Baltic Dry Index. 948 -06
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
In central banking as in diplomacy,
style, conservative tailoring, and an easy association with the affluent count
greatly and results far much less.
J. K. Galbraith.
Suddenly the global economy seems to have run out
of steam. Or rather steamed right into an unexpected and unexplained glut of
crude oil and industrial commodities. Are we about to repeat 2007-2009 again?
Has the Great Chinese Miracle of 1978 – 2014, finally crashed on the rocks of
dodgy figures, masking a tsunami of mal and over investment? Has the Yellen
put, and the Draghi “whatever it takes,” bluff, just been trumped by the
imminent arrival of a slew of “next Lehmans?” Has the global economy just been
tossed out of the last chance saloon? The BIS seems to think so and is as near to
panic as central banksters ever get.
With oil prices collapsing and China sitting on a
mountain of unneeded iron ore and steel products, the Great Nixonian Error of
fiat money, and the world as we knew it 1971 – 2007, looks increasingly likely
to have run out of road. If it has, the western central banksters have run out
of bullets and luck. A whole era of debt is about to evaporate.
After a dead cat bounce, the deluge?
“It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity. If there must be madness something may be said for having it on a heroic scale."
J. K. Galbraith. The Great Crash: 1929.
Birinyi not even sure what’s going on with stocks
October 14, 2014, 1:57 PM ET
If you’re confused as to what’s going on with the stock market, you’re in
pretty good company.In a recent note, Birinyi Associates, headed by Salomon Brothers veteran Laszlo Birinyi, said the S&P 500 SPX has a 60% probability of hitting the firm’s year-end target of 2,100, compared with the 80% probability of a month ago.
According to the note:
The stock market has had a detour and investors are — and should be — concerned. We continue to expect higher prices but recognize that there are significant issues which should be addressed. Our biggest concern is that we are not sure as to what is happening.
The S&P 500 hit its all-time intraday high of 2,019.26 on Sept. 19 and is now trading about 6% below that.
Here are some concerns at Birinyi’s firm:
- Oil: “No commodity is more tracked, analyzed, and discussed and yet all of a sudden we have a glut and a surplus?”
- Global economy: China’s growth keeps on being questioned and now “Germany and France have replaced Greece and Spain as economies of concern and the market has, rightly so, taken notice.”
- Increased Wall Street optimism: Comments about the bull market “such as ‘another ten years’ and the ‘next move will be up 5%,’ have not been especially persuasive.”
More
U.S. Stock Rebound Fades as Energy Shares Drop With Oil
Oct 14,
2014 9:38 PM GMT
A rebound in U.S. stocks faded late in the session as energy shares slid with the price of oil, snuffing out most of an
earlier rally in benchmark indexes led by industrial companies, airlines and
banks. The Standard & Poor’s 500 Index ended the session up less than 0.2 percent at 1,877.70 at 4 p.m. in New York after earlier climbing as much as 1.3 percent. The measure is down 6.6 percent from its record on Sept. 18 and yesterday capped its worst three-day retreat since 2011. The Dow Jones Industrial Average lost 5.88 points, or less than 0.1 percent, to 16,315.19 today, wiping out a 143 point earlier gain.
“The last hour has come down to ‘do you want to hold stocks overnight or not?’” Ryan Detrick, a Cincinnati-based strategist at investment research firm See It Market, said by phone. “There’s a lot of skittishness and concerns out there with headlines on a global slowdown, a recession in Europe, a slowdown in Asia and Ebola.”
Energy shares in the S&P 500 lost 1.2 percent as a group and extended their retreat from a June record to 20 percent. West Texas Intermediate crude oil slid 4.6 percent to $81.84 a barrel, the lowest settlement price in more than two years, after the International Energy Agency said demand will expand this year at the slowest pace since 2009. Brent crude sank to the lowest since 2010.
More
BIS warns on 'violent' reversal of global markets
Investors take zero-rates for granted and unwisely believe that central banks will protect them, says the capital markets chief of the Bank of International Settlements
The global financial markets are dangerously stretched and may unwind with shock force as liquidity dries up, the Bank of International Settlements has warned.Guy Debelle, head of the BIS’s market committee, said investors have become far too complacent, wrongly believing that central banks can protect them, many staking bets that are bound to “blow up” as the first sign of stress.
In a speech in Sydney, Mr Debelle said: “The sell-off, particularly in fixed income, could be relatively violent when it comes. There are a number of investors buying assets on the presumption of a level of liquidity which is not there. This is not evident when positions are being put on, but will become readily apparent when investors attempt to exit their positions.
“The exits tend to get jammed unexpectedly and rapidly.”
More
Your Xmas List Just Got Cheaper Amid China Factory Slump
Oct 15, 2014 4:52 AM GMT
Christmas shoppers rejoice! China’s factory-gate prices fell in September from a year earlier for a record-tying 31st month. Input-cost moves influence China’s export prices, meaning consumers from New York to Berlin pay less for toys, tools and T-shirts.
For the global economic outlook, the 1.8 percent drop in China’s producer-price index in September is more worrying, signaling deepening slack in capacity.
“If Chinese factories are paying less for commodity imports, they will charge less overseas and can therefore export deflation,” said Shane Oliver, a Sydney-based global strategist at AMP Capital Investors Ltd., which oversees about $131 billion. “It’s all part of the world running below full capacity, resulting in the risk of deflation.”
The International Monetary Fund
last week cut its outlook for global growth in 2015 and said Europe’s policy
makers may need to do more to stave off declining prices. For China, the PPI
decline and the slowest consumer inflation since January 2010 add to signs of a
loss in growth momentum.
“This highlights the weakness in
the demand side of the economy,” said Tao Dong, chief regional economist for
Asia excluding Japan at Credit Suisse Group AG in Hong Kong. “Manufacturing is
fairly weak. Bank credit is weak.”
More
http://www.bloomberg.com/news/2014-10-15/china-factory-gate-price-drop-ties-asian-crisis-record.html
Bank of China Starts Marketing Up to $6.5 Billion Note Sale
Oct 15, 2014 6:13 AM GMT
Bank of China Ltd.
has begun marketing what may be Asia’s biggest sale of bank capital securities. China’s fourth-biggest lender by market value plans to sell as much as $6.5 billion of offshore preference shares to yield 6.875 percent to 7 percent, people familiar with the matter said today, asking not to be identified because the details are private. The notes may price as early as today.
China’s banking giants are shoring up their capital buffers at a record pace as bad loans spike to the highest level since the global financial crisis. Nonperforming loans touched a five-year high of 694.4 billion yuan ($113 billion) on June 30, 1.08 percent of total advances, making it more urgent for banks to build capital cushions against losses.
Beijing-based Bank of China said it more than doubled the money it set aside for bad loans in the second quarter. It has regulatory approval to issue 40 billion yuan of offshore notes eligible as Tier 1 capital and the entire amount may be sold at once, people familiar said. The lender can also sell as much as 60 billion yuan of Tier 2 notes before the end of 2015
More
In other less than helpful news, is your trip
really necessary? How much longer will airlines be allowed to play Russian
roulette during the Ebola outbreak? Do you really want to sit for hours in a
sealed tube with two hundred others of unknown health?
Ebola Outbreak Boosts Odds of Mutation Helping It Spread
Oct 15, 2014 2:56 AM GM
The Ebola virus circulating in West Africa is already different from
previous strains. While scientists don’t fully understand what the changes mean, some are concerned that alterations in the virus that occur as that pathogen continues to evolve could pose new dangers.
Researchers have identified more than 300 new viral mutations in the latest strain of Ebola, according to research published in the journal Science last month. They are rushing to investigate if this strain of the disease produces higher virus levels -- which could increase its infectiousness.
So far, there is no scientific data to indicate that. The risk, though, is that the longer the epidemic continues, the greater the chance that the virus could change in a way that makes it more transmissible between humans, making it harder to stop, said Charles Chiu, an infectious disease physician who studies Ebola at the University of California at San Francisco.
----Viruses such as
Ebola, whose genomes are made from ribonucleic acid, are constantly mutating.
Some mutations are good for the virus and some are bad for the virus, said Ian
Mackay, a virologist at the University of Queensland. It’s the ones
that are good for the virus that tend to stick around.
“Viruses don’t think. They make mutations that are good for them,” he said. “If it helps the virus spread or replicate faster it will be around more.”
“It is a numbers game, the more cases you have the more likely there are going to be mutations that could change the virus” in a significant way, said David Sanders, a professor of biological sciences at Purdue University who studies Ebola. “The more it persists, the more likely we are going to be thrown a curve.”
More
WHO Sees Ebola Cases as High as 10,000 a Week in West Africa by Dec. 1
Oct 14, 2014 5:36 PM GMT
The number of new Ebola cases in three West African
nations may jump to between 5,000 and 10,000 a week by Dec. 1 as the deadly
viral infection spreads, the World Health Organization said. The outbreak is still expanding geographically in Guinea, Sierra Leone and Liberia and accelerating in capital cities, Bruce Aylward, the WHO’s assistant director-general in charge of the Ebola response, said in a briefing with reporters in Geneva. There have been about 1,000 new cases a week for the past three to four weeks and the virus is killing at least 70 percent of those it infects, he said.
“Any sense that the great effort that’s been kicked off over the last couple of months is already starting to see an impact, that would be really, really premature,” Aylward said. “The virus is still moving geographically and still escalating in capitals, and that’s what concerns me.”
The WHO’s forecast shows the magnitude of the task facing governments and aid groups as they try to bring the worst-ever Ebola outbreak under control. More than 8,900 people have been infected with Ebola in the three countries, with more than 4,400 deaths, the WHO said.
The effects of the epidemic have rippled outward in recent weeks, adding to concern that Ebola may spread in the U.S. and Europe. The first two cases of Ebola being contracted outside Africa occurred, with health workers in Madrid and Dallas falling ill after caring for infected patients. The U.S. and the U.K. began screening some airline passengers on arrival in the past few days.
More
At the Comex silver depositories Tuesday final figures were: Registered 66.57 Moz,
Eligible 117.53 Moz, Total 184.10 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today the new war in crude oil. America’s Citicroup
confidently predicts a win for America’s Light Tight Oil producers, aka shale
oil frackers. I am not so sure. It seems
to me that no one wins in a crude oil price war, excepting those final sellers
of petrol and gasoline who will probably use the price drop to raise profit
margins. With shale oil well production collapsing after about one to two
years, LTO producers must “drill baby drill” to keep replacing production. Even
with ZIRP, I doubt that money will be borrowed to finance much new US
production in a bear market. But the
heavy importing nations like China and Japan and India, are about to get a
massive OPEC “tax” break.
“But it (the boom) could not last forever
even if inflation and credit expansion were to go on endlessly. It would then
encounter the barriers which prevent the boundless expansion of circulation
credit. It would lead to the crack-up boom and the breakdown of the whole
monetary system.”
Ludwig Von Mises
Can Saudis beat North Dakota in an oil price war?
Published: Oct 8, 2014 2:41 p.m. ET
NEW YORK (MarketWatch) — With oil prices tumbling — and dragging gasoline
prices at U.S. pumps further below $4 a gallon — investors wonder if Saudi
Arabia will cut production in an effort to stop the slide. Don’t count on it.
In a note, commodity strategists led by Seth Kleinman at Citi argue that the Saudis aren’t likely to throttle back output, in part because they apparently “think that they can win any price war” with U.S. shale producers.
In other words, Saudi producers are playing a long game, confident that “full cycle” shale production costs are considerably more than their own.
As Julian Jessop, head of commodities at Capital Economics points out, there is precedent. Saudi Arabia responded to a glut of non-OPEC oil in the latter half of the 1980s by increasing its own output, successfully eroding the profitability of other producers, including those in the North Sea, he said.
Oil futures remained under pressure Wednesday, with the price of light, sweet crude for November delivery CLX4, +0.39% on the New York Mercantile Exchange falling $1.54, or 1.7%, to $87.31 a barrel, hitting the lowest price for a most-active contract since April 2013 after data showed a further rise in U.S. crude supplies. ICE November Brent crude futures LCOX4, +0.42% fell 58 cents, or 0.6%, to $91.53 a barrel, setting a two-year low.
Saudi Arabia earlier this month cut the official selling price for its crude, according to news reports, a move that put additional pressure on oil prices at the time.
The Citi analysts say the Saudis might be right to think they can win a price war, but only up to a point.
Comments by Saudi officials indicate they continue to believe shale oil requires a price of $90 a barrel to be profitable, the analysts noted. While the Saudis think this represents a new floor for oil prices, the floor is actually falling as shale-oil production technology continues to improve, Citi said. (It costs just a few dollars a barrel to extract Saudi Arabian oil, but the International Monetary Fund in September estimated that the “breakeven” price required to balance the country’s budget rose to $89 a barrel in 2013 from $78 in 2012.)
Moreover, this supposed floor reflects the “full cycle costs” of production, they said, arguing that this overlooks the fact that many producers in North Dakota, Texas and elsewhere have already acquired acreage, contracted rigs and even hedged crude prices.
“We think what counts at this
stage is half-cycle costs, which are in the significantly lower band of $37 to
$45 a barrel. This means that the floor is falling and may not be nearly as
firm as the Saudi view assumes,” they wrote.
“Even at $75 a barrel or perhaps
below, U.S. oil production would almost certainly grow in 2015 an 2016, not
changing much the need for OPEC to cut if the market is to be balanced. Even if
such a price war were ensuing, the Saudis would end up punishing themselves in
our view. They could sustain the pain of $60 a barrel oil for a while, but
definitely not forever.”
The bottom line, they said, is
that the Saudis could conceivably win a price war, but it would be a “painful,
pyrrhic and short-lived” victory as the price floor for shale continues to
fall.
“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.”
The monthly Coppock Indicators finished September.
DJIA: +141 Down. NASDAQ: +289 Down. SP500: +216 Down.
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