Tuesday, May 28, 2013

Central bank support pledges boost shares, dollar

By Richard Hubbard
LONDON (Reuters) - Investors seized on clear signs of policy support from Japanese and European central banks on Tuesday to drive world shares higher, denting appetite for safe-haven German bonds.
The better sentiment also put Wall Street on course for a higher open when trading resumes after Monday's holidays in the major centers. All three major stock indexes ended last week in negative territory for the first time since mid-April. (.N)
Heightened expectations the U.S. central bank could soon taper its stimulus program unleashed turbulence across the markets last week, leaving it to central banks in Japan and Europe to reassure investors their liquidity taps remain open.
"I expect the major markets to test resistance levels of last week as investors are still seeking higher highs and new record levels in the near term, whilst the central banks are continuing their quantitative easing operations," said Tom Robertson, senior trader at Accendo Markets.
Equity markets around the world have traded at their highest levels in years encouraged by cheap funding from the Fed and other central banks. But comments last week by Fed chairman Ben Bernanke suggesting a U.S. recovery could bring a shift in policy have made investors question prospects for further gains.
"We have had a significant move higher and now it's time for taking stock and deciding whether we continue to go higher or we are due a correction," Michael Hewson, Senior Market Analyst at CMC Markets said.
The question is being asked most about the Japanese market, where the Nikkei stock index had reached a 5-1/2-year high before dropping 7.3 percent last Thursday - its largest one-day loss since the March 2011 earthquake and tsunami. (.T)
The Nikkei (.N225) steadied on Tuesday, ending 1.2 percent higher after long-serving board member Ryuzo Miyao said the Bank of Japan would fine-tune market operations to ensure its unprecedented easing campaign is not derailed.
Central bank officials lifted sentiment in Europe, where the broad FTSE Eurofirst 300 index (.FTEU3) rose over 1.3 percent by mid-morning, adding to Monday's 0.3 percent rise. European Central Bank Executive Board member Peter Praet said the ECB could still cut interest rates further to stimulate the economy if needed.
Tuesday's rebound took Germany's DAX (.GDAXI) up 1.1 percent to near recent record highs. In London, the FTSE 100 index (.FTSE) was up 1.67 percent, led by banking stocks.
MSCI's world equity index <.miwd00000pus> had risen 0.3 percent by mid-morning, reversing four days of losses.
SAFETY ABANDONED
Assets seen as safe havens fell, leaving the dollar up 0.7 percent against the Swiss franc at 0.9697 francs. "The yen and Swiss franc have dropped noticeably this morning, essentially because risk assets seem to be stabilising," said Societe Generale currency strategist Alvin Tan.
The euro was down 0.2 percent at $1.2910 against the dollar, trading well within its recent range of $1.28-1.32.
Investors also deserted German government bonds although the talk of an ECB rate cut lent support. The yield on the 10-year bond was down 1 basis point at 1.43 percent.
Commodity markets remain pressured by an uncertain demand outlook after U.S. and Chinese data last week.
The rising dollar also makes some dollar-based commodities more expensive for non-dollar holders. Spot gold was down 1 percent to $1,380.50 an ounce.
However the better tone on equity markets and signs of rising Middle East tension support oil. U.S. crude futures gained 0.7 percent to $94.78 a barrel and Brent rose 1.4 percent to $104 a barrel.
(Additional reporting by Atul Prakash and Anooja Debnath. Editing by Catherine Evans)

J.P. Morgan slashes 2013 metals forecasts

LONDON (MarketWatch) -- Analysts at J.P. Morgan Cazenove on Tuesday lowered the price forecasts for most metals, including cutting the outlook for gold in 2013 to $1,595 an ounce from $1,745 expected previously. In the short term, the analysts slashed the gold outlook 18% to $1,450 in the second quarter, while lowering the 2015 forecast by 5% to $1,650 an ounce. The copper outlook for 2013 was cut 4% to $3.50 a pound, or $7,707 per tonne from $8,032 per tonne expected previously. For silver, the 2013 forecast was cut to $27.89 an ounce from $30.01. Gold for August delivery lost $8.60 to $1,379.20 an ounce in Tuesday's trade, while Silver for July dropped 23 cents to $22.27 on ounce. July copper added 1 cent to $3.31 a pound.

Europe and China Trade Talks End Bitterly

HONG KONG — Trade negotiations between the European Union and China ended on Monday with mutual recriminations. China called on the European Union to refrain from imposing tariffs on solar panels, and the European trade commissioner complained that China was pressuring individual countries to prevent Europe from reaching a consensus.
The European Union accuses Chinese firms of selling solar panels below cost in Europe, a practice known as dumping, and has already proposed antidumping tariffs of nearly 50 percent on Chinese solar panel shipments. That is one of the largest categories of Chinese exports to Europe and worth about $27 billion a year.
But Germany’s economy minister said that his country had informed the European Commission, which is the executive branch of the European Union, that it opposed proceeding with the solar panel tariffs. If a majority of the European Union’s 27-member states oppose tariffs during the current consultation period, then the commission could be forced to abandon the tariffs. But that could risk undermining the commission’s long-term ability to negotiate trade deals on behalf of the bloc.
Zhong Shao, China’s vice minister of commerce and chief international trade representative, denounced the European Commission for not reaching a deal at the talks, which were held in Brussels.
The commission’s plan to impose tariffs on Chinese solar panels starting on June 6, together with the commission’s preparations to begin a similar trade case against Chinese exports of wireless communications gear, “would seriously hurt the Chinese industries and workers concerned and seriously sour the climate on bilateral trade and economic engagement,” he said in a statement.
He added, “Such practices of trade protectionism are not acceptable to China,” and asked that the European Union to delay the tariffs.
European officials have said repeatedly that they face statutory deadlines for actions in trade cases and have little or no discretion to delay action.
The commission has been discussing the tariffs with member governments; Germany, with large exports to China that could be vulnerable to retaliation by Beijing in any broader trade conflict, has been particularly vocal in calling for a negotiated deal.
Karel De Gucht, the European Union’s trade commissioner, issued an unusually blunt complaint late Monday that China was bypassing the European Union’s leaders by going to member governments. Mr. De Gucht, “also made it very clear to the vice minister that he was aware of the pressure being exerted by China on a number of E.U. member states,” said John Clancy, Mr. De Gucht’s spokesman.
Mr. Clancy added, “It is the role of the European Commission to remain independent, to resist any external pressure and to see the ‘big picture’ for the benefit of Europe, its companies and workers based upon the evidence alone.”
The United States has already imposed antidumping and antisubsidy tariffs totaling about 30 percent on Chinese solar panels. The Obama administration has recently decided to seek its own negotiated settlement with China to replace the tariffs. Such a settlement could take the form of setting high minimum prices for Chinese exports to the United States, a ceiling on the volume of exports, or both.
While Washington, Brussels and Beijing are all saying now they want a negotiated settlement, Chinese solar companies and their many local government patrons are divided on what a settlement should look like.
James Kanter contributed reporting from Brussels.

Investors Spread Their Housing Bets

Rising U.S. home prices have sparked a run-up in shares of Lennar Corp., KB Home and Toll Brothers Inc., and cleared the way for the first initial public offerings by home builders since 2004.
Now, some believers in the housing recovery are spreading their bets. They are buying shares in the makers of appliances, building materials and even pickup trucks, as well as real estate sales firms and home-improvement retailers. These investments will reap the rewards of an upsurge in residential construction and home renovation, proponents say, at lower prices than homebuilding shares.
The average price of residential property in 20 large U.S. cities has risen 9.5% since the start of 2012, according to the S&P/Case-Shiller home price indexes. Building permits for single-family houses rose last month to their highest level since May 2008.
Bullish investors expect those trends to continue. They contend an improving economy and historically low mortgage rates will bolster demand for both new and existing homes, while low housing inventory will help push prices higher.
The recovery is in "the very early innings," says Russell Croft, a portfolio manager at Baltimore-based Croft Leominster Inc., which manages about $950 million in assets.
He has ridden the rally in Lennar, but now prefers investments in appliance maker Whirlpool Corp. and Ford Motor Co., whose F-150 pickup truck he says stands to benefit from increased demand for the services of contractors and construction workers. Mr. Croft says he is trying "to find the secondary or tertiary stocks that might be influenced by housing."
He likes the lower valuations of companies outside the homebuilding sector. Ford trades at just 9.9 times projected 12-month earnings, according to FactSet. Whirlpool trades at a 12.4 multiple, despite surging more than 170% since the end of 2011. Mr. Croft says he wishes he had bought more of the Benton Harbor, Mich., company.
The stocks in the Standard & Poor's 500-stock index are trading at 14.4 times profits that Wall Street analysts expect the company to report over the next 12 months, according to FactSet.
By contrast, Lennar now trades at above 20 times projected earnings, while Toll Brothers and KB Home trade at more than 30 times earnings.
To be sure, not everyone is buying the housing recovery. Some fund managers who have ridden the rise in home-related stocks warn that the rally already has played itself out.
Chip Reed, who helps oversee $9 billion in stocks as portfolio manager at Atlanta Capital Investment Managers, has considered selling stakes in paint maker Sherwin-Williams Co. and building-materials distributor Beacon Roofing Supply Inc. that he acquired around the start of 2009. At more than 20 times future earnings, the stocks look overvalued to Mr. Reed. If he sells them, he doubts he would invest proceeds in housing-related companies.
"Because the market is up so much, it's so much harder to find new [housing-related] ideas than it was at the end 2008 or early 2009," Mr. Reed says.
Others see plenty more room to run. Home prices on average are still 28% below their April 2006 peak. Some expect more homeowners to fix up their houses for eventual sale as prices increase.
Three U.S.-listed residential-construction companies have gone public this year, ending a drought of more than eight years for such initial public offerings. Tri Pointe Homes LLC, Taylor Morrison Home Corp. and William Lyon Homes all have traded higher since their debuts.
Home Depot Inc. and Lowe's Cos. each have jumped by about 60% over the past 12 months, while some investors have fanned out into manufacturers of roofing, floorboards, drywall and faucets.
"For years, we've seen no interest in families remodeling their kitchens, adding a new bedroom or putting a new deck out there," says Ragen Stienke, who manages about $3 billion in assets at Dallas-based Westwood Holdings Group. Now, he says, "We're looking for companies that will benefit from homeowners deciding that their home will be worth more in a year or two, so they want to invest in it."
As that changes, Mr. Stienke says he sees more gains ahead for stocks such as plumbing-supplies company Watts Water Technologies Inc. and backyard-decking-systems maker Trex Co.
They aren't the only potential beneficiaries. Ply Gem Holdings Inc., which makes siding, fencing, doors and other housing materials, has risen 12% since its IPO priced late Wednesday above its expected range. Plywood maker Boise Cascade Co. has rallied 39% since its February debut, and also priced above projections.
Mitch Rubin, chief investment officer at New York-based RiverPark Funds, which manages $1.6 billion, expects U.S. home prices and sales volumes to rise back to historical norms.
So Mr. Rubin bought shares of Realogy Holdings Corp., the world's largest franchiser of residential real-estate brokerages, after the company's October initial public offering. Realogy takes a cut of the commissions that brokers operating under the Century 21 and Coldwell Banker brands earn on home sales.
"There are a lot of derivative plays on housing, but this is a super-direct play," Mr. Rubin says, arguing that the shares benefit from both rising prices and transaction volume.
At Brown Advisory, which oversees $33 billion in assets, analyst Kevin O'Keefe has been buying regional-banking stocks such as SunTrust Banks Inc. and Synovus Financial Corp., betting the firms' balance sheets will improve as homes backing loans rise in value. "The housing market is one of the best investible themes out there for 2013 and for 2014 as well," Mr. O'Keefe says.
Write to Jonathan Cheng at jonathan.cheng@wsj.com and Matt Jarzemsky at matthew.jarzemsky@dowjones.com

PR may hold 'mammoth' street protest

PETALING JAYA: PAKATAN RAKYAT is planning a mammoth street protest next for electoral reforms, raising questions among various quarters as to whether such demonstrations would ever end.
Claiming that the people would even want to go beyond protest, Parti Keadilan Rakyat de facto leader, Datuk Seri Anwar Ibrahim hopes that taking to the streets once again would rejuvenate the opposition following its setback in the general election.
PAS deputy president Mohamad Sabu had said about a million people were expected to join the next Bersih rally in protest if Putrajaya did not implement immediate electoral reforms.
He pledged his party's commitment to organising the next Bersih rally, saying it would be necessary if the government did not initiate proper polls reforms before the next general election.
Malaysian Associated Indian Chambers of Commerce and Industry (MAICCI) president Datuk K.K. Eswaran said that as businessmen, the rallies had a negative effect on the community.
Related story: Big spike in new voters before key 1994 Sabah polls, EC tells RCI
"When rallies are held they make it difficult for people to go out and carry on with their daily chores," he said.
"They create congestion, traffic jams and effects restaurant and shopping mall businesses because the public are reluctant to go out."
He said that Malaysia would continue to attract foreign investors because they are drawn by a stable government under the stewardship of Prime Minister Datuk Seri Najib Razak.
"In countries where street protests removed governments they still remain in turmoil. PR must accept the result and start serving the people who elected them."
Related story: 'Buy Chinese last': NGOs blame Red Bean Army
Eswaran said if PR was unhappy with the results their polling agents should not have signed off on the results but instead called for recounts until they were happy with it.
"You cannot have it both ways by accepting the results in Penang, Selangor and Kelantan but rejecting the results from elsewhere," he said.
"PR can always work towards the 14th general election. They must end the rallies and let people get back to their normal lives."
PKR vice-president Tian Chua claimed the people were unhappy with the results and were voicing their displeasure over the Internet.
He said PR had a duty to listen to the voice of the people as there was a strong calling for another Bersih rally.
"We are organising Bersih 4.0 to change the electoral system. The Election Commission must be more independent and accountable," he said.
"The EC must undergo a complete transformation process to ensure fair results." Tian Chua said election petitions and rallies were two different things.
Related story: Pakatan protests, Malay-Chinese rift bad for business, says Mustapa
"Laws regarding the election petition are "repressive" and you have to prove that any wrongdoing has a direct effect on the results," he said.
PPP president Datuk M. Kayveas said the rallies were already having an adverse effect on the tourism industry.
He said the Hong Kong Tourist Association had recently advised its members not to organise any tours to Malaysia because of the rallies.
EC deputy president Datuk Wan Ahmad Wan Omar said the election was a series of processes and any aggrieved party had the right to appeal the results by filing an election petition.
He said the EC had no reason to meet with PR because they were going to meet them in court.
"The people have already spoken and they have picked their representatives," he said.
"We will leave it to the courts to decide when the petitions are filed. "If there are issues that need to be discussed we can always do it after the courts have decided on the election petitions."
The organisers of the "Black 505" gathering, of which Solidariti Anak Muda Malaysia was one, said the rally marked "only the beginning".
"We are giving a final warning from the people that they are prepared to walk peacefully, if the EC (chiefs) are still not fired or if they do not step down"the Suara Rakyat 505 coalition said in a statement yesterday.
"The people are now prepared to take to the streets anytime starting now, for the sake of our democracy that has been blackened."

Najib never signed pre-polls peace deal, reveals Anwar

BY CLARA CHOOI
ASSISTANT NEWS EDITOR
PETALING JAYA, May 27 — Datuk Seri Anwar Ibrahim revealed today that Datuk Seri Najib Razak never signed the peace deal brokered by former Indonesian Vice-President Jusuf Kalla before Election 2013, and only offered a verbal agreement to play fair and respect the polls results.
He said that unlike himself, the prime minister had “no courage” to sign the deal, which was physically inked shortly before Nomination Day on April 20.
“Well, Najib said he agreed, that he is a man of honour but he dare not,” Anwar told a press conference here.
“As usual, the prime minister has no courage even to sign what he agreed.”
Anwar added that the absence of Najib’s signature on the deal automatically freed him from its bounds, even if opposition leader maintained that it was his opponent who reneged on his commitment.
“Of course I’m not (legally bound). Firstly, there was no contract. Secondly, the parameters (of the contract) were never executed.

“And now you (Najib) want to say, ‘you’ve lost the elections, please accept, ya,’” Anwar said. He explained that the agreement had first been verbal but upon his insistence, Jusuf crafted a written deal to formalise the matter.
Anwar said he had asked to sign the deal as he had not wanted “to be like Najib” by offering assurances that he would not honour later.
“If I agree on ethical standards, I will sign it. If I agree on free and fair elections, I will sign it. I agree on peaceful transition and also, no malice (post-polls) in the spirit of reconciliation.
“I was prepared to sign it and I signed it. Alone. Because Najib did not,” he said.
According to Anwar, Najib had said “No” to signing the deal that Jusuf put forth for unconfirmed reasons.
“He said people may think this and that... whatever. I said, no. To me, if you talk about ethical standards and free elections, I am prepared to sign it... and I did,” he said.
Digital magazine The Edge Review first broke the story of meetings between Jusuf and both Najib and Anwar on April 19, saying in its report that the Indonesian leader had advised both men to ensure the polls process is peaceful.
Details of the agreement brokered by Jusuf were revealed by the Wall Street Journal last Saturday in a report quoting the leader as accusing Anwar of reneging on the pre-polls peace treaty.
According to the WSJ, the deal had stipulated that both sides accept the outcome of the polls peacefully without contest, regardless of who wins.
But insisting on the inaccuracy of the claim here, Anwar reminded that the agreement to accept the polls results had been contingent on several key prerequisites, including a promise to ensure ethical standards during campaigning and fair access to the media.
None of these had been adhered to by Najib’s Barisan Nasional (BN) during the polls, the Permatang Pauh MP said, leading to his and Pakatan Rakyat’s (PR) refusal to accept defeat.
“Number one... unless someone here can tell me that the media was free and fair, and ethical standards were observed?
“Number two, that the process was free and fair?
“The entire discourse now is about fraud and mass rigging,” Anwar said. “So why then, do you say about reneging the agreement?”.
Election 2013 saw the ruling BN returned to power with 133 federal seats to PR’s 89 seats despite losing the popular vote by scoring just 48 per cent to PR’s 51 per cent.
PR leaders have maintained that Election 2013 was fraught with irregularities, starting from the use of an indelible ink that was not indelible to discrepancies in the voter roll and outright cheating on polling day itself through the alleged use of phantom voters and electricity blackouts.
Speaking during a youth rally in Putrajaya, Najib appeared to label Anwar “unprincipled” for allegedly failing to keep to his end of the agreement brokered by Jusuf simply because the polls results had not been to his favour.
“He reneged on a promise,” he said. “This is not our way, we must have principles... in any matter, we must have principles, follow the rules.”

40 Statistics About The Fall Of The U.S. Economy That Are Almost Too Crazy To Believe

f you know someone that actually believes that the U.S. economy is in good shape, just show them the statistics in this article. When you step back and look at the long-term trends, it is undeniable what is happening to us. We are in the midst of a horrifying economic decline that is the result of decades of very bad decisions.
30 years ago, the U.S. national debt was about one trillion dollars. Today, it is almost 17 trillion dollars. 40 years ago, the total amount of debt in the United States was about 2 trillion dollars.  Today, it is more than 56 trillion dollars. At the same time that we have been running up all of this debt, our economic infrastructure and our ability to produce wealth has been absolutely gutted.  Since 2001, the United States has lost more than 56,000 manufacturing facilities and millions of good jobs have been shipped overseas.
Our share of global GDP declined from 31.8 percent in 2001 to 21.6 percent in 2011.  The percentage of Americans that are self-employed is at a record low, and the percentage of Americans that are dependent on the government is at a record high.  The U.S. economy is a complete and total mess, and it is time that we faced the truth.
The following are 40 statistics about the fall of the U.S. economy that are almost too crazy to believe…
#1 Back in 1980, the U.S. national debt was less than one trillion dollars.  Today, it is rapidly approaching 17 trillion dollars…
National Debt
#2 During Obama’s first term, the federal government accumulated more debt than it did under the first 42 U.S presidents combined.
#3 The U.S. national debt is now more than 23 times larger than it was when Jimmy Carter became president.
#4 If you started paying off just the new debt that the U.S. has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 184,000 years to pay it off.
#5 The federal government is stealing more than 100 million dollars from our children and our grandchildren every single hour of every single day.
#6 Back in 1970, the total amount of debt in the United States (government debt + business debt + consumer debt, etc.) was less than 2 trillion dollars.  Today it is over 56 trillion dollars…
Total Debt
#7 According to the World Bank, U.S. GDP accounted for 31.8 percent of all global economic activity in 2001.  That number dropped to 21.6 percent in 2011.
#8 The United States has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row.
#9 According to The Economist, the United States was the best place in the world to be born intoback in 1988.  Today, the United States is only tied for 16th place.
#10 Incredibly, more than 56,000 manufacturing facilities in the United States have been permanently shut down since 2001.
#11 There are less Americans working in manufacturing today than there was in 1950 even though the population of the country has more than doubled since then.
#12 According to the New York Times, there are now approximately 70,000 abandoned buildings in Detroit.
#13 When NAFTA was pushed through Congress in 1993, the United States had a trade surplus with Mexico of 1.6 billion dollars.  By 2010, we had a trade deficit with Mexico of 61.6 billion dollars.
#14 Back in 1985, our trade deficit with China was approximately million dollars (million with a little “m”) for the entire year.  In 2012, our trade deficit with China was315 billion dollars.  That was the largest trade deficit that one nation has had with another nation in the history of the world.
#15 Overall, the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975.
#16 According to the Economic Policy Institute, the United States is losing half a million jobs to China every single year.
#17 Back in 1950, more than 80 percent of all men in the United States had jobs.  Today, less than 65 percent of all men in the United States have jobs.
#18 At this point, an astounding 53 percent of all American workers make less than $30,000 a year.
#19 Small business is rapidly dying in America.  At this point, only about 7 percent of all non-farm workers in the United States are self-employed.  That is an all-time record low.
#20 Back in 1983, the bottom 95 percent of all income earners in the United States had 62 cents of debt for every dollar that they earned.  By 2007, that figure had soared to $1.48.
#21 In the United States today, the wealthiest one percent of all Americans have a greater net worththan the bottom 90 percent combined.
#22 According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.
#23 The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.
#24 According to the U.S. Census Bureau, more than 146 million Americans are either “poor” or “low income”.
#25 According to the U.S. Census Bureau, 49 percent of all Americans live in a home that receives direct monetary benefits from the federal government.  Back in 1983, less than a third of all Americans lived in a home that received direct monetary benefits from the federal government.
#26 Overall, the federal government runs nearly 80 different “means-tested welfare programs”, and at this point more than 100 million Americans are enrolled in at least one of them.
#27 Back in 1965, only one out of every 50 Americans was on Medicaid.  Today, one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse.  It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.
#28 As I wrote recently, it is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.
#29 At this point, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years.  That comes to approximately $328,404 for every single household in the United States.
#30 Right now, there are approximately 56 million Americans collecting Social Security benefits.  By 2035, that number is projected to soar to an astounding 91 million.
#31 Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.
#32 Today, the number of Americans on Social Security Disability now exceeds the entire population of Greece, and the number of Americans on food stamps now exceeds the entire population of Spain.
#33 According to a report recently issued by the Pew Research Center, on average Americans over the age of 65 have 47 times as much wealth as Americans under the age of 35.
#34 U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.
#35 As I mentioned recently, the homeownership rate in America is now at its lowest level in nearly 18 years.
#36 There are now 20.2 million Americans that spend more than half of their incomes on housing.  That represents a 46 percent increase from 2001.
#37 45 percent of all children are living in poverty in Miami,more than 50 percent of all children are living in poverty in Cleveland, and about 60 percent of all children are living in poverty in Detroit.
#38 Today, more than a million public school students in the United States are homeless.  This is the first time that has ever happened in our history.
#39 When Barack Obama first entered the White House, about 32 million Americans were on food stamps.  Now, more than 47 million Americans are on food stamps.
#40 According to one calculation, the number of Americans on food stamps now exceeds the combined populations of “Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”

New Zealand, China in Talks on Convertibility of Currencies

WELLINGTON, New Zealand—Seeking to help its exporters, New Zealand is negotiating with China to make their currencies directly convertible, a spokeswoman for Prime Minister John Key said.
Most of New Zealand's exports to China are agricultural products—particularly milk powder, meat and wool—while most of its imports from there are computers, mobile phones and clothes. Above, sheep shearering near Dunedin, New Zealand in September.
Wellington's push is aimed at driving down costs for companies that do business with China, which is close to overtaking Australia as New Zealand's No. 1 trading partner.
Talks are in the "very early stages" and "progressing," the spokeswoman said, adding that the issue had been brought up during Mr. Key's visit to China last month.
Officials at the People's Bank of China didn't return calls seeking comment.
Direct convertibility between the Chinese yuan and New Zealand dollar would end the need for New Zealand's companies and currency traders to convert New Zealand dollars or yuan into U.S. dollars when making or receiving payments.
New Zealand's two-way trade with China totaled 15.3 billion New Zealand dollars (US$12.4 billion) in the year ended April 30, compared with NZ$16.8 billion with Australia, government data showed last week. Most of New Zealand's exports to China are agricultural products—particularly milk powder, meat and wool—while most of its imports from there are computers, mobile phones and clothes.
Trade relations took a knock earlier this month when China temporarily blocked millions of dollars of New Zealand meat from entering the country, as it bolstered scrutiny of imports after a spate of mainly homegrown food-safety scandals.
Beijing is undertaking a long, gradual campaign to establish the yuan as a more market-oriented, international currency. China's State Council, or cabinet, said in a statement this month that the country would draft a plan to allow the yuan to become fully convertible. Meanwhile, the People's Bank of China is guiding the currency higher and set the median point of its permitted daily trading band last week at the strongest level ever.
China and Australia reached a deal to allow direct convertibility between the yuan and Australian dollar last month; before that, only the U.S. dollar and Japanese yen were directly exchangeable with the yuan. As China has become more industrialized, it has become Australia's biggest trading partner and buyer of its commodities, including raw materials such as copper and iron ore.
For New Zealand, "There is no time frame for concluding an agreement," Mr. Key's spokeswoman said. "We are aware it took Australia around 12 months to achieve its recent agreement with China."
China topped Australia as New Zealand's biggest trading partner from February through April this year, recent monthly government data showed. Trade between the countries has been growing ever since they reached a bilateral free-trade agreement five years ago. That increased trade helped New Zealand, like Australia, weather the economic turmoil in Europe and the fragility of the U.S. recovery, which have weighed on global growth.
As well as lowering business costs, direct convertibility may pave the way for New Zealand's central bank to diversify some of its foreign-exchange assets into Chinese government bonds. Last month, the Reserve Bank of Australia said it planned to invest up to 5% of its foreign-currency assets—close to two billion Australian dollars (US$1.9 billion)—in Chinese government bonds.
The Reserve Bank of New Zealand declined to comment.

The Real Numbers: Half of America in Poverty — and It’s Creeping toward 75%

Source: AlterNet
The Census Bureau has reported that one out of six Americans lives in poverty. A shocking figure. But it’s actually much worse. Inequality is spreading like a shadowy disease through our country, infecting more and more households, and leaving a shrinking number of financially secure families to maintain the charade of prosperity.
1. Almost half of Americans had NO assets in 2009
Analysis of  Economic Policy Institute data shows that Mitt Romney’s famous  47 percent, the alleged ‘takers,’ have taken nothing. Their debt exceeded their assets in 2009.
2. It’s Even Worse 3 Years Later
Since the recession, the disparities have continued to grow. An  OECD report states that “inequality has increased by more over the past three years to the end of 2010 than in the previous twelve,” with the U.S. experiencing one of the widest gaps among OECD countries. The 30-year  decline in wages has worsened since the recession, as low-wage jobs have  replaced formerly secure middle-income positions.
3. Over half of Americans are now IN poverty.
According to IRS data, the average household in the bottom 50% brings in about $18,000 per year. That’s less than the  poverty line for a family of three ($19,000) or a family of four ($23,000).
4. 75% of Americans are NEAR poverty.
The average household in the bottom 75% earns about  $31,000 per year. To be eligible for food assistance, a family can earn up to  130% of the federal poverty line, or about $30,000 for a family of four.
Incredibly, Congress is trying to  cut food assistance. Republican Congressman Stephen Fincher of Tennessee referred to food stamps as “stealing.” He added a Biblical quote: “The one who is unwilling to work shall not eat.” A recent  jobs hearing in Washington was attended by  one Congressman.
5. Putting it in Perspective
Inequality is at its ugliest for the hungriest people. While food support was being targeted for cuts, just  20 rich Americans made as much from their 2012 investments as the entire  2012 SNAP (food assistance) budget, which serves 47 million people.
And as Congress continues to cut life-sustaining programs, its members should note that their 400 friends on the Forbes list made more from their stock market gains last year than the total amount of the  foodhousing, andeducation budgets combined.
Mr. Fincher should think about the tax breaks that allow this to happen, and then tell us who’s stealing from whom.

Russia, Greece, Turkey, Other Central Banks Buy Gold; China’s PBOC Buying?



 
Today is a national holiday in the United Kingdom and the USA.
Friday’s AM fix was USD 1,385.25, EUR 1,068.95 and GBP 917.81 per ounce.
Gold climbed $5 on Friday and closed at $1,390.25/oz in London and silver closed at 22.482 in NY. 
Gold rose 0.45% this morning in quiet European trading with UK and U.S. markets closed for holidays. Silver, platinum and palladium also advanced this morning.
Gold’s gains come on the back of the best week in a month last week when gold rose 2%.
Gold is being supported by continued diversification from central banks and signs of increased physical demand which is countering continued outflows in ETF holdings. 
Russia,Turkey, Kazakhstan and Azerbaijan expanded their gold reserves for a seventh straight month in April, buying bullion to diversify foreign exchange reserves due to concerns about the dollar and the euro.
Russia’s steady increase in its gold reserves saw its holdings, the seventh-largest by country, climb another 8.4 metric tons to 990 tons, taking gains this year to 3.4% after expanding by 8.5% in 2012, International Monetary Fund data show. 
Kazakhstan’s reserves grew 2.6 tons to 125.5 tons, taking the increase to 8.9% this year after a 41% expansion in 2012, data on the website showed.
Turkey’s holdings rose 18.2 tons to 427.1 tons in April, increasing for a 10th month as it accepted gold in its reserve requirements from commercial banks. 
Belarus’s holdings expanded for a seventh month as did Azerbaijan’s.
Interestingly, Greece’s gold holdings climbed for a fourth month, according to the IMF data. 
This could be a sign of rising economic nationalism in Greece or that the Greek central bank realises that if Greece leaves the euro and is forced back onto the drachma that gold reserves will offer a modicum of protection. Only a modicum, because Greece’s gold reserves remain miniscule especially considering the scale of their debts.  

IMF Greece Gold Reserves, in Mill Fin Troy Oz, (Quarterly 01Jan1956-27May2013)
Central banks are buying gold as an overall strategy of forex portfolio diversification and the recent price drop will not deter them from a long term policy of diversification into gold. 
Central bank reserve managers are conservative rather than speculative and will ignore the day to day noise and price predictions emanating from certain banks in favour of passive allocations to gold as part of their foreign exchange diversification strategy. 

IMF World Gold Reserves, in Mill Fin Troy Oz, (
Monthly 31Mar2007-31Mar2013)

While not driven by price, some central banks may have made the most of the lower prices by increasing their holdings by more than they would have if prices had risen in value.   
The long term trend for central banks to increase gold reserves remains intact and will support gold.
Central banks bought 534.6 tons of gold last year, the most since 1964, and may add as much as 550 tons in 2013, the World Gold Council estimates. While central-bank purchases fell 5.2 percent in the three months through March, they totaled more than 100 tons for the seventh straight quarter, according to council data.
China’s foreign currency reserves have surged more than 700% since 2004 and are now enough to buy every central bank’s official gold supply - twice.
China’s foreign reserves surpassed the value of all official bullion holdings in January 2004 and rose to $3.3 trillion at the end of 2012 and are at $3.4 trillion today.
The price of gold has failed to keep pace with the surge in the value of Chinese and global foreign exchange holdings. Gold has increased just 54% in the last 5 years and 250% since 2004, with the registered volume little changed, according to data based on International Monetary Fund and World Gold Council figures.
By comparison, China’s reserves rose 721% from 2004 through 2012, while the combined total among Brazil, Russia and India rose about 400% to $1.1 trillion.
Continuing diversification into gold from the huge foreign exchange reserves by the People’s Bank of China and other central banks is a primary pillar which will support gold and should contribute to higher prices in the coming years.
We are confident that the PBOC is quietly accumulating gold and we expect another announcement from the PBOC, possibly this year, when they again disclose to the market that they drastically increased their gold reserves – possibly from 1,054 tonnes to between 2,000 and 3,000 tonnes.

The American Dream Film-Full Length

FT: Europe Investigates Apple's IPhone Tactics

TEHRAN (FNA)- The European Commission is investigating whether Apple Inc is using anti-competitive iPhone sales tactics and technical restrictions to squeeze out rival smartphone makers from the European market, according to documents seen by the Financial Times.


According to a questionnaire sent last week to several European mobile network operators, the Commission is focusing on distribution terms that might favor Apple by ensuring no rival can secure a better sales deal, said the newspaper, Reuters reported.

Apple said its contracts comply with EU laws, said the FT.

The inquiry is the result of private complaints from mobile operators and is at a preliminary stage.

Before a formal probe can be launched, the Commission would need to be confident that Apple was dominant in the EU smartphone market, which may be hard to show given the popularity of Samsung Electronic's Galaxy handsets.

Oregon law school graduate beats back $50,000 in student loans

The financial advice gets repeated as a mantra: Student loans are the one form of debt that can't be forgiven, even in bankruptcy. But a Klamath Falls man has proven that's not always true.
Mike Hedlund waged a 10-year legal battle to force his lender to discharge most of the $85,000 in federal student loans he built up while earning his 1997 law degree from Willamette University in Salem. He argued that, even when working full-time and living frugally, he could not repay that much money and also maintain a minimal standard of living for himself and his family.
Last week, in a decision that could affect debtors in eight states, a panel of the Ninth Circuit Court of Appeals in Pasadena, Calif., ruled in Hedlund's favor.
It upheld a bankruptcy judge's ruling that Hedlund proved all three factors necessary to have $53,000 of his debt forgiven: He made a good faith effort to repay the money; he can't earn enough to both repay the money and maintain a basic standard of living; and his inability to earn substantially more is likely to persist.
One twist to the case: Hedlund was unable to make much use of his expensive law degree. He failed the Oregon bar exam twice in his first year out of law school, then locked his keys inside his car on the way to his third scheduled test, and so missed it entirely. He did not try again.
Instead, Hedlund got a $40,000-a-year job as a Klamath County juvenile probation officer, a job he still holds.
"I had planned on making $200 an hour instead of $20 when I agreed" to take out loans totaling about $100,000, Hedlund said.
But testimony from an employment expert convinced judges that Hedlund holds a good-paying job for Klamath Falls and wouldn't likely earn a whole lot more as a starting lawyer there, particularly if he worked in the public sector.
Hedland expressed happiness and relief to have won, lowering his debt to $32,000 plus interest.
"I owe a car instead of a house now," he said. "It's huge for me. What I've wanted all along is something I can afford," not having the slate wiped clean, he said.
He and his wife have three daughters, and his wife works one day a week. He coaches soccer on the side to supplement his income and continues to live frugally, he said. "We don't go on many vacations, other than day trips. My newest car is six or seven years old and our other one is a '96 Explorer."
"I am happy that maybe this will help someone else in their dealings with the student loan people," he added.
When Hedlund graduated from Willamette, he owed two student loan companies. He struggled to pay either of them, but reached a deal with the smaller lender to repay $18,000 at $50 a month.
He tried to negotiate a repayment plan with the firm he owed $85,000, called Pennsylvania Higher Education Assistance Agency, but that lender would not agree to a plan Hedlund felt he could remotely afford.
That lender exists to make money to help Pennsylvania students afford college, and it currently holds $39 billion worth of student loan debt. A previous director stepped down in 2007 after a state audit revealed he'd issued millions in lucrative, undisclosed bonuses to managers and executives.
In 2003, Hedlund filed in federal bankruptcy court to have most of his remaining loan discharged. His parents footed his legal bill.
When a judge agreed that all but $30,000 should be wiped clean, the Pennsylvania agency appealed, setting off a 10-year legal odyssey that twice reached the Ninth Circuit. Hedlund filed to represent himself before that high court, but Ninth Circuit judges awarded him pro bono representation by an experienced San Francisco firm.
The Portland-based lawyer who represented the lender said Friday he would ask an official with the agency to comment on the decision. None did.
Natalie Scott, a Eugene lawyer who represented Hedlund, said lawyers for the loan agency suggested that forgiving most of Hedlund's loans would "open the flood gates" to healthy college graduates claiming they couldn't earn enough and demanding their loans be forgiven.
Scott said thinks a smaller set of borrowers will be affected, because Hedlund's actions and circumstances were particularly compelling. He tried repeatedly to work out a payment plan that he could deliver on; he made some payments; he worked full-time at a good-paying job and applied for jobs paying more; and he put up with having $280 a month garnished from his wages for 16 months without objecting.
Only when the second lender garnished $1,000 in one sweep, leaving him without money to support his wife and baby, did he file to erase most of his loan, she said.
"He had to make his showing, all this evidence, to get part of his loan discharged," Scott said. "This wasn't a case of, 'Oh, I went to school and I didn't get this dream job I thought I was going to get, so now I'm not going to pay what I owe.' He had made his best effort to pay."
--Betsy Hammond

The End of the Beginning of the End

Protected businessman(Image: Protected businessman via Shutterstock)Where justice is denied, where poverty is enforced, where ignorance prevails, and where any one class is made to feel that society is an organized conspiracy to oppress, rob and degrade them, neither persons nor property will be safe.
- Frederick Douglass
I think my daughter's eyes are blue. They might be green. She hasn't been around long enough to tell just yet, but they are certainly something. She recognized me for the first time just a few days ago, and smiled up at me in a simple, sweet way that obliterated my heart. She cannot focus on anything more than a few feet from her face, but that, like everything else about her, will change in time. Someday soon, she will be able to see everything, and tragically, this will be the world within her view.
report released early this year by the organization Oxfam International revealed that the combined income of the richest 100 people in the world is enough to end global poverty four times over, and that the gap between rich and poor has exploded by some 60% in the last 20 years. Rather than hinder this division, the recent global economic crisis has exacerbated it. Money does not disappear, you see, but tends to be translated up the income ladder in times of financial distress.
According to UNICEF, nearly half the world's population lives on less than $2.50 a day. One billion children live in poverty, and 22,000 of them die each day because of it. More than one billion people lack access to adequate drinking water, and 400 million of those are children. Almost a billion people go hungry every day.
The incomes of 100 people out of the seven billion on the planet could fix that, and then fix it again, and then fix it again, and then fix it again. The exact total of the wealth of these individuals is actually something of a mystery, thanks to the tax havens they use to hide their fortunes. There are trillions of dollars squirrelled away in those havens - no one knows quite how much - and the subtraction of that money from the global economy has a direct and debilitating effect on the people not fortunate enough to be part of that elite 100.
In America alone, some $150 billion in tax revenue is lost each year because of these havens, money that could be used for education, food assistance programs, infrastructure repair and health care. Instead, Americans are told the country is going broke, and are force-fed austerity measures by the same politicians who passed the laws allowing the wealthy and corporations to wallow in treasure like Tolkien's dwarves hiding under their mountain.
The recession being endured by the American people is becoming more a thing of fiction every day. The so-called "job creators" are doing just fine, thank you very much, but they don't seem very interested in using the money they've hoarded to expand the job market. According to an analysis of some 2,300 companies by Bloomberg news, hiring by those companies has risen the least amount since 2010. At the same time, however, those companies are sitting on a cash stockpile of $1.73 trillion.
That's "trillion," with a "T." They can afford to hire people. Lots and lots and lots of people. They just aren't, because they make more money that way...and there's always offshore labor available if they need warm bodies to work on the extra-cheap. More than a thousand of those people died in a garment building collapse Bangladesh last month, and the engine of industry barely burped.
Is there any sign that such glaring and damaging inequalities will inspire a legislative response by America's leaders? Don't hold your breath:
A bill called the Swaps Regulatory Improvement Act recently sailed through the House Financial Services Committee. But when The New York Times went through emails from a lobbyist to the congressmen who wrote it, the paper discovered an unofficial co-author: Citigroup. It turns out that recommendations from Citigroup made up 70 of the bill's 85 lines, with two important paragraphs copied almost verbatim - save for two words that were changed to make them plural, according to the Times.
The bill takes aim at the 2010 Dodd-Frank Act, the financial regulatory reform bill that was meant to prevent a repetition of the 2008 financial crisis. The specific provision in question forbids banks from trading certain derivatives that critics say were instrumental in causing the crisis. Under Dodd-Frank, those derivatives would have to be moved to affiliates that weren't FDIC-insured, lessening the chance they would be the recipients of government bailouts.
Erika Eichelberger at Mother Jones also compared the Citigroup draft of the bill with the final House version and found them "practically identical." She noted that Citigroup has long played a role in relaxing financial regulations, including the 1999 repeal of the Glass-Steagall Act, which once prevented commercial banks from engaging in the same activities as investment brokerages.
The majority of congressmen who supported the legislation were Republicans, but it was co-sponsored by Rep. Sean Patrick Maloney (D-N.Y.), who, the Times reported, recently held a fundraiser in Washington, D.C., in which corporate executives and lobbyists paid up to $2,500 to have dinner with him. While there has been a notable lack of bipartisanship in Congress in recent years, it appears that both Democrats and Republicans are more than open to Wall Street's money. As Sen. Dick Durbin (D-Ill.) once said of Congress, banks "frankly own the place."
Oh, P.S., the notorious war profiteer Kellog Brown & Root primly announced earlier this month that it will take thirteen years and half a billion dollars for them to wind down their operations in Iraq. They consider this money to be part of the $38 billion deal they made with the US Army back in 2001. How much of that money - your tax dollars - do you figure they have hidden in some offshore tax haven?
Not so very long ago, the Occupy Movement sought to draw a bright public circle around the terrible influence enjoyed by the few over the many. Mainstream opinion will say the movement collapsed due to its own inadequacies, but recent revelations have shown how the movement was attacked and undermined by law enforcement, elements of "homeland security" ostensibly meant to be part of the federal government's anti-terrorism programs, and by private security firms hired by corporations and wealthy individuals to keep "undesirables" out of sight and out of mind.
Occupy was only the beginning, but may very well have been the last manifestation of peaceful resistance against the ever-widening chasm of inequality and desolation. The noose is tightening around the necks of average people, and more become radicalized with each passing day. The wealthy would do well to take note of this, and voluntarily move to square the savage imbalance that drives billions around the world into furious despair. It does not have to be this way, and if it continues in this way, eventually the dam is going to break. When that happens, woe be unto those who believe their wealth keeps them safe and cozy. On that day, the rock will not hide them, and the dead tree will give no shelter.
If it does not happen in my lifetime, it will happen in my daughter's. I shudder to think what she will see.
Copyright, Truthout. May not be reprinted without permission.

Japanese Stocks Extend Overnight Plunge - Down Over 14% From Highs

As if the overnight session in Japan was not bad enough, futures markets are indicating yet more weakness from the market that seemed (until 3 days ago) incapable of falling. With a 14.3% drop from its May 22nd highs, Japan's Nikkei 225 is struggling to find buyers for this dip. What is interesting is the bid for European peripheral debt and equity markets this morning and the bounce in US futures (with no commensurate move in JPY which is hovering around 101). Gold and Silver are up around 1% with the USD unchanged. Treasury Futures imply a rise of 1-2bps in yield.



and just as the NKY saw its blow-off top, now US equities are ignoring the drop (for now)...


(h/t Sean Corrigan)

N.Z., China May Allow Direct Currency Conversion for Trade

New Zealand and China are in talks about making their currencies directly convertible, aiming to reduce costs as trade between the two countries is targeted to surge 33 percent in the next two years.
The talks were initiated during New Zealand Prime Minister John Key’s visit to China last month, his spokeswoman Lesley Hamilton said by telephone yesterday, confirming an earlier report in the Wall Street Journal. The negotiations are in an early stage and are progressing without a specific timeframe, she said.

May 27 (Bloomberg) -- Geoffrey Yu, senior currency strategist at UBS AG, talks about the Swiss franc and Australian dollar. He spoke May 23 in London. (Source: Bloomberg)
New Zealand’s exports to China jumped 32 percent in the first quarter, surpassing shipments to Australia for the first time, led by dairy products, logs and meat. The currency talks are underway as New Zealand targets NZ$20 billion ($16.2 billion) in two-way annual trade with China by 2015 from about NZ$15.2 billion in the year ended March.
“By having direct convertibility, that would reduce the transaction cost of doing business with China,” said Jane Turner, economist at ASB Bank Ltd. in Auckland. “It reduces the cost of hedging and the risk of currencies moving against you, and you can become more competitive in your pricing.”
The People’s Bank of China today raised the daily yuan fixing to 6.1811 per dollar, the strongest level since a peg ended in July 2005. The currency fell 0.09 percent to 6.1274 per dollar at 12:52 p.m. in Shanghai. The New Zealand dollar fell to 80.77 U.S. cents at 4:52 p.m. in Wellington.

Overtaking Australia

New Zealand’s sales to China amounted to NZ$2.31 billion in the three months ended March 31, Statistics New Zealand said in an April 26 report. Exports to Australia fell 7.3 percent to NZ$2.17 billion, the lowest since early 2008 and the first calendar quarter it fell behind China.
New Zealand became the first developed nation to sign a free-trade agreement with China in 2008. In the 12 months through March, exports rose 25 percent to NZ$7.41 billion, still lagging behind NZ$9.74 billion of shipments to Australia.
“We’re looking for as fast an outcome as we can get,” New Zealand Prime Minister John Key told reporters in Wellington today. “The indications I got from the Chinese side were that it was possible for us to do it quite quickly.”
Direct trading between the yuan and the Australian dollar began last month, making the Aussie the third currency to be directly convertible with China’s, following the U.S. dollar and the Japanese yen. Direct trading means the fixing will be computed without involving a cross rate with the dollar.
China’s yuan was the 13th most-used currency in global payments in April, according to the Society for Worldwide Interbank Financial Telecommunication. Its share of global payments rose to a record 0.74 percent in March, according to figures from the financial messaging platform.

Another US highway bridge collapses in Missouri State

Another US highway bridge collapses in state of Missouri.
Another US highway bridge collapses in state of Missouri.
Mon May 27, 2013 10:42AM GMT

accident came over a week after a passenger train derailment in Connecticut that injured 70 people and disrupted service for days. That accident involved a railroad corridor used by tens of thousands of commuters northeast of New York City."
Another US highway bridge has partially collapsed in the state of Missouri reportedly after its support pillars were impacted as a result of a nearby freight train collision.


The collapse of the highway overpass near the town of Chaffee came when rail cars smashed into one of its support pillars after the train collision on Saturday, according to authorities cited in local press reports, which added that seven people in two cars on the overpass were injured when two 40-foot sections of the overpass crushed down.

“You’re driving down the road, and the next thing you know the bridge is not there. … It could have been really bad,” said Scott County Sheriff Rick Walter as quoted in an AP report.

He noted that the 15-year-old bridge, though in good condition, couldn’t withstand the impact of the rail cars.

The collapse occurred after a Union Pacific train struck the side of a Burlington Northern Santa Fe train at a rail intersection, said Sheriff Walter, adding that the derailed train cars then impacted columns supporting the Highway M overpass, causing it to buckle and partially collapse.

According to the report, the derailed freighter cars were loaded with scrap metal, automobiles and auto parts.

The National Transportation Safety Board (NTSB) has reportedly begun a probe into the cause of the train collision.

The accident came over a week after a passenger train derailment in Connecticut that injured 70 people and disrupted service for days. That accident involved a railroad corridor used by tens of thousands of commuters northeast of New York City.

Further in Washington State last week, a major highway bridge collapsed after a truck driver’s load reportedly bumped into its steel framework.

According to the report, NTSB board member Robert Sumwalt said while official probes into both bridge collapses are in early stages, “there is no similarity” between the Missouri accident and the bridge collapse in Washington State, which sent two vehicles and three people plunging into the chilly water below.

Sumwalt further added that the NTSB investigation to determine a likely cause will include routine testing of railroad employees for drugs and alcohol, testing of the track and rail signals, and an examination of the video footage from the front of the train.

MFB/MFB

Russia, Greece, Turkey, Other Central Banks Buy Gold; China’s PBOC Buying?

by GoldCore

Today is a national holiday in the United Kingdom and the USA.
Friday’s AM fix was USD 1,385.25, EUR 1,068.95 and GBP 917.81 per ounce.
Gold climbed $5 on Friday and closed at $1,390.25/oz in London and silver closed at 22.482 in NY.
Gold rose 0.45% this morning in quiet European trading with UK and U.S. markets closed for holidays. Silver, platinum and palladium also advanced this morning.
Gold’s gains come on the back of the best week in a month last week when gold rose 2%.
Gold is being supported by continued diversification from central banks and signs of increased physical demand which is countering continued outflows in ETF holdings.

Gold Price (Nominal) and Central Bank Net Buying/ Selling (1971-2013)

Russia, Greece, Turkey, Kazakhstan and Azerbaijan expanded their gold reserves for a seventh straight month in April, buying bullion to diversify foreign exchange reserves due to concerns about the dollar and the euro.
Russia’s steady increase in its gold reserves saw its holdings, the seventh-largest by country, climb another 8.4 metric tons to 990 tons, taking gains this year to 3.4% after expanding by 8.5% in 2012, International Monetary Fund data show.
Kazakhstan’s reserves grew 2.6 tons to 125.5 tons, taking the increase to 8.9% this year after a 41% expansion in 2012, data on the website showed.
Turkey’s holdings rose 18.2 tons to 427.1 tons in April, increasing for a 10th month as it accepted gold in its reserve requirements from commercial banks.
Belarus’s holdings expanded for a seventh month as did Azerbaijan’s.
Interestingly, Greece’s gold holdings climbed for a fourth month, according to the IMF data.
This could be a sign of rising economic nationalism in Greece or that the Greek central bank realises that if Greece leaves the euro and is forced back onto the drachma that gold reserves will offer a modicum of protection. Only a modicum, because Greece’s gold reserves remain miniscule especially considering the scale of their debts.

IMF Greece Gold Reserves, Quarterly 01Jan1956-27May2013, in Mill Fin Troy Oz
Central banks are buying gold as an overall strategy of forex portfolio diversification and the recent price drop will not deter them from a long term policy of diversification into gold.
Central bank reserve managers are conservative rather than speculative and will ignore the day to day noise and price predictions emanating from certain banks in favour of passive allocations to gold as part of their foreign exchange diversification strategy.

IMF World Gold Reserves, Monthly 31Mar2007-31Mar2013, in Mill Fin Troy Oz

While not driven by price, some central banks may have made the most of the lower prices by increasing their holdings by more than they would have if prices had risen in value.
The long term trend for central banks to increase gold reserves remains intact and will support gold.

Central banks bought 534.6 tons of gold last year, the most since 1964, and may add as much as 550 tons in 2013, the World Gold Council estimates. While central-bank purchases fell 5.2 percent in the three months through March, they totaled more than 100 tons for the seventh straight quarter, according to council data.

IMF China Gold Reserves, Quarterly 01Jan1977-27May2013, in Mill Fin Troy Oz

China’s foreign currency reserves have surged more than 700% since 2004 and are now enough to buy every central bank’s official gold supply – twice.
China’s foreign reserves surpassed the value of all official bullion holdings in January 2004 and rose to $3.3 trillion at the end of 2012 and are at $3.4 trillion today.
The price of gold has failed to keep pace with the surge in the value of Chinese and global foreign exchange holdings. Gold has increased just 54% in the last 5 years and 250% since 2004, with the registered volume little changed, according to data based on International Monetary Fund and World Gold Council figures.

China’s Foreign Exchange Reserves vs Gold Monthly (2004-2013)

By comparison, China’s reserves rose 721% from 2004 through 2012, while the combined total among Brazil, Russia and India rose about 400% to $1.1 trillion.
Continuing diversification into gold from the huge foreign exchange reserves by the People’s Bank of China and other central banks is a primary pillar which will support gold and should contribute to higher prices in the coming years.
We are confident that the PBOC is quietly accumulating gold and we expect another announcement from the PBOC, possibly this year, when they again disclose to the market that they drastically increased their gold reserves – possibly from 1,054 tonnes to between 2,000 and 3,000 tonnes.

FINANCIAL DOOM!!!They’re Betting On It

This is on CNN, no less:
Stocks have had a stellar year so far. In fact, the rally has gotten so heated that some investors are making bets on a big crash.
Universa Investments, which spends hundreds of millions of dollars a year buying crash protection, has attracted a record amount of money into its fund this quarter.
“People are starting to recognize that these market moves are unnatural and distorted,” said Universa president and chief investment officer Mark Spitznagel, who declined to say how much is spent on crash protection, citing SEC rules.
Universa’s view that a crash is coming is not widely held, making crash protection cheap, he said. Universa buys this protection in the form of options that generate huge returns when the stock market falls by more than 20%. Universa’s adviser, economist and former derivative trader Nassim Taleb calls it ‘black swan’ hedging.
http://money.cnn.com/2013/05/24/investing/hedge-funds-crash/index.html
Billionaires Dumping Stocks, Economist Knows Why
Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.

In the latest filing for Buffett’s holding company Berkshire Hathaway, Buffett has been drastically reducing his exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced his overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel.
With 70% of the U.S. economy dependent on consumer spending, Buffett’s apparent lack of faith in these companies’ future prospects is worrisome.
Unfortunately Buffett isn’t alone.
Fellow billionaire John Paulson, who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks too. During the second quarter of the year, Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase. The fund also dumped its entire position in discount retailer Family Dollar and consumer-goods maker Sara Lee.