New Mines Threaten to Continue a Bear Market in Iron Ore

“The world’s biggest iron-ore producers are planning $250 billion of new mines, threatening to deepen a price slump for the commodity already forecast to drop for at least the next three years.

Mining companies are facing growing investor pressure to defer or cancel projects to stem price declines. Rio Tinto Group (RIO), the second-largest iron ore exporter, will decide on one of the biggest industry expansions in Western Australia in the second half. A decision to delay would boost its earnings in 2015 by $3.7 billion, according to Liberum Capital Ltd.

The price of iron ore, the most shipped commodity after oil, more than tripled in the past decade, encouraging the biggest mining companies to boost output. That was before a surge in Chinese steel output that drove the bull market through 2011 started to wane. Given iron ore operations made up 78 percent of Rio’s earnings last year and more than 90 percent at Brazil’sVale SA (VALE5), producers are being forced to review plans.

“It’s the most important issue the mining industry is facing today — whether or not to collectively act to destroy the single greatest source of value generation,” said Paul Gait, a London-based analyst at Sanford C. Bernstein & Co. “Getting this right and not repeating the mistakes of the past is absolutely key.”

Investors should be concerned. According to Credit Suisse Group AG, over the last three years, 80 percent of the time iron ore prices have fallen European mining companies have underperformed.

Over-Enthusiastic Investing….”

Full article

“Australia’s dollar slid versus its major peers after data showed the nation’s unemployment rate climbed to a three-year high, fanning speculation the Reserve Bank will lower borrowing costs to support growth.

The yield on Australia’s benchmark three-year note fell, snapping a two-day gain. The New Zealand dollar touched 86 U.S. cents for the first time in 1 1/2 years after reports showed the nation’s manufacturing industry expanded last month and a gauge of home prices advanced to a record.

“We’ll probably see weakness on the crosses for the next couple of days, as the view on a recovery in the Australian labor market remains challenged, and also the RBA retains its easing bias,” said Andrew Salter, a Sydney-based foreign- exchange strategist at Australia & New Zealand Banking Group Ltd. (ANZ), referring to Australia’s dollar against its peers.

The Australian dollar lost 0.2 percent to $1.0520 as of 4:57 p.m. in Sydney. The New Zealand dollar, known as the kiwi, rose 0.2 percent to 85.91. The climb to 86 was the first time for the currency since August 2011.

Australia’s three-year note yield fell two basis points, or 0.02 percentage point, to 2.81 percent. It slid to 2.75 percent on April 8, a level unseen since March 5.

The nation’s jobless rate rose to 5.6 percent last month, the highest since 2009, from 5.4 percent in February, the statistics bureau said in Sydney today. The number of people employed dropped by 36,100, compared with the 7,500 decline estimated by economists in a Bloomberg News survey.

RBA Outlook

Swaps traders see a 61 percent chance that the Reserve Bank of Australia will cut the benchmark rate from 3 percent by October, according to data compiled by Bloomberg on overnight- index swaps. The probability was 57 percent yesterday.

New Zealand’s Performance of Manufacturing Index was 53.4 in March, remaining above the 50 level which indicates expansion for a sixth month, Bank of New Zealand and Business New Zealand reported….”

Full article

World Markets

Currencies

Commodities

USD Libor

Euribor

Yields for Italy, Spain, France,  and Germany …

“April 8, 2013

Full article

Original Source

[youtube://http://www.youtube.com/watch?v=NXuLkVg6HXs 450 300]

High stock piles, new discoveries, and lower consumption…..why do we hover around $95-$100 per barrel?

Full article

“WASHINGTON, April 8 (Reuters) – The cash-strapped Federal Housing Administration will likely require a $943 million taxpayer bailout to cover expected losses from loans it insured as the U.S. housing bubble was deflating, the Obama administration said on Wednesday.

It would be the first bailout of the government’s mortgage insurer in its nearly 80-year history.

The FHA, which has struggled to manage a glut of delinquent mortgages, will likely need the funds given a shortfall in its reserves, the administration said in President Barack Obama’s fiscal 2014 budget proposal.

FHA Commissioner Carol Galante said the agency might still be able to avoid taking aid from the U.S. Treasury despite the projected budget hole. The agency has until Sept. 30 to decide whether it needs a cash infusion.

“FHA, while still under stress from legacy loans, has made significant progress and is on a sound fiscal path forward,” Galante told reporters on a conference call. “We are continuing to act and do everything possible to ensure that the impact of these legacy loans … are corrected as soon as possible.” …”

Full article

“Policy makers on the Federal Reserve’s interest-rate setting panel have for the first time identified high student debt burdens as a risk to economic growth, adding to a growing chorus of government officials concerned about households’ education borrowings.

At $1.1 trillion, according to the Consumer Financial Protection Bureau, outstanding student loan debt is the largest consumer debt class after home mortgages. Financial regulators, the U.S. Treasury and the New York Fed have all warned about the possible danger student loans pose to financial stability and the broader economy.

But prior to its March meeting, the Federal Open Market Committee, which sets interest rates that affect trillions of dollars of loans and securities, had never before mentioned student loans as a possible downside risk to the economy, according to a review of past meeting minutes.

According to newly released minutes from the March meeting, some members of the panel mentioned “the high level of student debt” as a risk to aggregate household spending over the next three years.

“There is increasing consensus that student loan debt is having a broader impact on the economy than we think,” Rohit Chopra, the CFPB official responsible for the student loan marketplace, said in an interview.

The committee’s mention of student debt burdens is likely to further discussion in Washington over what, if anything, policy makers should do to rein in what has been diagnosed as a growing problem….”

Full article

$FSLR helped to crush short interest in the last two days of trade. Expect more covering….

Full article

INTC, AMD, QCOM, ARMH, MU, SNDK, BRCM, MRVL, NVDA, TXN, AMAT, SMH,

Full article

“Free money” being printed by the Federal Reserve has led to a disconect between soaring stocks and the real economy, according to author and TV host Simon Constable.

“I look at the tremendous poverty that we have,” Constable told Newsmax TV in an exclusive interview. “We have about 50 million people on food stamps,” he said, describing the number as “staggering.”

The host of The Wall Street Journal’s News Hub was asked about the wealth effect created by the stock market.

Watch our exclusive video. Story continues below…”

Full article

“The direction of stocks is still pointed toward the sky, according to Gene Peroni, who predicts the Dow Jones Industrial Average will hit 18,000 before the current bull market ends in 2015.

In a commentary for MarketWatch, Peroni, senior vice president of equity research at Advisors Asset Management, said valuations are appropriate and market sectors are balanced for continued upward momentum.

“Based on the technical qualities of the market’s advances so far this year, the market’s risk/reward ratio remains attractive, both short and longer term,” Peroni wrote. “I see the Dow Jones Industrial Average ending 2013 between 14,750 and 15,100; by the time this cycle ends in 2015, the Dow will be at 18,000.”

Peroni conceded the Dow’s first-quarter advance — more than 11 percent — was “stunning,” and there are valid reasons to expect a pullback. But he suggested investors may do well to ignore such a likelihood.

“Predicting the timing or depth of a decline could prove difficult and may even be distracting, given the broad field of technically attractive stocks at this juncture. The market is being driven by many different and diverse sectors and does not appear vulnerable to any individual micro-thematic event.”

There are several attractive areas investors should focus on, according to Peroni….”

Full article

“The 2013 Atlantic hurricane season will be “above average” with 18 tropical storms, nine of which will intensify into hurricanes, forecasters at Colorado State University predicted on Wednesday.

Four of the hurricanes will be major with sustained winds of at least 111 miles per hour (178 kph), the leading U.S. storm research team said.

An average season brings about 12 tropical storms, six hurricanes and two major hurricanes in the Atlantic, Caribbean and Gulf of Mexico, according to CSU. The hurricane season runs from June 1 to Nov. 30.

The prediction for a busier 2013 season was based on two factors, the researchers said. Hurricanes thrive on warm water and the Atlantic Ocean has warmed in recent months.

There is also little expectation of an El Nino effect this summer and fall.

El Nino is a warming of surface waters in the tropical Pacific that occurs every four to 12 years and has far-ranging effects around the globe. The weather phenomenon creates wind shear that makes it harder for storms to develop into hurricanes in the Atlantic-Caribbean basin.

The researchers said there was a 72 percent chance that a major hurricane will hit the U.S. coast this year, compared with a historical average of 52 percent….”

Full article

“The yen could breach its 2007 pre-credit crisis high of 125 versus the dollar if the Bank of Japan expands its aggressive asset purchase program further, a UBS research note said on Wednesday.

“The strongest upside risk to our new USDJPY forecasts will come if inflation remains stubbornly in deflationary territory despite the BoJ’s new easing this month,” wrote UBS economist Larry Hatheway.

“That will force the central bank to consider buying more assets in future including equities and even foreign bonds. In those scenarios, USDJPY would likely breach its pre-credit crunch 2007 highs of 125.” …”

Full article

Give us your gold at a low bid please…

Full article

“Yesterday, Reuters reported that EU officials were pushing for a seven-year extension on the bailout loans given to Ireland and Portugal during the euro crisis in recent years.

Today, the “troika” of international lenders at the EU, ECB, and IMF made the recommendation official ahead of a meeting of Eurogroup finance ministers in Dublin taking place on Friday and Saturday.

European markets are on fire today, and bank stocks are leading the way higher across the euro zone. Portugal is up 4.5 percent, Spain is up 3.7 percent, Italy is up 3 percent, Germany is up 2 percent, and France is up 1.9 percent.

Bloomberg‘s Finbarr Flynn & Brian Parkin have the details of the troika’s recommendation:

The troika and the EFSF “would advocate to extend the maximum average maturity by seven years as it appears to be the best compromise accommodating the constraints and preferences of debtors and creditors,” …”

Full article

“Goldman has advised clients to straight up short gold, with an end-of-the-year price target of $1450/oz.

Izabella Kaminska at FT Alphaville has the full summary of the call, which actually is a follow-on to a generally bearish call that the company has had all year.

This is an interesting observation

While there are risks for modest near-term upside to gold prices should US growth continue to slow down, we see risks to current prices as skewed to the downside…”

Full article

Source 

“PARIS (Reuters) – Growth is picking up in most industrialized countries, including in the euro zone, the OECD said on Wednesday, with the United States leading the way.

The Paris-based think tank’s composite leading indicator shows growth firming in Japan and picking up in China while the outlook is improving for Italy and France is stabilizing.

Growth is seen weakening in India, however, while indicators for Russia, Brazil and the United Kingdom point to growth around trend, the Organisation for Economic Cooperation and Development said.

The monthly indicator for the 33 OECD member countries inched up to 100.5 in February from 100.4 in January, slightly above the long-term average of 100.0, a level last seen in October.

The euro area’s indicator has been gradually increasing over the past months, now at 99.9 from 99.7 in January and 99.4 in October.

France’s 99.6 reading, from 99.5 in January, suggests that there is no further decline in growth, while growth is picking up in Germany, the OECD said….”

“GENEVA (Reuters) – The World Trade Organization slashed its forecast for trade growth in 2013 on Wednesday, saying it feared protectionism was on the increase.

It cut its forecast for global trade growth in 2013 to 3.3 percent from 4.5 percent and said trade grew only 2.0 percent in 2012. That was the smallest annual rise since records began in 1981 and the second weakest figure on record after 2009, when trade shrank.

WTO Director General Pascal Lamy warned that 2013 could turn out even weaker than expected, especially because of risks from the euro crisis, and countries might try to restrict trade further in a desperate attempt to shore up domestic growth.

“The threat of protectionism may be greater now than at any time since the start of the crisis, since other policies to restore growth have been tried and found wanting,” he said.

Lamy, who will step down at the end of August this year, called the 2012 growth rate “sobering”. …”

Full article

“Information received since the Federal Open Market Committee met in January suggests a return to moderate economic growth following a pause late last year.  Labor market conditions have shown signs of improvement in recent months but the unemployment rate remains elevated.  Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy has become somewhat more restrictive.  Inflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices.  Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.  The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate.  The Committee continues to see downside risks to the economic outlook.  The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.  The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.  Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative…”

Full report