Monday 20 January 2014

The Curse of the “14s”.



Baltic Dry Index. 1421  +23 

LIR Gold Target in 2019: $30,000.  Revised due to QE programs.

War is too important to be left to the Generals.

Georges Clemenceau

We open with more on the growing wobble in the global economy. Not that anyone seems to care of course. All news for now is still good news. QE Forever and all that. But our Great Disconnect will one day reconnect. In a Great Crash, I suspect. One day ahead, probably not too far ahead, an “unforeseen event” will rock our over-extended complacent stock markets. A great bond and stock market rout will then ensue, as all the leveraged gamblers try to exit at the same time.

So what could possibly go wrong? Well Turkey, the Ukraine, or Thailand might default. Possibly the trifecta of all three.  China’s great expansion could stall, whatever the official figures say. India fall into political gridlock after the election. France have another 1968 moment as President Buffoon attempts to implement last week’s announced U-Turn. Oil prices collapse as the EU drops into real deflation. Prime Minister Cameron switch his hair parting back to its former side! Years bearing the number 14 have tended to be transformational.

China’s Expansion Loses Momentum in Fourth Quarter

Jan 20, 2014 3:54 AM GMT
China’s economic growth slowed in the fourth quarter as gains in factory output and investment spending eased last month, sapping momentum as a credit clampdown adds pressure on the outlook for this year.

Gross domestic product rose 7.7 percent in the October-December period from a year earlier, the National Bureau of Statistics said today in Beijing, compared with 7.8 percent in the third quarter. Asian stocks pared declines and the Australian dollar and copper erased losses after GDP exceeded the median estimate of analysts in a Bloomberg News survey.

----“Growth momentum is clearly weakening,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong. “The slowdown became increasingly clear as the quarter progressed.” Expansion will decelerate this year, he said.
More

Deutsche Bank posts shock €1.2bn loss for fourth quarter

Germany's biggest lender swings into the red in the fourth quarter, a profits warning issued late on Sunday evening has revealed

By Denise Roland 9:59PM GMT 19 Jan 2014
Deutsche Bank rushed out a shock profits warning last night after days of speculation over its poor performance, disclosing that it had plunged to a €1.2bn (£989m) pre-tax loss in the fourth quarter.

On Friday, reports that the lender was poised to issue a profits warning sent the share price down 3pc. Analyst estimates compiled by Bloomberg suggested the market had been expecting the lender to post quarterly profits of almost €700m.

Deutsche Bank's fourth quarter performance was hit by heavy costs for litigation, restructuring and balance sheet reduction.

The bank said that litigation expenses cost €528m in the quarter while adjustments to the value of credit, debt and funding produced another €623m in costs, and restructuring costs added a €509m burden.

In addition, the bank's fourth quarter revenue fell 16pc year-on-year to €6.6bn, largely due to a slowdown in its fixed income and currencies business.
More

Thai Default Risk Soars as Funds Pull $4 Billion: Southeast Asia

Jan 20, 2014 4:27 AM GMT
The risk of Thailand defaulting on its debt is the highest since August as anti-government protests prompt money managers to sell the nation’s assets.

The cost of protecting the nation’s debt soared after investors including Wells Fargo Inc. pulled more than $4 billion from Thai stocks and bonds since Oct. 31, as rallies clogged up Bangkok roads and clashes left nine dead with 550 injured. Pacific Investment Management Co., Goldman Sachs Group Inc. and Kokusai Asset Management Co. reduced debt holdings before protests first erupted in late October, regulatory filings show.

“We sold the entire Thai position in our international bond fund through the end of last year,” Lauren Van Biljon, an analyst in London at Wells Fargo’s First International Advisors LLC unit, said in a Jan. 17 telephone interview. “There seems to be a very wide gulf between the different political sides.”

A resolution of the crisis has eluded Prime Minister Yingluck Shinawatra since she dissolved parliament in December and called a snap poll for Feb. 2. Demonstrators want to remove her and end the influence of her brother, Thaksin Shinawatra, who was ousted by the army in 2006. Blasts rocked a protest site in Bangkok yesterday. The baht has slumped on bets the central bank will cut borrowing costs this week as the turmoil crimps growth, and amid speculation about a coup.
More

In better news, news of a potential transformational energy savings device.

Designer hailed as next Dyson for compressor blade discovery

A British invention can cut energy costs by up to 20pc, reports Rebecca Burn-Callander

----Entrepreneur and technologist Steve Lindsey has spent the past 10 years testing a new invention that aims to make engines up to 20pc more efficient. “Most industries try to optimise for a 1pc to 2pc increase in efficiency – 20pc is unheard of,” he says.

His Blade Compressor replaces the old “up and down” piston technology with a circular widget that compresses the air – or gas – in front and induces the air behind in continuous motion, minimising wastage. The technology can be applied to any kind of engine, from the compressor in your fridge to a car engine, potentially revolutionising everything from coffee machines to battleships.

“Every compressor out there gets something wrong,” says Mr Lindsey. “Either the air is wasted, or it’s not compressed properly. But the beauty of this design is that it is so simple. There’s no magic in terms of material. If the Victorians had thought of it, they could have made it.”

To commercialise the technology, Mr Lindsey created Lontra, an intellectual property (IP) company based in Napton, near Coventry. The Midlands location was key. “This is where the UK’s high- tech engineering skills are,” he says. “Lots of ex-Cosworth, [Mahle] Powertrain and Formula One engineers are based in the area.”

----The decision to launch an IP firm, rather than a manufacturer, was based on the sheer volume of applications for the Blade Compressor. “You have to be pragmatic about these things,” says Mr Lindsey. “We didn’t want to sell to consumers, we wanted to work with global companies from the outset. But big corporates like to buy from other big corporates, not small start-ups. There’s an access to market issue. The logical route, therefore, was licensing to a global engineering group.”

Mr Lindsey decided to set his sights on the water industry. Sewage processing is very energy-intensive. Waste water is cleaned using aeration, whereby air is pumped into tanks to encourage the growth of bacteria that then consume waste matter. Over 1pc of the UK’s total energy consumption goes on waste water treatment, and well over half of that goes on blowers alone.
More

Now back to the list of years bearing 14

1314 The Battle of Bannockburn. The rout of the English King and the freedom of Scotland. Edward fled with his personal bodyguard, ending the remaining order in the army; panic spread and defeat turned into a rout. He arrived eventually at Dunbar Castle, from here he took ship to England. From the carnage of Bannockburn, the rest of the army tried to escape to the safety of the English border, ninety miles to the south. Many were killed by the pursuing Scottish army or by the inhabitants of the countryside that they passed through.

1414 The Council of Constance commences. Held from 1414 to 1418. The council ended the Three-Popes Controversy, by deposing or accepting the resignation of the remaining Papal claimants and electing Pope Martin V. The Council also condemned and executed Jan Hus and ruled on issues of national sovereignty, the rights of pagans, and just war in response to a conflict between the Kingdom of Poland and the Order of the Teutonic Knights.

1514 Pope Leo X issues a papal bull against slavery. Battle of Orsha: Polish/Lithuania army defeat the Russian army

1614 Trades people under Vincent Fettmilch chase & plunder Jews out of ghetto in Frankfurt
 University of Groningen opens,

1714 Georg Ludwig becomes king George I of England. Treaty of Baden: Holy Roman Emperor Charles VI & France, ends War of Spanish Succession, French retain Alsace, Austria gets bank of Rhine. French & Spanish troops under Duke of Berwick occupy Barcelona

1814 Napoleon abdicates unconditionally; he is exiled to Elba. War of the Sixth Coalition - the Treaty of Paris (1814) is signed returning French borders to their 1792 extent. Treaty of London-Netherland stops transporting slaves. British forces captured Washington, DC, & burned down many landmarks.  British forces destroy Library of Congress, containing 3,000 books. ] Battle at Masurische Meren: Germans chase Russians out of E Prussia.

1914 Ford Motor Co wages jump from $2.40/9-hr day to $5.00/8-hr day. Stock brokerage firm of Merrill Lynch founded. Beverly Hills, Ca, is incorporated. World's first airline, St Petersburg Tampa Airboat Line, begins.  First air flight out of sight of land (Scotland to Norway)  Franz Ferdinand, Archduke of Austria and his wife Sophie are assassinated in Sarajevo by young Serbian nationalist Gavrilo Princip at 10.45 , the casus belli of World War I. Austria invades Siberia. Austrian-Hungary & Russia proclaim general mobilization.  France & Germany mobilize. German troops overthrows Luxembourg. Russian troops invade Eastern Prussia.  Germany invades Belgium & declares war on France.  Great Britain declares war on Germany. Turkey signs military pact with Germany. USA declares neutrality in WW I. Montenegro declares war against Austria-Hungary. Serbia declares war against Germany. Lithuiana surrenders to Germany. Gen von Hausen executes 612 inhabitants of Dinant Belgium.  Japan declares war on Germany . Russia declares war on Turkey. Great Britain & France declare war on Turkey.

You will be home before the leaves have fallen from the trees.’ 

Kaiser Wilhelm II  August 1914.

At the Comex silver depositories Friday final figures were: Registered 48.34 Moz, Eligible 128.77 Moz, Total 177.11 Moz.  

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.

Today, doubts about French ability to implement last week’s U-turn.  Will France blow up the euro?

"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."

William F. Rickenbacker

In France, les poulets are coming home to roost

France’s charmed life falls prey to excessive state spending and regulation

Last week the French economy was supposed to have something of a re-launch – along with the career of President Hollande. But things did not quite work out that way – on either count. I will leave the president’s personal life to others. I am interested in the bigger question of whether it is going to be possible to reform the French economy radically.

The president’s words sounded good to all those who think that France has to make a definite turn towards more markets and less regulation to avoid economic relegation, if not calamity.

M Hollande spoke of the absolute necessity to cut public spending and of the need to switch from demand-side to supply-side policies. That is code for a switch from policies that centre on more public borrowing to policies that centre on structural reform.

He announced that the “family welfare” tax on firms would be scrapped. This would cut payroll taxes by €30bn (£24.8bn), which would reduce firms’ labour costs by about 5pc. And he restated his commitment to reduce state spending by €50bn in 2015-17, simplifying the tax system, putting social security on a firmer footing and reducing layers of public administration. In the circumstances, I am surprised that he did not also commit himself to the abolition of the baguette and the croissant.

In Britain, the New Labour era has permanently scarred us into cynicism. Such cynicism is surely justified with regard to President Hollande’s reform programme. First, the cut in labour costs is not due to take effect until 2017, by which time French employers will have endured another three years of huge social charges and cost uncompetitiveness against trading partners in Europe and beyond. Second, there is the issue of where the money is to come from. It seems that about €20bn will come from scrapping a tax credit for firms, unveiled earlier in the president’s term. So this amounts to a case of robbing Pierre to pay Paul. Meanwhile, the other €10bn is going to come from spending cuts, as yet unspecified. Announcing such things is easy enough but when you actually come to pinning down what is going to be cut, that is when things get difficult.

Third, the reductions in social charges are part of a “responsibility pact”, and to benefit from them, firms must agree to create jobs in return. How on earth this is going to be implemented heaven only knows. It is a clear illustration of how socialists don’t really understand the market economy. It works through incentives and people being left alone to get on with things. Unemployment in France is not high because firms are incompetent or exploitative. It is high because labour costs are high, the state imposes massive charges on employers, the labour market is heavily regulated, it is difficult to get workers to work flexibly and, if something goes wrong, it is devilishly difficult to cut the workforce.

----The broader picture is that French governments have a habit of backing down in the face of pressure from groups who see themselves threatened by market reforms. Indeed, there was an instance of this very recently. The government had planned to allow more competition in the taxi trade by allowing private cars (akin to our minicabs) to compete openly and foursquare with regular taxis. But the taxi drivers objected. Surprise, surprise. And thousands of taxis blocked the Paris traffic. The result? The government has watered down its ideas. Private cars will now have to wait 15 minutes from receiving a call to being able to pick someone up. Plus ça change and all that.

More

"The history of paper money is an account of abuse, mismanagement, and financial disaster."

Richard M. Ebeling

The monthly Coppock Indicators finished December and 2013.

DJIA: +204 Up. NASDAQ: +311 Up. SP500: +247 Up. The new Fed bubble continues, but for how much longer?

No comments:

Post a Comment