Month: May 2012

London Gold Market Report
from Ben Traynor
BullionVault
Friday 11 May 2012, 08:00 EDT

WHOLESALE MARKET gold prices touched their lowest level since the first week of January Friday, hitting $1574 an ounce before recovering some ground, while stocks and commodities fell and US Treasury bonds gained, with dealers in major gold buying countries reporting continued limited demand for precious metals.

Silver prices fell to $28.54 an ounce – also a four-month low, and 6.1% down on last Friday’s close.

Heading into the weekend, spot market gold prices looked set for a 3.7% weekly loss by Friday lunchtime in London. Based on PM London Fix Gold prices, the week ended 2 March was the last time gold fell further in a single week.

On the currency markets, the Euro fell to its lowest level against the Dollar since January 23 – two days before the Federal Reserve published policymakers’ interest rate projections for the first time, showing a majority expected near-zero rates until at least late 2014.

The US Dollar Index – which measures the Dollar’s strength against a basket of other currencies – hit its highest level since March 16 this morning.

“When the market gets very nervous, then they buy Dollars and gold finds it difficult to rally,” says Jesper Dannesboe, senior commodity strategist at Societe Generale in London.

“Given what’s going on in the markets at the moment, any rally will probably just be a bounce before another setback.”

The Reserve Bank of India ordered exporters to convert 50% of their foreign exchange holdings to Rupee Thursday, a day after the currency closed at an all-time low against the Dollar in Indian trading.

Despite the central bank’s move, however, the Rupee again fell against the Dollar on Friday, at one point coming within 0.6% of Wednesday’s low. Rupee gold prices however still traded slightly lower this morning. The most heavily traded gold contract on Mumbai’s Multi Commodity Exchange, the June delivery contract, touched its lowest level in over a month during Friday’s trading.

“Slowly deals are taking place as market is in the falling mode,” one dealer told newswire Reuters.
“Traders will try to catch the bottom…[but] people will not be willing to maintain huge inventory in a falling market and only resort to need-based buying.”

Over in China – behind India the world’s second-largest gold buying nation last year – some gold dealers say they expect to see gold demand growth fall this year.

“Chinese consumers share a quite pronounced tendency in which they usually buy gold when prices are rising and refrain from purchasing when prices are conceived to be on a downtrend,” says Xin Zhihong, vice president at Shanghai jeweler Lao Feng Xiang.

“Some consumers are now sitting on the sidelines…the expectation that gold prices will always rise and that gold’s value can only appreciate seems to have faded.”

“It’s the worst start of the year [for Chinese gold demand] since the financial crisis in 2008,” adds Emily Li, brand general manager at Chow Sang Sang, the second-biggest gold jeweler in Hong Kong.

China’s gold imports from Hong Kong – seen by many as a proxy for overall imports – rose 59% month-on-month in March, figures published this week show. The 63 tonnes figure however was 39% down on last November’s all-time high, while the volume of gold heading from China to Hong Kong also rose, leaving net exports in March at 38 tonnes.

Chinese consumer price inflation fell to 3.4% last month – down from 3.6% in March, according to official data. Growth in retail sales and industrial production also slowed, while figures published Thursday show exports grew by 4.9% year on year in April, compared to 8.9% y-o-y a month earlier.

The lower CPI figure “confirms that inflation is trending down and that the policy focus will remain on promoting growth,” reckons Zhang Zhiwei, Hong Kong-based China economist at Nomura.

“The weak export data yesterday put more pressure on the government…probably policy loosening will become more likely going forward.”

Here in Europe, the Spanish government is set to miss its deficit targets in both 2012 and 2013, with both Spain and Italy expected to fall back into recession, according to European Union forecasts published Friday.

The forecasts, produced by the European Commission, show that Spain’s deficit for this year is expected to be 6.4% of GDP – compared to an EU target of 5.3%. In 2013, Spain is expected to have a 6.3% deficit-to-GDP ratio, versus a target of 3%.

Despite the news, yields on 10-Year Spanish government bonds fell slightly this morning, dipping back below 6%.

France meantime is forecast to meet its 2012 deficit target of 4.5% of GDP. Next year, however, the Commission says it expects the French government deficit to be 4.2% of GDP, meaning that France, like Spain, would miss the 3% target. The Commission has the power to fine governments that miss EU targets.

“Without further determined action…low growth in the EU could remain,” said Olli Rehn, European Commissioner for economic and monetary affairs, adding that there are “large disparities between member states”.

In Germany, consumer price inflation remained unchanged at 2.1% last month, official figures published Friday show.

German inflation however is likely to be “somewhat above the average within the European monetary union” Bundesbank head of economics Jens Ulbrich told the German parliament finance committee this week.

Greece, which is still without a government after Sunday’s election, must stick to its reform plans or it risks having bailout payments stopped, German foreign minister Guido Westerwelle said Friday.

“If Greece strays from the agreed reform path, then the payment of further aid tranches won’t be possible,” said Westerwelle.

Over on Wall Street, JPMorgan recorded a $2 billion trading loss in the first quarter of the year, Q1 earnings published Thursday show.

“This puts egg on our face,” said JPMorgan chief executive Jamie Dimon, who blamed “errors, sloppiness and bad judgment” for the losses.

Investors meantime are “losing faith” in commodity hedge funds, Reuters reports.

“For people that only came in when the noise about commodities started a couple of years ago, they have basically done nothing,” one investor told the newswire.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Source: ForexYard

The euro spent most of the day slightly above recent three-month lows hit against the US dollar and Japanese yen. Greece’s inability to form a new government has raised the prospects that a new election will be held in the coming weeks, which has resulted in additional risk aversion in the marketplace. Turning to today, traders will want to pay attention to a batch of US data, including the PPI figure and the Prelim UoM Consumer Sentiment. Both indicators are considered valid indicators of overall economic health and have the potential to create market volatility before markets close for the week. Should any of the data come in above expectations, the USD may be able to see some upward movement against the yen today.

Economic News

USD – Dollar Turns Bearish vs. GBP

The dollar turned bearish against several of its main currency rivals yesterday, as positive news out of Australia and the UK led to moderate risk taking in the marketplace. A significantly better than expected Australian Employment Change figure gave the aussie a boost vs. the greenback. Overall, the AUD/USD was up close to 100 pips for the day. Following the Bank of England’s decision to hold interest rates steady during mid-day trading, the GBP/USD began moving upward. The pair eventually gained close to 90 pips to peak at 1.6180 during the afternoon session.

Ahead of markets closing for the week, traders will want to pay attention to several potentially significant indicators out of the US which may generate market volatility. The US PPI figure, set to be released at 12:30 GMT, is forecasted to come in at 0.0%. Should the figure come in above expectations, the dollar may be able to reverse yesterday’s downward trend. Later in the day, traders will want to pay attention to the Prelim UoM Consumer Sentiment, scheduled for 13:55 GMT. Analysts are predicting the figure to come in at 76.4, which if tru, could give the greenback an additional boost during the afternoon session.

EUR – Fresh Greek Worries Lead to Additional EUR Losses

Investor concerns about the Greek political situation kept the euro near a three-month low against both the US dollar and Japanese yen during trading yesterday. Greek political parties have so far failed to form a government, raising the prospects that fresh elections will be held in the coming weeks. After dropping as low as 1.2924 during early morning trading, the EUR/USD staged a slight recovery, eventually reaching as high as 1.2970 toward the close of the European session. Against the yen, the euro fell as low as 102.94 before staging an upward correction and climbing as high as 103.72.

Turning to today, euro traders will want to continue monitoring any developments out of the euro-zone, particularly with regards to the Greek political situation. With investors largely remaining bearish toward the common-currency, traders should be warned that the possibility for further downward movement exists before markets close for the weekend. That being said, with potentially significant US news set to be released this afternoon, the euro may be able to capitalize on the figures if they come in below expectations.

Gold – Gold See Slight Boost during Afternoon Trading

Gold spent most of yesterday’s session trading flat, as investors continued to bet against the precious metal amid concerns regarding the global economic recovery. Gold has seen steady downward movement throughout the week, as euro-zone political worries combined with poor US fundamental data have resulted in risk aversion in the marketplace. That being said, gold received a slight boost, following a better than expected US Unemployment Claims figure. Prices reached as high as $1601.37 an ounce after dropping as low as $1585.12 during the morning session.

Turning to today, the US PPI and Prelim UoM Consumer Sentiment may lead to volatility for gold. Better than expected news could result in moderate risk taking in the marketplace, which may boost prices. At the same time, should any of today’s news disappoint, gold could resume its bearish movement.

Crude Oil – US Unemployment Claims Helps Boost Oil

After falling for six consecutive days, crude oil was able to stage a slight upward correction during the afternoon session, following a better than expected US Unemployment Claims figure. The news signaled a possible increase in oil demand in the US, the world’s biggest oil consuming country. The price of oil rose from a low of $96.05 a barrel to $97.64 toward the close of European trading.

Turning to today, oil traders will want to pay close attention to the US PPI figure and the Prelim UoM Consumer Sentiment. Should either of the indicators come in above expectations, it may boost confidence in the US economic recovery which could result in additional upward movement for crude oil before markets close for the week.

Technical News

EUR/USD

A bullish cross on the daily chart’s Slow Stochastic indicates that this pair could see upward movement in the near future. This theory is supported by the Williams Percent Range on the same chart, which has dropped into oversold territory. Going long may be a wise choice for this pair going into the rest of the week.

GBP/USD

The daily chart’s Bollinger Bands are beginning to narrow, indicating that this pair could see a price shift in the near future. Furthermore, a bearish cross on the weekly chart’s Slow Stochastic indicates that this pair could see downward movement in the coming days. This may be a good time to open short positions ahead of a possible downward breach.

USD/JPY

Long term technical indicators are providing mixed signals for this pair. While the daily chart’s Williams Percent Range is in oversold territory, meaning that upward movement could occur, the weekly chart’s MACD/OsMA has formed a bearish cross. Taking a wait and see approach may be the wise choice for this pair.

USD/CHF

A bearish cross on the daily chart’s Slow Stochastic indicates that this pair could see downward movement in the near future. This theory is supported by the Williams Percent Range on the weekly chart, which has just crossed over into overbought territory. Going short may be the wise choice for this pair.

The Wild Card

Gold

A bullish cross appears to be forming on the daily chart’s Slow Stochastic, indicating that upward movement could be seen in the near future. Furthermore, the Relative Strength Index on the daily chart has dropped into oversold territory. Forex traders may want to open long positions ahead of a possible upward breach.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By TraderVox.com

Tradervox (Dublin) – Fed Chairman Ben Bernanke expressed his concerns about the expiration of pro-growth policies to a group of senators today. According to some senators who attended the meeting, the Federal Reserve chairman was concerned about the expiration of some policies that were put in place to spur economic growth in United State.

Bernanke talked about the end of programs such as Bush tax cuts, extended unemployment benefits, budget cuts, and the payroll tax holiday according to North Dakota Democrat Kent Conrad. Further, Illinois Democrat, Richard Durbin, who also attended the meeting, indicated that the Federal Reserve Chairman stressed that if all these things occur at the time they are scheduled, they would drive the economy back to a worse recession.

According to his April 25 press statement; there are possible setbacks that could occur as a result of expiration of tax cuts and federal spending reductions. He warned that the economic progress seen so far could be reversed following a change in policy. He said that if no action is taken, the Federal Reserve will have no ability to offset the effects on the economy. In his discussions in the meeting with senators, Bernanke was keen not to get into politics surrounding these policies which was seen as a positive thing for him.

The concerns raised by Fed Chairman came as housing and labor market show some signs of improvement, and Bernanke has been keen to say that such progress should be guarded. His FOMC colleagues have shown their intention to keep the economy on the recovery track by keeping the interest rates at near zero. The Chairman also insisted that there are some progress being made but the economy requires some time to fully come out of the recession. He also warned on taking steps on policies that may undermine consumer confidence in the US economy.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
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By The Sizemore Letter

Men are not always the best about remembering anniversaries, but there are a few that we would all like to forget.  This past Sunday marked the two-year anniversary of the infamous “Flash Crash” of May 6, 2010 that saw the Dow Jones Industrial Average swing by 600 points in 20 minutes.

What is perhaps most remarkable about that incident is that there was never a proper explanation for what happened.  High-velocity “algorithmic” trading is generally credited as the culprit, but what exactly happened?  And what is to prevent it from happening again?  To these questions we have no answers.

The real legacy of the Flash Crash is not the portfolio losses suffered by some investors; in fact, unless you happened to have open stop loss orders that got executed, chances are good that the entire event came and went before you had time to act.

No, the real damage was to Wall Street itself, or rather its reputation.  The Flash Crash made investors cynical, making them feel the market was a casino game rigged against them.   Perhaps never again would they believe that the stock exchanges were what they claim to be: a place for holders of capital to allocate it to businesses deemed worthy of investment.

In truth, the market is a rigged game, and it always has been.  Perhaps we need a good Flash Crash every few years to remind us of that.  But rigged game or not, investors able to keep a level head can still use the market for its ostensible purpose of allocating long-term capital.  Market turbulence is something that can be embraced rather than shunned. 

John Templeton

The late Sir John Templeton had a great strategy for managing volatility and taking his emotions out of the equation.  He would make a list of stocks that he would love to own if only they sold for a substantially cheaper price.  He would then place limit orders to buy them at those prices.  If a wave of panic swept the market, Sir John would not be paralyzed by indecision because the decision had already been made for him.

An investor with a plan like this in place on May 6, 2010 could have made a fortune in a matter of minutes.

A similar strategy that had the added benefit of earning you a little extra income is selling deep out-of-the-money puts on stocks you’d like to own at the right price.  Under normal conditions, your puts will expire worthless and you pocket the premium.  But if prices experience a short-term dip, your options might get exercised, meaning that you would have to buy the shares in question.  Of course, that’s the whole idea.  You’d be buying shares of a company you always wanted to own at a price you weren’t expecting to get.

These strategies work fine for buying on the cheap, but what about investors that use stop loss orders for risk management purposes?  I will address that, but first I want to ask a question: would you knowingly play a game of poker if you knew the other players could see your cards?

You most assuredly would not.  But when you place stop loss orders, you have effectively done exactly that.  Don’t be surprised when the stock price dips just low enough to hit your stop before rallying higher.

I’m not suggesting that investors eschew stop losses; good risk management is essential to prevent small losses from becoming catastrophic ones.  But I am suggesting that you play it close to the vest.  Have your stop losses tracked in an Excel spreadsheet, a website not affiliated with your broker, or even a Post-It note.

Warren Buffett

And finally, while automatic techniques like these are valuable tools, they will never fully replace good old fashioned intestinal fortitude.  An oft-quoted line from Warren Buffett is to “be greedy when others are fearful.”

Today, investors are fearful about Europe, which has me feeling more than a little greedy.  I’ve recommended Spanish telecom giant Telefonica (NYSE:$TEF) in these pages before (see “Investing Lessons from Peru”), and I would like to reiterate that recommendation again today.

Telefonica is one of the finest, most globally-diversified telecom firms in operation today, and long after the current crisis has passed it will be routing telephone calls and paying its investors a fat dividend.  Use any turbulence in the months ahead as an opportunity to accumulate more shares.

Disclosure: Telefonica is held by Sizemore Capital clients and is a holding of the Sizemore Investment Letter Portfolio.

Source: ForexYard

The euro fell to a fresh 3 ½ month low against the US dollar in overnight trading as political uncertainty in Greece continues to weigh down on the common currency. In addition, crude oil reversed its gains from yesterday afternoon and is once again trading below $96 a barrel.

Main News for Today

UK PPI Input- 08:30 GMT
• Analysts are predicting that the figure will come in at -0.9%, well below last month’s 1.9%
• If true, the pound could extend its losses from last night against the USD and JPY

US PPI- 12:30 GMT
• The US PPI is forecasted to come in at 0.0%
• A better than expected figure could help the USD recover some of its losses vs. the JPY
• Positive figure could also lead to gains for crude oil

US Prelim UoM Consumer Sentiment- 13:55 GMT
• Consumer sentiment figure forecasted to come in at 76.4
• A better than expected figure could help the USD against JPY and give commodities like crude oil a boost to close out the week

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By MoneyMorning.com.au

‘Actioni contrariam semper et æqualem esse reactionem: sive corporum duorum actiones in se mutuo semper esse æquales et in partes contrarias dirigi.’ – Law Three, Principia Mathematica Philosophiae Naturalis, Sir Isaac Newton

Or to non-Latin speakers (including your editor)…

‘To every action there is always opposed an equal reaction: or the actions of two bodies upon each other are always equal, and in the parts directed to contrary.’

Apparently, this is a new idea to the guys and gals at the International Monetary Fund (IMF). But thanks to ‘three decades’ of research, the boffins at the IMF have finally found out what Sir Isaac Newton knew 325 years ago.

That is, every action creates an opposite and equal reaction.

It’s Newton’s Third Law.

OK. Newton’s third law doesn’t directly relate to house prices. And strictly speaking, he’s not saying that what goes up must come down.

Even so, you can easily apply the words from the Third Law to asset price action. And we strongly suggest you pay close attention to them.

Because the latest IMF report (World Economic Growth 2012: Growth Resuming, Dangers Remain) reveals the central bankers’ plan to ignore the laws of maths and physics. Instead, they’ve got their own ideas on how things should work.

Only this time, they assure you, things will be different…

We were stunned when we read this statement buried on page 89 of the latest IMF report:

‘Based on an analysis of advanced economies over the past three decades, we find that housing busts and recessions preceded by larger run-ups in household debt tend to be more severe and protracted.’

Really?

They’ve only just figured that out?

It’s taken them ‘three decades’?

Oy vey.

But that statement was nothing. We read on…

‘Based on case studies, we find that government policies can help prevent prolonged contractions in economic activity by addressing the problem of excessive household debt. In particular, bold household debt restructuring programs such as those implemented in the United States in the 1930s and in Iceland today can significantly reduce debt repayment burdens and the number of household defaults and foreclosures. Such policies can therefore help avert self-reinforcing cycles of household defaults, further house price declines, and additional contractions in output.’

Bottom line: it’s not the job of the State and the central banks to prevent asset bubbles. It’s the job of the State and central banks to inflate asset bubbles and then make sure they don’t burst.

How?

By implementing ‘bold household debt restructuring programs…’

You understand that’s shorthand. It means using private savings and taxpayer dollars to bail out those who get over their head in debt.

Of course, as we see it, the State and central banks cause the asset bubbles in the first place. So it’s no wonder there isn’t a peep from the IMF about government and central bank intervention causing price bubbles.

No, in their view the market causes all the problems and so the government must intervene.

Bubbles are good…busts are bad. That’s why they’re so keen to keep the ‘good’ stuff and get rid of the ‘bad’ stuff. Trouble is they ignore the fact that too much of the ‘good’ stuff causes the ‘bad’ stuff.

But the IMF commentary is more than just about house prices. It gives you a sneak peek inside the maniacal mind of central planners.

The Market is Sending Warning Signals

All around you, the market is screaming out. It’s sending warnings left, right and centre that something isn’t right. The message?

That the market needs a natural purge of all that’s bad…bad banks…bad economies…bad governments…bad central banks…

The whole darn lot needs a dose of economic Metamucil so world economies and the free market can start from scratch.

But that won’t happen anytime soon, because, as the IMF notes, it has a different take on things:

‘We also highlight the policy implications. In particular, we explain the circumstances under which government intervention can improve on a purely market-driven outcome.’

This morning Bloomberg News reports:

‘Spain said it would take over Bankia (BKIA) SA and may inject public funds into the banking group with the most Spanish real estate as the government prepares the fourth attempt to overhaul the financial system.’

According to the report, Spain will use 4.5 billion euros of taxpayer dollars to buy a 45% stake in Bankia.

And as the chart below shows, Spain’s biggest bank, Banco Santander, S.A. has fallen 64.2% since reaching a post-bust high in 2009:

Click here to enlarge

Meanwhile, in the U.S., JP Morgan Chase & Co. [NYSE: JPM] announced a USD$2 billion loss due to… ‘synthetic credit securities…’

The banks will never learn as long as they know there’s a government and central bank to provide the ultimate backstop.

And finally, Bloomberg News reports the following comments from U.S. Federal Reserve chairman, Dr. Ben S. Bernanke:

‘If no action were to be taken by the fiscal authorities, the size of the fiscal cliff is [so large that there’s] absolutely no chance that the Federal Reserve would have any ability whatsoever to offset that effect on the economy.’

In other words – you got it – the government must spend more so the economy keeps growing. And as a result, they delay the necessary bust yet again.

The Market Always Shines Through

As you know, Australia isn’t immune from central planning interference. Federal and State governments have spent billions propping up the Australian housing market.

And for what? Nothing. The stinking heap is slowly collapsing anyway.

The loudmouth spruikers who insisted it was impossible for Aussie house prices to fall are suddenly silent. They can’t explain it, ‘House prices always go up…I should know, I’ve seen it for the past 20 years!’

But as our old pal Steve Keen noted in a recent article, ‘Real house prices [adjusted for inflation] have fallen 10% since June 2010′:

All this tells you that regardless of how much central banks and governments intervene, the market will always shine through.

We’re not a fan of former U.K. PM, Margaret Thatcher, but she got one thing right: ‘You can’t buck the market.’

It’s just a shame to see so much taxpayer money wasted in order to save the bacon of politicians, bankers and other vested interests.

Cheers,
Kris.

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By MoneyMorning.com.au

Europe, Europe, Europe…

I know, you’re sick of hearing about Europe’s problems.

But the problem with Europe is that it won’t go away. And if it does go away, we’ll have even bigger problems. What a mess.

Of course, I’m talking about the Euro-currency zone and the European Union, not Europe itself.

I love Europe. I love every country in Europe. I love the different cultures. I love the different languages. I love the different societal models. I love the history of Europe.

And no doubt all the Europeans love all the same things about their Europe – except maybe some of their history. But even more than loving Europe, Europeans love their own countries. Why? Because they have different cultures, languages, societal models, and differing views of their history. Vive la différence!

So, whose bright idea was it to gloss over (with shiny promises and, later, a shiny new currency) thousands of years of differences and shove all Europeans into a funnel in the hopes that they’d all come out the other end as one homogeneous mass of humanity?

Oh, that would be the bankers and financiers who wanted a United States of Europe so that the free flow of goods and services payable with a common currency would make everyone better off, and make themselves better, better off, by a lot of betters.

And now, what a surprise!

The Mess Europe Created

There are differences all across Europe about, well, Europe and what it has become and where it has to go to get out of the mess it’s created for itself.

How that’s going to end is playing out right before our eyes.

And if there’s any comeuppance in the world, the bankers and political brokers who sold Europeans on “Funnel Europe” may just end up bankrupt.

Anyway, the gloss is coming off the game very quickly, and we’re seeing what’s going on.

But, once again, today, we’ve got another piece of the puzzle that’s fallen into our hands, so let’s look at it as a microcosm of what’s going on across Europe.

The double fantasy is that the little game that was played with Spain’s third-largest bank (by assets) is being played by the European Union’s euro-currency promoters. What’s the game? It’s more of a scheme than a game. And it has a name.

It’s called a Ponzi scheme.

The Spanish government is going to have to bail out Bankia, the No. 3 bank in the country, with a €188 billion book of “assets” which consists of €51.5 billion worth of property assets. (Don’t you love calling non-performing property loans “assets?”)

What you may not know is that Bankia is only two years old. It was formed by rolling up seven large, in-trouble cajas (essentially “local” savings banks or savings houses) who were in trouble because of – guess what – bad property assets.

But it gets better…

The bank was all glossed-up, like putting lipstick on a pig, and was taken public with a wink and a nod of the pompom-wielding and cheering government. Fully 60% of the stock that was sold was sold to savers – yeah, the same savers who were the cajas’ own customers. They were duped into believing that the property problems that they helped create, had been solved. Their stock is now down 40%. Nice.

The government has been saying, emphatically, that Spain’s banking system doesn’t need any additional money.

Everything is cajalicious. NOT.

What the crooks did was “renegotiate” non-performing, bad loans so their capital position looked better and they could draw in equity capital investors. “Renegotiated” means flim-flammery accounting. It means lying and cheating.

And guess what? Now Bankia has problems. And it’s going to have to be bailed out.

Bail Outs and Ponzi Schemes

Yeah, bailed out by the same government that supported renegotiating assets, rolling up the cajas and floating stock in the new Bankia. That’s a Ponzi scheme, folks.

And that’s what’s happening all across Europe. It’s a Ponzi scheme.

European banks are being given euros (okay they’re borrowing the money, but very cheaply) by the European Central Bank to buy the sovereign debts of their respective countries, which are backing the ECB and the banks that are in trouble.

Hmmm… Insolvent sovereigns backing illiquid banks buying sovereign debts with borrowed money from a central bank that’s backed by the same sovereigns?

Ponzi scheme. Goodnight.

Leave the lights on; it’s going to get a lot darker out there.

Shah Gilani
Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in Wall Street Insight and Indictments

From the Archives…

Why China’s New Consumer Economy Won’t Give You the Trade of the Decade
2012-05-04 – Kris Sayce

Why China Could Be The Next Destination For the Financial Crisis
2012-05-03 – Merryn Somerset Webb

How Did We Get It So Wrong on Australian Housing?
2012-05-02 – Kris Sayce

This Indicator Shows the Copper Price Could Be Set to Soar
2012-05-01 – Dr. Alex Cowie

How Gold Nanoparticles Will Create A New Kind of Gold Rush
2012-04-30 – Michael Robinson

One Thing is Shoring Up Europe

By MoneyMorning.com.au

What I call the New Space Race is about to “take off” in a big way.

And front and centre is asteroid mining.

Yes, I mean literally digging into asteroids to extract ores and other materials.

Not long ago, this was the stuff of sci-fi. (It smacks of the 1998 movie Armageddon, in which a team of roughnecks lands on an asteroid on a collision course with Earth in order to blow it out of the sky.)

Today, it’s a reality, thanks to advances in three fields – low-cost computing, cheaper rockets, and advanced robotics.

Both private industry and the U.S. government want to extract a wide range of resources from asteroids. They are teeming with resources like iron and nickel. A rock the size of a football stadium contains more platinum than we have mined in all of world history.

And you won’t believe how much this stuff could be worth.

Remember, space is a target-rich field. To date we have discovered some 9,000 of these rocks that pass near Earth’s orbit. Of those, about 1,500 are just as easy to get to as the surface of the Moon. Moreover, they have light gravity, meaning space craft can land and take off easily.

Here’s the math that will blow your mind: A space rock the size of a museum gallery could contain resources worth $100 billion (according to the startup I’m about to tell you about).

If we hit pay dirt on all the close asteroids, they would be worth a combined $150 trillion. Don’t take my word for it. You can do the math yourself right here.

No doubt, many of those rocks will be dead ends. But if we could tap just 10%, that would total $15 trillion worth of resources. (And if we’re being even more conservative, just a 1% return would still equal $1.5 trillion – nearly the value of Canada’s entire economy.)

Space Mining:
Who’s Pursuing All This Untold Wealth?

At least two independent groups that include former NASA officials and leading scientists have plans to tap these thousands of big rocks orbiting in our solar system.

And that’s not all. Obama wants an unmanned mission called OSIRIS-Rex to launch in 2016 and land on an asteroid. OSIRIS would return with resource samples by 2023.

NASA isn’t just along for the ride. It is casting a wide net in the search for valuable space rocks. The agency has asked amateur stargazers to help find even more near-earth asteroids that show great promise.

So the question isn’t if we are going to mine asteroids but when.

And I think investors should keep an eye on Planetary Resources.

Asteroid Mining: 
A New Paradigm for Resource Discovery

This new startup is on a “mission” to mine asteroids.

The firm has a solid plan. It will begin by making and selling very low-cost robotic spacecraft for survey missions. The team expects to have a demo craft in orbit around Earth within two years.

Next comes the key early part of any good mine – prospecting, the phase in which you find the most valuable spots to drill. That will take between five to 10 years.

Finally, Planetary Resources will develop the most efficient capabilities to deliver these resources – everything from water to platinum – directly to both space-based and Earth-bound customers.

For cutting-edge tech, there’s another big payoff – rare earths. These are the unique elements needed for such products as smart phones and iPads. China controls 97% of the rare earths on Earth. But they don’t control outer space…

Not only does Planetary Resources have tons of money behind it; it also benefits from a team of top-tier leaders focused on success.

This is a group of billionaires who know firsthand how much focus and energy it takes to succeed.

Planetary Resources boasts a cast of big-name backers with a track record for creating wealth – and not just the standard scientists, astronauts, and entrepreneurs you might expect. I’m talking about true visionaries, like:

• Peter Diamandis, who serves as co-chairman for the firm. He also runs the foundation that was responsible for the Ansari X-Prize, a $10 million award for commercial space flight that led to $100 million in high-tech investments;
• Larry Page and Eric Schmidt, two senior execs from Google Inc. (NASDAQ:GOOG);
• Charles Simonyi, formerly of Microsoft Corp. (NASDAQ:MSFT). He has already made two trips to space and funded other related ventures;
• Ross Perot, Jr., son of the high-tech leader who ran for president;
• John S. Lewis, author of “Mining the Sky: Untold Riches from the Asteroids, Comets, and Planets.” In this 1997 book, Lewis argues that natural resources and energy are abundant in the solar system and could support a vast civilization many times larger than ours (1016 people).
• And even film director James Cameron.

Make no mistake about it: These guys are in it for the long haul.

“We’re not expecting this company to be an overnight financial home run,” Eric Anderson, the company’s co-founder and co-chairman, told Reuters last month. “This is going to take time.”

Like I said, the U.S. remains committed to space flights. This time, however, it’s even better – we don’t need to depend so much on NASA and federal funding. Because private enterprise has every incentive to make asteroid mining a success.

And that means it’s just a matter of time before tech investors find ways to profit from the New Space Race. Stay tuned.

Michael A. Robinson

Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in Era For Radical Change

From the Archives…

Why China’s New Consumer Economy Won’t Give You the Trade of the Decade
2012-05-04 – Kris Sayce

Why China Could Be The Next Destination For the Financial Crisis
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How Did We Get It So Wrong on Australian Housing?
2012-05-02 – Kris Sayce

This Indicator Shows the Copper Price Could Be Set to Soar
2012-05-01 – Dr. Alex Cowie

How Gold Nanoparticles Will Create A New Kind of Gold Rush
2012-04-30 – Michael Robinson

Asteroid Mining in Space: An Abundant Future Awaits

GBPUSD breaks above the downward trend line on 4-hour chart, suggesting that a cycle bottom is being formed on 4-hour chart. Further rise is still possible later today, and the target would be at 1.6230 area. However, the rise is likely correction of the downtrend from 1.6301, another fall is still possible and next target would be at 1.6000 area. Key resistance is at 1.6301, only break above this level could trigger another rise towards 1.6500.

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