Tuesday, June 11, 2013

Gold slides to three-week low on stimulus concerns

By Jan Harvey
LONDON (Reuters) - Gold fell 1 percent on Tuesday to a near three-week low after the Bank of Japan opted not to extend its stimulus programme, stoking speculation that the era of ultra-loose global monetary policy is coming to an end.
Gold had already been hurt by talk the U.S. Federal Reserve may be set to taper its monetary easing sooner than expected, after Standard & Poor's revised up its U.S. sovereign credit outlook on Monday and a U.S. payrolls report last week beat forecasts.
Successive rounds of stimulus measures around the world have boosted gold prices to record highs in recent years by keeping up pressure on interest rates while stoking inflation fears. Speculation they may be set to end is now pressuring the metal.
Spot gold was down 1.1 percent at $1,371.11 an ounce at 0923 GMT, while U.S. gold futures for August delivery were down $15.20 an ounce at $1,370.80.
"The market is coming around to the view that the Fed will taper quantitative easing," Credit Agricole analyst Robin Bhar said. "The fact that the economy seems to be creating jobs, as we saw with the payrolls report on Friday, makes Fed tapering more likely than not."
He added, "The Bank of Japan's reluctance to further stimulate is just another reason to at least be cautious on gold."
Concerns that the era of plentiful monetary stimulus is on the wane knocked European shares 0.9 percent lower and hit peripheral euro zone bond prices. The dollar fell a quarter of a percent against the euro. (MKTS/GLOB) (GVD/EUR) (FRX/)
Dealers in Singapore said gold demand had eased after a jump in April, which followed the biggest two-day fall in gold prices in 30 years. Gold bars and coins were therefore easier to obtain, they said.

GRAPHIC-2013 asset returns: http://link.reuters.com/dub25t
GRAPHIC-2013 commod returns: http://link.reuters.com/reb25t
GRAPHIC-Gold/USD correlation: http://r.reuters.com/ryx52s
GRAPHIC-Plat/palladium ratio: http://link.reuters.com/qub87s
The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, reported its largest inflow in over a month on Monday, of 2.7 tonnes. Its holdings still remained near four-year lows, however, down 340 tonnes this year.
Among other precious metals, silver was down 1 percent at $21.69 an ounce, spot platinum was down 1.1 percent at $1,485.99 an ounce and spot palladium was down 1.3 percent at $757.72 an ounce.
Platinum producer Lonmin and South Africa's Association of Mineworkers and Construction Union (AMCU) were in talks on Tuesday to avert a strike, a union official said.
AMCU wants to be recognised as the majority union at Lonmin as it now represents over 70 percent of the workforce at the world's third-largest producer of the precious metal and has threatened to down tools at the mine this week if talks fail.
Swiss bank UBS said while platinum had been at its cheapest compared with palladium in more than a decade recently, supply threats in South Africa had more scope to drive platinum higher.
"In spite of their apparent preference for palladium this year, investors are also wary of supply risks in platinum that could easily result in sharp price spikes, especially in the next few months," it said.
"Market participants are keeping a close eye on headlines from South Africa. Tensions are increasing. Given the more acute upside risks to platinum in the near term, palladium's relative strength versus platinum should not be taken for granted." (editing by Jane Baird)

Why Lululemon Is a Buy Right Now: Macke

Sports apparel maker Lululemon (LULU) reported earnings last night. Here's the quick and dirty on the quarter: EPS came in at 33-cents including the endlessly discussed see-through pants debacle. Revenue was good, margins were fine, and guidance was decent.
All was basically well until they got to the kicker: CEO Christine Day is stepping down as soon as a replacement is found. The news surprised the Street and sent shares down 15% from all-time highs at $82.50. The stock dipped below $70 a share in early trading.
Estimates are dropping and there's blood in the Streets. The shares seem expensive and bears are licking their chops. I'm on the other side of the trade planning to add shares anywhere under $70.
That said the product remains the same, the opportunities are huge and untapped, and LULU is replacing a CEO who presided over several operational snafus over the last 12 months. Ms. Day had taken LULU as far as she could in terms of expanding it as a bricks and mortar concept. Now the company needs an operator to execute international expansion plans and improve distribution.
Related: How Much Blame Should a CEO Shoulder for a Recall?
There may be more roaches in the kitchen for LULU. Maybe the numbers aren't all they seem or Day was fired for causes the company isn't addressing. I'm willing to give them the benefit of the doubt largely because of how well it handled the pants recall recently and the overall brand since LULU went public.
The image of Lulu as a retailer is wrong. Direct to consumer revenue (read: online and some catalog) rose 40% year-over-year and now accounts for 15.6% of total sales compared to 55% last year.
Lululemon is still regarded as a women's wear company, particularly on the East Coast. The truth is Lulu makes the best workout gear a man can buy. It's more comfortable, looks better and lasts longer than anything from Nike (NKE), Under Armour (UA), or anything else on the market.
Downgrades be damned, I'm using the sell-off as a buying opportunity. THIS IS NOT A RECOMMENDATION but I intend to initiate a position in LULU after the open anywhere under $70 a share. My stop is under $63 (10%).
Feel free to take the other side.

Wall St. down as Bank of Japan decision fuels stimulus worries

By Angela Moon and Alison Griswold
NEW YORK (Reuters) - Stocks fell on Tuesday after the Bank of Japan chose not to take stimulus measures and increased investors' worries about the eventual decline in central bank support that has supported equities' rally.
Losses were felt broadly across sectors, with the financial (.SPSY) and materials (.SPLRCM) groups leading the way down, falling more than 1 percent each. The defensive utilities sector (.SPLRCU) fared relatively better, down just 0.2 percent.
The lack of further action from BOJ rattled investors across asset classes. U.S. Treasury yields hit fresh 14-month highs, the yen rose sharply and equities dropped globally.
The reaction highlighted worries about what will happen when the global stimulus programs eventually go away. Investors have also become more nervous in recent weeks over when the U.S. Federal Reserve may slow its measures, which have been a significant driver of this year's stock market rally.
"Clearly this is attributable to the Bank of Japan and them not following through on what everybody anticipates as a blank check in aiding banks in particular with their policies," said Joseph Greco, managing director at Meridian Equity Partners in New York.
He said investors must stop seeing bad economic news as good for the stock market because it means prolonged stimulus efforts by the Fed. "We're starting to see people coming to grips with that. We need good news to be good news for the market," Greco said.
Data showed U.S. wholesale inventories rose modestly in April, the latest suggestion that restocking will not be much of a boost to economic growth in the second quarter. Market reaction was muted.
The Dow Jones industrial average (.DJI) was down 80.45 points, or 0.53 percent, at 15,158.14. The Standard & Poor's 500 Index (.SPX) was down 10.86 points, or 0.66 percent, at 1,631.95. The Nasdaq Composite Index (.IXIC) was down 21.97 points, or 0.63 percent, at 3,451.80.
In the first two hours of trading, decliners had the upper hand, beating advancers on the New York Stock Exchange by 2,564 to 343. On the Nasdaq, decliners were beating advancers 1,775 to 529.
The Bank of Japan in April announced a $1.4 trillion stimulus program, and while the central bank on Tuesday left the door open to taking fresh steps to calm markets if borrowing costs spike again, it did not appear to assuage investors.
The S&P 500 is up more than 15 percent since the start of the year, but markets have been bumpier since comments from Fed Chairman Ben Bernanke last month sparked uncertainty over the central bank's timeline for slowing its $85 billion a month bond purchase program.
Some investors are starting to prepare for the Fed to cool the pace of its bond buys by the end of the year.
Among individual companies, shares of Lululemon Athletica (LULU.O) (LLL.TO) slumped after the company's chief executive said she will step down. The stock was down more than 17 percent at $68.05.
SoftBank Corp (9984.T) said it agreed with Sprint Nextel Corp (S.N) to raise its offer for the U.S. wireless carrier to $21.6 billion from $20.1 billion. Sprint was up 2.2 percent at $7.34.
Dole Food Company Inc (DOLE.N) surged more than 21 percent to $12.37 after the company received an unsolicited buyout offer from its chief executive.
(Reporting by Angela Moon)

U.S. hiring outlook positive; global employers uncertain: report

By Madeline Will
NEW YORK (Reuters) - More employers in the United States plan to hire workers next quarter than in any period since the fourth quarter of 2008, according to a survey by Manpower Group (MAN.N), the global employment services giant.
Manpower's quarterly survey released Tuesday found most employers around the globe were uncertain about hiring more workers in the July through September period given tepid consumer demand. There were certain bright spots, however, with employers in the United States and some parts of Europe feeling cautiously optimistic.
"If you look at it from a global perspective, the overall feeling is that there are definitely challenges," said Manpower's CEO Jeff Joerres. But he said employers are more optimistic than in past months about global economic prospects.
Manpower, which surveyed 42 economies, found that employers in 31 countries and territories planned to hire next quarter. Hiring intentions strengthened in 17 economies, including Spain, Greece and the United States, compared to the previous quarter.
Hiring intentions remained unchanged in four economies and weakened in 21, including France, China and India.
The United States added 175,000 jobs last month after adding only 149,000 in April, the Labor Department said on Friday. The unemployment rate rose a tenth of a point to 7.6 percent.
The United States' net employment outlook ticked forward one point from the previous quarter to a seasonally adjusted plus-12, the report said. The outlook measures the difference between those adding jobs and those cutting jobs. Manpower's index is a directional indicator rather than a predictor of the size of job gains.
For the second consecutive quarter, employers in all 50 states, Washington, D.C. and Puerto Rico have reported positive hiring plans, Manpower said.
Joerres said U.S. companies still have concerns about what will happen next in areas like Europe or China, about healthcare costs and general uncertainty.
"In the past, that would shock the system," he said. "Today, we're used to shocks."
More than one in four employers in the U.S. construction sector have said they will hire in the quarter beginning in July, the strongest outlook since before the global recession. This is a positive sign for the housing market, Joerres said.
In Europe, hiring has stalled with growing uncertainties among employers, the report said. But Joerres said the region has had some positive indicators, including in Greece, which has seen its still-negative hiring outlook improve for four consecutive quarters.
"We're not saying Europe is out of the woods," Joerres said. "It's that Europe is still moving and driving towards an overall solution rather than falling off the cliff, and that's positive for the rest of the world."
Hiring outlooks weakened in most of the Asia Pacific region, most significantly in India, which reported the weakest expectations since joining Manpower's survey eight years ago.
While none of the Indian employers surveyed by Manpower said they intended to reduce their workforce this quarter, the hiring expectations dropped 6 points from the previous quarter and 28 points from a year earlier to a plus-18. Joerres said the decline is partly due to the slowdown of India's business process outsourcing industry, which has matured.
"The Indias and Chinas of the world are in some ways less emerging and more mature, and are feeling some of the illnesses of a mature economy," Joerres said.
Sixty-one percent of Indian employers have also struggled to find suitable employees, telling Manpower that recent graduates of India's business and engineering schools often lack necessary hard and soft skills.
The talent shortage has been an issue worldwide, with a lack of skilled trades workers topping the list. Thirty-five percent of employers reported difficulties in filling positions due to a talent shortage, the highest proportion since 2007.
Employers in the United States and Germany, however, reported a smaller talent shortage this year than last year, with the lowest percentages reported in both countries since 2010.
Thirty-nine percent of U.S. employers reported difficulties in filling positions, 10 percentage points less than last year, and 35 percent of German employers, 7 percentage points less.
(Reporting by Madeline Will; Editing by Chizu Nomiyama)

Apple unveils music streaming service, revamps iOS

By Poornima Gupta and Edwin Chan
SAN FRANCISCO (Reuters) - Apple Inc unveiled a music streaming service called iTunes Radio and new mobile software on Monday, in the biggest redesign of its operating system since the original iPhone was introduced in 2007.
The new software, designated iOS 7 and announced at Apple's annual developers' conference in San Francisco, sports a streamlined design, employs translucency and a fresh palette of colors, and features animation in apps.
Apple's iTunes Radio, one of the more highly anticipated features of the new iOS 7, comes free, supported by ads across many devices including iPhones, iPads and the Apple TV.
Much like rival Pandora Media Inc's Internet radio, the service - which launches in the fall, months after Google Inc's "All Access" on-demand competitor debuted - allows listeners to customize their own radio stations by genre, skip songs multiple times, or just tune in to some 200 featured stations.
Apple has been talking to record companies for the past year in hopes of getting the service off the ground, seen as crucial to retaining users as music consumption grows alongside smartphone use. It will also come free of ads for customers who subscribe to Match, another Apple music service.
Executives also showed off a new line of Macbook Air computers. They gave a sneak peek at a cylindrical Mac Pro desktop, in a rare preview of upcoming hardware. And, in a continuation of efforts over the past year to wean itself off arch-rival Google's services such as maps, Apple's updated Siri voice software on the iPhone will turn to Microsoft Corp's less-popular Bing as its default in-app search engine.
Previously, Siri handled Web search queries by asking users if they would like to access Google, which dominates Internet searches. With iOS 7 however, users can still choose to ask specifically for Google results.
The latest Macs will run a new computer operating system christened OSX Mavericks - named after a famous California surfing spot and a departure from Apple's penchant for naming software after big cats like Mountain Lion.
The real makeover was reserved for iOS 7, a smartphone and tablet platform overhauled by resident creative honcho, Jonathan Ive. It comes with a new edge-to-edge look that uses translucency to highlight underlying content, new typefaces, and new icons. Apple plans to release iOS 7 in the fall.
It will support multitasking for all apps.
"It's the biggest change to iOS since the iPhone," said Chief Executive Tim Cook.
Robert Brunner, founder of design consultancy Ammunition and a former design head at Apple, said it was past time Apple changed the look of software that had become "busier and busier" visually and, to some degree, busier and busier functionally.
"The iOS look and feel had become long in the tooth," said Brunner, who hired Ive while he was at Apple. "So what Jony has done is really gone in and cleaned it up. He made it feel more sophisticated, more modern."
"It seems like quite a lot to have done in a relatively short period of time," said Brunner, who uses an iPhone.
The conference, whose tickets sold out in just over a minute after they went on sale in April, comes as Samsung Electronics Co Ltd solidified its lead in the smartphone market in the first quarter with a 33 percent share followed by Apple with 18 percent, according to market research firm IDC.
Cook is under pressure to show that the company that created the smartphone and tablet markets is not slowing as deep-pocketed competitors like Samsung and Google encroach on its market.
Investor concerns center on whether Apple will be able to come up with more groundbreaking products as the smartphone and tablet markets get more crowded. In April, Apple reported its first quarterly profit decline in more than a decade.
Marketing chief Phil Schiller offered the audience a sneak peek at Apple's upcoming new Mac Pro, its top-of-the-line computer. The computer has a sleek cylindrical chassis that he said will feature several times the processing and memory speed and power of the previous generation.
It will be released later this year and be assembled in the United States, Schiller said.
"Can't innovate any more, my ass," Schiller said as he showed off the new Mac Pro. "This is a machine unlike anything we've ever made."
Apple's stock has fallen 37 percent after touching a high of $705 in September as competition in the smartphone market escalated. Some investors believe the company is struggling to come up with original new products since the death of cofounder and former CEO Steve Jobs in 2011.
The redesigned iOS comes after Cook ousted former chief mobile software architect and 15-year Apple veteran Scott Forstall last November, in a sweeping management move that also gave Ive more control of the look-and-feel of both hardware and software.
Some industry experts have criticized Apple's mobile operating software, which has retained its general look and feel since its inception, for looking somewhat dated.
"The iPhone was the first real smartphone for a lot of people so it had to be really basic," said Phil Libin, CEO of Evernote, which makes note-taking software for smartphones. "Now the training-wheels are starting to come off a little bit."
Among some of the other features introduced was "activation lock," an anti-theft security enhancement that prevents unauthorized resetting of the device.
Cook told the audience of developers that Apple's App Store now has 900,000 apps that have been downloaded a total of 50 billion times.
Apple's stock dipped 0.66 percent to close at $438.89 on the Nasdaq.
(Additional reporting and writing by Noel Randewich, Editing by Andre Grenon, Richard Chang, Steve Orlofsky and Matt Driskill)

Jim Willie: Next Scandal to Break is Leasing & Theft of 20,000 Tons of Allocated Gold!

empty vaultThe Gold manipulation will continue until the Gold market is totally broken, until the big banks that control it are totally broken, or until the USDollar & USTBond structures are totally broken.  Personally, I am encouraged by the mid-April events to crash the Gold price. It has resulted in exposure of the criminal element, in exposure of the COMEX & LBMA as being desperately low in Gold inventory, in exposure of the great difference between paper Gold price (futures contracts) and physical Gold price (actual high volume sales), and in tremendous motivation by the very wealthy to reclaim their Gold in Allocated Gold Accounts. The bankers have brought to the table a Prima Facie case that their corrupt Gold market attack was motivated by having no Gold for contract delivery.
The Jackass forecast is for the next great scandal to be centered upon the Allocated Gold Account thefts, which my excellent source informs me involves the improper usage, leasing, and theft of over 20,000 metric tons of Gold bullion. The German Government formal request for repatriation is the tip of the iceberg.  It is a contest, a race, between the breakdown of the USD/USTBond structure and the COMEX & LMBA Gold market structure. The former is in the process of being rejected by the Eastern nations, now organized. The latter is in the process of being recognized as an empty arena with no Gold in inventory.

From Fabrice Ristori, GoldBroker:
“In view of the on-going manipulation in the gold and silver paper markets, I have decided to do a multi-interview with three prominent voices in the precious metal markets, and ask them exactly the same questions about gold and silver manipulation : Chris Powell (GATA), Egon Von Greyerz (Goldswitzerland.com) and Jim Willie (Goldenjackass.com).
Investors (in the know about the manipulation) have a few essential questions, so I tried to focus on some that go straight to the point.
I have already explained, in my latest Market Report, that there is a disconnection going on between the paper and the physical markets but, this time, with these three interviews, I wanted to share the views of three key analysts who do recognize that gold and silver paper prices have been manipulated for years.
After Chris Powell, here is the second interview with Jim Willie of GoldenJackass.com.
The Golden Jackass is designed to inform and instruct in the complex ways of gold, currencies, bonds, interest rates, stocks, commodities, futures, derivatives, and the world economy, with no respect shown for inept bankers and economists, whose policies and practices contribute toward the slow motion degradation, if not destruction, of the financial world.”
Fabrice Drouin Ristori

Fabrice Drouin RistoriMr Willie, thanks for accepting this interviewHow long can the manipulation of the precious metal markets last ?
Jim WillieRather than focusing on the time spectrum, think instead on the event spectrum. Focus not on a sequence of time, but instead on an event schedule in a chain. Systems are sustained by the corrupt players, institutions, and policies. The Gold manipulation will continue until the Gold market is totally broken, until the big banks that control it are totally broken, or until the USDollar & USTBond structures are totally broken. Personally, I am encouraged by the mid-April events to crash the Gold price. It has resulted in exposure of the criminal element, in exposure of the COMEX & LBMA as being desperately low in Gold inventory, in exposure of the great difference between paper Gold price (futures contracts) and physical Gold price (actual high volume sales), and in tremendous motivation by the very wealthy to reclaim their Gold in Allocated Gold Accounts. The bankers have brought to the table a Prima Facie case that their corrupt Gold market attack was motivated by having no Gold for contract delivery. The Jackass forecast is for the next great scandal to be centered upon the Allocated Gold Account thefts, which my excellent source informs me involves the improper usage, leasing, and theft of over 20,000 metric tons of Gold bullion. The German Government formal request for repatriation is the tip of the iceberg. The banks will not break first since far too protected. It is a contest, a race, between the breakdown of the USD/USTBond structure and the COMEX & LMBA Gold market structure. The former is in the process of being rejected by the Eastern nations, now organized. The latter is in the process of being recognized as an empty arena with no Gold in inventory.

FDR: What will put an end to it ? Physical demand ? Geopolitical event (BRICS) ?   
JW: My strong suspicion is that the COMEX & LMBA corrupt schemes will continue ad nauseum, despite the growing recognition of their corruption and empty inventory. Those in control of the Gold market are not subject to regulatory rules or legal prosecution, operating as essential parts of the sprawling fascist system. So they will continue. However, the end will come with the global isolation and then rejection of the USDollar in trade settlement. The recent G20 Meeting in Turkey brought attention to the bypass of the USD/USTBond system. The Eastern nations are working fast to create an alternative system, frustrated and angry at the abuses and corruption in the open. The Jackass forecast is for the new Gold Trade Standard to come, which will arrive within several months. It will not create a standard for banking and currency, as in SWIFT rules and FOREX rules. It will involve a new BRICS Development Fund, which will transform into a USTBond processing plant, converting the toxic USGovt debt into Gold bars. The trade settlement will work toward Gold payments, with an important intermediary function provided by Turkey. When crude oil abolishes the USDollar as the standard payment vehicle, the game is over. The G7 Meeting hastily called in emergency session in the first week of May demonstrated that the Western nations have noticed that time is almost up completely. The death of the Petro-Dollar defacto standard will coincide with the death of the USDollar global reserve currency. The end is being driven by China & Russia working within the BRICS, the G20, and the Shanghai Coop Organization.

FDR: What will be the signs proving that the manipulation is ending ?
JW: When the COMEX & LBMA are turned into an empty arena, with very few players and very little activity and a storm of controversy about contract fraud with growing lists of lawsuit cases. When the COMEX shows no posted Gold price at all, amidst broad controversy as to why, an implicit invitation for lawsuits over contract fraud and cases to recover past losses by investors. When the COMEX official Gold price shows not a small discrepancy with the actual physical Gold price from known publicized transactions at the major trading centers, but rather a gigantic and embarrassing discrepancy. My term is the great price spread between the paper Gold price and the physical Gold price. It is growing, since very tiny supply is available at the paper price, and high premiums are required at the physical price. Shortages will become a major problem, a desired problem for the gold community. When the spread widens further, the Jackass forecast is for the debate to enter the room on whether the COMEX price is an anachronism, an artifact from a corrupt era, a recognized den of thieves under financial press scrutiny, a point in fact as evidence for legal court cases (lawsuit damage or criminal prosecution). Expect court cases long before regulatory action.

FDR: Do you anticipate an overnight ending of the manipulation or a progressive process ?
JW: A progressive degeneration is far more the case, the pathogenesis of a cancerous organism. The Jackass expects the manipulation to continue far beyond what most people anticipate. The manipulation will soon become absurd. Another Gold market ambush attack is likely soon. When the paper Gold price is $600 to $800 per ounce lower in the paper COMEX price, the banking authorities will continue their charade, but have a difficult time maintaining credibility or a straight face before public questioning of Congressional grilling. Remember their motive, which in the Jackass opinion is to escape the clutches of their mountain of short Gold futures contracts by means of a declared Force Majeure. The true Gold price might be several $100s higher than the COMEX price, but the banking cartel does not care. They wish to escape the consequences of the short Gold futures contracts with a legally recognized COMEX Gold price, even though corrupt. If the courts recognize and endorse the corrupt lower paper Gold price presented by the COMEX, then the big bankers can legally escape from catastrophic losses and slither like snakes into the forests of Paraguay. That is their goal, and they do not care if the public laughs at the process, or if the financial analysts harshly criticize them. They care about the legal escape route offered by Force Majeure, then establishment of a fascist police state.

FDR: Is the gold/silver paper spot price still relevant to value physical gold and silver ?
JW: Not at all. It is a guideline which is becoming more and more ignored. Rather the spot price is becoming more understood as the starting point, the reference point, in a negotiated price. That price will vary in different parts of the world, already the case. The remarkable fact to the Jackass is that premiums on physical Gold purchases (whether bars, coins, talens) is coming down from the rising levels seen in mid-April right after the Gold market smash assault attack with a flood of paper rubbish slamming the market. The big challenge to the banker cartel will be to bring Gold to market in order to meet the growing demand. They must avoid grand and even grotesque shortages. The bankers will be drained. Recall back in March through July, the London banks were drained of 5000 metric tons by angry motivated Asian entities. The event was kept out of the news, but not out of the Hat Trick Letter. If price is to be kept stable, then supply must meet the heightened demand. The banker cartel has two choices: to continue to bring supply to market and be drained dry, or to refuse to bring supply to market and watch the physical price premium grow toward $1000 per ounce amidst well advertised shortages and an empty COMEX.

FDR: What direct consequences would a free gold/silver market have on people worldwide — not investors, people in general ?
JW: The consequences could fill an entire book. But the Jackass would write the chapter headings as follows. People could save in a true sense with a proper legitimate store of value, in instruments which do not represent a counter-party risk like in debt securities or gold certificate holders. People could be protected from central bank actions that exhibit extremely destructive policies toward the debasement of money itself. People could be assured that their life savings could not be leased, assigned, subjugated, hypothecated, or otherwise stolen by banking and government officials. People could build more effective barriers from the ravages of price inflation. People would not have to constantly search for investment vehicles that act as inflation hedges from the endorsed ruin of money. People could be protected from banker thefts, hidden and overt.

Asian shares hit 2013 lows; Nikkei slips as BOJ disappoints

By Chikako Mogi
TOKYO (Reuters) - The U.S. dollar fell against the yen and Japanese stocks sagged after the Bank of Japan held off from taking fresh steps to curb bond market volatility, while Asian shares hit 2013 lows amid worries over slowing growth in China and continued uncertainty on how long the U.S. stimulus will remain in place.
European stock markets are likely to follow suit, with financial spreadbetters predicting London's FTSE 100 (.FTSE), Paris's CAC-40 (.FCHI) and Frankfurt's DAX (.GDAXI) will open down 0.4 percent. A 0.1 percent drop in U.S. stock futures also pointed to a cautious Wall Street start. (.L)(.EU)(.N)
The BOJ kept monetary policy steady and refrained from taking new measures to calm bond market turbulence, possibly judging that the recent market turbulence has yet to pose severe damage to the economy's recovery prospects.
The BOJ's unprecedented bond-buying program launched in April triggered sharp swings in the Japanese government bond market and led to a spike in yields. The Nikkei stock average has also come under heavy selling since May 23 and slumped from 5-1/2-year highs while the dollar had briefly lost all gains made on the yen since the April 4 announcement.
The decision disappointed some market players who had expected fresh steps from the BOJ in response to the elevated market volatility, sending the Nikkei (.N225) skidding 1.5 percent at the close and the dollar 0.6 percent lower to 98.18 yen. (.T) (FRX/)
"The 'zero' response could be taken as the BOJ allowing the market volatility to continue, and highlights its insensitivity to market sentiment and price actions. This is very regrettable especially since the policy the BOJ is taking is significant and appropriate," said Shogo Fujita, chief Japan bond strategist at Bank of America Merrill Lynch.
MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> tumbled 1.1 percent to a fresh 6-1/2-month low for a fifth straight day of declines, which would mark its longest losing streak in nearly three months.
The Indian rupee hit a record low, with the absence of central bank intervention prompting importers to rush to cover future dollar needs, while traders also cited the drop in other Asian currencies as hurting sentiment. (EMRG/FRX).
Solid U.S. jobs data and the Standard & Poor's raising the rating outlook of the U.S. to stable from negative on the back of an improved economy kept alive speculation about an eventual softening of the Fed's strong commitment to quantitative easing even as few saw any imminent policy shift.
Global equity and commodity markets have been jolted recently by the Fed stimulus concerns, slowing growth in China, a deep slump in Europe and wild swings in Japanese stocks, bonds and the yen.
Hong Kong shares tested a seven-month low, with local developers and Chinese cyclical names leading index losses as investors took risk off the table ahead of a holiday on Wednesday. Chinese markets are closed from Monday to Wednesday.
"People are cutting risk ahead of the holiday and unsure about how mainland markets will react when they reopen on Thursday after the soft data over the weekend," said Kelvin Wong, Julius Baer's China and Hong Kong equities analyst.
Australian shares (.AXJO) bucked the trend to rise 0.4 percent, while South Korean shares (.KS11) fell 0.6 percent.
Analysts said the jitters over the Fed's outlook underscores some of the drawbacks of the quantitative easing policy.
"It shows the cost of the QE policy, which boosts liquidity and exacerbates moves in financial markets, while having a very slow follow through in the real economy," said Adrian Foster, head of financial markets research for Asia-Pacific at Rabobank International in Hong Kong.
Before the recent setback, Japanese equities enjoyed a record-breaking rally and the yen tumbled to multi-year lows against the dollar on the back of Prime Minister Shinzo Abe's sweeping growth-spurring measures.
Even after this session's pullback, market players largely maintain their view for the dollar's longer-term uptrend.
The dollar reached a high of 99.29 yen overnight after the S&P's rating move reduced the risk of the world's biggest economy losing its AA-plus rating. Last month, the U.S. currency hit a 4-1/2-year peak of 103.74 against the yen, underpinned by the BOJ's massive stimulus.
"We are USD-bullish due to the ongoing Fed tapering debate which has steepened the U.S. yield curve ... Long-term capital flows are now directed towards U.S. corporates, which is USD-positive," Morgan Stanley said in a research note.
Worries about slackening demand from the world's leading consumer China have weighed on the commodity-sensitive Australian dollar, which fell to a 20-month low of $0.9393 on Monday. The Aussie was at $0.9404 on Tuesday.
U.S. crude futures eased 0.2 percent to $95.63 a barrel and Brent fell 0.3 percent to $103.65. (O/R)
Spot gold was down 0.2 percent at $1,383.56 an ounce, as the S&P's move on the U.S. credit outlook hurt bullion's safe-haven appeal.
(Additional reporting by Clement Tan in Hong Kong; Editing by Shri Navaratnam)

S&P revises U.S. credit outlook to 'stable' from negative

By David Gaffen and Daniel Bases
NEW YORK (Reuters) - Standard & Poor's on Monday removed the near-term threat of another credit rating downgrade for the United States by revising its outlook to stable from negative, citing an improved economic and fiscal outlook.
The change effectively means there is less than a one-third chance of a downgrade in the next two years.
S&P said a key factor to its revision in the U.S. rating outlook was the agreement reached by the U.S. Congress to avoid the 'fiscal cliff', which had threatened some $600 billion in automatic tax increases and spending cuts.
S&P cut the U.S. sovereign credit rating in August 2011 to AA-plus from the highly coveted top grade of AAA, citing political brinkmanship and gridlock in Washington that delayed an otherwise routine raising of the nation's debt ceiling.
"We did get some movement from both sides and we think that is encouraging, at least to the point of convincing us that the dynamics in Washington are not likely to get substantially worse in the medium term," Nikola Swann, S&P's lead sovereign analyst for the United States, said in a webcast with reporters.
Moody's Investors Service and Fitch Ratings give the U.S. credit their highest rating but both have negative outlooks.
The U.S. Treasury Department, which had argued that S&P's initial downgrade was misguided, welcomed the latest action. "We're pleased that they are recognizing the progress in the U.S. economy and fiscal results," Treasury Under Secretary Mary Miller told reporters.
S&P said it does not expect the debate later in 2013 regarding a raising of the debt ceiling to result in "a sudden unplanned contraction in current spending - which could be disruptive - let alone debt service."
The current rating already factors in a "lesser" ability of U.S. elected officials to move quickly and effectively to deal with public finance pressures.
S&P estimates the government will need to authorize a further increase in the amount of debt it can issue near the end of the fiscal year in September.
"We think that this (debate) is likely to not be any more dramatic than was the equivalent vote in August of 2011," said Swann.
The non-partisan Congressional Budget Office announced on May 14 that the U.S. federal budget deficit is shrinking faster than previously thought.
The CBO cut the deficit forecast for the current fiscal year by $203 billion from estimates made in February of $642 billion, making it the smallest budget shortfall since 2008.
The deal struck by Congress on New Year's Day 2013 meant much of the threatened tax hikes did not come to fruition.
"The news is better on the tax side," John Chambers, chairman of S&P's sovereign ratings committee, said on the webcast.
Chambers said the boost in tax revenues was due to investors taking profits on investments sooner than they might otherwise have done because of uncertainty over whether tax rates on capital gains might rise if no agreement were to be reached. The tax rates by and large did not rise in the end.
Another factor helping the U.S. fiscal position were the automatic spending cuts, known as sequestration. They were meant to be so severe that Republics and Democrats would be forced to reach an agreement on a budget to avoid them. They failed, resulting in cuts going into effect on March 1.
"In the meantime we think that policymakers and elected official have a bit more time to get the fiscal house in order," said Chambers.
S&P said it expects the U.S. debt-to-GDP ratio to stabilize around 84 percent over the next three to five years. Economic growth is expected in the 2 to 3 percent range, on average, over the same period.
Financial market reaction to S&P's decision was muted.
Initially, the news led to gains in U.S. stock prices, although they proved short-lived. The U.S. dollar added value against the euro and yen, extending gains already in place from European and Asian trading hours. Prices for U.S. Treasuries fell and in the case of the 30-year bond, the yield hit a 14-month high before receding.
"The strong stock market has created tax revenues, which is certainly positive, and the economy continues a slow but steady growth path, so while we continue to print money, the overall debt numbers have stabilized and I think that's what the S&P is reflecting," said Tim Ghriskey, chief investment officer at Solaris Group in Bedford Hills, New York.
Fitch affirmed its AAA rating in January, effectively stepping back from its threat to downgrade the U.S. credit after a deal was reached to avoid the fiscal cliff.
Moody's has maintained that it is looking for improvement in the ratio of the United States' debt to gross domestic product and setting a downward trajectory on the overall level of debt.
"Few people actually take notice of the rating on the government's debt. The change makes sense, though, since the trajectory of the deficit has improved," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.
"Of course, S&P should not have downgraded the debt to begin with. If the credit rating is supposed to assess the probability of default, it's silly to give the U.S. government anything but a AAA," said Jacobsen.
(Reporting by David Gaffen; Writing by Daniel Bases; Additional reporting by Ellen Freilich and Alison Griswold in New York and Margaret Chadbourn in Washington, DC; Editing by Diane Craft, Clive McKeef and James Dalgleish)

Egypt will not give up ‘‘a single drop of water’’… Ethiopia is building is an ‘‘act of defiance’’…

‘No Nile, no Egypt’, Cairo warns over Ethiopia dam
Egypt’s foreign minister, vowing not to give up “a single drop of water from the Nile”, said on Sunday he would go to Addis Ababa to discuss a giant dam that Ethiopia has begun building in defiance of Cairo’s objections.
Egypt’s PM says Ethiopian Nile dam “act of defiance,” vows Egypt will not cede a drop of water
Egypt is facing the prospect of a worsening water shortage when the so-called Grand Ethiopian Renaissance Dam is completed.
Experts estimate that Egypt could lose as much as 20 percent of its Nile water in the three to five years needed for Ethiopia to fill a massive planned reservoir.
The Grand Ethiopian Renaissance Dam, formerly known as the Millennium Dam and sometimes referred to as Hidase Dam, is an under construction gravity dam on the Blue Nile River about 40 km (25 mi) east of Sudan in the Benishangul-Gumuz Region ofEthiopia. At 6,000 MW, the dam will be the largest hydroelectric power plant in Africa when completed, as well as the 13th or 14th largest in the world sharing the spot with Krasnoyarskaya. The reservoir at 63 billion cubic meters will be one of the continent’s largest. The potential impacts of the dam have been the source of regional controversy. The Government of Egypt, a country who relies heavily on the waters of the Nile, protests the dam and its political leaders have discussed methods to sabotage it

Fear Is Coming Into The Markets! The Stock Market Is Broadly Expensive While Hedge Funds And Small Investors Pouring Into Stocks – Highest Level Since 2007. And Risk Appetite Index Suddenly Taking A Dramatic Hit

Hedge Funds Haven’t Owned This Much Of The Stock Market Since Right Before The Crash In 2008
All bulled up.
Two interesting stats on hedge fund exposure to the market via BofA Merrill Lynch analysts Stephen Suttmeier, Jue Xiong, and MacNeil Curry:
  1. In the first quarter of 2013, net exposure (the difference between long and short positions in stocks) rose to match the previous peak (made in the second quarter of 2007).
  2. The percentage of the stock market (specifically, the Russell 2000 float) owned by hedge funds is now the highest since the second quarter of 2008.
In their Hedge Fund Quarterly Report, the BAML analysts write:
Based on the quarterly 13F filings and estimated short positions of the equity holdings of 895 funds, we estimate that hedge funds reduced cash holdings to the 2Q07 trough of 4.3%, while raising net exposure to the 2Q07 peak of 59% in 1Q13. Meanwhile, dollar notional net exposure rose by 11% to $463bn notional in 1Q13 – setting a new record. The bullish positioning indicates that risk appetite is back to the peak set in 2007.
Read more: http://www.businessinsider.com/hedge-fund-net-exposure-hits-2007-peak-2013-6#ixzz2Vf24s3pl
Highest level since September 2007.
We’re finally starting to see the small investor chase equity returns.  And they’re just in time for it all after a 150% rally.  According to the most recent AAII investor allocation survey individual investors allocated their portfolios towards the highest equity weighting since September 2007.  Meanwhile, bond allocations are close to the post-crisis lows and well off the 2009 highs when fear peaked
Read more: http://pragcap.com/small-investors-start-to-pour-into-stocks#ixzz2Vf2ETYbg

The Stock Market Is Broadly Expensive According To This Uncommon Measure

Dramatic decline in Risk Appetite took place of late!

The Risk Appetite Index took a rather swift decline in the past couple of weeks, declining to the 18% level.   Opinions in the stock, bond, currency and metals markets impacts this index. (Sentiment Trader)
The decline of less than 5% in stocks drove the VIX up nearly 50% in a two week window, another reflection of fear coming into the markets.

Sequestration – It’s Just Beginning
Evidence of the sequester remains elusive. The warning signs that we track closely – initial jobless claims, Richmond Fed, personal income and payrolls – do not show any material deterioration that we can attribute to the sequester. One mystery is why personal income of government workers has not contracted, as fewer hours worked should equal less pay. The answer, BofAML notes, is simple - it’s just beginning…

Close to a million federal employees have been told that they will be furloughed for several days this year, but the number that has actually started to take furlough days is quite low.


Price of Lunch with Warren Buffett Crashes

Are people getting sick of Buffett’s crony capitalist spiel?
Chinese Export Fall and Strong Yuan: Bad Times Ahead
Looks like the sun has gone behind the clouds in China for a bit! Not only are the solar panels creating friction between China and the EU, but now it turns out that last month saw Chinese export growth unexpectedly decrease. Imports into China were also in for a decrease as the dropped last month (by 0.3%) to a record low and you’d have to go back to the start of 2012 to get better figures. Although, some might argue that what with the faked trade-surplus figures revealed last month, it’s hardly surprising that figures actually fell last month.
Beijing released figures today that showed that there was a rise of 1% in overseas sales compared with May 2012 (General Administration of Customs). April had shown an increase of a staggering 14.7%. The figures for May are well below any analysts’ forecasts and it’s perhaps revealing that China is trying to get its house in order in the wake of criticism that they had faked their trade surplus. There is always a silver lining in a cloud some might say. The figure for May seems a little more realistic (and easier to swallow for the rest of the world’s economies). For once, we are seeing a true figure regarding Chinese exports. That picture shows the outlook as being pretty depressed. One man’s meat is another man’s poison? I think we can all take a strong Chinese export figure, but only if it is realistic and a true representation. Otherwise, we can lie too, can’t we? Can’t we just!
Unemployment Benefits Cut – Part of Deflation
This is how Deflation operates. The budget cuts are impacting the unemployment benefits which have been cut to the states and how they pass that on will vary. Nevertheless, when the economy turns down after 2015.75 (~Oct 1st 2015) and unemployment continues to rise thanks to cutting mainly state and local government jobs, we begin to create the same trend as we see in Europe. It just takes about a 4 year lag economically as well as in fashion. This is based on official numbers that are doctored. Nevertheless, it is the official number that we are watching that will rise in any event as projected back in 2009.
- – Martin Armstrong
Federal budget cuts are taking a big bite out of the unemployment checks for the long-term jobless.
Precisely how those cuts are being carried out varies by state. Most are enacting an across-the-board reduction for all federal unemployment insurance recipients, but some are ending the program early or slashing benefits only for new enrollees.
And in some states, recipients should brace for an upcoming shock. The places that took the longest to implement the cuts will need to compensate by slicing off a bigger chunk of recipients’ remaining checks.


AWESOME! Dylan Ratigan (rightfully) Loses It On Air

German court case could force euro exit, warns key judge

By Ambrose Evans-Pritchard, The Telegraph
Crucial hearings on the eurozone’s bail-out policies at Germany’s top court this week could set in motion events that force Germany’s withdrawal from the euro, a leading judge has warned.

Udo di Fabio, the constitutional court’s euro expert until last year, said the explosive case on the legality of the European Monetary Union rescue machinery could provoke a showdown between Germany and the European Central Bank (ECB) and ultimately cause the collapse of monetary union.
“In so far as the ECB is acting ‘ultra vires’, and these violations are deemed prolonged and serious, the court must decide whether Germany can remain a member of monetary union on constitutional grounds,” he wrote in a report for the German Foundation for Family Businesses.
“His arguments are dynamite,” said Mats Persson from Open Europe, which is issuing its own legal survey on the case on Monday.

Bread, butter, and food stamp economy

The American economy has developed a deep disconnect between its financial markets and the working and middle class.  The stock market has soared by 138 percent from the low reached in 2009.  Yet very little of this has trickled down to the majority of Americans.  In fact, most Americans actually saw little to negative growth in their net worth over this period.  Even more problematic is the emergence of a permanent working poor in spite of a booming stock market.  Over 47 million Americans are still receiving food stamps on a monthly basis.  Not only has this number remained high, there is now an economy that is building up around servicing the needs of this large constituency.  Why wouldn’t there be a new booming market here?  Nearly one out of every six Americans is on food assistance in the most prosperous country in the world.  Doesn’t exactly go hand and hand with the perception of a record breaking stock market.  Is the US and the current economy developing a permanent under-class of citizens?
The boom in food stamp participation
What is fascinating is that the boom in food stamp usage coincided with the massive rally that started in 2009.  The recession officially ended in the summer of 2009 but take a look at this chart:
food stamp usage
Source:  SNAP
Since the recession ended, we have added over 17 million Americans to the food stamp program.  This was a 56 percent rise during a time that the stock market rose by 138 percent.  Yet a large part of the rise has occurred courtesy of the Federal Reserve allowing banks to borrow for very little and allowing for the same kind of speculation to occur once again that led to the initial financial crisis.  The Fed’s balance sheet currently stands at $3.38 trillion:
Fed balance sheet
The expansion is fascinating because it allowed banks to offload non-performing and sluggish loans and freed up leveraging capabilities so the large financial institutions could go back to speculating in global markets.  American households are still in a process of debt deleveraging.  Yet it is abundantly clear that very little of this freed up money flowed into the working and middle class.  In reality more and more of the wealth in the country is flowing into the hands of a few:
share of net worth
In 1989, 32 percent of all the wealth in the US was held by those in the 0 to 90 percentile of income.  Today it is merely 25 percent.  And the top one percent is holding a much larger share showing that the inequality when it comes to wealth is only getting larger.
Another point to make is that most Americans do not own any sizable amount of stocks or investments.  Most Americans derive whatever net worth they have from housing.  Yet in a low yield environment the Fed has created an incentive for Wall Street to invest in residential real estate again but this time crowding out regular buyers.  Even with that said, the gains in housing pale to what has occurred in the stock market recently:
case shiller and stock market
At the height of annual gains the S&P 500 was going up at an annual rate of more than 60 percent.  This is how the S&P 500 was able to soar by 138 percent just from the recent lows in 2009.  Yet many of these gains have come at the expense of slashing wages, cutting costs, and passing on fewer and fewer of the gains to workers.  Keep in mind many of these large companies and financial institutions required every sort of bailout from the American people yet now, are largely in a position to squeeze them even further.  Corporate welfare.
It is hard to see what will reverse this trend of a shrinking middle class.  Many estimates assume that food stamp usage will remain high for many years to come.  Bread, butter, and food stamps.  At least this recipe seems to work for a boom in the stock market.

An Inconvenient Irony: QE Favors the Rich

feature photo Here's something important. From The Economist:
‘The most recent figures show that the top 10% of households own about 91.4% of outstanding stocks and mutual funds, up from 84.5% in 2001. The richest 1% own almost half of all stock and mutual funds.
‘No surprise then that the recent jump in consumer sentiment recorded by the University of Michigan was led by the better-off; upper-income households (the top third) had a 15 point increase in sentiment, the bottom two-thirds rose just five points.’
Damn! But don't worry. If you're among the rich, you'll get that other 8.6% of stock and mutual fund wealth.
With Ben Bernanke on the case, it's just a matter of time until you have 100% of America's stock market wealth. (Of course, you'll also be turned into a zombie.)
But you're probably wondering: How does that work, again? Simple. Think of it this way: QE and ZIRP are essentially new forms of wealth. Whoever gets this wealth first gets richer. Everybody else gets, relatively, poorer.
Did you get this new money, dear reader? You may have, without realizing it. It feeds corporate profits and equity prices. The new money is not designed to create wealth. It just transfers more resources to rich people.
Small businesses create new jobs and new wealth. But small business can't borrow at today's low rates. They're lucky if they can borrow at all. Instead, almost all the new credit goes to banks, big businesses and the government.
In the normal course of investing, you win some and you lose some. That's what keeps the rich from always getting richer. Wealth goes both ways. But along comes the Bernanke Fed with zero interest-rate lending...and even bad businesses can refinance their mistakes. If they're big enough that is.
So you end up with an economy full of giant, lumbering zombies...protected by the government and nourished by the Fed.
Here's The Wall Street Journal on the subject:
‘Companies add jobs more slowly, even in good times. Investors put less money into new ventures. And, more broadly, Americans start fewer businesses and are less inclined to change jobs or move for new opportunities.
Zombies to the right of us. Zombies to the left of us. Zombies everywhere. And they're getting richer all the time.
Bill Bonner
for The Daily Reckoning Australia

America's Student Loan Racket: Stiffer Debt Bondage Coming

Stephen Lendman
Activist Post

For growing numbers of American youths, higher education is increasingly out of reach. High tuition and fees make it unaffordable. So does a disturbing government/corporate partnership.

Millions of students need financial aid. They're exploited for profit. Providers are enriched. Higher education involves debt entrapment.

Students graduate tens of thousands of dollars in debt. Some post-graduates face burdens up to $100,000. If unpaid after 30 years, it's multiples higher. If default or declare bankruptcy, it's unforgiven. Bondage is permanent until repaid.

Loan providers thrive from defaults. Wages can be garnished. So can unemployment benefits, disability payments, tax refunds, as well as Social Security and other retirement benefits.

A conspiratorial alliance of lenders, guarantors, servicers, and collection companies derive income from debt service and inflated collection fees. College marketing officers, state and federal legislators, and administration officials are complicit with them.

Principle, accrued interest, late payment and collection agency penalties create enormous burdens to repay. Private lenders are exempt from federal fair debt collection requirements. Federal loans have minimal safety net protection.

Lenders operate virtually risk-free. The system is rigged against borrowers. Loans are easy to get. They're tough to service. They're not forgiven. Burdensome debt escalates higher. A vicious circle entraps graduates and dropouts. For many it's permanent.

Once entrapped, escape is impossible. Unless repaid, future lives and careers are impaired. Today's economic crisis exacerbates conditions. Job opportunities are scarce. High-pay/good benefit ones are fast disappearing.

A lost generation threatens. At issue is exploiting ordinary people for profit, transferring maximum wealth to corporate favorites and super-rich elites, as well as thirdworldizing America. A race to the bottom defines it.

What began decades earlier, Obama accelerated. He's beholden to monied interests. He spurns populist ones. He's done so throughout his tenure.

He's waging class war. He's in lockstep with Republicans and most Democrats. He's gutting America's social contract en route to eliminating it altogether.

For millions of higher education aspirants, affordability puts it increasingly out of reach. Others attaining it face onerous debt repayment burdens.

From 1971 - 1989, Robert Stafford was Republican Senator from Vermont. He was considered moderate compared to bipartisan extremists now running things.

In 1988, Congress renamed the Federal Guaranteed Loan program in his name. It did so for his work on higher education. Eligible students in accredited US institutions may apply for Stafford Loan help.

They're federally guaranteed. Lower interest rates are offered. As explained above, repayment is mandatory. Debt bondage on all student loans remains until repaid.

If default or declare bankruptcy, it's unforgiven. It's the only loan obligation mandated this way.

PLUS Loans are offered to parents. They're committed to repay. They're for students enrolled at least half time.

They must be in eligible undergraduate or post-graduate institutions. Currently, fixed 7.9% interest rates are charged. They're from initial disbursement until final loan repayment.

On July 1, Stafford rates will double. PLUS Loan rates will increase. They'll do so unless Congress intervenes. Republicans, most Democrats and Obama agree in principle.

In 2012, bipartisan agreement was reached. It was for one year only. Subsidized Stafford Loan rates remained 3.4%.

At issue now is what follows. The fate of million of students hangs in the balance. Both parties claim they want rates kept from doubling. Rhetoric differs from policy. Republicans control the House.

On May 23, they passed HR 1911: Smarter Solutions for Students Act. Smarter for whom wasn't explained. Not for students for sure. Passage reflects greater debt bondage.

Obama and most Democrats rhetorically distanced themselves from Republicans. Doing so differs from what they support. Both parties largely agree.

Republicans want interest rates tied to 10-year Treasury note yields + 2.5% and 4.5% for Stafford Loans and PLUS loans respectively. They'd be capped at 8.5% and 10.5%.

In December 2008, the Fed cut its overnight federal funds rate to a range of zero - 0.25%. Banks can borrow short-term for virtually nothing.

They can keep doing so by borrowing to repay what's owed. At the same time, the Fed pays interest on required reserve balances. It does so for amounts held at Reserve Banks.

The Fed is privately owned and controlled. Major Wall Street banks do so. Reserve Banks issue stock shares to members. It's conditional of being part of the system.

They can't be sold, traded or pledged for loans. Why bother in today's near-zero rate environment? Banks alone benefit. Dividends are guaranteed. By law, they're 6% annually. It's sure money. It accrues to bottom line profits.

Borrowing for virtually nothing helps maintain them. Republicans wants student loan rates up to 10.5%. Democrats aren't much better. Obama's plan may be worse.

It offers short-term relief only. He's comfortable with much higher long-term costs. Republicans want rates capped.

Obama excludes doing so. He wants market forces setting them. He wants them based on when loans were issued. Eventually rates will rise. From past experience, they could be well into double digits at some point.

With no cap, the sky's the limit. In 1979, the fed funds rate averaged 11.2%. In June 1981, it peaked at 20%. Savers were well compensated. Today they're cheated.

Borrowers were severely penalized. They still are via credit cards, other consumer rates, and student loans. Bipartisan complicity wants them more made more onerous.

Debt entrapment already is policy. It's long-term or permanent. Obligations can't be erased. Raising interest rates exacerbates today's burden.

Regardless of inflation changes, tuition and fees rise annually. Future costs become less affordable. Greater burdens are created. For many students, higher education's out of reach entirely.

Worse still is how few good jobs await graduates. Desired careers become unattainable. Low-pay employment makes debt service and loan repayments harder.

For many, permanent debt bondage is certain. There's no escape. Around 38 million borrowers face loan repayment burdens. About 10% default within two years. Many more do thereafter. Doing so means added penalties.

Last March, student debt topped $1 trillion. Currently it's over $1.1 trillion. It increases by about $3,000 per second. Only home mortgage debt exceeds it. Some economists call it a dangerous bubble. Bursting would impact economic conditions significantly.

The student loan crisis grows increasingly worse. Relief is badly needed. Nothing ahead appears promising. America's ownership society is heartless. Popular interests don't matter. What's ahead looks grim.

Record 23,116,441 households on food stamps… 60 percent of Virginia families are single parent

Record 23,116,441 households on food stamps
The number of American households on food stamps reached a new record high in March, according to new data released by the Agriculture Department.
The March numbers the USDA released Friday reveal 23,116,441 households enrolled in the Supplemental Nutrition Assistance Program (SNAP), or food stamps, each receiving an average monthly benefit of $274.30.
Study: 60 percent of Richmond families are single parent
The number of American households on food stamps reached a new record high in March, according to new data released by the Agriculture Department. The March numbers the USDA released Friday reveal 23,116,441 households enrolled in the Supplemental Nutrition Assistance Program (SNAP), or food stamps, each receiving an average monthly benefit of $274.30.

Royal Mint: Demand Surge Continuing In June After Demand Trebled In April

by GoldCore

Today’s AM fix was USD 1,376.75, EUR 1,041.89 and GBP 887.37 per ounce.
Friday’s AM fix was USD 1,410.00, EUR 1,065.12 and GBP 905.53 per ounce.
Gold fell $33.30 or 2.36% on Friday to $1,378.70/oz and silver slid to a low of $21.56 and finished down 4.89%. Gold was down 0.45% and silver fell 2.75% last week.

Cross Currency Table – (Bloomberg)

Gold is marginally lower in dollars today but has eked out gains in Japanese yen and Australian dollars both of which have fallen. The slightly lower close last week (-0.45%) was bearish technically and could weigh on prices this week.
Sentiment towards gold remains as bearish as we have seen it in many years which is bullish from a contrarian perspective. The weak hands and speculative froth has been taken out of the market as seen in the decline in ETF holdings and COT data.
However, physical demand remains robust internationally as seen in the demand figures coming from refineries and government mints.
Mints from the Perth Mint in Australia to the U.S. Mint, to the Austrian Mint and the Royal Mint in the U.K. continue to report a surge in sales after gold’s recent price falls led to a marked increase in physical demand.
Britain’s Royal Mint, which saw its gold coin sales triple in April, said the surge in demand has continued into June. British people are diversifying into gold due to concerns about the UK property market and the risk of inflation.
As a result of a zero interest-rate environment, many investors and savers in the UK have shown increased interest in gold coins in recent years in order to preserve wealth.
British sovereign and Britannia gold coins are especially attractive given their capital gains tax free status which makes them far more attractive than ETFs and all other forms of gold ownership in the UK.
“Since the dip in the price of gold, the Royal Mint has seen a steep increase in demand for its gold coins which has continued over recent weeks,” Shane Bissett, director of bullion and commemorative coin at the Royal Mint, told Bloomberg.
“An additional attraction for customers based in the UK is that gold coins are VAT free and capital gains tax free”, said Bissett.

Gold in British Pounds, 5 Year – (Bloomberg)

Sterling has lost 50.07% of its value versus gold in the last 5 years of the global debt crisis. The euro has lost 46.3% of its value versus gold during the same period.

Demand for U.S. gold and silver bullion coins remains at “unprecedented” high levels almost two months after the historic sell-off in gold released years of pent-up demand from retail buyers, the head of the U.S. Mint said last week.

Gold Euro’s, 5 Year – (Bloomberg)

Muenze Oesterreich AG, the Austrian mint that makes euro denominated gold and silver coins, expects “quite good business” for gold in the next couple of months on wealth-protection demand due to central banks continuing to print money.
It warned that physical gold is safer then exchange traded funds and pointed out that “private investors in particular have realized that physical gold is perhaps an even safer asset than ETFs.”
The Austrian mint did not see a surge in demand recently but demand remained steady with the mint selling the same amount of ounces from January to May as in the first five months of 2012, Marketing and Sales Director Andrea Lang said in an e-mailed response to questions from Bloomberg.
“We expect quite good business for the next couple of months,” Lang said. “Same good reasons for buying gold as a year ago are still valid. Global stimulus forecasts and effectively negative interest rates are helping gold, as well as the fact that it is seen as a safe haven.”

Precious Metals Bounce, But Rally Seen “Over” as US Fed Tapering Talk Hits Emerging Markets

London Gold Market Report
from Adrian Ash, BullionVault
Mon 10 June, 08:25 EST

Precious Metals Bounce, But Rally Seen “Over” as US Fed Tapering Talk Hits Emerging Markets

The GOLD PRICE rallied from a 1-week low at $1376 per ounce Monday morning in London, edging back up to $1383 as world stock markets rose.

Silver fell within 20¢ of mid-May’s 30-month low, before rallying to $21.80 per ounce.

Commodity prices fell after weaker-than-expected Chinese industrial data. US Treasury bonds also slipped in price once again, nudging interest rates on 10-year debt up to 2.17%.

The gold price “conclusively broke back down through $1400 and stayed there” following Friday’s release of US Non-Farm Payrolls data for May, says the latest daily note from brokers Marex Spectron.

But “the market is well ahead of itself in thinking the Fed will soon pare back on their stimulus,” reckons Danske Bank’s head of fixed-income trading Soeren Moerch, pointing to the slight uptick in the US jobless rate shown in Friday’s official data.

Now at 7.6%, the unemployment rate is well above the 6.5% level previously named by US Federal Reserve chairman Ben Bernanke as key to any review of target interest rates.

“The latest employment news,” says one gold price analyst, “supports our view that the [US Federal Reserve's] asset purchase programme will not start to ‘taper’ until the latter part of this year.”

But Fed officials “are likely to signal at their June policy meeting that they’re on track to begin pulling back their $85-billion-a-month bond-buying program,” writes the Wall Street Journal‘s Jon Hilsenrath – dubbed “Fed wire” for his apparent connections to the US central bank.

“The recent recovery [in the gold price] is over,” Bloomberg today quotes Richard Adcock, technical strategist at London bullion market-maker UBS.

“The next leg of the bear trend is to be seen down to the long-term 50% retracement point at $1303, which we would set as our objective.”

Other analysts point to a trading range with either $1360 or $1375 at the bottom, with a move above $1420 needed “in order to escape the downward trend” according to German refining group Heraeus in a note.

Even before Friday’s jobs data, “News out of India had already weighed on gold,” says Heraeus.

Last week’s import duty rise from 6% to 8% for gold going into India – the world’s No.1 gold-buying nation – in will cut foreign-currency outflows and so help reduce the country’s current account deficit, spokesmen for the Finance Ministry said at the weekend.

“The prospect of lower inflation and [lower] gold imports [is] good news for the Rupee,” agrees Singapore fund manager Samir Arora of Helios Capital.

The Indian Rupee today fell to new all-time lows at worse than 58 per Dollar.

“I think this is panic in the market which is unwarranted,” economic affairs secretary Arvind Mayaram told journalists Monday, pointing to concerns that tighter US policy would hurt investment flows to India.

“[The Fed] have now more than clarified that this [tapering of QE] is not imminent. Neither is it something which will happen quickly.”

“What’s happening today is not India-specific,” says J.P.Morgan’s chief India economist, Sajjid Chinoy, quoted by the Financial Times.

“Emerging markets are bleeding [money] across the board.”

Speculative traders in US futures and options meantime grew their overall bullishness on gold in the week-ending last Tuesday, latest data from regulator the CFTC show – the first such rise in two months.

The so-called “net long” of bullish minus bearish bets held by non-industry players rose by 13% to the equivalent of 204 tonnes – only the 7th week-on-week rise out of 23 weeks so far in 2013.

Compared to New Year, however, the total net long remained below one-third the size. It was less than one-fifth the record levels of summer 2011.

“Silver [positioning] followed the recovery in gold,” says the weekly analysis from Standard Bank in London.

“Unlike for gold, it was an addition to speculative longs that drove the overall improvement…avoiding a push into negative territory which had seemed imminent.”

Adrian Ash

Japan sending soldiers in warships to US for first time for training amid tensions with China

The unprecedented training led by U.S. Marines and sailors starts Tuesday off the San Diego coast. U.S. and Japanese military officials say the exercise will help Japan’s Self-Defense Force operate in stronger coordination with the United States, its main ally, and better respond to crises such as natural disasters.
Now we have both China and Japan sending warships to US.—————
Rising Red tide: China encircles U.S. by sailing warships in American waters
China has been quietly taking steps to encircle the United States by arming western hemisphere states, seeking closer military, economic, and diplomatic ties to U.S. neighbors, and sailing warships into U.S. maritime zones.
The strategy is a Chinese version of what Beijing has charged is a U.S. strategy designed to encircle and “contain” China. It is also directed at countering the Obama administration’s new strategy called the pivot to Asia. The pivot calls for closer economic, diplomatic, and military ties to Asian states that are increasingly concerned about Chinese encroachment throughout that region.
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“It’s another dot that the Chinese will connect to show this significant expanding military cooperation,” said Tai Ming Cheung, an analyst of Chinese and East Asian security affairs and director of the Institute on Global Conflict and Cooperation at the University of California, San Diego.

The troops will practice an amphibious assault on San Clemente Island, a naval training ground off San Diego’s coast, and also conduct a mock beach invasion at Marine Corps Base Camp Pendleton.