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Monthly Archives: March 2012

Goldman Says BUY, BUY, BUY Gold: $1840 Coming Up Soon

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“There’s a fresh note out this morning from Goldman Sachs urging traders to buy gold.

Under our gold framework, US real interest rates are the primary driver of US$-denominated gold prices. However, after being remarkably strong in the first half of 2011, this relationship broke down last fall, with gold prices falling sharply in the face of declining US real rates, as tracked by 10-year

TIPS yields. While gold prices have returned to trading with a strong inverse correlation to US real rates since late December, at sub-$1,700/toz they remain below the level implied by the current 10-year TIPS yields.

We believe that despite last fall’s decline in 10-year TIPS yields, the gold market may have been expecting that real rates would soon be rising along with better economic growth, leading to a sharp decline in net speculative length in gold futures. Accordingly, a simple benchmarking of real rates to
US consensus growth expectations suggested a level of +40 bp by year end. Our models suggest this higher level of real rates would be consistent with the current trading range of gold prices. As we look forward, our US economists expect subdued growth and further easing by the Fed in 2012, which should push the market’s expectations of real rates back down near 0 bp and gold prices back to our 6-mo forecast of $1,840/toz.

Goldman isn’t the only bank to go bullish on gold lately.”

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Citibank Reveals That Spain’s Finances are a Mess and Understated

“Here’s What’s In Citi’s Gloomy New Report On The Crisis In Spain

 

Earlier we mentioned how Citi top economist Willem Buiter had a big warning about Spain

We’ve now seen a copy of the report, and get tell you some more details.

Here is our bullet-pointed summary of the report:

  • Spain’s public finances are worse than officially stated. Already there have been upward revisions to debt-to-GDP, and the number could rise as high as 90% when all the various categories of debt are added together.
  • The fact that GDP assumptions are badly missing estimates makes this all worse.
  • Although Spain’s banks get a lot of attention for being ugly, the non-financial sector is doing badly as well. Households are overleveraged.
  • The new government delayed reform legislation too long, missing the ‘honeymoon period’.
  • Spain’s PM Rajoy is alienating partners in Germany and France by announcing revised deficit targets without consultation.
  • The decline in Spanish land prices is not over.
  • The spending problems in various autonomous regions are big, and the central government cannot control them.

Buiter’s Conclusion:

Spain is likely, in our view, to be pushed into a troika (EC, ECB, IMF) programme of some kind during 2012……”

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Refis Continue to Fall as Mortgage Rates Climb

Source 

“If you can refinance your mortgage at a much lower rate, it’s something of a free lunch (assuming all the fees don’t end up costing you more than they’re saving you).

But rates on 30-year mortgages are rising.

According to the latest report from the Mortgage Bankers Association, refis have now fallen for 5 consecutive weeks.

From Reuters:

The decline in refinancing was driven by a 12.0 percent drop in government refinance activity, while conventional applications fell just 3.4 percent, the report said.

The refinance share of total mortgage activity slipped to its lowest level since July of last year at 71.9 percent of applications from 73.4 percent.

Fixed 30-year mortgage rates jumped to their highest level since November to average 4.23 percent, up 4 basis points from 4.19 percent.

If this continues, it’s not hard to imagine this playing into the Fed’s decision on whether to launch a further round of monetary easing with the idea of pushing down interest rates.”

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France Considering Strategic Oil Release to Coordinate With the U.S. and the U.K.

“PARIS (Reuters) – France is in contact with Britain and the United States on a possible release of strategic oil stocks “in a matter of weeks” to push fuel prices down, Le Monde daily said on Wednesday, citing presidential sources.

France would join a UK-U.S. cooperation on a release of strategic oil stocks that is expected within months, two British sources said earlier this month, in a bid to prevent fuel prices choking economic growth in a U.S. election year.

The presidential office and the French energy ministry were not immediately available for comments.

Crude hit $128 a barrel this month, only $20 short of its 2008 peak, and is up more than 15 percent since January, largely because of sanctions against oil producer Iran.

They were down 0.6 percent to $124.85 by 0807 GMT on Wednesday.

Global oil supply outages are running at more than a million barrels a day, a Reuters survey has found, helping provide justification for the United States and Britain should they release strategic reserves in a bid to cut oil prices….”

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Tyco Will Merge Flow Division With Pentair to

Pentair Inc. (PNR) agreed to combine with the Tyco International Ltd. (TYC) division that makes valves and other flow-control instruments in a deal that values Tyco Flow at $4.53 billion as the Swiss manufacturer breaks itself up.

Tyco will spin off its flow unit to shareholders and the business will immediately merge with the operations of Minneapolis-based Pentair, the two companies said in a joint statement today. Shareholders of Schaffhausen, Switzerland-based Tyco will own 52.5 percent of the combined company, with Pentair investors owning the remainder….”

Full article

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The Bank of England Will Seek More Control Over the Flow of Liquidity in the Banking System

“The Bank of England’s Financial Policy Committee said it may seek powers over liquidity buffers to manage risks across the banking system.

“A key risk faced by many financial institutions, and banks in particular, derives from the fact that they typically borrow funds on a short-term basis and lend over a longer term,” the FPC said in the record of its March 16 meeting, published in London today. It was “likely to be desirable, in due course, for the statutory FPC to have powers of direction over a liquidity instrument that would tackle the build up of such vulnerabilities.”

The FPC said it held off seeking such a power at the meeting as there is no “commonly accepted regulatory liquidity standard.” It will return to the liquidity issue once international standards have been agreed, it said.

The panel recommended earlier this month that Parliament give it tools in three areas. It requested powers of direction over countercyclical capital buffers, sectoral capital requirementsand leverage ratios. The U.K. Treasury had sought guidance from the FPC on the tools it would need as the government overhauls regulation of lenders after the financial crisis.

The FPC expressed concern in today’s statement about the “lack of consistency across banks’ internal assessments of the riskiness of various categories of exposures.” It said control over a leverage ratio could be “an effective way of counteracting problems with mis-calibrated risks weights.”

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European Leaders Pass the Hopium as They See an End to the Debt Crisis

“European leaders signaled rising confidence that their region’s crisis is near an end, while Federal Reserve Chairman Ben S. Bernanke warned that a U.S. recovery isn’t assured.

The euro area’s woes are “almost over” after a slow initial response by policy makers, Italian Prime Minister Mario Monti said in Tokyo today. German Chancellor Angela Merkel said yesterday that the crisis is ebbing and her country’s borrowing costs will probably rise as its status as a haven wanes….”

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Arab Spring Leads to Economic Winter

“Amir Mohammed has been sleeping outside the Libyan Embassy in Cairo awaiting a visa for a week, his bed a layer of cardboard on the sidewalk. He has given up on finding a job in Egyptand is looking for a way out.

“I’m trying to just eke out an existence in my own country, but I can’t,” the 30-year-old hairdresser said. “There’s no work. Why did we have a revolution? We wanted better living standards, social justice and freedom. Instead, we’re suffering.”

The world’s highest youth jobless rate left the Middle Eastvulnerable to the uprisings that ousted Egypt’s Hosni Mubarakand three other leaders in the past year. It has got worse since then. About 1 million Egyptians lost their jobs in 2011 as the economy shrank for the first time in decades. Unemployment in Tunisia, where the revolts began, climbed above 18 percent, the central bank said in January. It was 13 percent in 2010, International Monetary Fund data show.

Finding work for people like Mohammed will be the biggest challenge for newly elected governments, highlighting the rift between soaring expectations unleashed by the revolts and the reality of economies struggling to escape recession. Failure risks another wave of unrest in a region that holds more than half the world’s oil.

‘High Hopes’

“The advent of democracy brought with it high, high hopes,” said Raza Agha, London-based senior economist at the Royal Bank of Scotland Group Plc. “Expectations are that new governments will bring prosperity, but when you look at the fundamentals, this does not appear to be the case.”

Full article

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Australian and New Zealand Dollars Fall on Growth Concerns

“The Australian and New Zealand dollars slid against most major peers as Asian stocks extended a global retreat, sapping demand for higher-yielding assets.

Both currencies are headed for their first monthly drop this year amid concern Chinese manufacturing will slow, curbing demand for resource exports. Australia’s dollar touched the weakest level in five months against New Zealand’s currency before a report forecast to show annual growth in bank lending in the larger nation was the slowest since August.

“A drop in Asian stocks is a negative catalyst for the South Pacific nations’ currencies,” said Takuya Kawabata, a researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit ofJapan’s largest currency-margin company. “We’d like to be cautious about a Chinese slowdown because it weighs on Australia’s dollar.”

Full article

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Asia Falls on Falling Earnings; Societe Generale Predicts a Halt of Earnings Profits

“Asian stocks fell after Chinese companies posted slumping profit and Societe Generale SA said the country’s earnings growth with come to a halt this year.

Gome Electrical Appliances Holding Ltd. plunged 21 percent in Hong Kong after China’s No. 2 electronics retailer missed profit estimates. Hong Kong’s Hang Seng China Enterprises Index of Chinese companies listed in the city dropped for the 10th day in 11 days. Li & Fung Ltd. (494), the world’s biggest supplier of clothes and toys to retailers, slid 5.2 percent in Hong Kong on a plan to sell shares.

The MSCI Asia Pacific Index dropped 0.4 percent to 127.46 as of 5:18 p.m. in Tokyo, having lost 1.2 percent this month. The measure advanced 12 percent this year through yesterday, headed for the biggest quarterly gain since the three months ended September 2009.

“We’re seeing a modest correction following recent gains,” said Yoji Takeda, who oversees about $1.1 billion at RBC Investment Management (Asia) Ltd. in Hong Kong. “We’ve seen some negative earnings, but overall the economy is still growing at a healthy speed, so I’m not too worried.”

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Magic Johnson Makes $2 BILLION Purchase for LA Dodgers

Magic Johnson is in as part owner of the Los Angeles Dodgers — and Frank McCourt is out — after sealing a TWO BILLION dollar deal to purchase the team!! And the crowd went wild.

Magic and McCourt announced the record-setting deal late Tuesday night that should transfer ownership of the team to an investment group led by the former NBA great by the end of April.

The deal still has to be approved in federal bankruptcy court.

The $2 billion price tag would be a record for the sale of any American sports franchise.

As part of the deal McCourt would get to buy the land around Dodgers Stadium — mainly the overpriced parking lots — for around $150 million. Face it Dodger fans … he’s never leaving.

But at least ya got Magic!

TMZ

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Soros Insider-Trade Appeal Rejected by Human Rights Court

Heather Smith

Billionaire investor George Soros lost a challenge to his 2002 insider-trading conviction, with the European Court of Human Rights’s Grand Chamber refusing to review whether France had violated his rights.

The court declined to hear Soros’s appeal it said in a statement today, without providing any reasoning. Soros, 81, was convicted by Paris courts in 2002 for using inside information about Societe Generale SA (GLE) in his trading. He argued that French market regulations weren’t clear enough to hold him responsible.

Read the rest here.

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New Study: The whole of the Earth Heated up in Medieval Times Without Human CO2 Emissions

By Ted Thornhill

PUBLISHED: 07:21 EST, 26 March 2012 | UPDATED: 07:55 EST, 26 March 2012

Current theories of the causes and impact of global warming have been thrown into question by a new study which shows that during medieval times the whole of the planet heated up.

It then cooled down naturally and there was even a ‘mini ice age’.

A team of scientists led by geochemist Zunli Lu from Syracuse University in New York state, has found that contrary to the ‘consensus’, the ‘Medieval Warm Period’ approximately 500 to 1,000 years ago wasn’t just confined to Europe.

In fact, it extended all the way down to Antarctica – which means that the Earth has already experience global warming without the aid of human CO2 emissions.

Read the rest here.

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