Peso del Pacifico #4

25th May approx 0600GMT

Today, 30th May 0330GMT.

1. Overbought on Techs.
2. At declining Resistance.
3. Poor economic data on Australia starting yo filter in ( AUD Economic Data this week )
4. European woes point to 'risk off'.

Letter from a Fukushima Mother

From ZeroHedge. Hiroko Tabuchi is reporter with the New York times.

Letter from a Fukushima mother

When Tomoko-san, a mother of two in Fukushima City, heard from an NGO worker that I was going to be in Fukushima to report on a story about radiation levels at local schools, she was kind enough to volunteer her time to speak to me – and handed me this letter. I promised to translate it and share it with you. So here it is:

To people in the United States and around the world,


I am so sorry for the uranium and plutonium that Japan has released into the environment. The fallout from Fukushima has already circled the world many times, reaching Hawaii, Alaska, and even New York.


We live 60 kilometers (37 miles) from the plant and our homes have been contaminated beyond levels seen at Chernobyl. The cesium-137 they are finding in the soil will be here for 30 years. But the government will not help us. They tell us to stay put. They tell our kids to put on masks and hats and keep going to school.


This summer, our children won’t be able to go swimming. They won’t be able to play outside. They can’t eat Fukushima’s delicious peaches. They can’t even eat the rice that the Fukushima farmers are making. They can’t go visit Fukushima’s beautiful rivers, mountains and lakes. This makes me sad. This fills me with so much regret.


Instead, our children will spend the summer in their classrooms, with no air conditioning, sweating as they try to concentrate on their lessons. We don’t even know how much radiation they’ve already been exposed to.
I was eight years old when the Fukushima Daiichi plant opened. If I had understood what they were building, I would have fought against it. I didn’t realize that it contained dangers that would threaten my children, my children’s children and their children.


I am grateful for all the aid all the world has sent us.


Now, what we ask is for you to speak out against the Japanese government. Pressure them into taking action. Tell them to make protecting children their top priority.


Thank you so much,


Tomoko Hatsuzawa
Fukushima City
May 25, 2011
[Translated by Hiroko Tabuchi]

You can get the official latest update on the Tepco and Japanese govts mismanagement here.

Also recent Iodine131 plume updates from http://www.zamg.ac.at/wetter/fukushima/

The Pain in Spain

Unemployment stats for the PIGS and Germany.

Youth unemployment.

Spanish youth unemployment >45%. Greek >35%. Ireland >30%. This is before austerity measures start to really bite.

So far the Spanish protests are peaceful but the policia appear a little too enthusiastic with their batons.

• Youth unemployment soaring past 45%,
• General unemployment soaring past 20%,
• A police force with a penchant for jackbooted club wielding,
• Voter backlash over austerity measures. (a few days ago)

Powderkeg?

For those that can't remember beyond last weeks footy round, When the Spanish revolt, they don't hold back.

Banking exposure? French and German banks @ 162B and 182B a piece are the big winners. UK banks get the bronze with a lazy 111B in the pot.

Wonder how our bank's overseas borrowing efforts will go (to fund the property ponzi) when the Eurozone's shit really starts to hit the fan?

Pop Pop Pop

I've put a new blog link on the right: http://popping-bubble.blogspot.com/

Brilliant stuff.

I've taken this graph from the 20th April post (click to enlarge).

If that doesn't demonstrate to the spruikers and denialists that unemployment FOLLOWS housing crashes and slashing interest rates once the tumble begins has no effect...nothing will.

I dips m'lid Raveswei.

Peso del Pacifo #3a (24 hours later)

Just under 24 hours ago I posted the post below.

 I expect* a small rally to the mid to high 1.05s then a leg down etc. I've also circled oversold indicators.

Yesterday

Today

Zoom In

Yesterday

Today

With $1000 margin (on $100K), your (mine, actually) trade has grown to $2400. Thats a return of 140% in 22 hours.

I've moved my "StopLoss" to 1.055 so I have guaranteed a gain of 100% (a TrailingStop actually).

Its not rocket science.



Peso del Pacifico #3

Risk off as folks around the world notice smelly brown stuff is building on the fan.

But one thing to note. Markets rise and fall in waves (two steps down the stairs one up, two down etc etc).

Note 1 month of the AUD (price as of 1 hour ago as I write this post) below.

Down  then slightly up, further down etc. I expect* a small rally to the mid to high 1.05s then a leg down etc. I've also circled oversold indicators.

(Click on graph to enlarge)

*The party pooper though, could be the Greek PM saying something really dumb this evening (Australian time).

Then, it could PLUNGE! And, all bets are off!

When the Greek PM (like Bernanke) speaks, he often sounds muffled.

Famous Quotes from The Bernank[e]

7/1/05  – Interview with CNBC

“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”

10/20/05 –  Testimony before the Joint Economic Committee

“House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”

11/15/05 -  Nomination of ben s. bernanke, of new jersey, to be a member and chairman of the board of governors of the federal reserve system

“With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly. The Federal Reserve’s responsibility is to make sure that the institutions it regulates have good systems and good procedures for ensuring that their derivatives portfolios are well-managed and do not create excessive risk in their institutions.”

2/15/06 – Hearing before the Committee on Financial Services

“Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”

2/15/07 -  Semiannual Monetary Policy Report to the Congress

“Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low.”

3/28/07 -  Testimony before the Joint Economic Committee

“At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”

5/17/07 -  At the Federal Reserve Bank of Chicago’s 43rd Annual Conference on Bank Structure and Competition

“All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.  The vast majority of mortgages, including even subprime mortgages, continue to perform well.  Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”

8/31/07 -  At the Federal Reserve Bank of Kansas City’s Economic Symposium

“It is not the responsibility of the Federal Reserve–nor would it be appropriate–to protect lenders and investors from the consequences of their financial decisions.”

1/10/08 -  Q&A after speech

“The Federal Reserve is not currently forecasting a recession.”

2/27/08 -  Q&A after testimony to Senate Banking Committee

“I expect there will be some failures [referring to smaller regional banks]. Among the largest banks, the capital ratios remain good and I don’t anticipate any serious problems of that sort among the large, internationally active banks that make up a very substantial part of our banking system.”

6/10/08 -  Boston Federal Reserve’s 52nd annual economic conference

“The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

If you prefer video (and roller coasters):

This is the f*cking tool with his hand on the world's economic tiller and engine throttle control. But is he an idiot?

He is either a totally myopic and inflexible idiot or a pawn of Kleptocrats.

Here is the income of the top 500 CEO's in the USA for 2009 (GFC in full roar and failures and falling assets everywhere). CEO's income 2009.

Tip of The Iceberg.

New York Times

EL MIRAGE, Ariz. — The nation’s biggest banks and mortgage lenders have steadily amassed real estate empires, acquiring a glut of foreclosed homes that threatens to deepen the housing slump and create a further drag on the economic recovery.

All told, they own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider. In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.

Five years after the housing market started teetering, economists now worry that the rise in lender-owned homes could create another vicious circle, in which the growing inventory of distressed property further depresses home values and leads to even more distressed sales. With the spring home-selling season under way, real estate prices have been declining across the country in recent months.

“It remains a heavy weight on the banking system,” said Mark Zandi, the chief economist of Moody’s Analytics. “Housing prices are falling, and they are going to fall some more.”

Over all, economists project that it would take about three years for lenders to sell their backlog of foreclosed homes. As a result, home values nationally could fall 5 percent by the end of 2011, according to Moody’s, and rise only modestly over the following year. Regions that were hardest hit by the housing collapse and recession could take even longer to recover — dealing yet another blow to a still-struggling economy.

Although sales have picked up a bit in the last few weeks, banks and other lenders remain overwhelmed by the wave of foreclosures.

In Atlanta, lenders are repossessing eight homes for each distressed home they sell, according to March data from RealtyTrac. In Minneapolis, they are bringing in at least six foreclosed homes for each they sell, and in once-hot markets like Chicago and Miami, the ratio still hovers close to two to one.

Before the housing implosion, the inflow and outflow figures were typically one-to-one.

Here is a capture of the situation. Housing Graphic.

The US Taxpayer will be left holding the bag (again). Like Australia's will in years to come.

Caught In A Web

This was in the Financial Times on December 1st,  2010, sorry can't find the link. Interesting on which country's banks are exposed to which country's falling assets.

Spain and Ireland going under and will see the tanks roll....again.

Is the End Nigh?

Greece runs out of money on 18th July.

ZeroHedge

Today's EUR trading session which begins in about 4 hours, may be rather violent. While on one hand we have bond-negative news out of Spain, the biggest news once again comes out of the Swiss journal NZZ, which citing greek newspaper Kahtimerini, discloses that insolvent Greece has less than two months of cash left, or enough to last it until July 18, unless a new installment in the bailout tranche is approved for the country by the now headless IMF, and the suddenly insolvent ECB. Insolvent, because as Spiegel will report in its headline article tomorrow, and as we have noted many times before, the bank is "suddenly" finding itself lending out money collateralized by now virtually D-rated bonds: something not even Trichet will be able to spin off to the increasingly malevolent media. Per Dow Jones: "Skeleton risks amounting to several hundreds of billions of euros are on the balance sheet of the European Central Bank, magazine Der Spiegel writes in a preview of its edition to be published Monday. Those risks arise because banks, above all from Greece, Ireland, Portugal and Spain, have provided as collateral asset-backed securities that are unfit for central bank loans as their debt rating is low or non-existent, the magazine says." Alas, the European central bank's dirty laundry is being exposed just as a rift between the bank and Germany: its most solvent backer, is starting to develop. Also from Dow Jones: "German Finance Minister Wolfgang Schaeuble cautioned in an interview published Sunday that there shouldn't be a conflict with the European Central Bank over a possible restructuring of Greek debt. "If in the end it should come to an extension of bonds, of course, we need the approval of the IMF and above all of the ECB. Under no circumstances should it come to a conflict with the ECB," Schaeuble told Bild am Sonntag. "I advise all of us to use restraint in public debates about this question."

Several ECB officials have rejected a restructuring of Greek debt and have warned of possible catastrophic consequences, while European finance ministers are slowly warming up to the possibility of some kind of restructuring as a last resort." Thus the crunch time for Europe's latest kick the can down the road round, once again centered on a bankrupt Greece, may be coming fast, and this time with a rather furious Germany.

NZZ

If experts from the EU, the International Monetary Fund (IMF) and the European Central Bank (ECB) do not give the go ahead for the next installment of the bailout package totaling 12 billion euros by the end of June give, then Greece will become insolvent on July 18, as the conservative Journal "Kathimerini" reported.

In the coming days Athens will fast track an aggressive privatization program. According to media reports, real estate should be taxed higher than before.

Further cuts in wages and pensions in the public sector and pensions are no longer excluded. In addition, state-run enterprises are privatized and will sell real estate, they said. The new savings program should be approved by parliament in early June.

Prime Minister Giorgos Papandreou noted in an interview with the Sunday edition of the newspaper "Ethnos" denying any form of debt restructuring. This would be no debate. Greece will repay all his debts, he said.

The head of the Euro Group, Jean-Claude Juncker, has proposed the privatization of state property Greece after the German model of trust. I would appreciate it if our Greek friends would start following the example of the German Treuhand privatization agency, a non-governmental, "Juncker said in an interview with the magazine" Der Spiegel ". This institution should be staffed with foreign experts. "The European Union will support the privatization program in the future as closely as we would conduct themselves," Juncker announced.

The potential revenue he estimated at "significantly more than the 50 billion proposed by the Greek government." The EU is also expected from Greece, "that the two major political groupings in the country put aside their petty disputes," said the euro-group leader: "Government and opposition parties should jointly declare that they are committed to the reform agreements with the EU . 'Only when Greece had consolidated its budget, one could initiate a "soft debt restructuring." Then we can consider to extend the maturities of public and private loans and interest rates lower, "said Juncker.

Heres what may happen after. The Telegraph.

What happens when Greece defaults. Here are a few things:

1. - Every bank in Greece will instantly go insolvent.
2. - The Greek government will nationalise every bank in Greece.
3. - The Greek government will forbid withdrawals from Greek banks.
4. - To prevent Greek depositors from rioting on the streets, Argentina-2002-style (when the Argentinian president had to flee by helicopter from the roof of the presidential palace to evade a mob of such depositors), the Greek government will declare a curfew, perhaps even general martial law.
5. - Greece will redenominate all its debts into “New Drachmas” or whatever it calls the new currency (this is a classic ploy of countries defaulting)
6. - The New Drachma will devalue by some 30-70 per cent (probably around 50 per cent, though perhaps more), effectively defaulting 0n 50 per cent or more of all Greek euro-denominated debts.
7. - The Irish will, within a few days, walk away from the debts of its banking system.
8. - The Portuguese government will wait to see whether there is chaos in Greece before deciding whether to default in turn.
9. - A number of French and German banks will make sufficient losses that they no longer meet regulatory capital adequacy requirements.
10. - The European Central Bank will become insolvent, given its very high exposure to Greek government debt, and to Greek banking sector and Irish banking sector debt.
11. - The French and German governments will meet to decide whether (a) to recapitalise the ECB, or (b) to allow the ECB to print money to restore its solvency. (Because the ECB has relatively little foreign currency-denominated exposure, it could in principle print its way out, but this is forbidden by its founding charter.  On the other hand, the EU Treaty explicitly, and in terms, forbids the form of bailouts used for Greece, Portugal and Ireland, but a little thing like their being blatantly illegal hasn’t prevented that from happening, so it’s not intrinsically obvious that its being illegal for the ECB to print its way out will prove much of a hurdle.)
12. - They will recapitalise, and recapitalise their own banks, but declare an end to all bailouts.
13. - There will be carnage in the market for Spanish banking sector bonds, as bondholders anticipate imposed debt-equity swaps.
14. - This assumption will prove justified, as the Spaniards choose to over-ride the structure of current bond contracts in the Spanish banking sector, recapitalising a number of banks via debt-equity swaps.
15. - Bondholders will take the Spanish Banking Sector to the European Court of Human Rights (and probably other courts, also), claiming violations of property rights. These cases won’t be heard for years. By the time they are finally heard, no-one will care.
16. - Attention will turn to the British banks. Then we shall see…

Pandora's Box

Gigabytes of financial knowledge in the one spot:

TRADERS LIBRARY

Over 800 trading books @ say $30 a pop (some as high as $100) thats $24,000+ worth of resources.

Enjoy.

Jesse Edit: This "Traders Library" site is now going to a server that is Russian that translates to:

Error 403. Access is forbidden The access into this folder is forbidden by the administrator of site or in the folder there is no index file. You can try to be returned or to pass to the main page of site. If you the owner of this site, become acquainted with the possible reasons for the appearance of this error.

If this persists, I'll kill this post.

Australia's Last Property Crash

I thank Corydora at Simple Sustainable for the research. 

The Political Economy Of Environmental Policy: an Australian introduction

Page 97

Huge paper fortunes were backed by the ‘security’ of land valued at prices so inflated that some Melbourne suburban blocks did not reach their 1888 prices again until 1962!

74 years? Sweet, a blip or a 'sideways market' in Real Estate wankspeak. Maybe even 'unusual'.


Another book.
Sydney Boom, Sydney Bust

Page 161

Land at Hurstville which had fetched £25 000 in the 1880s could attract no takers when reofferred for sale in 1905 at £4000, and another estate at Tennyson which had changed hands for £50 000 in the boom was sold in 1905 for £3000.

Thats not a crash, thats carnage. In Tennyson you lost 94% in 25 years. That is close to the Noosa development that just lost 75% in 16 years.

"History never repeats" and "Its different here" and "This time its different" yada yada.

Ole

The gatherings in Spain have been getting bigger (and judging by this feed, the one last night is the biggest yet), they have so far been peaceful.

Yet with 21% unemployment, and according to some over half of youth without a job, just how long until someone decides to send a flaming Molotov cocktail at the riot police?

Its Not Unusual

House Values Dip Across Nation

HOUSE property values fell in all Australia's capital cities in April. Sydney's fell 0.3 per cent to a $667,500 median, the third lowest fall. The city had a 0.6 per cent drop during March.

''The magnitude of the corrections are not extreme, and is not a cause for alarm at this stage,'' a Residex forecaster, John Edwards, said. ''But it is very unusual to see the total market in a correction phase.'

The last time all the capital cities were in a downturn was June 2008, during the global financial crisis. Before that it was June 1990, when Australia was heading into recession.

''Both times before, the reasons for the downturn were much more obvious,'' Mr Edwards said.
Hobart recorded the biggest April fall of 2.3 per cent to a $380,500 median. Residex said Hobart was a very small market that was more susceptible to adjustment than other capitals.

Mr Edwards said Melbourne, while starting to adjust, still had relatively strong sales volumes, and prices had eased just 0.2 per cent to a $599,500 median.

''Melbourne has yet to enter a correction phase, so care in this market needs to be exercised,'' he said. ''All other housing markets will be approaching a turning point or will have passed the bottom of the cycle.

''While there may be a few more months of slight correction, these markets are worth watching for buying opportunities.

''In a situation like this, given other weak economic indicators, considerable care will need to be exercised by the Reserve Bank in regards to interest rates until the market regains some level of confidence,'' Mr Edwards said.

"Correction phase" and unusual.

Its called a crash bonesmoker. This is what they look like.

-1.25% a month and you have - 45% over 4 years.

-0.6% a month and you have - 17.5% over 4 years.

Yummy, Yummy, Yummy, I got love in my tummy
And I feel like a-lovin you
Love, you're such a sweet thing
Good enough to eat thing
And it's just a-what I'm gonna do

Ooh love to hold ya
Ooh love to kiss ya
Ooh love I love it so
Ooh love you're sweeter
Sweeter than sugar
Ooh love
I wont let you go

Yummy, Yummy, Yummy, I got love in my tummy
And as silly as it may seem
The lovin' that you re giving
Is what keeps me livin'
And your love is like peaches and cream

Thumbs Down for Aussie Banks

SMH

Moody's Investors Service has downgraded the long-term debt ratings of Australia's big four banks to Aa2 from Aa1, citing their relatively high reliance on overseas funds rather than local deposits.

Australia's banks have typically relied on overseas credit markets to finance much of their lending, such as for new mortgages. The ratings cut by Moody's - which brings it in line with Standard & Poor's - may make it marginally more expensive for the banks to tap funds overseas.

To the tune of over $1Trillion gross and $650B net foreign debt. Onya lads.

SMH

Cash-strapped borrowers and tight-fisted mortgage insurers are a greater threat to Australian banks than previously thought, says a major ratings agency.

New information shows that Australian mortgage insurers, which secure loans for banks and other lenders, do not always pay the full outstanding amount of mortgages when they fall over which can leave banks out of pocket, according to ratings agency Fitch.

Based on its findings, Fitch moved 54 tranches of residential mortgage backed securities (RMBS) from ratings watch "stable" to "negative". Mortgage backed securities are home loans which are bundled together and sold to institutional investors by banks and mortgage lenders.

"While the LMI providers in Australia and New Zealand have shown a willingness to pay valid claims, recent years' surveillance data show that not all claims are paid-in-full,” said Natasha Vojvodic, head of Australian structured finance at Fitch.

A Monastery Driving Finance Policy?

 

 

How on earth do monks wind up as Greece’s best shot at a Harvard Business School case study? I work up the nerve to ask.

 

 

Beware of Greeks Bearing Bonds

As Wall Street hangs on the question “Will Greece default?,” the author heads for riot-stricken Athens, and for the mysterious Vatopaidi monastery, which brought down the last government, laying bare the country’s economic insanity. But beyond a $1.2 trillion debt (roughly a quarter-million dollars for each working adult), there is a more frightening deficit. After systematically looting their own treasury, in a breathtaking binge of tax evasion, bribery, and creative accounting spurred on by Goldman Sachs, Greeks are sure of one thing: they can’t trust their fellow Greeks.

and,

 

That was a good question. Not for church; I was there for money. The tsunami of cheap credit that rolled across the planet between 2002 and 2007 has just now created a new opportunity for travel: financial-disaster tourism. The credit wasn’t just money, it was temptation. It offered entire societies the chance to reveal aspects of their characters they could not normally afford to indulge. Entire countries were told, “The lights are out, you can do whatever you want to do and no one will ever know.” What they wanted to do with money in the dark varied. Americans wanted to own homes far larger than they could afford, and to allow the strong to exploit the weak. Icelanders wanted to stop fishing and become investment bankers, and to allow their alpha males to reveal a theretofore suppressed megalomania. The Germans wanted to be even more German; the Irish wanted to stop being Irish. All these different societies were touched by the same event, but each responded to it in its own peculiar way. No response was as peculiar as the Greeks’, however: anyone who had spent even a few days talking to people in charge of the place could see that. But to see just how peculiar it was, you had to come to this monastery.

The full article is 7 pages at Vanity Fair. Michael Lewis is one the best at untangling the ongoing GFC's web of lies, greed and deceit.

I love this.

The tsunami of cheap credit that rolled across the planet between 2002 and 2007 has just now created a new opportunity for travel: financial-disaster tourism. The credit wasn’t just money, it was temptation. It offered entire societies the chance to reveal aspects of their characters they could not normally afford to indulge. Entire countries were told, “The lights are out, you can do whatever you want to do and no one will ever know."

• Americans wanted to own homes far larger than they could afford, and to allow the strong to exploit the weak.

  Icelanders wanted to stop fishing and become investment bankers, and to allow their alpha males to reveal a theretofore suppressed megalomania.

  The Germans wanted to be even more German;

  the Irish wanted to stop being Irish.

Australia went the American way.

Japanese Economy has Collapsed

Zero Hedge

Confirming once again that Wall Street economist (and sell side in general) is the most useless profession in the world (though gladly accepting a 7 figures compensation), is the latest data out of Japan which is yet another stunner to most, as nobody, nobody, could have possible predicted that the Japanese economy would literally fall off a cliff in Q1, plunging at a 3.7% rate (down from -3% previously), which is double the consensus print of -1.9%. DOUBLE. And in nominal terms the collapse was simply epic: -5.2%!

And yes, this is officially a recession. Of course, anyone reading Zero Hedge would have been perfectly aware of this outcome. 4 short days ago we said: "Increasingly we have come to believe that the real marginal economy over the next several quarters will be neither that of the contracting US, nor that of the rapidly tightening, yet still very much inflationary China, but the (arguably) third largest one: that of Japan."

Today our prediction is more than confirmed. And instead of hiding deep in the whatever holes these morlocks cralwed out of, Bloomberg for some inexplicable reason continues to look to their blatantly horrendous opinion. “The negative economic impact from the disaster will be on full display during the second quarter,” Hiroshi Watanabe, a senior economist at the Daiwa Institute of Research in Tokyo, said before the report. “This recession may be deep, but short.” Yeah, sure. Short. We'll just hold our breath. And for it to be short, it means that the BOJ will be forced to print a few hundred trillion in Yen asap (just as we predicted here and here) right? Which in turn means that the USDJPY will surge and shift the Japanese recession even faster over to the US. And yes it means that the turbo print button among the central banks will get the F5 treatment as the second round of currency devaluation completes a lap.
Some more much delayed reality:

Highlighting the disaster’s effect on companies, Toyota Motor Corp. said profits plunged while Nippon Steel Corp. reported its first net loss in six quarters, after the quake closed plants, cut supply chains and caused power shortage.

Factory output fell by a record and retail sales and exports declined in March because of power shortages spurred by a nuclear accident in Fukushima, northeast of Tokyo, and damage to transportation facilities after the temblor.

“It’s hard to think that companies will become aggressive about increasing business spending when uncertainties remain strong,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. “Capital spending will likely be in a declining trend as corporate profits may do worse than expected.”

Capital investment dropped 0.9 percent in the first quarter, the first decline in six quarters, today’s data showed.

Consumer spending fell 0.6 percent in the January-March period from the previous three months, today’s report showed.

GFC II here we come. QE3 from the US Fed is a gimme.

Hi Ho Silver

Peter Schiff: Silver to take out $50

With gold off the lows and silver trading higher, today King World News interviewed Peter Schiff CEO and Chief Global Strategist of Europacific Capital.  When asked about the pullback in gold Schiff remarked, “I think it’s a buying opportunity...I do believe the US economy is slowing down, in fact I think it’s going to slow a lot more than people realize.  But for that reason I think that quantitive easing will not end over the summer, in fact I think the Fed is going to step it up.  QE3 could be even bigger than QE2 and that’s very bullish for precious metals and very bearish for the dollar.”

When asked about the Mexican central bank purchase of 100 tons of gold Schiff replied, “What surprises me is that more central banks aren’t buying even more gold.  Central banks are loaded up with depreciating dollars, they need to buy gold instead.   The crazy thing is that I’m even hearing talk about the US selling its gold to help fund its debts.  That would be the worst thing we could do.  The last thing we would want to sell is our gold, I mean if we sold that then that would be it, we would have nothing.  The dollar would just become complete confetti.” 

When asked about silver specifically Schiff stated, “Remember it went up to $50 from $30 almost as fast as it came down.  I think if you just take a look at the long-term trajectory it’s still a big bull market.  I think that $50 high is not going to hold...We are going to take that ($50 high) out and move a lot higher.  We are suckering a lot of new short sellers into the market as people are comparing it to a bubble now or 1980, the Hunt Brothers.  I don’t think what we’ve had so far is anywhere close to what happened in 1980.  We might get to that point at some time in the future, but we’re not there yet.

We’ve created sufficient nervousness and anxiety in the market and enough shorts that we should have a nice wall of worry that we can climb, and ultimately a pretty good short covering rally.  I think a lot of the people who have shorted this selloff in silver are going to lose a lot of money...We could have a dollar crisis as early as this fall and if we are having a dollar crisis then I would be expecting silver prices to be making new highs.”

Regarding mining shares Schiff had this to say, “A lot of these juniors are lower than they were five years ago, some of them are lower than they were ten years ago.  You wouldn’t even know that we are in a bull market in gold, you’d think it was still a bear market.  I own a lot of them and not a single one of them has ever split.  To me it doesn’t sound like a bull market when you don’t have any of your stocks splitting and I’ve owned them for ten years.  You remember the internet stocks, I mean there were internet stocks splitting every week.  There’s no bubble activity going on in these mining stocks, hardly anybody owns them.”

The KWN audio interview with Peter Schiff will be released shortly and you can listen by CLICKING HERE.   

 

Schiff is a smart hombre and one of about 6 financial commentators in the world I listen to intently.

Here he is in 2006 - 2007 calling it like a soothsayer (with accompanying jackasses rubbishing him).

Sidenote, looking at that Mexico buying Gold, back in 1997 Treasurer Costello and his RBA sycophant McFarlane sold 2/3s of Australia's Gold Reserves (167 Tonnes sold) for $2.4B. Today 167 Tonnes is worth $7.5B (AUD).

The Nurse and the Cop

You know why the Ponzi is over (Australian Property)?

A Registered Nurse with a degree on $60,000 a year (or the local Constable) takes home approx $930 a week (say $48K a year).

To borrow $450,000 to buy a house (7.25% int) with a $50,000 deposit is going to cost her $750 a week.

[Where did the 50K come from? Mum and Dad's property? Lets roll the Domino Effect if so]

No one can live on $180 a week with fuel, food, power requirements.

Thats the problem. Its end game. You've reached the limit, no more Ponzi players. Like the fat kid when the music stops and all the chairs are gone.

Now Nurse Betty or Constable Stadanko can put $50K in Ubank earn $63 a week and rent the same $500K dump for $450 a week.

Total saving? $363 a week.

Now consider that properties prices are falling (QLD and WA at least) at lets say 5% pa (stifles laugh - lets double down!).

Thats a fall of $480 a week initially (gets smaller because decay is a shrinking effective derivative) on that $500K 'good value' dogbox sliding at a benign 5%pa (don't make me laugh FFS).

Total Saving Now? $363+$480 = $843 a week or $43,836 a year if she didn't play Ponzi (she only earns $48K after tax remember!)

Who is going to be the fat kid when the music stops?

Hint: in 4 years since the property bubble peaked Irish rents have gone down 27%. At its best the Irish had 3 people per dwelling as a ratio and Australia has 2.5. If they now have too many dwellings, we have way more than too many dwellings.

Buy the shortage myth and work until you are 70. DYOR on the myth.

Buyers Markets (Seller/Vendor speak for "its going off and going cheap").

Mike Shedlock is on fire on this, in this comment taking to pieces a spruik in the Age.

Real Estate bulls pop out every cliche know to man.

Select Clichés from the Article 

• "It's definitely a buyer's market" - Richard Wakelin, director of Wakelin Property Advisory
• "This is a really good time for people to be trading up" - Richard Wakelin, director of Wakelin Property Advisory
• "Buyers should be sitting back and watching for opportunities, looking for properties that have been passed in on the weekend" - Mark Armstrong, from Armstrong Property Planning
• Century 21 director Charles Tarbey suggests buyers focus on the $400,000 to $600,000 range in coastal and tourist properties.

Decoded

Alternative Mish Suggestions

1. Trading up now will greatly increase losses
2. Tourist properties will be especially hard hit
3. Now is a poor time to buy in general
4. Wait 5 years, then see what prices are
5. In the meantime, rent

Our banks have borrowed over a $Trillion to make this bubble happen. Village idiots to NeuroSurgeons have made money from Real Estate over the last 15 years and "know where they are coming from when it comes to Real Estate".

You see, they, like me bought a house 15 years ago. It wasn't Warren Buffet or Bill Gates in insightfulness. Then the mother of all credit avalanches occurred and everything went to the moon. This is the problem. You aren't Warren Buffett and you/we got lucky. Steady growth (3-4% pa) is good and what we bought into, hyper growth is a euphoric bubble and it ALWAYS ends in tears because it becomes a Ponzi scheme that requires greater fools to participate so we can get our cut. See my previous, history never repeats.

The aphorism "A Rising Tide Will Lift All Boats" comes to mind.

A lazy $1,000,000,000,000 borrowed overseas in 15 years and dumped on you to play Ponzi Jenga with is a lot of tide considering our GDP is about that number.

The incentives to not be the Greater Fool* have never been better.

* http://en.wikipedia.org/wiki/Greater_fool_theory

Maxed out the Credit Card?

Today the US has reached its debt limit of $14,294,000,000,000. And if Congress (a hostile Congress) doesn't approve a higher limit (Obama and Turbo Timmy Geithner want $21Trillion) things will get ugly at the house of Uncle Sam.

How ugly?

Emergency measures to dip into Pension assets.

The Honorable Harry Reid
Democratic Leader
United States Senate
Washington, DC 20510

Dear Mr. Leader:

I am writing to notify you, as required under 5 U.S.C. § 8348(l)(2), of my determination that, by reason of the statutory debt limit, I will be unable to invest fully the portion of the Civil Service Retirement and Disability Fund (“CSRDF”) not immediately required to pay beneficiaries. For purposes of this statute, I have determined that a “debt issuance suspension period” will begin today, May 16, 2011, and last until August 2, 2011, when the Department of the Treasury projects that the borrowing authority of the United States will be exhausted. During this “debt issuance suspension period,” the Treasury Department will suspend additional investments of amounts credited to, and redeem a portion of the investments held by, the CSRDF, as authorized by law.

In addition, I am notifying you, as required under 5 U.S.C. § 8438(h)(2), of my determination that, by reason of the statutory debt limit, I will be unable to invest fully the Government Securities Investment Fund (“G Fund”) of the Federal Employees’ Retirement System in interest-bearing securities of the United States, beginning today, May 16, 2011. The statute governing G Fund investments expressly authorizes the Secretary of the Treasury to suspend investment of the G Fund to avoid breaching the statutory debt limit.
Each of these actions has been taken in the past by my predecessors during previous debt limit impasses. By law, the CSRDF and G Funds will be made whole once the debt limit is increased. Federal retirees and employees will be unaffected by these actions.

I have written to Congress on previous occasions regarding the importance of timely action to increase the debt limit in order to protect the full faith and credit of the United States and avoid catastrophic economic consequences for citizens. I again urge Congress to act to increase the statutory debt limit as soon as possible.

Sincerely,

Timothy F. Geithner

 
Identical letter sent to:

The Honorable John A. Boehner, Speaker of the House
The Honorable Nancy Pelosi, House Democratic Leader
The Honorable Mitch McConnell, Senate Republican Leader

cc:       The Honorable Dave Camp, Chairman, House Committee on Ways and Means

The Honorable Sander M. Levin, Ranking Member, House Committee on Ways and Means
The Honorable Max Baucus, Chairman, Senate Committee on Finance
The Honorable Orrin Hatch, Ranking Member, Senate Committee on Finance
All other Members of the 112th Congress

Watch those numbers roll:

http://www.usdebtclock.org/

Look! Even the nodding dashboard poodle is on board...

Barack Obama has warned of global financial chaos if the United States' $14 trillion debt ceiling is not raised soon.

The US president says any signal that the world's largest economy might default on even some of its debt could spook financial markets and plunge the nation into another recession.

America's debt clock is racing towards midnight - with the current limit for borrowings of $US14.3 trillion set to be reached on Monday US time.
Soon, US debt will be through the ceiling with the government adding about $US135 billion every month just to keep current programs running.

President Obama is in a battle with both Democrats and Republicans to have the ceiling raised to around $US21 trillion.

But speaking in a town hall meeting broadcast by the CBS 60 Minutes program, president Obama spoke of the unthinkable and the potentially catastrophic impact that even talk of a US debt default would have on the global financial system.

From Australian ABC.

(sorry that the pic doesn't show the Goldman Sachs puppetmaster's hand jammed up his arse)

I hope the grizzled Navy SEAL or Army RANGER retiring after 30 year in, gets his pension or someone in treasury is going to get a can of whoop ass opened in his proximity.

They did it to GM where the workers that accumulated decades of retirement benefits were given the heave ho via chapter 11 bankruptcy and restructure.

Lets eat into the public service coffers. Take Master Sergeant Hammer's money off him, I dare you. 

Mutually Assured Destruction (MAD)

Yesterday Eurostat disclosed that in order to hide its debt over the past decade, Greece had entered into not one, not two, but a total of 13 different currency swap contracts with Goldman Sachs, all based on the exchange of assorted currencies against the euro as well as one involving a dollar-CHF swap. This was a topic that was all the rage back in early 2010 when it was unclear just how deep the Greek insolvency runs, and was pushed into the open after Zero Hedge first exposed Titlos PLC, an SPV securitization deal by the National Bank of Greece which not took a shady "off the books" currency swap and then securitized it. Since then this story has died down as it has become all too clear just how insolvent not only Greece but all other European countries are, and it no longer matter to haggle over pennies when entire countries subsist day to day purely due to the generosity of the ECB. Yet while Eurostat disclosed the number of the swaps it did not provide detail into just what was contained within these swaps. Which is why back in December, Bloomberg, which recently won a lawsuit against the Fed and achieved release of top secret bank bailout documents, sued the ECB, asking "the European Union’s General Court in Luxembourg to overturn a decision by the ECB not to disclose two internal documents drafted for the central bank’s six-member executive board in Frankfurt this year. The notes show how Greece used swaps to hide its borrowings, according to a March 3 cover page attached to the papers obtained by Bloomberg News." Yet even now that it is all too clear just what the true fiscal situation of Greece and the periphery is, the ECB is still scrambling to hide its secretive and potentially fraudulent practices.

So let's get this straight: the ECB's decision-making process relies on shady transactions that involve the use of currency swaps? Interesting. So while we know that the Fed uses curve options to sell volatility and keep rates low, we wonder if the ECB is doing a comparable off-market intervention using the same mechanism that "nobody" knew was being used by Greece for nearly 10 years.

"Releasing the papers could damage the commercial interests of the ECB’s counterparties, hurt the region’s banks and markets, and undermine the economic policy of Greece and the EU, the central bank said." And so the mutual assured destruction pantomime continues unabated,

 The rest is here at ZeroHedge.

The Eurozone is on the cusp of a shady, covered up, financial shitstorm (as news comes to hand that IMF's Strauss-Khan, and French presidential favourite is fond of oral sex with unwilling couterparties) but 100 million Euro idiots are having an oragasm tonight as Azerbaijan's Ell and Nikki win the village idiot musical eisteddford.

Yay.

IMF Managing Director Dominique Strauss-Kahn was taken into custody on Saturday at JFK airport in New York and was being questioned in regard to a sexual assault, a New York police spokesman told Reuters.

Spokesman Paul Browne said the woman who filed the complaint against Strauss-Kahn, 62, was a 32-year-old chambermaid who fled the room after the incident.

Strauss-Kahn, a possible Socialist candidate in the French presidential election next April, left the hotel after the incident and boarded an Air France aircraft scheduled to depart for Paris, the police spokesman said.

"The NYPD realized he had fled, he had left his cell phone behind," Browne said. "We learned he was on an Air France plane. They held the plane and he was taken off and is now being held in police custody for questioning."

"Around noon today, a maid at the hotel [the Sofitel by Times Square] knocked on the door of Strauss-Khan’s room. After letting the maid in, Strauss-Khan allegedly threw the maid on the room’s bed and forced her to perform oral sex on him, said police sources. Strauss-Khan let the maid leave — and soon afterward, headed off to Kennedy Airport for his flight to Paris."

From ZeroHedge, BBC, CNN etc etc.

Financial Drought and Australian Banks

Its time to worry about that foreign debt - SMH.

There is no doubt Australia is one of the most heavily indebted countries. A list compiled by the American Central Intelligence Agency puts us at No. 14 on the foreign debt scale with about $1.2 trillion owing to offshore lenders.

When you consider our relatively small population, and our strong but comparatively tiny economy, that means we are punching well above our weight in the spendthrift stakes. In fact, total foreign debt easily outstrips national income. The CIA reckons we owe the rest of the world 132 per cent of our annual gross domestic product.

That's not too far behind Greece which, at 165 per cent, finally appears to have tipped the balance and is heading towards bankruptcy (more politely expressed these days as a debt refinancing).

But hang on, I hear you say. Didn't the Treasurer boast the other night that we are one of the least indebted nations in the developed world?

Indeed he did. Australia's net foreign debt would peak at just 7.2 per cent of GDP in the coming financial year, he claimed.

That's a long way shy of the figure calculated by the CIA, and far too big a gap to be explained by rounding or the rubbery calculations involved between net and gross debt. So who is telling the truth?

The simple explanation to this conundrum is that the Treasurer was only talking about government debt, the loot he's responsible for borrowing. At about $120 billion, it's certainly a lot bigger than the $38 billion debt in the first year of the Rudd government. But despite the theatrics from Tony and Joe, government debt is negligible compared to the size of our economy and barely makes an impression when calculating who owes what to the rest of the world
.
The real culprits in the foreign debt splurge are you and me.

Between us, with our mortgages, the renovations, our investment properties, our margin loans, the new car, the credit cards and that interest-free loan on the new fridge, we account for the vast bulk of that $1.2 trillion foreign debt.

Big companies are in for a hefty slice as well, but nowhere near as much as ordinary folk like us.Again, I hear you scratching your heads. How could that possibly be the case? Haven't we all been complaining about the dominance of the big four Australian banks, and how they have a stranglehold on the market? Who on earth is borrowing all this money offshore?

I'll tell you who. The Commonwealth Bank of Australia, Westpac Banking Corporation, ANZ Banking Group and National Australia Bank. For years now, they've been running around the world, raising vast amounts of cash, and then bringing it back home to lend to us
.
Depending on the bank, up to a half the money they lend us comes from offshore markets. The other banks were all into it as well before they were rudely interrupted by the financial crisis three years ago.

The author, Ian Virrender, must realise that $1.2T in foreign debt is gross debt and we have foreign assets as well. So whats the net position?

Australia's net foreign debt (foreign liabilities minus foreign assets) is a cool $650B on latest data. Thats about $31,000 for every man, woman and child.

http://www.abs.gov.au/ausstats/abs@.nsf/mf/5302.0

• 
  

  Australia's net IIP declined $5.7b to a net liability position of $782.1b in the December quarter 2010. Australia's net foreign debt liability decreased $26.7b to a liability position of $650.3b. Australia's net foreign equity liability increased $21.0b to a liability position of $131.8b.

Australia's Net Foreign Debt as a % of GDP

When the Howard govt took office in 1996 it was an approx net $100B.

Its increased 6 fold in 15 years (coincidence that house prices increased by 4x to 6x in the same time frame you think?)  Theres your housing bubble.

The banks just borrowed it and flicked it onto the schmuks. As long as new schmuks keep playing, a Ponzi scheme is technically sustainable.

June 2010 composition of bank foreign debt.

What happens to the Ponzi scheme if the foreign cash dries up or the schmuks lose their enthusiasm?

$31,000 per person owed overseas to keep the dream illusion alive. If you have large exposure to bank stocks and Australian Real Estate you better hope that the flow of foreign capital into Australia doesn't dry up and the boomers don't start panic selling in the mean time (as they watch $30,000 to $50,000 a year per house retirement asset 'disappear').

Sending €100 to random folk in Greece, Spain, Portugal and Ireland may help and there is always prayer.