27 January 2012
FITCH GOES ON RAMPAGE: CUTS SPAIN, ITALY, BELGIUM, CYPRUS, AND SLOVENIA
Fitch just cut the long-term issuer ratings of 5 EU countries:
Borrowing costs have been sinking for these countries lately–particularly for Italy and Spain—after the European Central Bank announced liquidity support measures in early December that have lessened mounting worries about the health of the banking system.
While Fitch says that it supports EU leaders' actions to address the crisis so far, a lot more has to happen before these countries are out of trouble:
Belgium: AA+ to AA
Spain: AA- to A
Italy: A+ to A-
Cyprus: BBB to BBB-
Slovenia: AA- to A
It affirmed Ireland's BBB+ rating with a negative outlook.Borrowing costs have been sinking for these countries lately–particularly for Italy and Spain—after the European Central Bank announced liquidity support measures in early December that have lessened mounting worries about the health of the banking system.
While Fitch says that it supports EU leaders' actions to address the crisis so far, a lot more has to happen before these countries are out of trouble:
In Fitch's opinion, the eurozone crisis will only be resolved as and when there is broad economic recovery. It is evident that further substantial reforms of the governance of the eurozone will be required to secure economic and financial stability, including greater fiscal integration.
Chart of the Day: Central Bank Balance Sheet as Percent of GDP: Fed, ECB, BOJ, BOE
MISH'S
Global Economic
Trend Analysis
Here is an interesting chart by Peter Garnry, an Equity Strategist at Saxo Bank in Denmark.
The race is on to see which central bank can load up its balance sheet with the most garbage the fastest.
Reader Scott says ...
Global Economic
Trend Analysis
Here is an interesting chart by Peter Garnry, an Equity Strategist at Saxo Bank in Denmark.
The race is on to see which central bank can load up its balance sheet with the most garbage the fastest.
Reader Scott says ...
War of attrition brewing with Iran over Gulf oil routes
DEBKAfile Special Report January 26, 2012, 10:50 PM (GMT+02:00)
He echoed debkafile's predictions that Iran will not shut down the Strait of Hormuz completely, but gradually cut down tanker traffic which carries 17 million barrels, or one-fifth of the world's daily consumption, through the waterway. Our Iranian sources report that the rule of thumb Tehran has devised for confront sanctions is to respond to the tightening of an oil embargo by having the Revolutionary Guards gradually narrow the tankers' shipping lanes through the strategic strait. This will progressively cut down the amount of oil reaching the markets.
Tehran will not go all the way and shut the channel down completely for fear of provoking a military showdown with the United States. But each time Washington manages to stop Iran supplying a given country, the IRGC will shut down another section of the strait.
General Martin Dempsey, Chairman of the US Joint Chiefs of Staff admitted on Jan. 8 that Iran has the capacity to block the Strait of Hormuz temporarily but the US would get it reopened within a short time.
Strait of Hormuz
Military tensions in the Persian Gulf shot up again Thursday, Jan. 26, after Dubai police commander Gen. Dhahi Khalfan said on Al Arabiya television that an imminent Gulf war cannot be ruled out and first signs are already apparent. "The world will not let Iran block Hormuz but Tehran can narrow the strait to the maximum," he said.He echoed debkafile's predictions that Iran will not shut down the Strait of Hormuz completely, but gradually cut down tanker traffic which carries 17 million barrels, or one-fifth of the world's daily consumption, through the waterway. Our Iranian sources report that the rule of thumb Tehran has devised for confront sanctions is to respond to the tightening of an oil embargo by having the Revolutionary Guards gradually narrow the tankers' shipping lanes through the strategic strait. This will progressively cut down the amount of oil reaching the markets.
Tehran will not go all the way and shut the channel down completely for fear of provoking a military showdown with the United States. But each time Washington manages to stop Iran supplying a given country, the IRGC will shut down another section of the strait.
General Martin Dempsey, Chairman of the US Joint Chiefs of Staff admitted on Jan. 8 that Iran has the capacity to block the Strait of Hormuz temporarily but the US would get it reopened within a short time.
Gold: Debt, Deficits, Doom, and Gloom
By: John Ing | Thu, Jan 26, 2012
Last month gold plunged more than $200 in less than a week and the dollar soared, trumping even gold. The move caused a catfight among letter writers with investors and central bankers questioning gold's safe haven status. By contrast, the US Treasury sold more debt despite growing concern about the US economy and politically dysfunctional Washington. In the seventies, gold corrected more than 50 percent, dropping $100 before heading higher. In the eighties, gold pulled back $100 after reaching $510 per ounce before reaching new highs. So, why the disconnect?
Start with cash strapped Europe where concerns about the euro crisis have sent investors into dollars instead of gold in a "dash for cash" because dollars provide liquidity at a time when liquidity is at a premium. Although the one month gold lease rate hit 0.2703 percent, European banks were "swapping" their gold in order to raise cash amidst a shortage of dollars, depressing gold prices. Investors seem to have confidence to hold dollar assets for maybe 30 seconds, 30 days but not 30 weeks.
However, gold has reversed course, resuming its uptrend on growing concerns over the lack of confidence in paper assets and the prospect of another round of quantitative easing. Central banks remain firmly on the path of printing money to pay off public debts and to keep their banking systems solvent. As bankers print ever more currency, they reduce the buying power of money in circulation. It is this dependency on the printing presses to liquefy the entire western banking system that has caused the central banks' balance sheets to be bloated with sovereign debts and the toxic paper of yesteryear. History shows that inflation always follows monetary expansion. Even with the correction, gold has done better than every other asset, including the dollar, up more than 10 percent last year making its eleventh consecutive annual gain. Having achieved ninety percent of our forecast of $2011 in 2011, we expect gold to reach $3,000 an ounce and end up for an even dozen years in 2012. There's just a lack of compelling investment alternatives.
Start with cash strapped Europe where concerns about the euro crisis have sent investors into dollars instead of gold in a "dash for cash" because dollars provide liquidity at a time when liquidity is at a premium. Although the one month gold lease rate hit 0.2703 percent, European banks were "swapping" their gold in order to raise cash amidst a shortage of dollars, depressing gold prices. Investors seem to have confidence to hold dollar assets for maybe 30 seconds, 30 days but not 30 weeks.
Gold's Next Stop
However, gold has reversed course, resuming its uptrend on growing concerns over the lack of confidence in paper assets and the prospect of another round of quantitative easing. Central banks remain firmly on the path of printing money to pay off public debts and to keep their banking systems solvent. As bankers print ever more currency, they reduce the buying power of money in circulation. It is this dependency on the printing presses to liquefy the entire western banking system that has caused the central banks' balance sheets to be bloated with sovereign debts and the toxic paper of yesteryear. History shows that inflation always follows monetary expansion. Even with the correction, gold has done better than every other asset, including the dollar, up more than 10 percent last year making its eleventh consecutive annual gain. Having achieved ninety percent of our forecast of $2011 in 2011, we expect gold to reach $3,000 an ounce and end up for an even dozen years in 2012. There's just a lack of compelling investment alternatives.
Precious Metals Jump, “Everything Points to Even Higher Prices”
By jturbin
January 26, 2012 3:22 PM EST
Gold and silver futures settled substantially higher at the COMEX on Thursday amid a broad-based rally in commodities and weakness in the U.S. dollar.
COMEX gold for February delivery climbed $26.60, or 1.6%, to $1,726.70 per ounce – its highest closing level since December 7, 2011.
Silver futures finished higher by $0.62, or 1.9%, at $33.74 per ounce – its best settlement since November 16, 2011.
January 26, 2012 3:22 PM EST
Gold and silver futures settled substantially higher at the COMEX on Thursday amid a broad-based rally in commodities and weakness in the U.S. dollar.
COMEX gold for February delivery climbed $26.60, or 1.6%, to $1,726.70 per ounce – its highest closing level since December 7, 2011.
Silver futures finished higher by $0.62, or 1.9%, at $33.74 per ounce – its best settlement since November 16, 2011.
Silver: 3 bullish signals you should watch out for
By Jeff Lewis
Several closely watched technical factors played a substantial role in precious metals trading last week as traders noted that increasingly bullish signals of an impending rally accumulated strength.
It is our conviction that ultimately the physical market will trump paper and drive technical traders, which in term will set-off the algorithm-funds, leading to significant moves higher or as we like to frame: a return to real equilibrium
Technical analysts pointed to a bullish potential chart pattern in silver’s price combined with a down trend line break, as well as gold’s price breaking above a key long term moving average, as supportive technical signs for the precious metals.
Furthermore, both of the recent corrective upwards trends in Silver and Gold prices have been reinforced by gradually increasing levels observed in their respective Relative Strength Index or RSI readings, without the rallies yet having pushed the key momentum indicator into overbought territory above the 70 level for either metal.
These observations indicate that the most recent technical rally seen in these metals since their late December lows may well have further to go.
Several closely watched technical factors played a substantial role in precious metals trading last week as traders noted that increasingly bullish signals of an impending rally accumulated strength.
It is our conviction that ultimately the physical market will trump paper and drive technical traders, which in term will set-off the algorithm-funds, leading to significant moves higher or as we like to frame: a return to real equilibrium
Technical analysts pointed to a bullish potential chart pattern in silver’s price combined with a down trend line break, as well as gold’s price breaking above a key long term moving average, as supportive technical signs for the precious metals.
Furthermore, both of the recent corrective upwards trends in Silver and Gold prices have been reinforced by gradually increasing levels observed in their respective Relative Strength Index or RSI readings, without the rallies yet having pushed the key momentum indicator into overbought territory above the 70 level for either metal.
These observations indicate that the most recent technical rally seen in these metals since their late December lows may well have further to go.
Steen Jakobsen on Maximum Intervention "Now is the Time You Need Metals – Particularly Gold and Gold Stocks"; Fool in the Shower
MISH'S
Global Economic
Trend Analysis
Steen Jakobsen, chief economist for Saxo Bank in Denmark has some interesting thoughts to share on gold an metals in an email update that just came in.
Steen writes ...
Interesting session with Fed yesterday! Both the ECB and the FED have now clearly showed that the changed board of directors is far more willing to print money and keep rates low forever than ever before in central banking history – which is probably not a good thing or is it?
It’s a wait and see game now – the FOMC action left plenty on the table for both the bulls and the bears. For the bulls this is ‘easy money’ for longer and low rates will have to work.
For the bears it’s sign of incoming depression when Fed feels obliged to signal low rates for longer.
The truth is probably somewhere in between. There is reason for low rates, but also printing money to the extend the major central bank does it makes all of us speculators chasing, again, investments which we would not normally engage in as commodities, metals, housing et al. We are effectively all being forced to take more risk for same return with low interest now predicted into the financial “forever”.
Global Economic
Trend Analysis
Steen Jakobsen, chief economist for Saxo Bank in Denmark has some interesting thoughts to share on gold an metals in an email update that just came in.
Steen writes ...
Interesting session with Fed yesterday! Both the ECB and the FED have now clearly showed that the changed board of directors is far more willing to print money and keep rates low forever than ever before in central banking history – which is probably not a good thing or is it?
It’s a wait and see game now – the FOMC action left plenty on the table for both the bulls and the bears. For the bulls this is ‘easy money’ for longer and low rates will have to work.
For the bears it’s sign of incoming depression when Fed feels obliged to signal low rates for longer.
The truth is probably somewhere in between. There is reason for low rates, but also printing money to the extend the major central bank does it makes all of us speculators chasing, again, investments which we would not normally engage in as commodities, metals, housing et al. We are effectively all being forced to take more risk for same return with low interest now predicted into the financial “forever”.
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