessels were navigating toward the Diaoyu Islands on Tuesday morning.

The report quoted Japanese defense minister Satoshi Morimoto as saying that Japan has dispatched surveillance aircraft to follow the Chinese fleet, while its navy is now collecting intelligence and strengthening its surveillance over the Chinese fleet.

“It should be pointed out that Japan in recent days sent military aircraft to the waters around the Diaoyu Islands, severely infringing on China’s sovereignty and interests,” said the statement, adding that China is now closely watching Japan’s movement and demanding the Japanese stop any actions that can complicate or magnify the issue.

We weren’t getting a fair deal on the budget and I wasn’t going to have it. There’s a great strand of equity and fairness in the British people – this is our characteristic. There’s not a strand of equity and fairness in Europe – they’re out to get as much as they can. That’s one of those enormous differences. So I tackled it on that basis.

Margaret Thatcher.

At the Comex silver depositories Thursday final figures were: Registered 36.85 Moz, Eligible 104.65 Moz, Total 141.50 Moz.

Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.

No Crooks today, they’re all still sleeping it off in Brussels. We will wait until they all arrive home to discover just how many versions of any “agreements” they arrived at. Since each has a vital need to tell their voters just what a good deal they got over on all the others, the weekend press and media will be interesting.

Socialists cry “Power to the people”, and raise the clenched fist as they say it. We all know what they really mean—power over people, power to the State.

Margaret Thatcher.

The monthly Coppock Indicators finished September:
DJIA: +66 Up. NASDAQ: +88 DOWN. SP500: +85 Up. All three indicators had reversed from down to up, but now the NASDAQ has reversed again to down. While not unprecedented, it is a warning sign a that the July reversal from up to down is about to fail.

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