There was some news that went largely unnoticed today amidst the chaos of what looked like a market not too happy with the F_O_M_C statement before it was bailed out by Jamie Dimon of JPM who essentially front ran the F_E_D by releasing news of a dividend increase and a share buyback which would only be possible if they passed the stress test, forcing the F_E_D to announce results 2 days earlier then scheduled with about 20% of the banks failing (4 of 19), which forced banks to come out with statements regarding their plans for dividends, etc or for the other banks, reasons why the felt the test was unfair.
News...
The US, EU and Japan are heating up a possible trade war wit China over rare earth elements that China has restricted export of as China produces 97% of the rare earth minerals .
"We want our companies building those products right here in America, but to do that American manufacturers need to have access to rare earth materials which China supplies," Obama said.
China has a stranglehold on the global supply of 17 rare earth minerals that are essential for making high-tech goods, including hybrid cars, weapons, flat-screen TVs, mobile phones, mercury-vapor lights, smartphones and camera lenses. The materials also are used in the manufacture of tiny motors, such as those used to raise and lower car windows and in consumer electronics. "
Somewhat comedically, China cited "environmental concerns" in their position. Obviously with China just announcing their first trade deficit in over a decade, they are looking to put a stranglehold on the manufacture of all of the technology and products rare earth is essential for. Rare Earth stocks obviously had a good day today.
The F_O_M_C...
I think the policy statement was largely as expected and that is pretty much another sleeper. The bulls didn't get any hints of QE3 and I think that is why the reaction to the statement started to lead the market lower (of course until Jamie Dimon-today's most powerful man in the world, stepped in with the JPM announcement- are we to assume Jamie's announcement 45 minutes after the F_O_M_C and two days ahead of schedule was purely coincidental?). Gold and Silver both were taken to the woodshed after the statement...
GLD in green, SLV in red.
Probably least noticed today was the CBO (Congressional Budget Office) raising the US by $97 billion dollars for 2012 and this adjustment after the last projection only a month ago. This brings the US projected deficit shortfall to $1.17 Trillion dollars!
In Europe, Greece is of course the main story, they are already on track to miss their short term budget targets as reported by the FT:
"Athens has probably cut spending enough to bring its primary deficit down to 1.5pc this year as agreed. But "current projections reveal large fiscal gaps in 2013-14" according to a leaked draft report by the European Union (EU), the European Central Bank (ECB) and the International Monetary Fund (IMF). In its report, the troika said Athens will have to impose further fiscal cuts of as much as 5.5pc of GDP to meet next year's targets."
Meanwhile Greek bonds which just started trading for the second day saw their yields hit 19%. Already?
In the far east, Japan's Finance Minister said, "Japan is fiscally worse than Greece", their 2011 fiscal deficit was 10% of GDP and their debt to GDP ratio is 230%. Europe, Japan, China.... but the f-e-d seems to think the US is coming along fine.
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