Nigel Farage Holds Funeral Procession For Euro In The Middle Of Brussels
The world's premier euroskeptic, Nigel Farage, just held a funeral procession for the Euro after Europe now has just 10 days left in which to save its battered currency. ND at the rate Europe is imploding, Nigel won't have long to wait to get confirmation that all his concerns about the flawed European experiment were not only grounded but outright optimistic. And yet Europe, caught up in its own historic ponzi, refuses to do the right thing which is to impair banks with a 50%+ haircut, and instead will kick the can down the road, in the process destroying any residual liquidation value of hundreds of trillions of impaired assets, which as has been pointed out on numerous times before, are concurrently the liabilities of other banking institutions, therby making the entire central banking plan of debt inflation pointless. Farrage summarizes this best: "European banks are going to take a hit at some point anyway, if you are a bank owed a great deal of money it's better to get 50% of it than none of it. Down the path we are going now is heading for a total bust." Probably a good analogy is that if Bernie Madoff was stopped in the 80s or ever 90s, much of his capital would have been recovered. Alas, waiting until he himself cried uncle, guaranteed no recoveries for anyone. It is sad that Europe, and the entire "developed world" has decided to pursue this path.
Guest Post: Why The Eurozone And The Euro Are Both Doomed
Submitted by Tyler Durden on 06/24/2011 12:24 -0400An inescapable double-bind has emerged for Germany: If Germany lets its weaker neighbors default on their sovereign debt, the euro will be harmed, and German exports within Europe will slide. But if Germany becomes the "lender of last resort," then its taxpayers end up footing the bill. If public and private debt in the troubled nations keeps rising at current rates, it's possible that even mighty Germany may be unable (or unwilling) to fund an essentially endless bailout. That would create pressure within both Germany and the debtor nations to jettison the single currency as a good idea in theory, but ultimately unworkable in a 16-nation bloc as diverse as the eurozone. Be wary of the endless "fixes" to a structurally doomed system.
While Equity Drinks Kool Aid, CDS Cautions Uncurable STD Problems May Be Coming To Spain
A comparison between equity and Subordinated CDS (inverted scale) levels on STD (that would be Spanish mega bank Santander) indicates that while stocks are still balls deep in hopium, credit is getting far more concerned about both recovery and viability prospects of the bank which is considered by many as the gateway to a full blown Spanish sovereign funding crisis. Where STD goes, so goes Spain. And the last time we checked, equities were right at the expense of credit... never. Is it time to just say not to STD? The CDS certainly says so.
QE3 Or No QE3: The CIA's Take
Well not quite the CIA, but close enough. The good ex-spies of BIA Behavioral Intelligence Analysis have conducted another behavioral assay, this time targeting global overlord Ben Bernanke and specifically his Wednesday press conference, focusing not on the script but what was left unsaid between the lines. For those unfamiliar, "The BIA team represents a diverse mix of highly accomplished professionals from the national intelligence and business communities, who came together to create and deliver BIA’s ground-breaking solutions for our clients. Our intelligence experts average more than 20 years experience in interviewing, evaluating and collecting information across the globe and have been working with premier firms since 2001 to improve investing and business outcomes through application of our unique methodologies." In lieu of a lie detector being hooked up to the Chairman (Simpsons scene comes to mind), this may be one of the better analyses in interpreting what was said... and unsaid.
June 23, 2011, at 5:45 pm
by Monty Guild in the category Guild Investment |
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by Monty Guild in the category Guild Investment |
Print This Post | Email This PostInternational Energy Association To Sell Crude Oil From Government Stockpiles
Today, the U.S. and IEA decided to sell 60 million barrels of oil over the next month, supposedly to make up for the 1.5 million barrels a day that was produced by Libya.
This is a political maneuver which will have a short term effect on oil and gasoline prices. The authorities announced that this is meant to help the consumer, but it’s obvious that they also wanted to punish the speculators. The IEA has previously said that targeting the speculators will backfire, yet here they are doing just that. We find that hard to grasp that the consumer will get more than very temporary help. The amount to be sold represents less than 1 day’s world consumption of oil, and the 30 million barrels sold in the U.S. represents about 1 1/2 day’s U.S. consumption of oil.
The sale will decreases world energy security by decreasing emergency stockpiles. The important fact is that world energy demand is rising faster than energy supply and that problem will not be solved by these band aid programs. The entire purpose of this is political the object is to decrease gasoline prices during the 2011 summer driving season in North America and Europe.
We predict that the effect of this sale will be unnoticeable in three months. At that time oil prices will be rising and possibly will be higher than they are today. We have not changed our view that further disruptions in the Middle East will take oil higher.
Gold and gold mining shares
Gold has fallen as the U.S. dollar has rallied on today’s IEA news. We believe that this is an excellent opportunity to buy gold and gold mining stocks.
As our readers know, our approach is to sell part of your position on rallies and buy on dips. This dip in price provides an opportunity. Buy part now, and if gold falls lower investors should add more. Take a close look at gold mining stocks; they have not participated as they should have during the rise in the price of gold. It is time for them to catch up. The upcoming European QE should inspire investors to own gold for both its role as real money and as a store of value during times of financial chaos. As we have pointed out before, large nations continue to buy gold to stockpile as protection from monetary and financial crises.
We believe that bullion and coins have a place in every investment portfolio, but we also think that some gold mining stocks have declined to a level that make them very attractive.
Repeatedly, short sellers have fabricated stories about smaller- and medium-sized gold mining companies in order to drive down their stock prices. These stories often get reprinted in the press. Even well-run companies with new gold discoveries are targeted by the manipulations of short sellers. We believe these shares will now move much higher in coming months and years. To profit from this opportunity, we suggest investors focus on the following types of companies:
1. Those that have not borrowed money via gold loans to grow,
2. Those with enough quality gold reserves to build a mine,
3. Those with proven management and a record of having built companies previously.
In our opinion, gold and quality gold mining companies will move much higher in the long run and now is the time to buy when investor pessimism is high and rationality is low. Eventually, the larger, better capitalized mining companies will step in and acquire the smaller operations when the acquisitions have current and expected mineral reserves exceeding their market prices as is the case for some companies. Such acquisition cycles eventually bring an end to the gold share undervaluation.
Europe’s New Plague: Debt Contagion
A new plague infests Europe. Not bacterial like the killer epidemics of past centuries, the current pathogen is debt, and the prognosis is poor. Much like 2008, when the U.S.banking system barely survived an acute crisis, Europe is careening into a monetary abyss of its own making. The outlook is increasingly uncertain. Will debt-strapped Greece accept the tough terms laid down by the International Monetary Fund (IMF) and the European Central Bank (ECB)? And behind Greece, the gasping, deep-in-debt economies of other European countries are also desperate for transfusions of money. Will they accept austerity?
The ultimate issue here is one of contagion. Will the bad debts of Greece and other nations infect, weaken, and possibly kill the collective European banking model? In the short term, we expect the ECB to cave in and ease the austerity demands upon Greece. Such action may avoid a serious crisis now, but not forever.
The next question is how long will the politicians in Europe continue the masquerade and pretend that policy solves the problem. What’s about to unfold is but medicine. You apply a drug (money, in this case) that temporarily relieves a symptom but you fail to address the underlying sickness which continues to progress. Investors will sigh in relief. The stock markets will applaud. They’ll ignore the disease…until the next flare-up.
Look for that to happen — the next phase — when the insolvency contagion spreads to the other weakened European nations: Portugal, Spain, Ireland, and others. The banks holding large amounts of these countries’ mounting debt will be attacked. Their ratings will be lowered. Investors will begin to aggressively bet against them using derivatives. Eventually, depositors will flee. This is what happened in 2008, first in March with Bear Stearns, and then after a few months of rally, Lehman in September. How long before a similar collapse will threaten the big banks of Europe?
Beyond Europe
When this happens, will the contagion extend beyond Europe? In our opinion, the odds are very high that the contagion will indeed extend to banks and stocks in U.S. and Asia.
Then what? Remember we live in the age of “quantitative easing (QE) — of money printing — where leaders kick the debt ball down the timeline for future leaders to deal with. We fully expect Europe and Asia, and perhaps both, to resort to massive amounts of QE-type of financing to save the European banking system just like the U.S. did with TARP, QE, and other programs that effectively averted a complete U.S. banking system collapse.
With each passing week, we hear more concern about Europe’s debt. The decibels of concern are rising. On June 11, The Economist published an article asking frankly “how much financial risk has the ECB taken on as a result of the European debt crisis?” Recently a report by Open Europe, a think tank, described as “potentially huge” the risk to taxpayers that lies buried in the ECB books.
On June 21, the New York Times quoted IMF managing director John Lipsky warning that the European Union must be prepared to underwrite the finances of the Greek state for the next year, a much tougher position than European officials expected, in order for the IMF to realize its portion of the aid.
At some point there will be a huge (probably over 1 trillion dollar) liquidity injection by the ECB to buy up the cancerous debt of European nations. Additionally, in recent months, China’s banking system appears to be getting overextended and we expect that this may require a QE-fix inside China as well. Over time, liquidity for others may also be forthcoming by the Chinese.
How exposed is the ECB Anyway?
The ECB has allowed banks in troubled Euro zone nations to borrow as much as they need from it even if those banks have shaky collateral. The ECB’s rationale is that it really doesn’t matter as long as the IMF is available to bail the nations out. Talk about throwing banking fundamentals to the wind. What happens if the IMF decides not to play ball? What happens if the borrowing nations refuse to meet the IMF’s stringent requirements of spending cuts and tax increases as many in Greece have threatened?
How much financial risk has the ECB actually taken on as a result of the debt crisis? The ECB has already bought up low-rated bonds of Greece, Ireland, and Portugalin the market. There are hundreds of billions more of bonds that European banks may need to sell to the ECB if they are to remain solvent. The ECB is thinly capitalized at 10.7 billion Euros. It is true that more capital could be contributed by member nation central banks, but the ECB already has billions in unfulfilled capital contributions from its members. To us, this means there will be a continual drain on the healthier Northern European nations. They will have to step up and contribute more and more. Hard-working, taxpaying Europeans will have to shoulder a heavy burden to pay for the profligacy of their neighbors. How long will they put up with it?
What This Means to You
As we mentioned a moment ago, Europe will eventually deal with the problem by printing money to provide liquidity to the markets and pump up the balance sheet of the ECB. Such a program is inevitable and will, in our opinion, provide a further impetus for gold, oil, and other assets. The European strategy is to keep the continent’s banking system and the ECB from failing, but the result will be a much weaker Euro and a wave of liquidity sloshing into other markets around the world.
We are working on a buy list for later in 2011 and are monitoring the global situation closely. Please keep current on these letters for recommendation changes.
Please see our recommendation table below.
Today, the U.S. and IEA decided to sell 60 million barrels of oil over the next month, supposedly to make up for the 1.5 million barrels a day that was produced by Libya.
This is a political maneuver which will have a short term effect on oil and gasoline prices. The authorities announced that this is meant to help the consumer, but it’s obvious that they also wanted to punish the speculators. The IEA has previously said that targeting the speculators will backfire, yet here they are doing just that. We find that hard to grasp that the consumer will get more than very temporary help. The amount to be sold represents less than 1 day’s world consumption of oil, and the 30 million barrels sold in the U.S. represents about 1 1/2 day’s U.S. consumption of oil.
The sale will decreases world energy security by decreasing emergency stockpiles. The important fact is that world energy demand is rising faster than energy supply and that problem will not be solved by these band aid programs. The entire purpose of this is political the object is to decrease gasoline prices during the 2011 summer driving season in North America and Europe.
We predict that the effect of this sale will be unnoticeable in three months. At that time oil prices will be rising and possibly will be higher than they are today. We have not changed our view that further disruptions in the Middle East will take oil higher.
Gold and gold mining shares
Gold has fallen as the U.S. dollar has rallied on today’s IEA news. We believe that this is an excellent opportunity to buy gold and gold mining stocks.
As our readers know, our approach is to sell part of your position on rallies and buy on dips. This dip in price provides an opportunity. Buy part now, and if gold falls lower investors should add more. Take a close look at gold mining stocks; they have not participated as they should have during the rise in the price of gold. It is time for them to catch up. The upcoming European QE should inspire investors to own gold for both its role as real money and as a store of value during times of financial chaos. As we have pointed out before, large nations continue to buy gold to stockpile as protection from monetary and financial crises.
We believe that bullion and coins have a place in every investment portfolio, but we also think that some gold mining stocks have declined to a level that make them very attractive.
Repeatedly, short sellers have fabricated stories about smaller- and medium-sized gold mining companies in order to drive down their stock prices. These stories often get reprinted in the press. Even well-run companies with new gold discoveries are targeted by the manipulations of short sellers. We believe these shares will now move much higher in coming months and years. To profit from this opportunity, we suggest investors focus on the following types of companies:
1. Those that have not borrowed money via gold loans to grow,
2. Those with enough quality gold reserves to build a mine,
3. Those with proven management and a record of having built companies previously.
In our opinion, gold and quality gold mining companies will move much higher in the long run and now is the time to buy when investor pessimism is high and rationality is low. Eventually, the larger, better capitalized mining companies will step in and acquire the smaller operations when the acquisitions have current and expected mineral reserves exceeding their market prices as is the case for some companies. Such acquisition cycles eventually bring an end to the gold share undervaluation.
Europe’s New Plague: Debt Contagion
A new plague infests Europe. Not bacterial like the killer epidemics of past centuries, the current pathogen is debt, and the prognosis is poor. Much like 2008, when the U.S.banking system barely survived an acute crisis, Europe is careening into a monetary abyss of its own making. The outlook is increasingly uncertain. Will debt-strapped Greece accept the tough terms laid down by the International Monetary Fund (IMF) and the European Central Bank (ECB)? And behind Greece, the gasping, deep-in-debt economies of other European countries are also desperate for transfusions of money. Will they accept austerity?
The ultimate issue here is one of contagion. Will the bad debts of Greece and other nations infect, weaken, and possibly kill the collective European banking model? In the short term, we expect the ECB to cave in and ease the austerity demands upon Greece. Such action may avoid a serious crisis now, but not forever.
The next question is how long will the politicians in Europe continue the masquerade and pretend that policy solves the problem. What’s about to unfold is but medicine. You apply a drug (money, in this case) that temporarily relieves a symptom but you fail to address the underlying sickness which continues to progress. Investors will sigh in relief. The stock markets will applaud. They’ll ignore the disease…until the next flare-up.
Look for that to happen — the next phase — when the insolvency contagion spreads to the other weakened European nations: Portugal, Spain, Ireland, and others. The banks holding large amounts of these countries’ mounting debt will be attacked. Their ratings will be lowered. Investors will begin to aggressively bet against them using derivatives. Eventually, depositors will flee. This is what happened in 2008, first in March with Bear Stearns, and then after a few months of rally, Lehman in September. How long before a similar collapse will threaten the big banks of Europe?
Beyond Europe
When this happens, will the contagion extend beyond Europe? In our opinion, the odds are very high that the contagion will indeed extend to banks and stocks in U.S. and Asia.
Then what? Remember we live in the age of “quantitative easing (QE) — of money printing — where leaders kick the debt ball down the timeline for future leaders to deal with. We fully expect Europe and Asia, and perhaps both, to resort to massive amounts of QE-type of financing to save the European banking system just like the U.S. did with TARP, QE, and other programs that effectively averted a complete U.S. banking system collapse.
With each passing week, we hear more concern about Europe’s debt. The decibels of concern are rising. On June 11, The Economist published an article asking frankly “how much financial risk has the ECB taken on as a result of the European debt crisis?” Recently a report by Open Europe, a think tank, described as “potentially huge” the risk to taxpayers that lies buried in the ECB books.
On June 21, the New York Times quoted IMF managing director John Lipsky warning that the European Union must be prepared to underwrite the finances of the Greek state for the next year, a much tougher position than European officials expected, in order for the IMF to realize its portion of the aid.
At some point there will be a huge (probably over 1 trillion dollar) liquidity injection by the ECB to buy up the cancerous debt of European nations. Additionally, in recent months, China’s banking system appears to be getting overextended and we expect that this may require a QE-fix inside China as well. Over time, liquidity for others may also be forthcoming by the Chinese.
How exposed is the ECB Anyway?
The ECB has allowed banks in troubled Euro zone nations to borrow as much as they need from it even if those banks have shaky collateral. The ECB’s rationale is that it really doesn’t matter as long as the IMF is available to bail the nations out. Talk about throwing banking fundamentals to the wind. What happens if the IMF decides not to play ball? What happens if the borrowing nations refuse to meet the IMF’s stringent requirements of spending cuts and tax increases as many in Greece have threatened?
How much financial risk has the ECB actually taken on as a result of the debt crisis? The ECB has already bought up low-rated bonds of Greece, Ireland, and Portugalin the market. There are hundreds of billions more of bonds that European banks may need to sell to the ECB if they are to remain solvent. The ECB is thinly capitalized at 10.7 billion Euros. It is true that more capital could be contributed by member nation central banks, but the ECB already has billions in unfulfilled capital contributions from its members. To us, this means there will be a continual drain on the healthier Northern European nations. They will have to step up and contribute more and more. Hard-working, taxpaying Europeans will have to shoulder a heavy burden to pay for the profligacy of their neighbors. How long will they put up with it?
What This Means to You
As we mentioned a moment ago, Europe will eventually deal with the problem by printing money to provide liquidity to the markets and pump up the balance sheet of the ECB. Such a program is inevitable and will, in our opinion, provide a further impetus for gold, oil, and other assets. The European strategy is to keep the continent’s banking system and the ECB from failing, but the result will be a much weaker Euro and a wave of liquidity sloshing into other markets around the world.
We are working on a buy list for later in 2011 and are monitoring the global situation closely. Please keep current on these letters for recommendation changes.
Please see our recommendation table below.
| Investment | Date | Date | Appreciation/Depreciation |
| Recommended | Closed | in U.S. Dollars | |
| Commodity Market Recommendations | |||
| 4/20/2011 | Open | -8.50% | |
| Corn | |||
| Gold | 6/25/2002 | Open | +374.50% |
| Oil | 2/11/2009 | Open | +165.50% |
| Corn | 12/31/2008 | 3/3/2011 | +81.00% |
| Soybeans | 12/31/2008 | 3/3/2011 | +44.10% |
| Wheat | 12/31/2008 | 3/3/2011 | +35.0% |
| Currency | |||
| Recommendations | |||
| Short | 4/6/2011 | -6.20% | |
| Japanese Yen | Open | ||
| Long | 9/13/2010 | Open | +8.30% |
| Singapore Dollar | |||
| Long | 9/13/2010 | Open | +5.50% |
| Canadian Dollar | |||
| Long | 9/13/2010 | Open | +19.90% |
| Swiss Franc | |||
| Long | 9/13/2010 | Open | +7.50% |
| Brazilian Real | |||
| Long | 9/13/2010 | Open | +4.40% |
| Chinese Yuan | |||
| Long | 9/13/2010 | Open | +12.80% |
| Australian Dollar | |||
| Long | 9/13/2010 | 6/22/2011 | +6.50% |
| Thai Baht | |||
| Short | 9/14/2010 | 10/20/2010 | -3.30% |
| Japanese Yen | |||
| Equity Market | |||
| Recommendations | |||
| India | 4/6/2011 | Open | -12.10% |
| Japan | 2/15/2011 | Open | -10.40% |
| Malaysia | 4/6/2011 | 6/22/2011 | +0.80% |
| Canada | 3/24/2011 | 6/22/2011 | -7.10% |
| Colombia | 9/13/2010 | 6/22/2011 | +2.6% |
| Australia | 2/15/2011 | 6/22/2011 | -0.90% |
| U.S. | 9/9/2010 | 3/11/2011 | +18.10% |
| Canada | 12/16/2010 | 3/11/2011 | +7.90% |
| South Korea | 1/6/2011 | 3/3/2011 | -2.90% |
| China | 9/13/2010 | 1/27/2011 | +5.00% |
| India | 9/13/2010 | 1/6/2011 | +7.90% |
| Singapore | 9/13/2010 | 12/16/2010 | +4.80% |
| Malaysia | 9/13/2010 | 12/16/2010 | +1.30% |
| Indonesia | 9/13/2010 | 12/16/2010 | +9.50% |
| Thailand | 9/13/2010 | 12/16/2010 | +11.90% |
| Chile | 9/13/2010 | 12/16/2010 | +8.90% |
| Peru | 9/13/2010 | 12/16/2010 | +32.20% |
| 10/20/2010 | 0.00% | ||
| Bond Market | |||
| Recommendations | |||
| 30 YR Long Term | |||
| U.S. Treasury Bond | 8/27/2010 |
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