September, Tuesday 20, 2011
The Corporate Bank Run Has Started: Siemens Pulls €500 Million From A French Bank, Redeposits Direct With ECB
Greece Nears the Precipice, Raising Fear
Turnaround Tuesday – Greece is Fixed (again)
Stocks Shrug Off Italian Downgrade
Bill Clinton’s Advice to President Obama on Jobs: Start With Clean Energy
Fed begins policy meeting, tiptoes toward easing
Global energy use to jump 53%
Guest Post: Will Tokyo Be Evacuated Due to Fukushima Radiation?
DOW + 7 = 11,408
SPX – 2 = 1,202
NAS – 22 = 2,590
10 YR YLD = 1.94%
OIL + 1.05 = 86.75
GOLD + 26.60 = 1,801.50
SPX – 2 = 1,202
NAS – 22 = 2,590
10 YR YLD = 1.94%
OIL + 1.05 = 86.75
GOLD + 26.60 = 1,801.50
Stocks were in positive territory for most of the day and then prices faded into the close. Once again, the story is Greece. A teleconference between Greek officials and international lenders, may have spurred sellers late in the day.
After the teleconference, the European Commission said debt inspectors would continue to review Greece’s progress on its budget goals early next week. So, there will be no resolution to Greece’s debt crisis for at least the next few days.
When debt grows to certain levels, then default is almost inevitable. The only question is whether the default is quick and painful or slow an painful. And who feels the pain.
Greece is working frantically in concert with other European nations to avoid default, by embracing further austerity measures it has promised in return for more European bailout money to help pay its debts; but Greece keeps inching closer to default.
The FT reports that Siemens, the European industrial conglomerate pulled €500 million form a large French bank, either SocGen|Credit Agricole. Bloomberg reports that, in total, Siemens has deposited between 4 billion euros and 6 billion euros, mostly through one-week deposits, with the ECB. This means that European companies now refuse to work directly with their own banks, and somehow the ECB has become a direct lender/cash holder of only resort to private non-financial institutions. OK, maybe you heard that yesterday on Bill Tatro’s show. What this means is confirmation that credit is freezing up in Europe.
A default would relieve Greece of paying off a mountain of debt that it cannot afford, no matter how much it continues to cut government spending, which already has caused its economy to shrink.
Default may actually be good for Greece, despite a short-term shock to the system. The consequences of a default or a more radical debt restructuring, dire as they may be, would be no worse for Greece than the miserable path it is currently on. To meet its budget goals in a declining economy, Greece is being pressure to cut 100,000 public jobs by 2015. With just 11M people in Greece, cutting 100,000 jobs is like asking the US Government to cut 3M jobs – isn’t that insaneNothing says “economic recovery” like firing 3M people.
Other countries have defaulted on their sovereign debt in recent times without causing systemic contagion; so, what are the consequences of a Greek default?
Total Greek public debt is about 370 billion euros, or $500 billion. By comparison, Argentina’s debt was $82 billion when it defaulted in 2001; when Russia defaulted, in 1998, its debt was $79 billion.
A Greek default could put further pressure on Italy is struggling to enact austerity measures and find a way to stimulate growth. Italy’s government debt is five times the size of Greece’s, and concerns about Italy’s ability to meet its obligations could grow if Greece defaults.
Yesterday, Standard & Poor’s on Monday cut Italy’s credit rating by one notch to A, citing its weakening economy and limited political response. The yield on Italian 10-year bonds was up slightly Tuesday, but at more than 5.6 percent, Italy’s borrowing costs are more than three times what Germany, the euro-zone anchor, pays. S.& P.’s A rating for Italy is still five steps above junk status, but it is three below that given by Moody’s, which is still assessing Italy’s rating.
Orderly or not, we have no idea what the effect of a default would be on other countries, especially Italy.
In part, what would happen in the wake of a Greek default would depend on whether European leaders could create a firewall to control the damage from spreading widely.
Here are two probable default outcomes. In the first, Greece forces private sector creditors to take a loss on their bonds of 60 to 80 percent but manages to stay inside the euro zone by keeping current on the smaller amount that it owes its official lenders, like the European Union and the I.M.F.
While technically a default, the loss would not be an outright repudiation of Greece’s debt and the contagion could, in theory, be contained.
One big unknown revolves around the fact that, unlike other countries that have defaulted on their debts in the past, Greece does not have its own currency.
If Greece either defaults or imposes a hard restructuring, banks would be forced to take a larger loss on their holdings. So, one of the more probable moves would be bank bailouts. The European Financial Stability Fund would try to fast track emergency loans to countries to buy European bonds and thereby inject capital into the banks. French and German banks would be the hardest hit, because they are among the biggest holders of Greek debt. Overall, European bank losses could top $500 billion – and maybe more if a contagion spreads.
Is any of this starting to sound familiar? We are being threatened – or at least Europe is being threatened with the prospect of a global financial meltdown if Greece defaults. The only solution is to give billions of dollars to the banks.
For the moment, Greek officials are adamant that neither a default nor a euro exit and devaluation is in the cards. Now, here is the crazy part – by next year Greece is likely to have achieved a primary budget surplus, meaning that after taking out the high levels of interest it pays on its debt, it will be running a surplus.
History shows that a country tends only to take such a drastic step as cutting ties with its international lenders when it has tightened its belt enough to achieve a budget surplus, and it is only payments to its bankers that is keeping it in the red.
Such was the case in most of the recent country defaults, including Argentina, Ecuador, Indonesia and Jamaica. The only question now is whether it will be quick or slow, and who feels the pain.
Well, it kind of sounds like the banksters are going to feel the pain – but we know that’s not going to happen – they’ll be standing there with their buckets ready to collect the bailout bucks. Of course, the Europeans might rise up and deny the banksters their bailout, so plan B is to earn their money the old fashioned way – by manipulating the markets.
Consider – the world equity markets were nervous and frightened for the past couple of weeks over whether Greece would get an $11 billion dollar bailout to fund itself for 3 more months. And the global markets gave up $1 trillion dollars in value because they weren’t sure the money in time to avoid default.
Turning a minor incident like Greek debt into a World-shaking economic crisis is BRILLIANT! If you want to by equities cheap – nothing better than the possibility of a global finanancial meltdown as the result of a sovereign debt crisis to push prices lower. This is the idea of shock and awe trading.
Here’s the best analogy I’ve heard. It’s as if a used car salesman convinces you that your lost cigarette lighter will force him to knock 30% off the Blue Book on your trade in. You may think you would never fall for that but what do you think you are falling for when you sell your stocks at 30% off the top because Greece may or may not get a $11Bn loan in a $60 trillion dollar Global Economy (0.18%). That’s right about the equivalent of losing the cigarette lighter in your car….
The Clinton Global Intiiative’s annual meeting is going on in New York. Former President Bill Clinton is hitting the news shows. A couple of interesting comments from Clinton:
To a large degree Obama is a victim of circumstance, the former President says. “The average financial crisis takes five years to get over,” Clinton notes. Plus, the official government revisions have shown that when President Obama entered office, the economy was about twice as bad as everyone thought. Notice, Clinton did not call this a recession. And Clinton is not crazy enough to say that the average recession takes 5 years to get over. He called it a financial crisis. Nobody wants to call it a depression, but that is what it is.
Clinton also said, “I think we have to flush the debt, that is accelerate our resolution to the housing and mortgage problems.” Again, this is how you deal with a depression, this is not how you make adjustments for a recession.
Clinton suggests that President Obama focus on creating jobs in two ways:
1.Create more public-private business partnerships. Clinton points to several so-called “prosperity clusters” throughout the country where government incentives and private investment have created growing industries.
2. Clean energy. President Clinton recommends retrofitting aging buildings and infrastructure with clean energy alternatives that will allow the country to become more energy efficient and also create jobs. The key to doing that he says, is to couch the clean energy conversion as an economic issue — not an environmental one.
President Clinton claims clean energy alternatives such as wind and solar “would create 6 to 8 times as many jobs” as conventional carbon-based energy.
So, do you rush out and buy solar energy stocks tomorrow? Sure, I got some shares of Solyndra right here
The Energy Information Agency says global energy use is expected to jump 53% by 2035, largely driven by strong demand from places like India and China. Combined, developing nations currently use slightly more energy than those in the developed world and by 2035, they are expected to use double.
EIA sees energy-related carbon dioxide emissions rising 43% by 2035.
Fossil fuels will continue to be the dominant fuel choice in 2035, with nat gas and coal constituting half of the world’s overall energy consumption, and renewables constituting just 14% to the world’s overall energy consumption. EIA predicts shale gas and other unconventional forms of natural gas will make up three quarters of U.S. natural gas production by 2035, up from about half today.
But that’s a substantial jump from renewable energy consumption in 2008, which stood at 10%. That growth rate makes renewables the fastest growing of all the energy sources, but it still seems pathetically small.
The agency says most future renewable energy supply will continue to come from wind and hydropower. It did not include biofuels like ethanol as part of its renewable catalog, instead lumping it in with liquid fuels like oil.
EIA does not expect solar power to become a significant energy source by 2035. That runs counter to the opinion of supporters who foresee rapidly declining prices for solar panels in the coming years.
The agency predicts will go from about 5% of overall energy consumption in 2008 to about 7% in 2035.
I don’t think the report really considered the fallout from the nuclear plant problems in Japan. A report from Al Jazeera
Experts estimate the radiation leaked from Fukushima nuclear plant will exceed that of Chernobyl.
The need to evacuate parts of the sprawling capital of 35 million may have once seemed an incredible prospect, but some experts say the possibility can no longer be ignored.
Indeed, as Japan Times reports today, the Japanese government started discussing the potential need to evacuate the 30 million residents of Tokyo soon after the quake hit:
Well, not yet but there is a typhoon headed for Japan, and the government is calling for one million people to be evacuated. These are difficult times for Japan.
Well, I Guess I’ll Just Take My Business To Another Soulless Multinational Corporation
The nerve of you people. Treating a longtime patron with so little respect, like I’m just another walking dollar sign. If that’s what passes for customer service around here, you sadly leave me with no choice but to have the exact same experience at another giant soulless multinational corporation somewhere else.
Maybe one that knows how to rob its customers of a fraction less dignity.
Every single time I’m in here—without fail—it’s been the same god-awful experience. But this! This is a new low for you guys. I don’t even know why I still bother coming here when I could happily take my business to one of the faceless global entities around the corner and be equally insulted and dehumanized there. My insignificant contribution to the bottom line could easily be theirs for the taking!
What do you think about that, you crooks? I don’t have to bend over and take this from you. I can bend over and take this from one of your sprawling, heavily franchised rivals.
Do you think you’re my only source for generic, mass-produced merchandise? You’re not the only vertically integrated international conglomerate with retail locations on five continents in this town, you know. Maybe you weren’t aware, but there are three or four morally bereft megacorporations hawking the same stuff within 10 minutes’ drive, and quite frankly, I’d be glad to engage in an emotionless transaction with any of them.
Okay, sure, I’ll concede that it was your competitive, high-volume discounts that got me in here in the first place. But that’s not the point. The point is that I’m an individual— an individual who has free will in choosing which uncaring global monolith to spend money at.
Face it, you’re a disgrace, and I’m going to tell everyone I know not to shop here and these actions will affect your multibillion dollar company in no way whatsoever.
And you know what? Have it your way. Don’t bring out your supervisor. I’d much rather stand in line at some other big-box store, ask the same question, and eventually be told to just call the company’s 1-800 number. There are plenty of other chains I can go to that are probably owned by the same parent company as you are and would no doubt be thrilled to abuse my loyalty at the drop of a hat, leaving me in the very same predicament I’m in now.
Well, this has been a complete waste of an afternoon. What a shame that I’m now going to walk out of here humiliated and totally empty-handed. You see what’s happening right now? This is $26.99 putting away her wallet, getting in her car, and driving to one of your competitors, who truly won’t give a shit.
So I hope you’re all really proud of yourselves. Because you just lost an instantly replaceable customer for good.
What is the best investment?
Hi, I’m Sinclair Noe. Over the past 10 years, the best asset class was precious metals. Gold returned more than 650% and silver is up more than 950%.
So, should you have some precious metals in your portfolio?
And the best place to buy or sell precious metals?
That’s easy – Resource Consultants in Tempe
For the past 20 years, Pat and Linda Gorman at Resource Consultants have been providing education, information, and great customer service, whether you’re looking for gold, silver, platinum, coins or bullion. They can even show you how to hold precious metals in your IRA. They do it all. visit the website – buysilvernow.com or better yet, Call 480-820-5877, tell them Sinclair sent you. I’m proud to recommend Resource Consultants – 480-820-5877
December Gold closed up 27.10 at 1806.00 per ounce
December silver closed up .69 at 39.85 per ounce.
December silver closed up .69 at 39.85 per ounce.
Precious metals Prices are brought to you by Resource Consultants.
Today, the S&P 500 closed at 1202. The first time the S&P 500 hit 1200 was in 1998. That means the S&P is at the same level it was in 1998. That does not mean that if you invested in the S&P 13 years ago, that you break even over 13 years – after inflation – you lose a ton. The official inflation rate between 1998 and 2011 was about 2.4% That’s the government’s official inflation rate. You know inflation is worse than that. What does this mean for you? Well, if you put $100,000 in the S&P in 1998 and waited for 13 years, you’d only really have $73, 560 in buying power – that is a losing proposition.
Over that same period, gold prices are up about 325%. Over that same time, silver prices were up about 600%.
Does this mean you shouldn’t own stocks? Of course not.
Does this mean you should own gold and silver? Abso-friggin-lutely.
And I’m not talking about holding gold or silver in an exchange traded fund. You need to have some physical gold or silver in your possession
Okay, how do you do that?
Easy, you call Resource Consultants in Tempe. What is Resource Consultants? Well that’s Pat and Linda Gorman. And over the past couple of decades they have been a trusted precious metals dealer. When it comes to buying and selling precious metals you can have the knowledge, experience, and integrity of Resource Consultants working for you. And whether you’re buying or selling, you won’t find better pricing than with Resource Consultants. I’m proud recommend Resource Consultants to you. Give them a call at 480-820-5877. that’s 480-820-5877. Or visit the website buysilvernow.com, that’s buysilvernow.com. And when you call, be sure to ask about their free newsletter. Just say, Sinclair said I could get a free, no obligation newsletter. It’s a monthly newsletter – with lots of good solid info. Call 480-820-5877, Resource Consultants, 480-820-5877