Baltic Dry Index. 726
-10 Brent Crude 46.18
Under
a Presidential government, a nation has, except at the electing moment, no
influence; it has not the ballot-box before it; its virtue is gone, and it must
wait till its instant of despotism again returns.
Walter
Bagehot
This weekend the G-20 finance monsters, err ministers, are getting
together once again, this time in China, to yet again try to fix what ails the
global economy. Yet again they will miserably fail, for none in the meeting
have the slightest idea of the real problem, i.e. the unintended consequences
of the Great Nixonian Error of fiat money, communist money, and all the
malinvestment, unrepayable debt, and global corruption it spawns.
All at the meeting are card carrying Keynesians, totally besotted with
funding the global casinos with free cash, driving interest rates into negative
territory, and funding the world’s greatest ever Ponzi scheme, aka China, now
in the process of undergoing a slow motion train wreck. At the mutual
admiration society, all are fully committed members of Albert Einstein’s insane
asylum, fully committed to doing the same thing, pushing on a string over and
over again and expecting a different result!
“under
the gold standard, a free banking system stands as the protector of an
economy's stability and balanced growth... The abandonment of the gold standard
made it possible for the welfare statists to use the banking system as a means
to an unlimited expansion of credit... In the absence of the gold standard,
there is no way to protect savings from confiscation through inflation”
Alan
Greenspan
Asian Stocks Drop as BOJ Rejecting Helicopter Money Supports Yen
July 22, 2016 — 12:28 AM BST Updated on July 22, 2016 — 4:35 AM BST
Asian stocks pulled back from an eight-month high and the yen held gains as
prospects for central bank stimulus cooled in Japan. Malaysia’s ringgit fell
toward this month’s low, while the yuan strengthened. The MSCI Asia Pacific Index declined after U.S. shares retreated from a record amid a mixed batch of U.S. corporate earnings. Japan’s Topix index dropped from a six-week high after central bank Governor Haruhiko Kuroda’s opposition to so-called helicopter money became clear. Malaysia’s ringgit slipped for a fifth day as corruption probes into a state investment fund remained in the spotlight and oil traded below $45 a barrel. The yuan rose for a fourth day before Group of 20 finance chiefs meet for weekend talks in China.
Equity markets had been on a roll, gaining more than $4.5 trillion in
three weeks on speculation authorities in Asia and Europe will add stimulus to
stoke inflation and growth, while positive surprises in U.S. corporate results
also supported the rally. The gains drove global stock valuations to a one-year
high, leaving the securities vulnerable to any disappointments on the policy
and earnings fronts. Kuroda, in a BBC Radio interview recorded on June 17 and
aired on Thursday, said there was no possibility of introducing helicopter
money, which would involve the BOJ’s direct financing of government spending.
Kuroda’s “comments will disappoint investors who had been selling the
yen in
anticipation of the Bank of Japan announcing helicopter money at its meeting
next week,” said Jasper Lawler, a London-based analyst at CMC Markets Plc. “After the failure of its current quantitative easing program to boost inflation, helicopter money is one of the few remaining tools in the Bank of Japan’s arsenal,” he said, noting that Kuroda may have changed his opinion since he made the remarks on June 17.
anticipation of the Bank of Japan announcing helicopter money at its meeting
next week,” said Jasper Lawler, a London-based analyst at CMC Markets Plc. “After the failure of its current quantitative easing program to boost inflation, helicopter money is one of the few remaining tools in the Bank of Japan’s arsenal,” he said, noting that Kuroda may have changed his opinion since he made the remarks on June 17.
More
Japan's CPI seen falling again in June, more headaches for BOJ
Japan's consumer prices were expected to fall in June for the fourth
straight month, a Reuters poll found, keeping alive market expectations the
central bank will expand an already massive stimulus program to hit its 2
percent price goal.
Separate data next week is also expected to show exports slumped in June
from a year earlier, a sign the economy is suffering from the hit from a strong
yen and global uncertainties after Britain's vote to leave the European Union.
The core consumer price index (CPI), which includes oil products but
excludes volatile fresh food prices, was expected to have fallen 0.4 percent in
June from a year earlier, the poll of 21 economists found. This follows a 0.4
percent annual fall in May.
"Oil prices are lower than last year and there is a strong downward
pressure on energy prices," said Takeshi Minami, chief economist at
Norinchukin Research Institute.
The internal affairs ministry will announce the CPI data at 8:30 a.m. on
July 29 (2330 GMT July 28), the day the BOJ meets for a closely-watched policy
meeting.
Weak consumer prices add to headaches for the BOJ, which has pledged to
raise inflation through heavy buying of government debt from the bond market
and its controversial adoption of negative interest rates in January.
Sources have told Reuters the central bank may offer a slightly bleaker
view on prices from its current assessment that the underlying trend inflation
is "improving steadily" though this would not immediately trigger
monetary easing if bank board members believed they could stick to their
forecast that inflation would accelerate ahead.
In another blow to the BOJ, Japan's government cut its forecasts for
consumer prices earlier this month, saying it expected prices to rise 1.4
percent for fiscal 2017, well below the 2 percent target the BOJ says will be
met during the fiscal year ending in March 2018.Trade balance data, due on July
25, is expected to show exports fell 11.6 percent in June from a year earlier,
the poll found, as a strong yen triggered by Britain's vote to leave the
European Union weighed on Japanese companies' overseas profits.
More
In China meeting, G20 has chance to soothe post-Brexit jitters
Finance heads from the world's leading economies will confront fresh
fears about protectionism when they meet in China this weekend, with Brexit
fallout and dwindling policy options to boost global growth expected to
dominate talks.
The Group of 20 finance ministers and central bankers meeting will put
the spotlight on Britain's new Chancellor of the Exchequer, Philip Hammond, who
makes his international debut at the gathering and will need to answer
questions about how London will manage its exit from Europe.
Also overhanging the G20 meeting in the southwestern city of Chengdu
will be Donald Trump's U.S. Presidential campaign in which protectionist themes
are expected to be central, after his official nomination as the 2016
Republican candidate this week.
"(On Brexit), the focus will be on what message G20 can deliver to
ease concerns," said an Asian financial official involved in G20-related
issues. "We still need to remain vigilant."
The International Monetary Fund this week cut its forecast for global
growth, specifically on Britain's vote to leave the European Union.
A South Korean finance ministry official said "expanded downside
risks to global economic growth" post-Brexit would feature in the Chengdu
talks.
"With everything aside, talk about strengthening cooperation
regarding monetary, fiscal and macro policy to recover global growth will be
essential," said the official.
Noting the growing public backlash against trade and globalization, a
senior U.S Treasury official said the G20 needed to focus on ensuring the
benefits of global trade and cooperation were shared broadly among their
citizens.
"We also need to do a better of job of explaining why this
cooperation is important to the lives or our citizens in terms of jobs,
economic growth and stability," the Treasury official said.
More
Euro Traders Tell Draghi That ECB’s Policy Is Going Nowhere Fast
July 22, 2016 — 12:00 AM BST
Euro traders are sending Mario Draghi a clear message: Monetary policy
is reaching a dead end.
Just look at how the world’s most-traded currency pair has done this
year. Its 200-day moving average has been stuck around $1.10, and it has
registered the smallest move of any of the major currencies. All the while,
Draghi and the European Central Bank delved deeper into negative interest rates
and more aggressive bond-buying -- policies that might typically debase the euro.
Even after ECB President Draghi stressed Thursday "readiness, willingness, ability" to add more stimulus in coming months, the euro barely budged. The diminishing impact of monetary stimulus has left the currency open to other drivers, such as trade flows and geopolitics. The euro zone’s trade flows have thwarted euro bears who rebuilt positions in the past two months, as a record current-account surplus provides underlying support for the single currency.
There’s “some fatigue in terms of what central banks can do to control currencies at this point and yes, in terms of what else the ECB may bring to the table," said Chris Chapman, a London-based trader at Manulife Asset Management (Europe) Ltd. "The sizable current-account surplus is also a factor in helping support the euro versus where most people would expect it to be lower."
The euro’s resilience against the dollar puts some hedge funds’ and other large speculators’ bets at risk. Short positions on the currency outnumbered bullish wagers by 87,660 contracts last week, after heading close to net-bullish positioning in May, according to U.S. Commodity Futures Trading Commission data.
ECB officials, and central bankers from industrialized nations worldwide have admitted monetary easing has its limits in reviving growth and inflation. By contrast, when the ECB first slashed its deposit rate below zero in June 2014, it triggered about a 20 percent slump in the euro during the next nine months.
Since then, the 19-nation euro has stayed more or less in the $1.10 range, even though the monetary authority started buying the region’s bonds last year and subsequently expanded the program to include corporate securities. It closed Thursday at $1.1026.
More
"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
F. A. von Hayek
At the Comex silver depositories Thursday final figures were: Registered
28.37 Moz,
Eligible 126.65 Moz, Total 155.02 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
What is wrong with this? What could possibly go wrong? Draghi’s
you have a friend in me!!!Inside Draghi’s Corporate Bond Frenzy—–$10 Billion/ Month, 440 Different Issues, Heavy BBB and BB Risk
by ZeroHedge • July 20, 2016
Yesterday for the first time, the various central banks of the Eurosystem
disclosed which bonds the ECB had bought under its CSPP program. Specifically, we
broke down the purchases of the Bundesbank, which revealed some of the most
prominent public company debt issuers in Europe. However, we were curious to
get a more detailed look at what Mario Draghi’s trading desk was spending their
time BWICing all day. For that we went to the
undisputed master when it comes to tracking what the ECB does in the bond realm
(because the ECB is not buying equities just yet), BofA’s Barnaby Martin.Here is the big picture as revealed in his report today titled “CSPP: Buying Frenzy” – “in just over a month of the Corporate Sector Purchase Programme, the ECB have bought 458 bonds, with virtually no stone left unturned.With the monthly run-rate of buying hovering around the €8.5bn mark, our conclusion for CSPP is, bluntly, that it is too big, too powerful and ultimately too bullish for spreads.”
But the best part was Martin’s answer to the key question: “So what did they buy?” His answer: “In short, almost everything.”
But we don’t think this should be particularly surprising –
the weekly CSPP buying numbers continue to suggest a monthly run rate for
corporate purchases of between €8bn-€9bn (with the buying pace picking up over
the last week). Yet, we think this is too big an amount for a market devoid of
supply and thus we continue to believe that CSPP is a very bullish technical
for non-financial spreads.
What caught our attention on the ECB’s shopping list?
- They bought “topical” credits such as VW, Glencore and EdF.
- They bought “high-yield” credits such as Telecom Italia and Lufthansa.
- They bought “foreign” credits such Bunge and Schlumberger (US), Nestle and ABB (Swiss).
- They bought long-dated bonds (2036s), but they also bought plenty of short-dated bonds. In fact, 35% of the bonds that they bought are negative yielding.
- The Central Bank of Italy seems to be the most “active” central bank thus far, purchasing 43% of their eligible universe (55 out of 127 bonds).
- The Banque de France seems to be relatively “lagging” at the moment, purchasing just 29% of their eligible universe (115 out of 399 bonds). In addition, the BdF has shied away from buying issuers such as Alstom and Legrand.
- The ECB has been involved in primary – buying recent supply from Bunge, Repsol, ASML, Iberdrola, Tennet, Total and Air Liquide.
They bought (almost) everything!
Since June
8th the ECB has bought 440 corporate bonds, which is around 35% of our
estimated universe. By issuer, we find that the ECB has bought bonds from 158 different
corporates.
The most popular bonds appear to be Deutsche Bahn (12 bonds bought),
Telefonica (11 bonds bought), BMW (10 bonds bought), Daimler (9 bonds bought),
ENI (9 bonds bought), Orange (9 bonds bought), Air Liquide (8 bonds bought),
Engie (8 bonds bought), Iberdrola (8 bonds bought), Total (7 bonds bought) and
Enel (7 bonds bought).
- ---- The ECB seems to be lagging a bit in its buying of French credits, with only 115 bonds bought so far. This compares to 122 German bonds bought. Yet our previous work suggested that the ECB would weight CSPP purchases 30% towards French names and just 25% towards German ones.
- Likewise the ECB seems to be a little bit ahead in its buying of Swiss credits, and behind in its buying of US credits.
- The chart also suggests that the Bundesbank and the Banque de France are buying smaller clips, on average, than the central banks of Italy and Spain.
---- For those eager to frontrun the ECB, Table
1 shows some of the high profile issuers that are yet to appear on the
ECB’s shopping list. Note that some of these are French, which
ties in with the analysis in chart 4 that French credits have been
under-purchased so far.
---- Finally, here is why – as
we hinted last week – corporate yields are set to go even lower, perhaps
even dipping below their respectively sovereigns: simply, because the ECB is
completely price and yield indescriminate, and it will prioritize volume and
liquidity (over price and yield). As a result, we would bet lots of money that
in the coming months, Deutsche Bahn will end up trading “through” the
matched-maturity Bund, as corporations end up being “safer” than governments,
and all thanks to the ECB’s
trading desk, first profiled here.
More
A
permanent Governor of the Bank of England [your central bank here] would be one of the greatest men in
England. He would be a little 'monarch' in the City; he would be far greater
than the 'Lord Mayor.' He would be the personal embodiment of the Bank of
England; he would be constantly clothed with an almost indefinite prestige.
Everybody in business would bow down before him and try to stand well with him,
for he might in a panic be able to save almost anyone he liked, and to ruin
almost anyone he liked. A day might come when his favour might mean prosperity,
and his distrust might mean ruin.
Walter
Bagehot. Lombard Street. 1873.
Solar & Related Update.
With events
happening fast in the development of solar power and graphene, I’ve added this
section. Updates as they get reported. Is converting sunlight to usable cheap
AC or DC energy mankind’s future from the 21st century onwards? DC?
A quantum computer next?
Fast-charging everlasting battery power from graphene
July 19, 2016 by Han Lin
Swinburne University researchers have invented a new, flexible energy-storage technology that could soon replace the batteries in our cars, phones and more.Han Lin's new super battery (actually, a supercapacitor) can store as much energy per kilogram as a lithium battery, but charges in minutes, or even seconds, and uses carbon instead of expensive lithium.
The majority of batteries used in Australia are lead-acid batteries. These have three main disadvantages: they can take hours to charge, they have a limited lifespan for charging and discharging, and they're bad for the environment, therefore requiring special, expensive disposal processes.
Han's supercapacitor charges extremely fast, can be charged and discharged millions of time, and is environmentally friendly.
Previously, a major problem with supercapacitors has been their low capacity to store energy. But Han has overcome this problem by using sheets of a form of carbon known as graphene, which has a very large surface area available to store energy.
Large scale production of the graphene that would be needed to produce these supercapacitors was once unachievable, but using a 3-D printer, Han is able to produce graphene at a low cost.
And because the technology is extremely flexible and thin (as thin as ordinary printing paper) the new super batteries could be potentially be built into clothing, or worn as a watch strap, to achieve a wearable power supply.
Another weekend, and we have entered the silly season, this year delayed by the terrible events in Nice and Turkey. Still ever willing to have the LIR do its part, and with the Republican Party convention just past, below the old master at his best. Have a great weekend everyone. Enjoy.
The monthly Coppock Indicators finished June
DJIA: 17930
-14 Up NASDAQ: 4843 -08 Down. SP500: 2099 -10 Up.
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