Baltic Dry Index. 973 +09
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"Every once in a while, the market does something so stupid
it takes your breath away."
Jim Cramer.
We open with
yet another red flag from China. Does China have any other sort of coloured
flags? If the property boom is well and truly over, doesn’t the shadow banking
system rapidly go bust? Our complacent
western stock markets are all in delusion land. A fantasy casino, far removed
from a rapidly deteriorating real world. Though they don’t ring a bell at the
top, they sure wave a lot of red flags. I suspect the trend is about to switch
from lower left to top right, to top left to lower right. The tide is about to
go out, and the Great Vampire Squids, banksters, the Fed’s talking chair, plus Mr.
Buffett may be in for a very big surprise. At least this year, “sell in May, go away,” means
selling out at the top.
"The individual investor
should act consistently as an investor and not as a speculator."
Ben Graham
China’s ‘Golden Era’ for Property Over, Vanke President Says
May 28, 2014 5:03 AM GMT
The “golden era” for China’s property market has passed, according to China Vanke Co. (3333), the nation’s
biggest developer, which is shifting its focus to homes for owner occupiers
rather than investors. “The period in which everybody makes money out of property is gone,” President Yu Liang told reporters May 26 in Dongguan, a southern city in Guangdong province. “Vanke will take a cautiously optimistic approach to face the slowdown and target those buyers who need homes for self-use.”
The housing market threatens Premier Li Keqiang’s efforts to put the brakes on a slowdown in the world’s second-largest economy that is projected to grow at the weakest pace since 1990. Moody’s Investors Service revised its credit outlook for Chinese developers to negative from stable last week, while home sales slumped 10 percent in the first four months of this year amid tight credit, reversing last year’s 27 percent jump and prompting developers including Vanke to cut prices.
“He should have seen some signs since it’s indeed difficult to make money now compared with before,” said Dai Fang, a Shanghai-based analyst at Zheshang Securities Co. “Growth we’ve seen before is no longer possible and you won’t be seeing blossoms everywhere again,” he added, using a Chinese idiom to refer to the property boom seen in every city.
Pressure on Chinese developers was
underscored by the collapse of a developer in a city south of Shanghai in
March. Moody’s forecasts year-on-year home sales growth will slow to at most 5
percent in the next 12 months, from 27 percent last year. Yu said.
More
China’s Real Estate Captain Calls Out The Titanic
by David Stockman •
Soho China Ltd. is the
country’s largest real estate company, and it chief, Pan Shiyi, is one of the China’s most
important tycoons. The only thing that can make the incendiary
comments attributed to him this morning that the Chinese real
estate market is the “Titanic that will soon hit the iceberg” is the fact
that he admits to saying it—- but that he thought he was off-the-record!
“I didn’t expect there are countless
reporters hiding [in the audience],” he said.
As the story further indicates,
Mr. Pan has been putting his money where is bearish sentiments lie and has
recently been selling substantial holdings in anticipation of “When
housing prices fall 20% to 30%, these problems will be all exposed”.
Apparently, the millions of
Chinese sheeple who have piled into the luxury apartments sold by Soho China
Ltd and its legions of imitators were not supposed to know about
the up-coming end of the Titanic’s voyage just yet.
So Wall Street bulls can dream on
with their preposterous delusion that China is the second coming of
capitalism. But even in the US, and even under the somnolent guardianship
of the SEC, Mr. Pan would likely be “lawyering-up” quite frantically at
the moment.
So let his helpful clarification
stand. Just call it the second coming of 1929!
From
The Wall Street Journal
China’s once buoyant property
market is facing some rough sailing. In fact, according to one tycoon – Soho China Ltd’s chief Pan Shiyi — the real estate market is
looking more like the Titanic headed in the direction of an iceberg.
Mr. Pan, the co-founder and
chairman of Soho China Ltd., is taking a very bearish view on the housing
market, which has struggled this year. In the first four months of the year,
home sales were down 9.9% from the same period a year ago in value terms,
official data shows. New construction starts — as calculated by area — were
down almost 25% year over year in the same period.
As if that’s not bad enough,
demand is also weakening in an expanding number of cities as banks tighten
mortgage lending and sales are dampened by widespread expectations of price
cuts.
“I think China’s property market
is like the Titanic and it will soon hit an iceberg in front of it,” Mr. Pan
told a financial forum on Friday, according to the China Business News.
“After hitting the iceberg, the
risks will not only be in the real estate sector. The bigger risk will be in
the financial sector,” he added.
More
China Banks Bad-Debt Ratio Seen Rising to Most Since 2009
May 28, 2014 5:36 AM GMT
China’s biggest banks are poised to report the highest proportion of bad
debts since 2009 after late payments on loans surged to a five-year high,
indicating borrowers are struggling amid an economic slowdown. The nation’s 10 largest lenders reported overdue loans reached 588 billion yuan ($94 billion) at the end of 2013, a 21 percent increase from a year earlier to the highest level since at least 2009. The rise in late payments portends more losses on soured loans for banks in coming months as China’s slowing economy crimps companies’ earnings, while a government crackdown on nonbank funding makes it tougher for borrowers to get new credit or finance older debt.
“Overdue loans are a leading indicator of asset-quality deterioration and show the rising liquidity constraints among borrowers,” said Liao Qiang, a Beijing-based director at Standard & Poor’s. “While we believe Chinese banks’ credit woes will unfold gradually, the disturbing thing is that the end is nowhere in sight.”
More
Below, self-interest
trumps starting a war with Russia or backing real sanctions, in America’s
botched coup in Kiev. Keeping Japan’s aging population warm and reducing their
energy bills, trumps helping America try to save face over setting off civil
war in the Ukraine. Below that, America’s fracking nightmare. High drilling costs,
low gas prices and fast production drop off, has many of America’s “frackers” looking at looming bankruptcy. If the Fed is
serious about normalising interest rates next year, a massive restructuring is
about to sweep through the US oil and gas patch. But don’t tell global stock
markets of course.
Japanese Lawmakers to Lobby Abe for Russian Gas Pipeline
May 28,
2014 4:20 AM GMT
Japanese lawmakers are reviving efforts for a 600 billion yen ($5.9 billion)
natural gas
pipeline from Russia,
which last week signed a supply deal with China, to cut energy
costs after the Fukushima nuclear disaster. A group of 33 lawmakers is backing the 1,350-kilometer (839 miles) pipeline between Russia’s Sakhalin Island and Japan’s Ibaraki prefecture, northeast of Tokyo, Naokazu Takemoto, the secretary general of the group, said in an interview on May 23. He plans to propose the project to Prime Minister Shinzo Abe as early as June so it’s on the agenda when Russian President Vladimir Putin visits in autumn, he said.
The shutdown of Japan’s nuclear reactors after the 2011 Fukushima disaster has spurred renewed interest in the Russia-Japan pipeline link, which has been discussed for more than a decade, Takemoto said. The effort also highlights Russia’s expanding role as a energy supplier to Asia after the country signed a $400 billion deal last week to sell China 38 billion cubic meters of gas annually for 30 years.
Japan spent a record 7 trillion yen last year on
liquefied natural gas imports, more than double the cost three years ago,
according to the Ministry of Finance. The country could lower its energy bill
by getting gas directly by pipeline rather than more-expensive LNG, which is
shipped by tankers, Takemoto said.
More
Shakeout Threatens Shale Patch as Frackers Go for Broke
May 27, 2014 12:23 PM GMT
The U.S. shale patch is facing a shakeout as drillers struggle to keep pace
with the relentless spending needed to get oil and gas out of the ground. Shale debt has almost doubled over the last four years while revenue has gained just 5.6 percent, according to a Bloomberg News analysis of 61 shale drillers. A dozen of those wildcatters are spending at least 10 percent of their sales on interest compared with Exxon Mobil Corp.’s 0.1 percent.
“The list of companies that are financially stressed is considerable,” said Benjamin Dell, managing partner of Kimmeridge Energy, a New York-based alternative asset manager focused on energy. “Not everyone is going to survive. We’ve seen it before.”
Some investors are already bailing out. On May 23, Loews Corp. (L), the holding company run by New York’s Tisch family, said it is weighing the sale of HighMount Exploration & Production LLC, its oil and natural gas subsidiary, at a loss.
HighMount lost $20 million in the first three months of the year, after being unprofitable in 2013 and 2012, Loews said it its financial reports. As with much of the industry, HighMount has shifted its focus to oil after natural gas prices plunged and has struggled to find sites worth developing, company records show.
----In a measure of the shale industry’s
financial burden, debt hit $163.6 billion in the first quarter, according to
company records compiled by Bloomberg on 61 exploration and
production
companies that target oil and natural gas trapped in deep underground layers of
rock. And companies including Forest Oil Corp.
(FST),
Goodrich
Petroleum Corp. (GDP)
and Quicksilver
Resources Inc. (KWK)
racked up interest expense of more than 20 percent.
More
In the
continent made for tanks, it was anything but veni vidi vici, yesterday.
Instead Europe’s leaders came (to Brussels,) whined and dined, and began to fix
the EC President election for Luxembourg’s “Mr. Liar.” Despite the Europhiles
just being trashed at the polls, it was business as usual in the Brussels
Bubble, as Herman van Who and the Bilderbergers set about trying to impose
Jean-Claude Junker to bring on the United States of Europe once again. Time for
the UK to slip out of the asylum.
"When it becomes serious, you have to lie"
Jean-Claude Juncker. Ex-Luxembourg Prime Minister and ex-president of the Euro Group of Finance Ministers. Confessed liar.
David Cameron: Brussels has become 'too big and too bossy'
Prime Minister attacks EU for being "too big, too bossy and too interfering" as MEPs try to install European federalist as commission president
David Cameron will tonight clash with France over plans to appoint Jean-Claude Juncker, one of the last supporters of a United States of Europe, as president of the European Commission.European Union leaders are holding crisis talks over dinner in Brussels tonight on the future political direction of Europe after stunning victories by populist parties on the far-Right and Left in elections.
"Europe cannot shrug off these results," said the Prime Minister.
Mr Cameron will argue that appointing one of the last senior politicians to advocate a federal European state to the top EU job is a serious mistake following the surge of Eurosceptic and far-Right at European elections.
----Mr Juncker, 59, was the last serving European leader who believes that the EU should be transformed into a federal United States of Europe and if appointed would be an active commission president modelled on Jacques Delors.
"There is nobody more
fanatical about building the United States of Europe, and his candidacy is
there just at the moment that the European electors have made it clear they are
going in the wrong direction," said Nigel Farage, the leader of Ukip.
The Prime Minister, with the
support of Hungarian and Swedish leaders, will oppose Mr Juncker, the former
prime minister of Luxembourg, who has been nominated for the commission post by
MEPs.
----The EU assembly,
with the support of France and Spain, has insisted that Mr Juncker should get
the job because he was the spitzenkandidat, or leading candidate, of the
European People's Party (EPP) which won most seats in Europe-wide elections.
More
We end for
the day with the new reality dawning in SE Asia. Far away friends, or near ones,
are little comfort when push comes to shove. China will become a hegemon just
like the USA. All the more so, if a hard landing generates a need for a foreign
escapade.
Vietnam Weighs Sea Rights Against China Business: Southeast Asia
May 28, 2014 6:17 AM GMT
Vietnam’s leaders face
growing pressure to challenge China in international court, risking economic retaliation by
its largest trading partner, after a Vietnamese fishing boat collided with a
Chinese ship and sank. Vietnam said last week it’s considering arbitration against China over an oil rig placed near the contested Paracel Islands, following a Philippine case under way with the United Nations over shoals off its coast.
Legal action is one of the few
options Vietnamese leaders have to placate a population that expects the
government to counter China’s increasingly aggressive moves in the South China
Sea. Deadly anti-China protests erupted in Vietnam earlier this month,
targeting businesses thought to be Chinese. Elevating the dispute to an
international tribunal or the UN threatens to damage economic ties between the
neighboring communist countries.
“Vietnam’s leadership has very
little left in their strategy,” Carlyle Thayer, an emeritus professor at the
Australian Defence Force Academy in Canberra, said in a phone interview
yesterday. “China will be antagonized no matter what Vietnam does. There is a
concerted program to keep smashing Vietnam’s ships so they have to go back to
port and are out of action. This is deadly serious.”
----“The Vietnamese side has been forcefully disrupting the normal operation by the Chinese side, but all these disruptions are in vain and it will in the very end hurt the interests of the Vietnamese side itself,” Qin Gang, a Chinese Foreign Ministry spokesman, said yesterday at a briefing in Beijing.
China’s actions violate international law and threaten peace, security and freedom of navigation, Dung said in a speech May 22 in Manila. The conflict threatens to disrupt the flow of goods and could even reverse the tide of the global economic recovery, Dung said.
Vietnam has been planning a legal case against China for some time, said Ha Hoang Hop, visiting senior fellow at the Institute of Southeast Asian Studies in Singapore.
“It will happen very soon,” he said by phone. “This has been the strategy of the Vietnam government.”
More
Why Vietnam Can't Count on Its Neighbors to Rally Against China
Even the Vietnamese government has to be cautious about upsetting the economic relationship with China. As wages have gone up in China, companies have moved factories to Vietnam to tap the country’s low-cost workforce. The supply chains are not completely separate, though, and companies that produce in Vietnam sometimes need to send products to factories in China. Vietnam’s exports to China now account for 42 percent of its total, up from 28 percent 18 months ago, Natixis Chief Asia Economist Luca Silipo told Bloomberg Television. Even as the political situation deteriorates, individual companies are cooperating more, creating a difficult balancing act for Vietnam’s diplomats.
More
"Investing should be more
like watching paint dry or watching grass grow. If you want excitement, take
$800 and go to Las Vegas."
Paul Samuelson
At the Comex
silver depositories Tuesday
final figures were: Registered 56.22 Moz, Eligible 119.95 Moz, Total 176.17 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Staying with China today, China seems to be serious
about reducing pollution. Long term in addition to cleaning up motors, that
means switching producing electricity from coal to gas. While that won’t really
happen until the new Russian gas pipeline is complete about five years away,
the global coal industry is still promoting a massive expansion based on
supplying China.
"The four most dangerous words in investing are: 'this time
it's different.'"
Sir John Templeton
China to scrap millions of cars in anti-pollution push
By David Stanway and Kathy Chen May 26, 2014 4:57 AM
BEIJING (Reuters) - China plans
to take more than five million ageing vehicles off the roads this year in a bid
to improve air quality, with 330,000 cars set to be decommissioned in Beijing
alone, the government said in a policy document published on Monday.
Pollution has emerged as an
urgent priority for China's leaders as they try to reverse the damage done by
decades of breakneck growth and head off public anger about the sorry state of
the nation's air, water and soil.
In a wide-ranging action plan to
cut emissions over the next two years, China's cabinet, the State Council, said
the country had already fallen behind in its pollution targets over the
2011-2013 period and was now having to step up its efforts.
As many as 5.33 million
"yellow label" vehicles that fail to meet Chinese fuel standards will
be "eliminated" this year, the document said. As well as the 330,000
cars in Beijing, 660,000 will be withdrawn from the surrounding province of
Hebei, home to seven of China's smoggiest cities in 2013.
According to Beijing's
environmental watchdog, vehicle emissions in Beijing were responsible for about
31 percent of the hazardous airborne particles known as PM 2.5, with 22.4
percent originating from coal burning. [ID:nL3N0N8144]
Beijing plans to limit the total
number of cars on the road to 5.6 million this year, with the number allowed to
rise to 6 million by 2017. Last year it cut the number of new license plates by
37 percent to 150,000 a year and is also paying for another 200,000 ageing
vehicles to be upgraded.
The State Council document did
not say how the plan would be implemented, but Beijing's municipal government
has previously offered subsidies of between 2,500-14,500 yuan ($400-2,300) to
drivers who voluntarily hand in their ageing vehicles to be scrapped. However,
the subsidy didn't cover "yellow label" cars that fail to meet even
minimum gasoline standards.
Beijing currently forbids
vehicles that do not meet required standards from entering the city, but
officials have admitted that China currently lacks the monitoring and policing
capability to ensure all cars make the grade, and drivers have also found ways
to avoid detection.
"Many vehicles have problems
and many didn't even meet the standards when they came out of the factory, and
fining them on the streets isn't the way to solve this problem," said Li
Kunsheng, an official responsible for transport emissions at the Beijing
municipal environmental bureau.
More
Brics malaise deepens as South Africa nears recession
Like other Brics, South Africa neglected basic reforms during the glory days of the resource boom
South Africa is sliding towards a
slow economic crisis as the global commodity boom fades and striking workers
dig in their heels, becoming the third of the Brics quintet after Russia and
Brazil at risk of full-blown recession this year.
Output contracted by 0.6pc in the
first quarter, the worst since the Lehman crisis. “The GDP figures reveal a sad
state of affairs and highlight the grave need for South Africa to get its
industrial house in order,” said Jeffrey Schultz, from BNP Paribas.
Large parts of the gold and
platinum industry have come to a near standstill as 70,000 workers remain on
strike for the 18th week, with no solution in sight. South Africa’s Chamber of
Commerce warned that the whole structure of labour relations is breaking down,
risking economic havoc. “South Africa urgently requires open debate on ending
and preventing debilitating strikes,” it said.
The rand slid 1pc to 10.47
against the US dollar. Yields on 10-year South African bonds rose eight basis
points to 8.17pc. Borrowing costs are returning to levels seen during last
year’s “taper tantrum” as the US Federal Reserve turned hawkish.
The strikes caused a 24pc
collapse in mining output, the worst in almost half a century. This distorted
the GDP figures but the slowdown is spreading, and the economic malaise runs
deeper. Shilan Shah, from Capital Economics, said the country faces a serious
structural crisis that threatens to drag on for years. “They have already
exhausted the scope for catch-up development. We think the growth rate has
fallen from 5pc-6pc to a new norm of 1.5pc-2pc, and this is going to be a
long-term problem,” he said.
More
I don't know where the stock market is
going, but I will say this, that if it continues higher, this will do more to
stimulate the economy than anything we've been talking about today or anything
anybody else was talking about.
Mr Bubbles, Alan Greenspan.
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