NICK ROST van TONNINGEN Posted by John on April 20, 2013

Nick Rost van Tonningen ~ Gleanings II ~ 508C

Quote of the week : “Somehow people believe QE is a panacea … It’s not. If you don’t do something else to support this policy, it’s a recipe for disaster.” Jin Liqun, Head of the Supervisory Board of the US$500+BN China Investment Corp. – unfortunately Mr. Policy Support is MIA.

The story of the past week has been the way the price of gold cratered. There are many theories as to why. Mine is a very simple one : the price action was driven by cumulative margin calls, with one forcing a sale that drove the price down which triggered another margin call, only to have the process repeat itself over & over again with blinding speed. And in the process there has been a massive erosion of a “paper gold” market that had increasingly been interfering with the interaction of supply & demand in the physical gold market, a major ‘deleveraging’ of the gold market as a whole, & a shift of exposure to gold from “weak” speculative hands, out to make a buck, into “strong” end investor hands less interested in return on, than in security of, capital). Anyway here are some facts. According to one of India’s leading jewelers demand for gold there YTD is up 40% YoY. All but unprecedented amounts of gold flowed into Hongkong during March & the first week of April. There has been no let-up in central bank demand for gold; in fact, some, incl. the People’s Bank of China, have been “holding a basket under the market”, looking at the lower prices as a buying opportunity. The gold ETFs experienced US$9.2.BN in redemptions in the First Quarter. Also during the First Quarter US$3BN-worth of physical gold was withdrawn from the COMEX warehouse (presumably to disappear into the hands of owners intent on holding it somewhere where it will be under their direct control). The world’s mints are having more trouble than ever keeping up with the demand for gold & silver coins. A Dutch bank last week announced its clients will have the option of taking cash for their gold certificates (seemingly suggesting they may not hold the gold that the holders of those certificates could rightfully demand they deliver). And there is a rumour that in a 20 minute period last Friday morning. April 12^th 500 tons of paper gold (‘worth’ a notional US$22BN) was extinguished.

A year or so ago Gleanings mentioned the experience of a Swiss banker who had a high net worth client come into his office, buy US$40MM-worth of gold (about a tonne of the stuff), insist on taking delivery & ‘walking out the door’ with it. He may well have been the gold market’s canary in the coal mine. For there appears to be an accelerating (& disturbing?) trend to hold physical gold, rather than take someone else’s word for it that it exists & actually is where it is supposed to be (a  phenomenon that now seems to be spreading downward in the system towards the retail level). When Venezuela ‘repatriated’ its gold from abroad, nobody paid attention; for this was rightfully seen as primarily politically motivated. But when Germany announced plans to do so early this year, people’s ears started to prick up, & even more so shortly after when the Swiss started talking about following suit. And most recently the University of Texas announced it wants hands-on control of the US$1BN of gold owned by its investment fund that hitherto it had been happy to let the Fed keep in its vaults. This suggests a growing lack of trust in our centuries-old “fractional reserve banking” system for which trust is of critical importance. Back in the middle of the 2008 financial crisis there was a time when the London wholesale ‘inter-bank’ market seized up because banks didn’t know who to trust anymore; the trend towards holding physical gold suggests similar concerns developing among the hoi polloi.

And the Law of Unintended Consequences may before too long also start to have a backlash affect on the price-, & the trend towards taking possession of-, physical gold. For all through the developed world governments starved for funds have declared war on tax havens & tax avoidance, and on bank client confidentiality. This cannot help but enhance the appeal of, & the demand for, physical gold; for, as has been the case during the ages, it is a good store of value & easily hidden from prying eyes (a standard gold bar is 20 x 8 x 4½ cms & weighs 400 ounces; so even at US$1,400, a chunk of gold smaller than a masonry brick is worth over half a million dollars).

US economic news is at best a mixed blessing. March retail sales unexpectedly declined by 0.4%, the most in nine months, while flat sales had been expected & in February they had been up 1.1% – this was largely due to 2.2% lower gasoline sales (that in February had been up 5.4%). New job creation was just 88,000, while 200,000 had been expected & 268,000 had been created in February. The April Thomson Reuters/University of Michigan Survey of Consumers Index was down 6.3 points to 72.3, its lowest level since last July, while a marginal decline to 79.0 had been expected. While in March the Producer Price Index (PPI) was down 0.6% (after being up 0.7% in February), well below the 0.2% expected, core PPI held steady, at 0.2%, from the previous two months. In March housing starts jumped to a 1.036MM annualized rate, the most since June 2008 & well in excess of the 930,000 expected – but this was all due to a surge in multi-family rental units to a seven-year record  417,000 unit annualized rate (vs. 99,000 in February), while single family home starts declined from 650,000 to 619,000 (which is not positive from an attitude-, & economic stimulus-, perspective) – it’s interesting in this context that in the past week two long-time home owners preparing for a more relaxed life style short of retirement, one an architect himself, mooted selling their homes & renting, since it would involve less work and worry (& “fix” their overhead?), and  they don’t trust the housing market (in Alberta). And, while US industrial production was up 0.4% in March, twice the 0.2% expected, this was all due to a 5.3% pickup in utility output which more than offset a 0.1% decline in manufacturing & 0.2% lower mining output.

The IMF, in its semi-annual World Economic Outlook, downgraded its outlook for global economic growth during the current year from 3.6% to 3.3% (& Canada’s from 1.8% to 1.5%, a five-year low & the second year it will be < 2% – so much for Prime Minister Harper’s claim of “good economic stewardship”). And, more importantly, it warned of the “high medium-term risks” to the system inherent in Europe’s ability (or lack thereof?) to claw its way out of its crisis  and America’s & Japan’s ability (or lack thereof?) to reduce public sector deficits & debt. And elsewhere the IMF, in its Global Financial Stability Report, warned that extraordinarily loose monetary policies risk sparking new & dangerous credit bubbles that could tip the world back into financial crisis, and that policy reforms are urgently needed to restore long-term health to the financial system before the long-term dangers of undue monetary stimulus materialize – as noted earlier, Mr. Policy Reform is MIA. Meanwhile in Germany, the ZEW Economic Sentiment Index (among investors & analysts) tumbled from 48.5 in March to 36.3 in April (twice the decline to 40.0 expected).

One wonders what’s going on in the JGB market. Earlier this month a very aggressive Japanese version of QE became official policy. The appearance in the market of a huge new semi-permanent government  paper sponge should have driven prices up, & yields down, as speculators sought to ‘front-run’ the market . Instead the opposite occurred : by mid-month the yield on three-month paper had more than doubled MTD, to 0.95% (to close to its January 1^st level), & the 10-year bond yield had risen by almost one quarter to 0.649% – This may just have been an application of the old stock market adage “Buy on the rumour, sell on the news”.

On April 17^th the PLA navy was very much in evidence in the Diaoyu/Senkaku Island waters. This was a emotionally important date for the Chinese. For it was the 118^th anniversary of the Treaty of Shiminoseki that ended the Sino-Japanese War of 1894-1895 under which China ceded Formosa (Taiwan) & its affiliated islands to Japan  & was made to pay a war indemnity, in eight instalments, of 200MM kuping taels (one kuping tael was equal to 579 grammes/1.32 ounces of pure silver).

According to Takung Pao (the oldest Chinese language newspaper in Hongkong that for many years has been financially supported by, & deemed a mouth piece for, the Communist Party of China, President Xi Jinping has been spotted moving around in Beijing in an ordinary taxi – if so, he must be trying to ‘lay down a (populist) marker’.

 North Americans this week were bombarded with endless stories about, & eye witness reports of, the Boston Marathon bombing. And while the death of innocent bystanders from criminal activity, especially that of kids, young women or visitors is always doubly tragic, the reality is that its three fatalities represent just 0.1% of those killed in 9/11, 16½ minutes-worth of annual preventable hospital-, 43½  of annual car accident-, & 49 ½ of annual gun-related-fatalities in the US, and just a fraction of those killed for years on an almost daily basis in Iraq, Syria & Afghanistan, places with populations one-tenth, or less, of that of the US. Meanwhile in Great Britain among the many stories & reminiscences about Margaret Thatcher’s life, career, achievements & funeral arrangements, there was little, if any, mention of the fact that, by her own admission, her proudest achievement in life had been when, at age 12, she helped her 17 year-old sister Muriel raise money to fund Muriel’s Jewish pen pal’s escape from  Austria, thereby saving her from Hitler’s “Final Solution” & enabling her to live a fruitful life in Sao Paulo, Brazil, long enough to enjoy her grandchildren (although that did not qualify her as a “Righteous Person” under Israeli law since she had not risked her own life to save a Jewish one). And amidst all eulogizing about her it was appalling to note the lengths to which her detractors were willing to go to “celebrate” her death (thereby giving witness to the extent to which British society has lost its “class”). And on the Continent the media were seized with the growing number of reports of more & more traces of horse meat in more & more countries in hamburger/minced meat fraudulently sold as beef. The truth of the matter, however, is that in many parts of Continental Europe horse meat has long been standard household fare, and that it may actually be a healthier source of animal protein than other meats since it is low-fat and, these days increasingly more importantly so, less likely to be loaded with chemicals whose names the hoi polloi cannot pronounce & the long-term effect of which on human wellbeing remains veiled in mystery.

Jefferies is a quality, but low-profile, New York City-based investment bank. It had a marvelous one- page ad in a recent Economist which read “For 50 years, we’ve measured success just one way : We only win when our clients win. There was a time when investment bankers were trusted partners and advisors to their clients. The goal was simple : relentlessly commit to you clients; be hardworking and humble; stay unconflicted in your work and uncompromising in your values. The rest will take care of itself …” – this pretty well sums up what’s wrong with the financial services industry today, & with much of the rest of society, first & foremost politics, and I thank my lucky stars to be old enough to have seen, in my youth & early, & later, in my career, how well that approach worked & how much job satisfaction ensued.

During his recent visit to Israel, Canada’s Foreign Minister, that fool John Baird, broke a 46 year-old Canadian-, & Western-, taboo by calling on Tsipi Livni at her office in what used to be the predominantly, but growing less so, Arab sector of East Jerusalem. He did so despite the fact that on the Foreign Affairs website it is clearly stated, under the Status of Jerusalem section of its Statement of Policy, that “Canada does not recognize Israel’s unilateral annexation of East Jerusalem.” And he likely did deliberately so; for as Foreign Minister there was little real business that he would have urgently needed to discuss with that country’s Justice Minister. Italy still has no real government (Mario Monti still heads the technocrat, but now solely ‘caretaker’, government’) but the various parties are this week engaged in trying to elect a new (largely ceremonial) President since the term of the incumbent, 87 year-old Giorgio Napolitano, runs out next month. There are 1007 voters (630 deputies, 315 senators + 4 senators-for-life, and 58 regional delegates), with the centre-left bloc, headed by Pier Luigi Bersani, ‘controlling’ 496 of them, Berlusconi’s centre-right bloc 270, the anti-establishment 5-Star Movement of former professional comedian Beppo Grillo 162, Monti’s centrist Civic Choice coalition 70 &  Others 9. The rules are that if no one gets a two-thirds majority (i.e. 672 votes) in three rounds of voting, he/she can be elected by a simple majority in the fourth round. Bersani, after consulting with Berlusconi, put forward the name of 80 year-old Franco Marini, the former Speaker of the Senate, a member of the Catholic wing of his party, in the hope this would engender broad support. But he was wrong : Marini got only 521 votes. This was due  in part to many of the voters deeming him a representative of the ‘old political class’ & in part to much of Bersani’s own party, led by the runner-up to him for the leadership of the socialist party, the photogenic Mayor of Florence, Matteo Renzi, rebelling (with Renzi saying that electing Marini would be playing a “prank” on the nation & pointing out that he had failed to get himself re-elected in February), although there was also considerable discomfort with Berlusconi having endorsed Bersani’s choice. Word has it that, both the Bersani loyalists & Berlusconi’s bloc will abstain from voting in the second & third rounds so that Marini can then be elected by a simple majority in Round 4.

In March European car sales slid for the 18^th month in succession, by 10% YoY, to a 20-year low.

In a new twist to the now quite common ‘citizenship investment schemes’ Cyprus’ Prime Minister Nicos Anastasiades is offering those large depositors in Cypriot banks who recently took a haircut of at least 3MM Euros or more on their deposits, Cypriot citizenship (& thereby an EU passport).   

 GLEANINGS II – 508

Thursday April 18^th, 2013 

JP MORGAN’S MYSTERIOUS $327 MILLION PRIVATE EQUITY LOSS (CNBC, John Carney)

It reported that First Quarter net revenues in its private equity division were up 8.6% to US$276MM but that it nevertheless had incurred a US$182MM loss (while during the year-earlier period it had been US$134MM in the black); this was, it said, “primarily due to higher net valuation losses on investments.” But buried in the fine print there was also a US$327MM write-down on “direct investments”. For the bank as a whole, America’s largest, this was ‘chump change (remember, not long ago it took a US$6+BN hit in the “London Whale” episode without much kerfuffle); but given the size of its private equity portfolio (US$5BN in private-, & US$578MM in public-, securities) these losses are noteworthy especially since they were taken during a period the market was ‘on wheels’.

The bank wouldn’t comment.  Meanwhile, in a letter to shareholders CEO Jamie Dimon conceded “The ‘London Whale’ was the stupidest and most embarrassing situation I have ever been part of” (at least he now conceded involvement) & warned the bank’s troubles with the regulators aren’t over since it faces sanctions from them requiring “extensive changes to the bank’s business … (that) touch almost every system, every legal entity, every product and every service we have across the company.”  Once JPMorgan was not the biggest, but by far the classiest, US bank, while now it seems to have exchanged quantity for quality (for which Dimon, its CEO since December 31^st, 2005, must bear much, if not all, the blame, despite having been “CEO of the Year” in 2011).

U.S.-CHINA NUCLEAR SILENCE LEAVES A VOID (WSJ, Jeremy Page)

John Kerry’s message on April 13^th, while in Beijing, was that the US boost of its missile defenses in Alaska & on Guam is directed at Pyongyang, not Beijing, but that China’s own security interests warrant reining in North Korea. Nevertheless, it may just prompt Beijing to expand its own nuclear arms development plans.

Things aren’t helped by the lack of an ongoing China-US nuclear security dialogue such as helped develop trust & understanding  between Washington & Moscow since the end of the Cold War. But China’s military has resisted US attempts to engage it in such a dialogue.

While many Chinese civilian experts agree North Korea’s belligerence is damaging Chinese interests, its military is focused solely on propping up Pyongyang as a buffer against US forces in Asia. And they agree that, rather than prompting Beijing to show displeasure with North Korea, its reaction to the US missile defense deployment will be to upgrade its own relatively modest nuclear arsenal. Thus this week, Maj.-Gen. Yao Yunzhu, a senior researcher at China’s Academy of Military Science, & a leading nuclear expert, said “The current developments, especially the deployment of missile defense systems in East Asia would be, in Chinese eyes, a very, very disturbing factor having implications for the calculation of China’s nuclear and strategic arsenal” (which the US estimates at 240 warheads, what Beijing itself calls “a minimum deterrence”). She also noted that the US missile defense system is being deployed jointly with allies in East Asia with whom “China has some disputes”, & argued that it’s the US deterrent that is driving North Korea’s nuclear program (which is, of course, errant nonsense since a) it is ‘defensive” & b) the North Korean nuclear program long predates their deployment).

Still, some US officials & analysts think they can see a bit of a shift in China’s position since it backed UN sanctions against North Korea, kept quiet about the US deployment of B-2 bombers & F-22 fighters jets in the skies over South Korea & allowed direct criticism of Pyongyang in its state-controlled media, even though  the Chinese military’s view is that Beijing cannot stop Pyongyang’s nuclear program, even if all economic aid were cut off.

The latter, of course, is also errant nonsense since North Korea cannot feed itself. But it does seem to suggest a fundamental difference of opinion between China’s civilian & military leadership.

U.S., CHINA SIGN CLIMATE CHANGE PACT (Postmedia News, William Marsden)

During John Kerry’s visit to China last weekend the world’s two biggest polluters signed a potential groundbreaking agreement & “call to action” on the fight against escalating climate change. In announcing this, the two sides said, in a joint statement on climate change, that they “consider that the overwhelming scientific consensus regarding climate change constitutes a compelling call to action crucial to having a global impact on climate change”, recognized the ”urgent need to intensify global efforts to reduce greenhouse gas emissions … is more critical than ever … Such action is crucial both to contain climate change and to set the kind of powerful  example that can inspire the world”, and stated that manmade climate change is having “worsening impacts, including the sharp rise in global average temperatures over the past century, the alarming acidification of our oceans, the rapid loss of Arctic sea ice, and the striking incidence of extreme weather events occurring all over the world.” Also during the weekend the US announced a similar deal with Japan.

The soup is never eaten as hot as it is served. Nevertheless, “a thousand mile journey begins with a single step” (an observation generally attributed to China’s Lao-tzu who lived from604 to 531 BC), & this is about as pro-active a statement as either government has ever made. And if this initiative were to ever bear fruit, it would leave Canada more isolated than ever climate change policy-wise, unless the  Prime Minister were to make a personally embarrassing policy climbdown.

ONE MORE THREAT TO THE OILSANDS (G&M, Nathan Vanderklippe)

Once the Alberta oilsands were seen as the last major oil reserve not SOE-controlled & in a stable, democratic country. Then came shale oil. And now the industry is looking to unlock the vast amounts of residual oil left in the Texas & New Mexico Permian Basin after nearly a century of production. According to Scott Sheffield, CEO of Pioneer Natural Resources, a major landholder there, it still holds 50BN bbls of economically recoverable oil (i.e. seven years US consumption) & half as much again in its Delaware subbasin (vs. the oilsands’ 169BN bbls. which are environmental footprint-, (dilbit) quality-, cost-, & access to market-, challenged. And Permian Basin oil is light, relatively cheap to produce, can be trucked cheaply to Texas refineries, and while its wells don’t have the long lives of oilsands plants, neither do they have their very high, upfront capital costs.

Another reason why it may be in Canada’s-, & TransCanada’s-, long-term interest if President Obama put the kibosh on the whole Keystone pipeline idea. This also ears out my contention that the oil left in the ground in the traditional fields constitutes the world’s most significant oil reserve.

PM BLAMED FOR CAPPING CLIMATE DEBATE (G&M, Shawn McCarthy)

On April 11^th the Ottawa-based ‘progressive’ think tank Canada 2020 said climate change had become the “third rail” of Canadian politics that the Harper government has been using as a “wedge issue”, but that it should take the partisan poison out of the climate debate & enact new policies, or fail in meeting its international commitments to reduce emissions.

This won’t resonate with a Prime Minister who is a climate change-doubting zealot. The presenter was none other than Diana Carney, Canada 2020’s Vice-President of Research & spouse of the still Governor of the Bank of Canada, but soon to be Governor of the Bank of England, Mark Carney. If Harper had known in 2007 that in appointing Mark Carney he was getting a two-in-one deal, he might have gone elsewhere & Carney’s career path would have evolved differently (Diana lost credibility last month when she tweeted that, with fewer foreigners buying houses in London, “maybe I’ll be able to find a place to live in London”, prompting a headline in The Telegraph saying “Does Diana Carney dare to joke about a £250,000 housing budget?” (over & above Mark’s £480,000 base salary, 60% more than advertised & well over outgoing Governor Mervyn King’s).

 FALSE START : URBANIZATION DRIVE FAILS TO MEET EXPECTATIONS

(Economic Times, Kang Yi et. al)

Steel companies & local governments expected the new leaders to release the usual flood of loans & infrastructure projects. But it has signaled it will sacrifice urbanization speed to quality. According to Ge Xin, a researcher with the Beijing Lange Steel Information Research Center, ”Over the past three decades entreprises have gotten used to new government leaders aiming high and going all out by releasing all kinds of new loans … This has been the case every time, the entreprises have been spoiled … Steel factories’ and steel trading companies’ optimism relied on the promise of urbanization … But once the ‘five new rules’ [regulating] real estate were launched that confidence was destroyed and the market went downhill.”

The five new rules are : local governments will be held accountable for curbing house price rises  & be fined if they don’t, the central bank will hike downpayments & mortgage rates, & homeowners will be taxed 20% (up from 1%) on their home sale profits, land supplies will be increased, government-subsidized housing programs will be accelerated, and local governments must release information on housing & build online information systems on personal home ownership.

CHINA’S LOCAL GOVERNMENT DEBT “OUT OF CONTROL” (Economic Times)

Zhang Ke of the accounting firm ShineWing, who doubles as Vice Chairman of China’s Accounting Association & headed Coopers & Lybrand’s Chinese operation before launching his own firm in 1998, told the Financial Times “We audited some local government bond issues and found them very dangerous, so we pulled out … most don’t have strong debt service abilities. This could become very serious … It is already out of control. A crisis is possible.” The paper commented that “it is rare for a figure as established in the Chinese financial industry as Zhang to issue such a stark warning.”

Since local governments cannot issue debt in their own name, they have been using “Special Purpose Vehicles” to fund infrastructure projects (sounds familiar?). 

SLOVENIA MANDATES BANKS TO EXPLORE FUNDING OPPORTUNITIES (Reuters)

BNP Paribas, Deutsche Bank & JPMorgan are to arrange fixed income investor meetings in financial centres starting April 22^nd. According to the Finance Ministry “This is not a mandate for a bond issue but for a non-deal related road show .. (to) test the possibilities for Slovenia’s financing on international capital markets.” This came the day after Slovenia issued 1.1BN Euros of 18-month Treasury Bills, more than double its target, & used part of the proceeds to purchase 511MM Euros of similar maturity bills coming due in June.

Formerly an Eastern Europe ‘Tiger’ , Slovenia was hard-hit by the recession & is struggling to avoid  an EU/IMF bailout. Once part of Yugoslavia, it has a population of 2MM, a GDP of 50BN Euros (both twice those of Cyprus),& a (state-owned) banking sector with 7+BN Euros in bad loans (to local clients). It needs 1BN Euros to prop up its banks & another 2BN Euros to keep its own head above water. The Treasury Bill sale results are deceptive : their yield was 4.15%, 3x Portugal’s rate for similar maturity paper last month, its own banks bought much of the issue (one alone 25% of it), & even after paying down its June T-Bill issue, it will still have to find nearly 400MM Euros to repay the balance when it comes due on June 6^th. Meanwhile its 10-year bond is yielding 6.80%.   

ITALY TO SEIZE 1.8BN EUROS IN NOMURA ASSETS (The Times, James Dean)

On April 16^th Italian prosecutors announced they would freeze 1.7BN Euros of deposits & 88MM Euros of commissions at the Milan branch of Japan’s Nomura Bank, as well as 14MM Euros in assets of three former executives of the Siena-based Banca Montei dei Paschi di Siena SpA (due to allegations by the new management of the bank that Nomura had colluded with its predecessor management to use derivatives to hide losses).

This reads like a thriller written to portray a banking system of questionable merit & credibility. It all started 641 years ago, in 1472, when the then Republic of Siena (in Italy’s Tuscany Hills about 250kms Northwest of Rome), in the era of Florence’s Lorenzo de Medici (aka “The Magnificent), the patron of Michel Angelo, Leonardo da Vince & Botticelli, issued a charter for a new bank, the forerunner of today’s Banca Montei, the oldest continuously operating bank in the world (Siena, where the bank’s headquarters remain to this day, is now a 55,000 inhabitant city & a UNESCO World Heritage site). Fast forwarding to the 21^st century, the bank had become Italy’s third largest, with a 250BN Euro balance sheet, 3000 branches, 33,000 employees & 4½MM customers (& JPMorgan as a 2½% shareholder). Meanwhile, in October 2007 the Royal Bank of Scotland, Spain’s Banco Santander & the Dutch/Belgian Fortis bank orchestrated the largest ever, 71BN Euro/US$98BN, bank takeover of  Holland’s ABNAmro Bank, with a view of breaking it up & each taking down parts thereof. Their  timing, on the eve of the Great Recession, proved catastrophic; for this transaction  led to the eventual demise of Fortis & UK government control of the Royal Bank of Scotland. The only one to come out of it OK was Banco Santander which  quickly “flipped” much of its share of ABMAmro assets to third parties to recover its 20BN Euro investment in the deal. Half of this came from its sale, for 10.3BN Euros, to Banca Montei of Italy’s of Banca Antonveneta (which ABNAmro had acquired two years earlier), a price so out of touch with reality that bankers everywhere shook their heads in wonder. Then in 2009 Banca Montei incurred serious operational losses. The allegations now are that shortly afterwards the bank’s then management did derivatives’ deals with Deutsche Bank & Nomura designed to hide these losses, with their documentation hidden from regulators & the central bank until late December 2012/early January 2013 (after a change of management). Shortly after this, on January 26^th, the Italian central bank approved a 3.9BN Euro bailout of Banca Montei which, in the late stages of the election campaign, distressed depositors & largely dispossessed shareholders. Since then the mystery deepened when a month ago the body of the bank’s spokesman, 52 year-old David Rossi, was found on the ground below his third story office window in the bank’s 14^th century headquarters (with purportedly a crumpled note to his wife in a waste paper basket in his office, saying “I messed up”).

There are two intriguing aspects to this affair. First, why target Nomura & not Deutsche Bank, which appears to have been the lead culprit in this affair – the answer may simply be that Nomura is the “softer target” & dragging Deutsche Bank in would upset Chancellor Merkel, & German voters generally, five months before a critical election, and conceivably might trigger a European banking crisis since Deutsche Bank, even though now only A+-rated (with a negative outlook), is still a power to be reckoned with in European banking. And secondly, what role did Mario Draghi play, or should, & did not, have played, in all this. For while now head of the ECB &, as such, about to become Europe’s ‘super bank regulator’, he was the Governor of Italy’s central bank when Bank Montei overpaid for Banca Antonvenata, and when it, and Nomura & Deutsche Bank, perpetrated the derivatives  scam (& had been Vice Chairman & Managing Director of Goldman Sachs International, and a member of its firm-wide management committee, when that Goldman did a similar series of derivative transactions with the Government of Greece to camouflage its true financial situation, while conveniently forgetting to mention that fact in the prospectuses for the international bond issues that the firm subsequently underwrote for the Greek government.

TURKEY’S ECONOMY IS WORTH WATCHING (Postmedia News, Matthew Fisher)

Turkey is becoming a regional powerhouse, reaching deep into Central Asia, the Caucasus, the Balkans & the Middle East, as in the days of the Ottoman Empire. Tourism & farming remain important but are part of its past. Three years ago its economy grew at 9% & , while last year it was only 2.2%, this year that’s expected to recover to 4%. It’s Iraq’s largest trading partner, much of it with its Kurds in the country’s North. It has big energy plans in the Black Sea & Mediterranean, wants to build a second nuclear power plant, and, led by its construction companies, has a growing presence in Central Asia., helped by the similarity between Turkish & the languages spoken there. And Turkish Airlines has quadrupled its passenger load in the past decade & soon will have the world’s biggest route network.

All yet the EU spurned its approaches to become a member in favour of those by backward economic minnows like Romania & Bulgaria.