Baltic Dry Index. 561 +02 Brent Crude 60.80
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise. The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."
Hans F. Sennholz
Today we await the latest employment figure from Uncle Scam, though
quite why we pay much attention is open question. They are heavily massaged and
spun after all, and USA stats are now only slightly better that China or Italy’s.
But the big news yesterday was the ECB finally pulling the trigger on its QE
Constrained program. Well from next Monday anyway.
For an emergency that started all the way back in 2007 in the UK with a
bank run on tiny Northern Rock. and that ended with the collapse in America of Bear Stearns,
Merrill Lynch, AIG and Lehman Brothers, among others in 2008, seven years on we
are all supposed to believe that the emergency is over. Look at the stock
markets after all. The ECB’s action, and the panic at the Fed anytime anyone
suggests that the Fed needs to normalise its interest rates, show that the
emergency is far from over. The Great Nixonian Error of fiat money is coming to
its long overdue end. Our charlatan central banksters, haven’t fixed anything,
and are now out of ammo, ideas and luck. It’s probably why the American War
Party is trying to start World War Three in the Ukraine.
Stay long fully paid
up physical precious metals held outside of the reach of John Bull and Uncle
Scam. 2015 is about to turn into a year like no other.
"We finished the year, and we reported that we had $17 billion of cash sitting at the bank's parent company as a liquidity cushion. As the year has gone on, that liquidity cushion has been virtually unchanged."
Bear Stearns CEO Alan Schwartz. March 12, 2008. Bust March 17, 2008
ECB launches €1.1 trillion blitz as bond market dries up
'Our monetary policy decisions have worked,' says ECB president Mario Draghi, basking in the glow of recovery
The European Central Bank is to
launch a €1.1 trillion blitz of bond purchases from Monday to avert deflation
and revive lending, finally joining the “QE club” a full six years after the
Bank of England and the US Federal Reserve.
The belated move came as the ECB
sharply raised its growth forecasts to 1.5pc this year and 1.9pc next year,
leaving it unclear whether such massive stimulus is still needed or even
advisable.
Year-on-year retail sales jumped
3.7pc in January as the delayed effects of falling energy prices feed through
to household spending.
Mario Draghi, the ECB’s
president, said the radical measures first unveiled by the central bank nine
months ago had restored confidence and were starting to bear fruit, alleviating
credit stress across every part of the eurozone.
“Our monetary policy decisions
have worked,” he said. While coy in admitting it, Mr Draghi has already
achieved much of his desired effect by driving the euro down 20pc against the
dollar and the Chinese yuan since last spring.
The devaluation has proved a
powerful form of stimulus, even if the eurozone’s inflation rate is still
languishing at -0.3pc.
The euro slumped yet further
after he confirmed that there would be no retreat from the original plan to buy
€60bn of assets each month, mostly sovereign bonds. It touched an 11-year low
of $1.10 against the dollar.
The pound has reclaimed all the
ground lost against the euro since 2007, closing at €1.38 on Thursday.
Under the scheme, each national
central bank in the ECB system is responsible for buying its own bonds,
reducing the level of shared liabilities to just 20pc of the total. This leaves
weaker countries at risk of a bad “feedback loop” if the EMU debt crisis ever
returns. They will buy bonds with yields as low as -0.2pc, and up to 33pc of
each country’s public debt.
Alberto Gallo, from RBS, said the
circumstances are entirely different from America’s QE. The Fed was able to
gobble up a vast supply of Treasuries as Washington ran budget deficits above 10pc
of GDP. “In Europe, the net supply of investment grade paper will be negative,”
he said.
More
The currency wars have begun
Published: Mar 6, 2015 12:01 a.m. ET
Central banks around the globe are rushing to ease monetary policy as
looming deflation and still-weak commodity prices weigh on growth expectations.
On Tuesday, the Reserve Bank of India surprised the market by cutting rates for the second time this year.
And with the European Central Bank beginning its massive stimulus plan on March 8, more easing is expected, as policy makers struggle to keep their currencies fairly valued against a rapidly weakening euro.
Mohamed El-Erian has described it as “accidental,” but however you characterize it, it’s hard to deny that a global currency war has already begun.
Here’s a map showing which central banks have already fired their opening salvo.
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Sturdy U.S. jobs report seen, could keep June rate hike on table
By Lucia
Mutikani WASHINGTON
(Reuters) - U.S. employment likely rose strongly in February with the
jobless rate slipping, signs that could encourage the Federal Reserve to
consider hiking interest rates in June. A Reuters survey of economists forecast a 240,000 increase in nonfarm payrolls after a 257,000 gain in January. That would mark the 12th straight month of job increases above 200,000, the longest such run since 1994.
"The jobs picture remains extraordinary healthy," said Jacob Oubina, an economist at RBC Capital Markets in New York.
The jobless rate was forecast to fall one-tenth of a percentage point to 5.6 percent, while average hourly earnings were seen rising 0.2 percent after jumping 0.5 percent in January.
Fed officials are monitoring pay closely to help determine when enough pressure is building in the jobs market to merit higher borrowing costs to keep the economy from overheating.
The Labor Department will release the jobs data at 8:30 a.m. on Friday, little more than a week before the U.S. central bank's March 17-18 policy meeting. Many economists expect the Fed could signal its openness to a June rates lift-off by dropping a pledge to be "patient" in considering a hike.
The anticipated pullback in earnings growth will probably not be an issue for the Fed given other signs that wage pressures are building, economists say.
More
U.S. factory orders fall for sixth straight month
WASHINGTON
(Reuters) - New orders for U.S.
factory goods unexpectedly fell in January, posting their sixth straight
monthly decline, a sign of weakness in the manufacturing sector.
The Commerce Department said on
Thursday new orders for manufactured goods slipped 0.2 percent after a revised
3.5 percent decline in December.
Economists polled by Reuters had
expected factory orders to gain 0.2 percent in January after a previously
reported 3.4 percent tumble in December.
The department also said orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans – rose 0.5 percent instead of the 0.6 percent advance reported last month.
Manufacturing has been hurt by softening demand in Europe and Asia as well as a strong dollar and lower crude oil prices, which have caused some energy companies to either delay or cut back on capital expenditure projects.
More
"When it becomes serious, you have to lie"
Jean-Claude Juncker. Failed Luxembourg Prime Minister and ex-president of the Euro Group of Finance Ministers. Confessed liar. EC President.
At the Comex silver
depositories Thursday final figures were: Registered 68.85 Moz, Eligible 109.36
Moz, Total 179.21 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, the fracking mess the Fed’s free money made, thanks to “Bubbles
Greenspan,” “Bernocchio,” and the talking chair.
“Egol and Fabrice were way ahead of their time,” said one of the former Goldman workers.
“They saw the writing on the wall in this market as early as 2005.”
Goldmanite, quoted in The Times of London. November 8 2009
Wolf Richter: “Default Monday”: Oil & Gas Companies Face Their Creditors as the Fracking Bubble Bursts
Lambert here: Who woulda thunk the Fed’s easy money policy — no, not for you! — would contaminate millions of gallons of water and create exploding “train bombs”? Life’s little ironies…Debt funded the fracking boom. Now oil and gas prices have collapsed, and so has the ability to service that debt. The oil bust of the 1980s took down 700 banks, including 9 of the 10 largest in Texas. But this time, it’s different. This time, bondholders are on the hook.
And these bonds – they’re called “junk bonds” for a reason – are already cracking. Busts start with small companies and proceed to larger ones. “Bankruptcy” and “restructuring” are the terms that wipe out stockholders and leave bondholders and other creditors to tussle over the scraps.
Early January, WBH Energy, a fracking outfit in Texas, kicked off the series by filing for bankruptcy protection. It listed assets and liabilities of $10 million to $50 million. Small fry.
A week later, GASFRAC filed for bankruptcy in Alberta, where it’s based, and in Texas – under Chapter 15 for cross-border bankruptcies. Not long ago, it was a highly touted IPO, whose “waterless fracking” technology would change a parched world. Instead of water, the system pumps liquid propane gel (similar to Napalm) into the ground; much of it can be recaptured, in theory.
Ironically, it went bankrupt for other reasons: operating losses, “reduced industry activity,” the inability to find a buyer that would have paid enough to bail out its creditors, and “limited access to capital markets.” The endless source of money without which fracking doesn’t work had dried up.
On February 17, Quicksilver Resources announced that it would not make a $13.6 million interest payment on its senior notes due in 2019. It invoked the possibility of filing for Chapter 11 bankruptcy to “restructure its capital structure.” Stockholders don’t have much to lose; the stock is already worthless. The question is what the creditors will get.
It has hired Houlihan Lokey Capital, Deloitte Transactions and Business Analytics, “and other advisors.” During its 30-day grace period before this turns into an outright default, it will haggle with its creditors over the “company’s options.”
On February 27, Hercules Offshore had its share-price target slashed to zero, from $4 a share, at Deutsche Bank, which finally downgraded the stock to “sell.” If you wait till Deutsche Bank tells you to sell, you’re ruined!
When I wrote about Hercules on October 15, HERO was trading at $1.47 a share, down 81% since July. Those who followed the hype to “buy the most hated stocks” that day lost another 44% by the time I wrote about it on January 16, when HERO was at $0.82 a share. Wednesday, shares closed at $0.60.
Deutsche Bank was right, if late. HERO is headed for zero (what a trip to have a stock symbol that rhymes with zero). It’s going to restructure its junk debt. Stockholders will end up holding the bag.
On Monday, due to “chronically low natural gas prices exacerbated by suddenly weaker crude oil prices,” Moody’s downgraded gas-driller Samson Resources, to Caa3, invoking “a high risk of default.”
It was the second time in two months that Moody’s downgraded the company.
----Moody’s was late to the party. On February 26, it was leaked that Samson had hired restructuring advisors Kirkland & Ellis and Blackstone’s restructuring group to figure out how to deal with its $3.75 billion in debt. A group of private equity firms, led by KKR, had acquired Samson in 2011 for $7.2 billion. Since then, Samson has lost $3 billion. KKR has written down its equity investment to 5 cents on the dollar.
This is no longer small fry.
Also on Monday, oil-and-gas exploration and production company BPZ Resources announced that it would not pay $62 million in principal and interest on convertible notes that were due on March 1. It will use its grace period of 10 days on the principal and of 30 days on the interest to figure out how to approach the rest of its existence. It invoked Chapter 11 bankruptcy as one of the options.
If it fails to make the payments within the grace period, it would also automatically be in default of its 2017 convertible bonds, which would push the default to $229 million.
BPZ already tried to refinance the 2015 convertible notes in October and get some extra cash. Fracking devours prodigious amounts of cash. But there’d been no takers for the $150 million offering. Even bond fund managers, driven to sheer madness by the Fed’s policies, had lost their appetite. And its stock is worthless.
Also on Monday – it was “default Monday” or something – American Eagle Energy announced that it would not make a $9.8 million interest payment on $175 million in bonds due that day. It will use its 30-day grace period to hash out its future with its creditors. And it hired two additional advisory firms.
One thing we know already: after years in the desert, restructuring advisors are licking their chops.
The company has $13.6 million in negative working capital, only $25.9 million in cash, and its $60 million revolving credit line has been maxed out.
But here is the thing: the company sold these bonds last August! And this was supposed to be its first interest payment.
That’s what a real credit bubble looks like. In the Fed’s environment of near-zero yield on reasonable investments, bond fund managers are roving the land chasing whatever yield they can discern. And they’re holding their nose while they pick up this stuff to jam it into bond funds that other folks have in their retirement portfolio.
More
Storage dearth may drive oil prices to $30
Published: Mar 5, 2015 4:53 p.m. ET
West Texas Intermediate crude CLJ5, +0.67% — the U.S. benchmark — has already seen its prices halved from a year ago. A cost of $30 per barrel of oil represents a 40% drop from the current level, which stands near $51.
At Cushing, Okla., the “mecca” of oil storage in the U.S., “the Motel 6 may have a vacancy sign out, but the storage terminals really don’t,” said Kevin Kerr, president of Kerr Trading International.
Here’s why storage plays such a big part: While there are several storage options such as pipelines, very large crude carriers, also known as VLCCs, aboveground tanks and underground salt caverns, the costs for these have “dramatically increased, forcing some companies to sell their inventory as a cheaper option, thus putting significant pressure on prices,” said John Macaluso, research analyst at Tyche Capital Advisors.
It’s not clear how much costs have increased but Perry, an oil-and-gas industry veteran, points out that he’s always heard the going rate for aboveground storage at Cushing was, more or less, 50 cents a barrel a month. Oil tanker storage is the most expensive, with prices likely in the $1 to $1.25 a barrel a month range, he said.
Total utilization of crude storage capacity in the U.S. is at about 60% as of the week ended Feb. 20, and capacity at Cushing, the delivery point for WTI futures contracts, is about 67% full, the U.S. Energy Information Administration reported Wednesday.
More
"The secret of life is honesty and fair dealing. If you can
fake that, you've got it made."
Groucho Marx
Groucho Marx
Another weekend, and a warm spring like weekend for all of Britain. Soon
it will be lambing season, followed by Bluebells, new green leaves and shoots.
In global economics, however, it rather looks like winter is returning. The fat
lady is standing in the wings. Have a great weekend everyone.
The monthly Coppock Indicators finished February
DJIA: +120 Down. NASDAQ: +213 Down. SP500: +169 Down.
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