Markets climb on Europe deal

Markets climb on Europe deal
Global markets are rallying today after a deal among EU leaders aimed at easing the crisis in the euro zone.

"With expectations about as depressed as they possibly could be, the agreement that emerged from the euro zone leaders’ summit in the early hours of the morning was a substantial positive surprise," said Adam Cole of RBC in London.

Tokyo's Nikkei climbed 1.5 per cent, and Hong Kong's Hang Seng 2.2 per cent. In Europe, the focus of attention, London's FTSE 100, Germany's DAX and the Paris CAC 40 were up by between 1.4 per cent and 2.6 per cent by about 7:45 a.m. ET. Dow Jones industrial average and S&P 500 futures also rose.

"Just when you’re about to lose all faith in Europe’s leaders, they finally make some progress," said Benjamin Reitzes of BMO Nesbitt Burns.

"Markets are rallying following the EU announcement," he added in a research note.

"The euro jumped more than 1 per cent, moving as high as $1.2628 from about $1.2450. The major currencies are up almost across the board, with only the yen trading about flat. As such, the U.S. dollar index is getting hammered, off about 1 per cent, which if sustained would be the biggest loss since November. Spanish and Italian yields are down sharply, with the latter’s 10-year off 26 basis points to 5.93 per cent ... Commodity prices are higher: WTI crude is up 3.2 per cent to $80.15, Brent crude is up 2.5 per cent to $93.65, gold is up $26 at $1579, base metals are stronger (Comex copper is up 2.4 per cent), while the grains are higher as well."

Source

405 Million Madoff Fraud Settlement

ALBANY, N.Y.—A settlement announced Sunday will bring $405 million to victims of Bernard Madoff’s historic investment scam, the state attorney general said.

The clients of hedge fund manager J. Ezra Merkin will receive $405 million, and New York state will get $5 million to cover the cost of the settlement worked out by Attorney General Eric Schneiderman. The victims include New York Law School, Bard College, Harlem Children’s Zone, Homes for the Homeless and the Metropolitan Council on Jewish Poverty.

Schneiderman called the agreement “a victory for justice and accountability.”

“Many New Yorkers entrusted their investments to Mr. Merkin, who then steered the money to Madoff while receiving millions of dollars in management and incentive fees,” Schneiderman said. “By holding Mr. Merkin accountable, this settlement will help bring justice for the people and institutions that lost millions of dollars.”

Merkin’s lawyer, Andrew J. Levander, didn’t immediately respond to a request for comment Sunday.

Merkin had managed investments for hundreds of investors in four funds: Ariel Fund Ltd., Gabriel Capital L.P., Ascot Fund Ltd. and Ascot Partners L.P. Schneiderman said many of the investors are New York residents and charitable organizations. Many of them requested not to be identified.

Most investors will get more than 40 per cent of their losses, but only up to $5 million. Those who lost more could see additional payments, depending on the number of investors who seek reimbursement.

Investors will see the terms of the settlement in the next few days, the attorney general’s office said.

Merkin used his social and charitable contacts and his reputation as a money manager over two decades to raise more than $4 billion from investors, many of them charitable groups. Schneiderman said Merkin concealed Madoff’s role through misleading documents and quarterly reports.

Madoff, once the Nasdaq chairman, used his reputation and savvy to dupe sophisticated investors, regulators and Wall Street banks. Merkin invested more than $2 billion with Madoff, who used money from new investors to pay returns to previous clients.

A Schneiderman spokesman said he can’t speculate on the effect of the settlement on other investors who lost millions of dollars.

A Manhattan judge in September noted that the plaintiffs had cited testimony by Merkin that he was aware of a number of people who were suspicious of the returns Madoff claimed to achieve.

Madoff confessed in December 2008 that he was running a multi-decade Ponzi scheme and that more than $65 billion he claimed to have on hand for investors had dwindled to a few hundred million dollars from an original investment of about $20 billion. He pleaded guilty to fraud and is serving a 150-year prison sentence in Butner, North Carolina.

Globe says Dundee's Klein reiterates Bankers at "buy"

2012-06-06 06:58 ET - In the News

The Globe and Mail reports in its Wednesday, June 6, edition that Dundee Securities analyst Alex Klein likes Bankers Petroleum ($2.01). The Globe's Shirley Won writes in the Eye On Equities column that Mr. Klein upgraded the shares of Bankers Petroleum to "buy," but downgraded his on-target price to $3 from $4.50. Mr. Klein notes that shares of the Canadian oil company, which has assets in Albania, have been beaten up. The Dundee stockpicker says the shares sell for "reasonably low valuations." Mr. Klein says, "Overall, we see minor improvements in its operations." The Globe reported on July 20, 2011, that Bankers was a top holding of Sentry Select manager Laura Lau. The shares were then worth $6.06. The Eye column reported on March 22, 2012, that UBS analyst George Toriola rated Bankers "buy." The shares were then worth $4.31. In the same item, Dundee analyst Alex Klein downgraded Bankers to "neutral, high risk" from "buy." Mr. Toriola said "buy" Bankers in The Globe on April 17, 2012, when it could be had for $3.71. Raymond James analyst Rafi Khouri said he considered Bankers undervalued on April 19, 2012. He maintained an "outperform" rating. The shares were then worth $3.49.

What would the G20 do?

The chase by Noah Zivitz:

G20 officials will dust off the typewriter and deliver a communique later today intended to soothe nerves and demonstrate a willingness, and ability, to do what it takes to contain the damage in Europe and avert a global economic crisis. To do so, they'll need to rise above the tension we sensed in comments yesterday. What will it take for this gathering to be deemed a success? That's what we need to establish today.

The sidebar to our coverage has to be Canada's role at the meeting. Does Stephen Harper's majority mandate give him a louder voice? And will admonishments like yesterday's rally support or lead to more sneers from the likes of Jose Manuel Barroso? A former Prime Minister's perspective never hurts, so keep in mind what Paul Martin said yesterday on Market Sense: Canada doesn't have the right to be smug.

Over in Athens, Antonis Samaras is into day two of coalition talks. PASOK's Evangelos Venizelos says his views are close to those of the New Democracy Party. And Democratic Left chief Fotis Kouvelis says a deal could be hatched within hours. We've been down this road before.

Spain's borrowing costs popped in its latest debt auction, and the final audit of the country's banks has reportedly been delayed until September from the original July 31 deadline. Andrew McCreath ruminated on Market Sense about the risk Spain could be forced into a full-fledged bailout before EU leaders meet later this month. We'll continue tracking developments. The euro zone misery knows no borders this morning, as we've seen investor confidence in Germany suffer its sharpest drop since 1998.

The FOMC hunkers down today for the start of a two-day meeting. Would extending Operation Twist be enough to satiate the appetite for more stimulus? Let's set expectations.

There is some corporate news on the docket.

Microsoft is lobbing the Surface into the tablet battleground. We need to know how it sizes up against the competition, and whether it could affect the company's relationships with other Windows-powered hardware makers.

Oracle surprised the market with an earnings beat yesterday, three days before it was scheduled to report. Why the early numbers? And how concerned should investors be about dissent within the ranks that led to a top sales exec's exit?

Walgreen is paying $6.7 billion in cash and stock for a 45 percent stake in Alliance Boots with an option to snap up the entire company in three years. The move allows WAG to tap a wider geographic footprint at a time when its core business is seeing same-store sales slide.

We're waiting for earnings from FedEx, Adobe, Barnes & Noble and Jabil Circuit.

JPMorgan's $2-billion trading blunder gets the Capitol Hill treatment again today. Dimon will be there, but last week's appearance before the Senate Banking Committee leaves little room for surprise from JPM's CEO today, unless someone on the Senate Banking Committee smells an opportunity to score some points in an election year. More interesting could be testimony from top regulators, including the SEC and CFTC chairs. It all starts at 9:30am ET. And we'll hear directly from CFTC commissioner Bart Chilton on The Close.

Finally, get a front-row seat for perspective into the future of Canada's newspaper landscape when Globe and Mail publisher Phillip Crawley and PostMedia CEO Paul Godfrey join Headline at 1 p.m. ET.

www.bnn.ca

 

Central banks ready to combat Greek market storm

* ECB hints at rate cut

* Britain to flood system with cash

* Greek leftist says bailout deal will be dead by Monday

By Eva Kuehnen and Sven Egenter

FRANKFURT/LONDON, June 15 (Reuters) - Central banks from Tokyo to London checked their ammunition on Friday in preparation for any turmoil from Greece's election, with the European Central Bank hinting at an interest rate cut and Britain set to open its coffers.

Tensions were high about how to manage the euro zone's debt crisis - epitomised by Greece's bankruptcy and need for international aid - and a rare fight broke out between Germany and France, normally the glue that keeps the bloc together.

Read More Here

What comes next for Greece?

The BNN chase by Marty Cej:

There was a metaphor for Sunday's Greek election and the euro-zone debt crisis somewhere in Nik Wallenda's attempt to cross Niagara Falls on a tightrope later today, but now that he's wearing a tether to keep from plummeting to his death amid the mossy rocks and churning water below, it doesn't quite work. Greeks go to the polls in just two sleeps, as four-year-olds like to say, and will choose between the Syriza party, which has promised to rip up Greece's bailout deal with the European Union and IMF, or the New Democracy party, which backs the rescue package. It would be wrong to think that Sunday's election result will lead to immediate action of any sort. If Syriza wins, it will represent a Greek vote against austerity and a new process of negotiation will begin between Athens and Berlin, ahem, I mean Brussels. Yes, Brussels. Anyhow, the euro zone won't explode like a ceramic plate thrown on the floor; the next phase will be more Mexican standoff than Zorba, as Bill Blain, senior director at Newedge UK Financial told clients this morning. Bill joins us at 10:30 am Eastern.

To put the election into context, ECB President Mario Draghi said this morning that the bank was ready to step in and fund any viable euro-zone bank that gets in trouble, and painted a picture of a deteriorating economy with no inflation danger -- code for monetary easing. Japan's top financial diplomat, Takehiko Nakao, warned that authorities in Tokyo would respond to unwelcome currency moves as appropriate (ahem, intervention). The Bank of England followed up on Thursday's joint announcement with the government of a 100 billion pound offer of loans to banks by saying it will start next week with a charge of just 0.75 percent. And the Fed meets next week.

But what about playing the Greek election? What's the best strategy depending on the various possible outcomes? Does a clear mandate for Syriza raise the likelihood of more quantitative easing by the Fed and other central banks, which in turn depresses currencies and lifts gold? Maybe. Does a mixed outcome in Athens lead to the same result in markets? And what about a clear mandate for a pro-euro party? Does that ease economic pressure by reducing the probability of a Greek exit and diminish the need for more monetary easing, which could be good for the U.S. dollar, oil and copper and bad for gold? We may not be able to book Kreskin but we can still talk about probabilities and strategy. Suki Cooper, precious metals analyst at Barclays Capital will help us on the gold front this morning at 10:45 a.m. ET but there's a lot more to cover.

I would also like to hear from some portfolio managers who own European banks. Dutch and Belgian banks were just cut by Moody's and cuts for banks in the U.K., France and Germany are like in the weeks ahead. Are these banks -- some of the biggest and best-known in the world -- good value or value traps?

Ottawa and Michigan have finally come to an agreement to build a second bridge between Windsor and Detroit to help alleviate the most stuffed-up chokepoint in trade between the world's two largest trading partners. The deal may not result in a bridge being built, however, with opposition to the project from the Michigan legislature and the old-school political manipulation and maneuvering by the owner of the Ambassador Bridge who has somehow (cash) managed to convince politicians and some voters in southern Michigan that more trade running through their state is a bad thing. We'll talk today about what a second bridge could mean for the economies of the two countries in general and the economies of the two cities in particular. We also have to look at astonishing strategy and success of the Ambassador Bridge's owners to keep good sense at bay for decades.

We also have an interesting deal to cover today: the Hong Kong stock exchange agreed to pay almost $3 billion to buy the London Metal Exchange in a deal that gives Asia's largest exchange operator a commodity trading platform and brings LME members closer to China, the world's biggest metals buyer.

Bankers Pet BNK:TSE Undervalued

BANKERS PETROLEUM (T-BNK) $2.10 +0.09

We have been following Bankers Petroleum for a long time

and having been to Albania and seeing firsthand the heavy oil in the ditches, on the gravel roads, the old rigs from Chinese and Russian times—it makes you believe there is a lot of oil there. Some suggests there are simply billions of barrels.

Bankers Petroleum has had trouble over the last while and on Monday of this week, they had a show and tell for analysts on how they expect to rectify their problems.

Bankers Petroleum has sold off dramatically like so many others in the market crash of the last three months, but why don’t we go to Canaccord analyst Christopher Brown for his technical update and look at some of the solutions the people at Bankers Petroleum have provided in his just published report.

He writes on the technical update and proposed solutions: “Following a market update on Monday, Bankers Petroleum held a sell-side analyst presentation detailing the company’s most recent operational challenges. The main issues impact- ing production are currently wellbore construction and water influx. Approximately 1,220 b/d has been lost due to produc- tion failures at 16 of the company’s horizontal wells, which have suffered collapsed liners and sand bridges.” (See chart to the left)

 “The underlying problem is not entirely known, but the plan of attack is to place stronger liners down hole at future locations, at an incremental cost of approximately $20,000 per location. This improvement is expected to commence in Q4/12, but in the interim, the company has recommended that analysts and investors reduce the historical horizontal suc- cess rate of 83% by an additional 10%. The company does not expect this problem to persist on future locations, but stated that the possibility exists on older designs. However, it noted that existing wells could potentially be remedied through a $250,000 side-track or $50,000 lateral and liner.

Water intrusion continues to impact production, and the company has identified over 60 instances where water above the oil formation has corroded through old wellbore casing and intruded on primary productive zones. As a result, water cuts throughout Patos Marinza are high, at over 90% in some cases.

To re mediate the problem, Bankers has gathered information on old well bores and has implemented bridge plugs around primary zones of interest to reduce the water influx from secondary zones.

While the company provided several examples of the effectiveness of this technique, it also noted that the length of time required to “de-water” a well ranged signifi- cantly depending on the degree of water encroachment. Although this process appears to have solved some of the water influx problems, the company stated that it may not solve 100% of the water intrusion issues (for example, behind casing crossflow).”

Brown writes on the General Operations Update: “The company highlighted current water capacity of ~40,000 b/d with a projected disposal capacity of ~47,000 b/d by year- end 2012. Current production appears to be between 14,100 and 14,700 b/d, while May 2012 averaged 14,150 b/ d. This compares favourably to the May 14, 2012 QTD rate of 13,600 b/d. Drilling is still on schedule with 56 horizon- tal wells expected to have been drilled by Q2/12, leaving 46 locations remaining for H2/12. The company plans on focusing on high-production opportunities in the North- Central region for the remainder of the year.

Finally, the company indicated that it does not plan to adjust its capital program unless Brent falls to the $70/bbl range. As such, Bankers is committed (and is expected to be able to financially support) its current development program with all five rigs actively working in the field for 2012.”

On Valuation, Brown writes, “We use a DCF analysis to estimate a 2012E NAV of approximately C$6.40 per share relative to a 2P value of C$7.50 per share. As we expect the company to trade at a discount to both its 2P value and our NAV estimate, we have estimated a 12-month tar- get price of C$5.00 per share.

Overall, we believe this information provides clarity on Bankers’ operational issues. As we have already risked our NAV in establishing our C$5.00/share target, we main- tain our target and BUY rating. We share investor sentiment that the company has a lot of work ahead of it to re- store production and shareholder confidence, but that we believe the fundamental value of the company remains intact.”

Markets Poised To Rally

The Toronto stock market headed for a positive open Monday after Spain admitted it needed help in recapitalising its debt-laden banks and secured a bailout for the sector.

The Canadian dollar was higher as relief over the deal pushed the U.S. dollar lower and commodities higher, up 0.17 of a cent to 97.54 cents US.

Eurozone finance ministers said Saturday they would make up to €100 billion in loans available to the Spanish government to prop up banks stuck with billions of non-performing loans and other toxic assets after the collapse of a real estate bubble. Spain has yet to say how much of this money it will tap.

Prime Minister Mariano Rajoy is avoiding using the term "bailout" to describe the aid, calling it instead a credit line without the strict austerity conditions that have accompanied bailouts for Greece, Portugal and Ireland.

However, on Monday the EU made clear the money is more than just a loan. Besides being paid back with interest, there will be strings attached for the Spanish government.

The interest rate on Spanish 10-year bonds, an indicator of investor confidence of how well Spain can maintain its debts, was down as much as eight basis points to about 6.1 per cent.

U.S. futures were positive with the Dow Jones industrial futures up 55 points to 12,558, the Nasdaq futures gained 10.2 points to 2,567.2 and the S&P 500 futures advanced 4.5 points to 1,326.5.

Prices for oil and metals advanced with the July crude contract on the New York Mercantile Exchange ahead 70 cents to US$84.80 a barrel.

July copper was up six cents to US$3.35 a pound while August bullion in New York gained $2.20 to US$1,593.60 an ounce.

With Spain taken care of for the moment, investors will now turn their attention to Greece, where voters head to the polls this coming weekend in an election likely to determine whether the debt-mired country will stick with the common currency. If Greece leaves the euro, that will raise questions of whether other countries might, too.

Relief over the Spanish bank bailout helped take some of the sting out of data from China that came out over the weekend showing the world's second-biggest economy also suffering under the weight of a rapidly slowing European economy.

China’s statistics bureau said that industrial production grew 9.6 per cent in May from a year earlier, higher than the 9.3 per cent growth registered in April. But it was lower than the 9.9 per cent gain that analysts expected.

But exports rose 15.3 per cent from a year earlier, beating 4.9 per cent growth in April and higher than the 6.9 per cent rise forecast by economists.

On the inflation front, consumer and wholesale price gains eased more than expected with the May consumer price index rising by three per cent, down from 3.4 per cent in April.

The CPI reading along with "a more-than-expected 1.4 per cent year-over-year drop in producer prices, is a clear indication that officials can focus squarely on boosting domestic demand and spurring growth and worry less about inflation," said BMO Capital Markets senior economist Jennifer Lee.

There was relief on markets last week after China's central bank cut a key lending rate by 0.25 per cent, its first rate cut in about four years.

European bourses were positive with London's FTSE 100 index ahead 0.51 per cent, Frankfurt's DAX gained 1.46 per cent and the Paris CAC 40 was up 1.1 per cent.

Earlier in Asia, Japan’s Nikkei 225 index climbed two per cent, South Korea’s Kospi added 1.7 per cent and Hong Kong’s Hang Seng added 2.4 per cent. Benchmarks in Singapore, Taiwan, mainland China, Indonesia and New Zealand also rose.

In corporate news, convenience store chain Alimentation Couche-Tard (TSX: ATD.B) has issued another warning to shareholders of Statoil Fuel & Retail who may be waiting for a higher offer. The Montreal-area company that owns Mac’s and Couche-Tard convenience stores and Circle K gas bars says it won’t pay more for the Scandinavian company. Couche-Tard’s offer values Statoil Fuel at about $2.7 billion.

Kinross Gold Corp. (TSX: K) says production has resumed at its Tasiast mine in Mauritania following a labour dispute that was resolved Saturday. The Toronto-based company has said the work stoppage was illegal. It provided no details of how the dispute was resolved in Monday's announcement.

Bailout nation gets a new member: Spain

The chase by Noah Zivitz:

We've got another bailout nation. And -- at least for now -- it looks to have won the markets' approval. Spain's euro zone partners announced Saturday they're prepared to cut a cheque for up to 100 billion euros to shore up the country's banks. A formal request is expected before euro zone finance ministers meet June 21. Spain's PM says the backstop "is a clear message that the euro project is irreversible."

Lots of questions to be answered: would 100 billion euros be enough to solve the country's real estate-induced banking crisis? How will other Euro nations already choking on austerity respond? How much of a reprieve from the markets has this won Spain, and what happens when everyone is reminded of the economic reality? What happens to confidence in the banks after Moody's imminent downgrades of some of the world's largest financial institutions? What happens after the Greek election? And is today's market reaction relief or short covering? The list goes on, and on.

If only the Euro group could bailout Holland's attack at the Euro Cup, but I digress.

China delivered its monthly data dump over the weekend, giving us some explanation for last week's rate cut by the People's Bank of China. While exports handily topped expectations, retail sales and industrial production lagged. Toss in inflation slipping to 3 percent, and we've got room to ask what the next policy moves will be in China.

The Street bursts out of the gates with analysis of all the weekend developments, with perspective from a variety of asset classes. Coverage continues throughout the morning, including the first of Howard's chats with economic and business leaders at the Conference de Montreal. At some point today, we need to hear what it all means for Canada.

Alimentation Couche-Tard is stomping on speculation it could bump its bid for Statoil Fuel and Retail. It's reiterating the current offer is the best and final bid, and the CFO says investors should consider it carefully, given market conditions.

Tim Cook takes the stage at 1 p.m. ET for his keynote at Apple's developers conference. News on next-generation software for the iPad and iPhone is expected.

Today's WSJ includes a nice wrap on investor discontent with the executive retention plan at Xstrata post-Glencore deal. The takeover plan goes to a vote July 12, and it looks like opposition is mounting. We should be hearing from a shareholder. The backlash against compensation is timely for BNN, with Headline's half hour review of pay packages today at 1 p.m. ET. Don't miss what Stephen Jarislowsky has to say.

We'll get some insight into thinking at the Fed ahead of next week's rate decision, with three voting FOMC members speaking today. It starts with the Atlanta and SF regional presidents' speeches at noon.

Residents near the site of the ruptured pipeline that sent several thousand barrels of oil into the Red Deer River are still looking for answers from Plains Midstream Canada and provincial officials. The spill is contained, but the damage might not be for the industry. Let's consider implications for the rest of the pipeline crowd.

MPs are facing a couple of sleepless nights this week, with voting set to begin on the government's omnibus budget legislation. There's talk voting could run more than 40 hours. It should be a lock for the majority government, but marathon sessions always leave room for human error when exhaustion kicks in.

Ivan Lo Equedia Weekly wake up investors...tracers take cover

Investors have once again been duped. Gold fell last week, while stocks rose. The S&P 500 ended its best week in 2012. The strong gains came after the benchmark index fell more than 6 percent in May and dropped just below its 200-day moving average. But why in the world is the stock market rising? Was it the possible thought of QE? Nope. Bernanke denied us of any immediate spending - yet the market continued to climb. Was it the encouraging report that U.S. wholesale stockpiles grew twice as fast as they grew in March, signalling that businesses are ordering enough goods to lead to increased factory production and sales? Nope. Stockpile growth largely depends on the spending habits of U.S. consumers and businesses. With little to no job creation and payrolls rising slower than the rate of inflation, where is the spending coming from? (I suspect that it's coming from savings and further loose credit. That means it's all an unsustainable one-time increase. Yes, oil and gas prices have dropped but still remain high. Spending is not coming from income.  That's what is really scary behind the GDP numbers. More QE? Coming right up...) Was it China's central bank announcing a surprise interest rate cut? Nope. Because that means China's economy is slowing down. It was China's first rate cut since the 2008 crisis which means the world's economic engine may be preparing to announce some very weak data. Analysts are already forecasting China would deliver its weakest quarter of growth in three years in the second quarter at 7.9pc - the sixth straight quarter of slowing growth. They expected 2012 full-year expansion of 8.2pc, the weakest outcome for China since 1999. So why in the heck is the market rising? Uh Oh, Look Out In March, I explained that stocks have been rising on historically low volumes: "The one biggest concern scaring investors is the volume in trades that has been pushing the market higher. Trading at the New York Stock Exchange declined to the lowest level since 1999 last month, with the average volume over the 50 days ending Jan. 25 slowing to 838.4 million shares. The value of stocks changing hands dropped to $24.9 billion, a 50-day average not seen since at least 2005."   When stocks rise on low volume, its fall could be disastrous. While stocks had one of its best weeks, it also had one of its lowest volume weeks of the year. If that signals to you that the markets are moving back up on a new bull leg, you need to think twice. It may sound shocking to you, but the rise in stocks and the downfall in gold was yet another clear shot of market manipulation by the powers running America. There are no buyers right now. So forget all the talk about a new bull leg. There isn't one. It's only a matter of time before everyone realises the market can only be propped up for so long. Stimulus can, and will, only ease the minds of investors for a brief period before it becomes mundane. And after one more round of QE, people will finally come to the realisation that their dollars and their currencies are losing value at an astonishing pace. That's why the Fed will wait until last minute to unleash its paper force. A Giant Credit Bubble The world is in one giant credit bubble sustained only by more credit. Just ask your friends, your neighbours, your families, and your coworkers. I bet they all owe a lot of money - and not just money for their overpriced Canadian homes they were able to buy because of historically low interest rates, despite record high prices. Most of these debts will never be repaid and yet  more debt and credit will flow. But don't stress yourself thinking you're the only one. The governments of the world are loaded with even more debt that will NEVER be repaid. It used to be millions. Then it turned into billions. And now sovereign debt is figured in the trillions. How are these debts being repaid? With more debt... What Does That Mean? There's nothing we can do to fix the world's financial crisis. It will get a lot worse before it gets better. There are only two likely simplified scenarios: We continue to print more money and inflate the heck out of all fiat currencies. We move to some sort of a gold standard. The likelihood of scenario two is highly unlikely given that the world is still, and will continue to be, controlled by politicians and bankers. In both scenarios gold prices will move up, as it has done without question in the past century. Citizens will soon realise that wealth is not something you can print. As a result they'll begin to hoard their gold, land, and other real tangible assets. Every fiat currency since the Romans first began the practice in the first century has not only ended in devaluation but eventually in collapse. Not only did currencies fail, but the economies that housed them failed as well. Is our modern civilization on the same path? If you compare the fall of previous fiat currencies, they all have a similar cycle and consequence. In almost every case, so much money was printed that they became useless and lost nearly all of their value as serious inflation took over. The fall of civilizations, economies, and currencies don't happen overnight. Some of these currencies failed within years, some within decades, and some within a century. While the US implemented fiat currency since the late 1800's, its current currency issued by the Fed (and no longer by the US) is just over 40 years old. How much longer do you think it will last? While it may seem farfetched today, this point of failing fiat currencies will eventually make sense. We're already seeing this in gold's slow and steady rise over the last ten years, right alongside our monetary base. Slowly, but surely, gold will continue to rise. There will be a point where gold will show its force and turn speculative. While gold has been shunned by the mainstream media, psychology will reverse and everyone will be rushing to own gold. It's the only form of money that has been rising steadily for the last few hundred years. Can you say the same about the dollars in your wallet? Will it take another 100 years before people realise that the only thing fiat currencies do is lose value over time? The only thing gold has done over time is gain more value... No wonder China continued to buy more gold in April, importing another 100 tons of physical gold. In the first four months of 2012 Chinese purchases have already increased by an unprecedented 782% over 2011. The Chinese are the only ones with real money to spend. With the highest savings rate in the world, they are spending their money on gold and silver. I wouldn't even call it spending; I would call it saving or preserving wealth. The Chinese have the strongest purchasing power and a labour shortage while America is a country riddled with debt and unemployment. Which side would you prefer? Walking on a Tightrope While QE and additional world stimulus packages have alleviated pressures for the time being, the truth is quietly lurking behind the scenes. Take a look at this chart from BofA Meryll Lynch's Global Research:   In the last year or so market fragility has soared, signaling even higher systemic risks than in the peak pre-Lehman era in 2008. The credit markets are clearly telling us that there is serious risk on the table. Even after spending trillions of dollars, systematic risks across the board are just as high as they have ever been. Spain still needs a bailout. Greece is finished. Europe remains a mess. And Americans aren't the economic powerhouse they need to be.   If we adjust for inflation, the real economy is actually in a contractionary state. We're 3 years into a recovery and we're growing at an anemic 1.88% rate while the per-capita income continues to shrink. I had mentioned last week that we may see a bounce from the week prior: "The stock market could bounce from Friday's low, but that won't signal we're in the clear. The real short term bottom would only be found if indeed another round of QE is announced, or the Greek mess is resolved. And I stress that it would be a near term bottom." My thoughts haven't changed. Politicians are only delaying the inevitable. I don't see a pretty week ahead. Let's see what Spain does first.     Until next week,   Ivan Lo Equedia Weekly    

China surprises with rate cut

The chase by Marty Cej:

China cut interest rates for the first time since 2008 in a bid to stoke growth and defend against the European debt crisis, almost like throwing up a massive wall, a great wall, even. The People's Bank of China cut the one-year deposit rate to 3.25 percent starting tomorrow and said the one-year lending rate will fall to 6.31 percent from 6.56 percent. The PBOC also said banks will be able to offer a 20-percent discount to the benchmark lending rate, up from the current 10 percent. Back in May, the country's ruling State Council said that risks to the economy were growing. I guess that the risks had grown quite enough, thank you.

The biggest challenge today will be in understanding and communicating how a quarter-point rate cut in China will be transmitted through the global economy and financial markets. Lending has dropped in China and the rate cut is intended to spur companies and consumers alike to borrow, which in turn stokes demand for goods and services both domestically and from abroad. Can lower Chinese lending rates offset Europe's impact on the global economy? Will the cuts be enough to lift industrial commodities from their recent funk (Maybe Prince, who turns 54 today, can help with the funk)? The Australian and Canadian dollars became the world's favourite currencies the last time China cut rates and introduced stimulus in 2008; will it happen again? For stock investors, is it suddenly time to take another look at the likes of Teck, Hudbay and other miners? The oil companies?

Today's action by the People's Bank of China may enliven Federal Reserve Chairman Ben Bernanke's visit with the Senate Joint Economic Committee at 10:00 a.m. ET. Bernanke will deliver a prepared statement at the top of the hour before facing a series of rambling political statements from committee members that may or may not end with the upward lilt of a question. At some point, he will be asked about jobs, and there will be a question or two on the impact of the European debt crisis buried in the rhetoric somewhere. We'll cover the Q&A.

Bernanke's testimony also comes a day after Fed Vice Chairman Janet Yellen told an audience in Boston that a "stalled" improvement in the jobs market and worsening financial conditions may result in more monetary easing by the central bank. The Fed's next meeting is June 19.

Among the stocks we're watching today is Lululemon, which reported a 25-percent jump in same-store sales in the first quarter and beat the average earnings expectation by 2 cents. The company said, however, that it sees second-quarter profit in a range of 28-30 cents US a share, compared with an average estimate of 33 cents. Full-year earnings per share and revenue are also seen coming in just short of analysts' consensus forecasts. Perhaps Tom Jones, who turns 72 today, could help sales with a new tour; all those Groovy Girlshorts, Premium Technikinis and Foxy Lulu Hotshorts flung from the audience will have to be replaced.

There's still more work to be done on the Barrick story. I'm interested in hearing more about the company's strategy now that Aaron Regent has been replaced. Will the focus return to gold? Is the new CEO Sokalsky cut from the same cloth as Munk? Is Barrick more of a "buy" today than yesterday? How many investors have had a change of heart, as Dean Martin asked in his 1955 hit. Martin would have been 95 today.

Bank Of Canada Rate Remains at 1%

Canada's central bank it keeping its benchmark interest rate steady at one per cent — the same level since September 2010.

The Bank of Canada said Tuesday it would hold its target for the overnight rate steady in its latest policy decision.

The bank has decided not to raise or lower the rate on which other banks base many of their interest rates for 14 consecutive six-week policy meetings, dating back to fall 2010. That's the longest that Canada's central bank has stayed on the sidelines since the 1950s.

MAPInterest rates around the globe

"Underlying economic momentum appears largely consistent with expectations," the bank said in its statement accompanying the decision.

"To the extent that the economic expansion continues and the current excess supply in the economy is gradually absorbed, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate," the bank said.

That was a slightly more hawkish tone that the previous statement, suggesting if and when the bank makes a move, it's more likely to be a hike to curb lending, not a cut to stimulate the economy.

"The message is that the bank, unlike the market, still expects the next move to be a hike, but it is acknowledging that there is less certainty about the economy being strong enough to warrant that move," CIBC economist Avery Shenfeld said in a note following the bank's rate announcement.

Modest growth

Canada's central bank says the U.S. economy has continued to expand at a modest pace, but activity in emerging markets has slowed a bit faster than expected, and Europe remains a major concern.

In Canada, the first-quarter growth rate was disappointing at 1.9 per cent, but the economy is holding up overall because of a strong housing sector, positive business, and consumer confidence and low interest rates.

The bank also said inflation remains in control and not a worry at this time. The bank has its next scheduled decision on rates on July 17.