Dr Mabuse

Topping, Again?

Currency Wars - The Bernank Denies

By Mike Obel | March 25 2013 2:31 PM

The head of the U.S. central bank, Ben Bernanke, on Monday dismissed worries that the Federal Reserve’s money printing is raising the likelihood of a global currency war.  Bernanke, speaking at the London School of Economics with prepared remarks, never once used the expression “currency war” but dwelled extensively on accusations from emerging market leaders in Brazil and elsewhere that the Fed’s quantitative easing, as its $85 billion per month bond purchases is called, was hurting emerging markets by raising the value of their currencies and thus making their exports more expensive.  

“Do these policies [of quantitative easing] constitute competitive devaluations? To the contrary, because monetary policy is accommodative in the great majority of advanced industrial economies, one would not expect large and persistent changes in the configuration of exchange rates among these countries,” Bernanke said.  

“The benefits of monetary accommodation in the advanced economies are not created in any significant way by changes in exchange rates; they come instead from the support for domestic aggregate demand in each country or region. Moreover, because stronger growth in each economy confers beneficial spillovers to trading partners, these policies are not ‘beggar-thy-neighbor’ but rather are positive-sum ‘enrich-thy-neighbor’ actions.”

Bernanke’s only concession to critics was to say that even if their scenarios played out it is not at all clear that it would hurt the emerging markets.

“Even if the expansionary policies of the advanced economies were to lead to significant currency appreciation in emerging markets, the resulting drag on their competitiveness would have to be balanced against the positive effects of stronger advanced-economy demand,” Bernanke said. “Which of these two effects would be greater is an empirical matter.”

http://www.ibtimes.com/bernanke-defends-federal-reserves-loose-money-policy-known-quantitative-easing-denying-it-leads#

European Regulators to Charge Banks Over Derivatives

By VANESSA MOCK, MATTHEW DALTON and KATY BURNE

BRUSSELS—European antitrust authorities are moving soon to bring a case against some of the world's largest banks alleging collusion in the $27 trillion market for credit derivatives, people familiar with the investigation said.

The probe by the European Commission involves 16 financial groups. It focuses on whether they sought to stifle competition from exchanges in the market for credit-default swaps, which pay out when a country or a company defaults on its debts.

If the European regulators press ahead with their administrative case and win, some or all of the banks could face fines.

Also under investigation is Markit Group, a credit derivatives data provider that is partly owned by the dealers, and ICE Clear Europe, a unit ofIntercontinentalExchange Inc. ICE -1.14% Markit and ICE declined to comment.

The commission said Tuesday it also had "preliminary indications" a derivatives trade body, the International Swaps and Derivatives Association, might have been part of an alleged effort to limit access to the credit-derivatives market.

ISDA said it "is aware that it has been made subject to these proceedings" and is "confident that it has acted properly at all times and has not infringed EU competition rules."

Markit and ISDA are likely to be part of the commission's case, a person familiar with the investigation said.

The probe is part of U.S. and European efforts to bring more competition to the opaque markets for CDS. The contracts came under fire during the 2008 financial turmoil and, more recently, the European debt crisis. Critics complained that some investors used them to speculate on the health of a country or company, not just as insurance against defaults.

The U.S. Department of Justice has launched a probe into the possibility of anticompetitive activity in credit-derivatives trading and clearing, and in information services industries supporting the activities. That probe is ongoing, a DOJ spokesman said, declining to elaborate.

Among those the European Commission probe has focused on are such industry giants as J.P. Morgan Chase JPM -1.49% & Co., Goldman Sachs Group Inc.GS -0.20% and Deutsche Bank AG, DBK.XE -3.12% the commission has said.

Others potentially involved, it has said, are Bank of America BAC -0.90% Corp,Citigroup Inc., C -0.98% Barclays BARC.LN -0.88% PLC, BNP Paribas SA,BNP.FR -3.13% Commerzbank AG, CBK.XE -2.25% Credit Suisse Group,CSGN.VX -1.26% HSBC Holdings HSBA.LN -0.52% PLC, Morgan Stanley,MS -1.35% Royal Bank of Scotland Group RBS.LN -3.21% PLC, UBS AG, Wells Fargo WFC -0.72% & Co., Credit Agricole SA ACA.FR -2.13% and Société GénéraleGLE.FR -2.68% SA.

The banks either declined to comment or didn't immediately reply to requests for comment.

The European Commission, the European Union's executive arm, said in 2011 it was investigating whether there was a coordinated effort among banks to prevent exchanges from getting a piece of the CDS market.

Unlike other financial instruments, these are traded privately between two parties, away from regulated exchanges where prices are displayed—meaning that customers aren't able to see whether they are getting the best prices.

The probe is part of a push by European officials to wrest control of the market from a relative handful of global derivatives dealers and move swaps trading onto exchanges, where pricing is more transparent.

The U.S. Dodd-Frank law and new EU legislation both called for derivatives, with some exceptions, to be traded on exchanges.

Officials hope that moving trading onto exchanges would help regulators monitor risks in the market and help prevent a repeat of the 2008 credit debacle.

A reshaping of credit-derivatives markets, and a move to open futures exchanges, poses a threat to profits dealers have long made in that market by dominating it. Profits for financial institutions that act as the intermediaries could shrink because of a smaller spread between bid and ask prices.

European regulators in April 2011 began looking into whether a number of investment banks had used Markit Group, the leading provider of financial information in the CDS market, to block the development of certain CDS trading platforms.

The commission said it was looking at whether dealers were providing raw swaps data only to Markit. The banks at the time either declined to comment or didn't respond to requests for comment.

Markit runs auctions to determine the price at which CDS holders can settle when a default occurs, but it does so on behalf of ISDA, which owns the intellectual property on the swaps auctions.

European authorities are looking into whether ISDA refused to allow exchanges to license CDS auction data that would be necessary to determine the payout on an exchange-traded CDS contract, according to two people familiar with the probe.

According to a person familiar with the matter, the commission's investigation of CDS trading is at a more advanced stage than another probe it is conducting—into whether banks colluded in the fixing of the Libor and Euribor benchmark lending rates.

Under EU rules, the European Commission's antitrust department first sends a so-called "statement of objections" laying out the charges. Companies are given a chance to respond to any charges levied.

If the commission decides to sanction a company, it can fine a firm up to 10% of its annual global revenue, though penalties that big are rare.

Regulators also take into consideration the market impact a violation has had, as well as its duration.

Companies that cooperate with a probe can be dealt with more leniently than others.

Write to Vanessa Mock at vanessa.mock@dowjones.com, Matthew Dalton atMatthew.Dalton@dowjones.com and Katy Burne at katy.burne@dowjones.com

http://online.wsj.com/article/SB10001424127887324789504578384382464803140.html

Jim Sinclair's NYC Meeting Notes

March 20, 2013 New York City, Meeting with Jim Sinclair

Dear friends and clients of AFE,

Yesterday Jim Sinclair spent over 5 hours in a question and answer session in New York City. He covered the implications of Cyprus proposing to confiscate as much as 10% of depositor wealth directly from bank accounts, as well as his views on a wide variety of subjects related to gold.

Mr. Sinclair is a 50 year veteran of the gold markets, and one of the most respected voices in the gold community. While we do not always agree 100% with Mr. Sinclair’s views, my personal observation is that he is genuinely concerned for the well-being of others when it comes to wealth preservation through gold.

What follows is a summary of what Mr. Sinclair had to say on these issues. Please bear in mind that this is being re-constructed from hand notes. If a phrase appears in quotes, it is verbatim, otherwise I am paraphrasing.

*****

According to Jim Sinclair:

The announcements that Cyprus put forward a proposal to force depositors to pay for bank bailouts directly has created a global uproar, and the backlash will have a substantial effect on the gold market. Sinclair considers this a major turning point in the gold market, and herald’s gold’s next major up leg.

Sinclair’s comments on various gold related subjects:

There are three phases left in this bull market. Now-2014, 2015-2017, 2018-2021

COMEX:

“As long as the price is made in the paper markets, the supply is infinite”. “Gold will only recognize its true value when the physical price (versus paper) is making the market”.

GOLD WINDFALL TAX:

In this environment taxes are going up across the board, it is difficult to project what the government will do on that.

CONFISCATION:

During the last confiscation in the 1930’s gold was the QE at the time. Nixon needed to expand the money supply and had to use gold to do it because QE wasn’t available to him at the time. I do not consider another confiscation likely.

GOVERNMENT CONFISCATION OF MINING RESOURCES:

“Yes it could happen. It depends on the wisdom of managers to share the bounty with the government as to whether they are a partner or not”.

PERSON ASKS QUESTION AND PREFACES WITH “I AM IN THE IF YOU DON’T HOLD IT YOU DON’T OWN IT CAMP, WHATS YOUR VIEW OF HOLDING GOLD OVERSEAS”:

“According to the way I have done it, I don’t have an ounce of gold here, its all in Africa.” “Gold you have should be stored internationally”. “For storage you don’t want anything cheap or easy, that doesn’t exist”.

GOLD/SILVER RATIO:

“Ratios are all 20/20 vision in hindsight. Keep what you have don’t sell gold for silver or vice versa”.

CORRUPTION IN THE FINANCIAL SYSTEM:

“The financial system we live in now is comparable to Sodom and Gomorrah, only Sodom and Gomorrah was probably a lot more fun”. “Finance is now a criminal enterprise”.

FDIC:

“FDIC gives us comfort, but does not function in a systemic crisis”.

IRA’s CASH OUT OR KEEP:

 “Cash out, take the tax hit”. “If QE fails the next large pool of money they have easy access to are pensions and IRA’s.”

IRA/401k CONFISCATION:

If the USD goes to 72.00 or below, the Fed may cease QE and go directly after pensions and IRA’s

HYPERINFLATION:

“If it happens it will be short lived and violent. Approximately 3 months in time frame”.

RESERVE CURRENCY:

“We will have a virtual reserve currency”. “The new reserve currency will be a worldwide M3 ratio versus gold held by central banks. This will be marked by the market versus the government”.

GOLD PRICE MANIPULATION.  ARE THE MEN IN THE ESF, CFR, ETC MANIPULATING THE GOLD PRICE LOWER?:

“As we would be if that was our job and motive”. “My dogs could figure out this is a manipulation”. “Economics schools today teach that gold is competitive to the control of currency”.

ON STATES MAKING GOLD LEGAL TENDER:

“States making gold legal tender is fine, but if there is no system to support a transaction it’s not practical”.

GOLD PRICE DROPPING AS IT DID IN 1980:

“We will not see a price drop like we did in the 80’s, the entire paradigm is different”.

REASONS TO BAIL OUT OF GOLD:

“The only argument I can see to bail out of gold would be the legitimate end of QE”.

ON TIMING AND PRICE:

“Anything below 3500 is a buy. Anything above 4400 is a sell”.

RAISING CAPITAL FOR MINING COMPANIES:

“Any attempt to raise money issuing stock in these capital markets is a suicidal move”. Jim goes on to explain additional capital raising with TRX will be by sales of gold not stock.

PETRODOLLAR:

“Attacking Iran is attacking other nations, big nations”. “This does not look attractive today.” “China recently surfaced two submarines in a US Navy Carrier group, undetected. This means they can also surface off the coast of the US undetected and fire nuclear weapons if they wanted to”. “The use of the dollar in trading energy (oil) is paramount to the strength of the dollar.” “The move in energy trading is away from dollars”.

3 PHASES OF A BULL MARKET:

“By all historical measurement’s, we should be approaching the final phase of this bull market”. “Keep in mind we are living in a false economic world today”.

NUMISMATICS:

Unless there is a ready market to buy it back, you are probably better off buying well known coins.

CHINA:

“I think China will shoot for a 15% reserves position in gold”.

*****

Please keep in mind that while we have published these comments for the benefit of our clients, there are some areas we may disagree on (for example, confiscation of gold).

If you are unclear about any of these subjects, we are happy to discuss them.

With kind regards,

Alex Stanczyk
Chief Market Strategist
Anglo Far-East

Prof Steve Keen on Cyprus

Daylight robbery in Cyprus will come to haunt EMU

Ambrose Evans-Pritchard 

One's first reflex is to gasp at the stupidity of the EU policy elites, but truth is that most EU officials handling the Cyprus crisis know perfectly well that their masters have just set the slow fuse on a powder keg – and they can only pray that it is slow.

The decision to expropriate Cypriot savers – even the poorest – was imposed by Germany, Holland, Finland, Austria, and Slovakia, whose only care at this stage is to assuage bail-out fatigue at home and avoid their own political crises.

This latest debacle has caught me on the hop, literally, since I am in Tokyo learning about Abenomics, so let me just make a few quick points before going off for a pint of sake.

The EU creditor states have at a single stroke violated the principle that insured EU bank deposits of up $100,000 will be guaranteed come what may, and in doing so they have more or less thrown Portugal under a bus.

They appear poised to seize large sums from Russian banks – €1.3bn from state-owned VTB alone, and therefore from the Kremlin – prompting the condign riposte from Vladimir Putin that the action is "unfair, unprofessional and dangerous."

They have demonstrated that the rhetoric of EMU solidarity is just hot air, that they will not force their own taxpayers to share a single cent of clean-up costs for the great joint venture of monetary union – in which northern banks, insurers, pension funds, and indeed governments, were complicit.

Their refusal to pay is entirely understandable in one sense – and if I were a German taxpayer, I would not care to swallow these losses either – but then the leaders of these creditor countries can hardly expect the world to believe that they will in fact do whatever it takes to hold EMU together. Quite obviously, they will not.

The sooner this is made clear, the better. The sooner they take the proper course of withdrawing from EMU and organise the break-up the euro in the least disruptive way, the sooner Europe can recover.

We have already seen the EU solidarity mask slip a few times, not least in the repeated retreats over Greece, and again when German-led quartet resiled from last year's summit deal to let the ESM bail-out fund take some of the weight of recapitalising banks off the shoulders of the Irish and Spanish states.

What is clear is that Angela Merkel will not risk defeat in the elections in September by ceding a single vote to Social Democrats determined to hold her feet to the fire over a bail-out for "Russian oligarchs, money-launderers, and tax evaders" in Cyprus, or by ceding votes to the new anti-euro party Alternative fur Deutschland. She will look after her own political interests, and all the rest is humbug.

It is a fast-moving story. The Cypriot parliament may throw out the deal. It may be rejigged so that depositors under $100,000 pay less than the 6.75pc levy agreed, and those above may pay more than 9.9pc.

The creditor powers appear to think that the contagion risk is manageable now that the ECB has its bond rescue mechanism in place for Spain and Italy. But they made just such an assumption when they imposed a haircut so cavalierly on private investors in Greece, only to precipitate a full-blown crisis across Club Med. And don't forget, the reason why Cyprus has gone belly up is because of the knock-on effect on Cypriot banks from the Greek haircuts.

It is far from clear that the ECB backstop for Italy still exists, given that there is no compliant government in Rome able to meet the rescue conditions.

Portugal is not safely out of the woods. Its slump has been deeper than expected. Its debt dynamics are nearing the danger zone faster than feared. Citigroup, Nomura, and many others think it almost certain that Portugal will need a second rescue, and probably debt-restructuring. What happens then? Are savers going to wait patiently for their own scalping as this becomes clearer?

As for Spain, we learn from leaks in the Spanish press that officials from the ECB and the Commission warned Eurogroup ministers that the raid on Cypriot savers posed a grave contagion risk to Spanish banks, threatening to set off deposit runs.

EMU commissioner Olli Rehn promised that there will be no losses imposed on depositors in other countries, but the decision will be made in Berlin, the Hague, Helsinki, Vienna. He has no authority to make such a pledge. He is just a civil servant.

The danger may not be immediate but if the economies of Portugal, Spain, and Italy languish through this year in deep slump with no green shoots of recovery starting to sprout in the second half – as many fear – this new dispensation will be tested. The fatal precedent of haircuts for depositors will start to matter a great deal. Hell hath no fury like a saver robbed.

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100023466/daylight-robbery-in-cyprus-will-come-to-haunt-emu/

@JamesGRickards on JPM and Jamie Dimon

@JamesGRickards Currency Wars Update

Why Time Frames Matter to You

Consider these various time frames, and what they mean to your investing or trading approach:

Minute-to-minute: Constant flow of prices, rumors, and chatter about stocks
Hourly: Similar to minute flow, only with opening and closing behavior (“strong open in XYZ” or “I hate the way the ABC closed”)
Daily: Very noisy. Filled with random gains and losses, driven mostly by the overall market (my guess 35%) or the equity’s sector (~30%).
Weekly:  Begins to smooth out the noise factor. Informative charts, overall trend beginning to develop. Still contains lots of noisy economic chatter.
Monthly: Provides a window into secular cycles. Most traders ignore the monthly charts — too slow they say — but these can give you some insight into real (versus false) reversals.
Quarterly: Valuation data comes into focus via earnings. Longer term view allows potential mean reversion to be taken advantage of  (via re-balancing).
Annual: For retirement planning, and life events. Yearly data puts the rest of the noise into perspective. Most of the daily or even weekly up and down movements get smoothed out. Ultimately, where long term investors should be focused.
Decades: The market historian’s friend.

What’s your time frame like?

http://www.ritholtz.com/blog/2013/03/why-time-frames-matter-to-you/?utm_source=dlvr.it&utm_medium=twitter

World Recession Alert

http://recessionalert.com/world-recession-update/