Baltic Dry Index. 1296 +32 Brent Crude 78.60
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"The most puzzling development in politics during the last decade is the apparent determination of Western European leaders to re-create the Soviet Union in Western Europe."
Mikhail Gorbachev.
If it wasn’t for bad news this morning there wouldn’t be
any news at all. Just don’t let on to the stock market or the central banksters
fuelling the Great Disconnect.
We open with a warning to the ECB from S&P, and brave
words from the BOJ on Japan’s economy. Everyone in Japan repeat after Abe, “every
day in every way we’re getting better and better.” At least it can’t hurt,
unlike Abenomics.
"When it becomes serious, you have to lie"
BOJ Governor Haruhiko Kuroda, with apologies to Jean-Claude Juncker. Failed Luxembourg Prime Minister and ex-president of the Euro Group of Finance Ministers. Confessed liar. EC President.
ECB entering 'very dangerous territory' warns S&P
“The risk of a triple-dip recession have increased. The ECB has one last arrow and that is quantitative easing of €1 trillion," said the credit rating agency
The European Central Bank’s plans
for €1 trillion of monetary stimulus is fraught with risk and is likely to fail
without full-blown bond purchases, Standard & Poor’s has warned.
The agency said the ECB’s blitz
of ultra-cheap loans to banks (TLTROs) cannot generate more than €40bn of net
stimulus once old loans are repaid, given regulatory curbs imposed on lenders.
Jean-Michel Six, the agency’s
chief European economist, said ‘doves’ on the ECB’s governing council know that
the loan plan is unworkable but are going through the motions in order to
persuade German-led ‘hawks’ that all conventional measures have been exhausted,
even if this means a debilitating delay.
“Risks of a triple-dip recession
have increased,” said Mr Six. "The ECB has one last arrow and that is
quantitative easing of €1 trillion, needed to restore the M3 money supply to
trend growth."
The ECB has suggested - with
caveats - that it will boost its balance sheet by €1 trillion, saying this will
be spread between TLTRO loans and asset purchases. The lower the share of TLTRO
loans in this total, the more it will be forced to expand QE in the teeth of opposition
from Germany.
“The ECB is moving into very
dangerous territory,” said Mr Six. "Their own credibility is at risk as
they take on more risk, but it is necessary."
The agency also said the Bank of
England has greatly under-estimated the degree of slack in the British economy
and risks killing the recovery by tightening too soon.
----Standard & Poor’s said the ECB will have to launch radical stimulus to head off a deep deflationary slump in the end, whatever they say in Germany. It said the pool of assets that can be purchased will have to be broadened, including a €2.2 trillion pool of bank bonds, and ultimately sovereign bonds. Nothing can be done until the European Court has ruled on a former case involving its back-stop plan for Italian and Spanish debt (OMT). “That has to be behind us,” said Mr Six.
It is unclear whether the OMT
case will in fact clear the air. Euroceptic groups and professors in Germany
are already planning to file a fresh case against QE at the German
Constitutional Court if the purchases escalate, arguing that the scale entails
large liabilities for the German taxpayer and circumvents the budgetary
sovereignty of the Bundestag.
More
BOJ stands pat despite grim GDP, focus on Kuroda's view on tax delay
By Leika
Kihara TOKYO
(Reuters) - The Bank of Japan
kept monetary settings and its upbeat economic view unchanged on Wednesday in
the wake of data showing the economy
has slipped into recession, preferring to spend more time to gauge the effect
of its surprise easing last month.As widely expected, the BOJ voted to continue its purchases of government bonds and risky assets, maintaining its pledge of increasing base money, or cash and deposits at the central bank, at an annual pace of 80 trillion yen ($683 billion).
"Japan's economy continues to recover moderately as a trend, although some weaknesses remain mainly in output," the BOJ said in a statement after its policy meeting.
It revised up its view on
exports to say they were "flat," compared with last month's
assessment that they were weakening.
Board member Takahide Kiuchi, a
skeptic of the current quantitative easing program, dissented to the policy
decision in a show of his continued disapproval to last month's surprise
monetary easing that was made by a closely split vote.
The meeting came in the wake of
data on Monday which showed the world's third-largest economy unexpectedly
slipped into recession in the third quarter, as the hit to spending from a sales
tax hike in April overwhelmed the impact of massive pump-priming by the BOJ and
the government.
On Tuesday, Premier Shinzo Abe
said he would call an early election to seek a fresh mandate for his economic
policies, and would postpone a second increase in the tax slated for 2015.
The dismal third-quarter gross
domestic product (GDP) data likely came as a shock to many BOJ officials, who
had hoped they pre-empted risks to the inflation outlook by expanding monetary
stimulus last month.
More
Elsewhere in the Great Nixonian Error of fiat money, the central banksters
free money has generated massive mal-investment in addition to the Fed’s final
bubble in stocks.
If
all else fails, immortality can always be assured by spectacular error.
J. K.
Galbraith.
Mining’s $120 Billion Ore Bet Sours as Peak Steel Looms in China
Nov 19, 2014 12:00 AM GMT
Chinese President Xi Jinping obviously wasn’t speaking for the world’s
iron-ore producers when he pronounced this month that the risks from his
country’s slowing growth “aren’t that scary.” The world’s mining giants have wagered $120 billion that steel production in China won’t peak until as late as 2030. Increasingly, it looks like they got that wrong, a miscalculation that could have huge consequences for companies led by BHP Billiton Ltd. (BHP) and Rio Tinto Group.
“I’ve always taken the view that the miners had the best intelligence on this as large investment decisions are based on it,” Richard Knights, a mining analyst at Liberum Capital Ltd. said by phone. “But if they get it wrong by a just a small margin, that has major implications for profitability and the share price for years to come.”
Iron ore is the worst-performing commodity this year, reaching a five-year low yesterday, and the slowing economy has persuaded some analysts and steelmakers that peak steel is nearing in China, the world’s largest producer.
Output in China will reach its high-water mark in as little as three years, prompting plant closures rather than expansions, according to Wolfgang Eder, chairman of the World Steel Association and chief executive officer of Voestalpine AG, Austria’s biggest steelmaker.
----It’s a big change. Every year for the past decade, China has added new steel mills with the capacity to exceed the annual production of Germany, the largest steelmaker in Europe. The surge in new blast furnaces created a consumption vortex, swallowing half the world’s iron ore and creating unprecedented wealth from Australia’s Pilbara region to Brazil’s Amazon basin. That gravy train, generating annual iron-ore sales of about $160 billion last year, is slowing.
The major flaw of producers of iron ore, the most traded commodity after oil, is they tend to be “over-bullish,” said Kirill Chuyko, head of equity research at BCS Financial Group in Moscow.
“Humans make mistakes,” said Chuyko, who thinks peak steel has been reached. “Chinese demand is going south.”
As China, the world’s second-biggest economy, heads for the weakest expansion in more than two decades, Communist Party leaders have discussed paring the growth target for 2015, according to a person with knowledge of their talks. The prospect growth will keep slowing has hurt commodities prices from coal to crude oil.
Iron-ore has dropped 47 percent to $71.80 a ton this year, the lowest since 2009, according to Metal Bulletin Ltd. Citigroup Inc. forecast the commodity could fall below $60 a ton next year. It peaked at $191.70 in February 2011.
----A total of 24 iron-ore projects have either started or been approved since 2011, according to Goldman Sachs. The mines have a combined annual capacity of 726 million tons and include operations in Australia, Brazil, Sierra Leone, Canada, Russia, Ukraine and Liberia.
More
In other news, it looks like Hell has frozen over. I blame it on “man-made
global warming,” now rebranded and re-launched as “climate change,” what else
could it possibly be?
If the facts don't fit the theory, change the facts.
Albert Einstein.
Albert Einstein.
All 50 U.S. states feeling freezing temperatures
By Laila Kearney NEW YORK
(Reuters) - Temperatures in all
50 U.S. states dipped to freezing or below on Tuesday as an unseasonably cold
blast of weather moved across the country, while heavy snow prompted a state of
emergency in western New York.
In the U.S. South, states were
bracing for a record chill from the Arctic-born cold that swept the Rocky
Mountains last week.
Every U.S. state, including
Hawaii, was bitten by temperatures at the freezing point of 32 degrees F (0 C)
or below, the National Weather Service (NWS) said.
Hawaii's Mauna Kea, a dormant volcano, had low temperatures of 30 F (-1 C) to 32 F, said NWS spokeswoman Susan Buchanan.
It was the coldest November morning across the country since 1976, according to Weather Bell Analytics, a meteorologist consulting firm. Typically, such cold is not seen until late December through February, the NWS said.
Parts of Erie County, in western New York, had 60 inches (1.5 m) of snow, with more falling, said Steven Welch of the National Weather Service near Buffalo.
Snow had fallen at a rate of up to 5 inches (13 cm) an hour, and the 24-hour total could reach 70 inches (178 cm), threatening the U.S. record for a populated area, Welch said.
----In Florida, freezing temperatures were expected through Wednesday morning, the NWS said.
“I can’t stand it,” said Robin
Roy, 53, shivering underneath a rainbow-colored poncho at an outdoor market in
Gulfport, Florida. “I’ve never liked the cold.”
More
Hell, Michigan
Two thousand scientists, in a hundred countries,
engaged in the most elaborate, well organized scientific collaboration in the
history of humankind, have produced long-since a consensus that we will face a
string of terrible catastrophes unless we act to prepare ourselves and deal
with the underlying causes of global warming.
Al Gore, Sept. 9, 2005.
At the Comex silver
depositories Tuesday final figures were: Registered 65.35 Moz, Eligible 112.65
Moz, Total 178.00 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Not the usual suspects today. Today, has China’s
bubble burst? What comes next if it has? Below, yet another red flag from
China.
Shanghai Stock Link Flows Plunge as CLSA Sees Ghost Train
Nov 19, 2014 4:34 AM GMT
The flood of buy orders for Shanghai shares through the Hong
Kong exchange link has slowed to a trickle two days after the
program’s debut. Net purchases of mainland equities by global investors totaled 1.1 billion yuan ($180 million) at the midday break, down from 2.7 billion yuan at the same time yesterday and 10.6 billion yuan on Nov. 17. Hong Kong stock buying slowed 66 percent from yesterday to 117 million yuan. The Shanghai Composite Index (SHCOMP) slipped 0.2 percent and shares of Hong Kong Exchanges & Clearing Ltd. (388) headed for the biggest three-day drop since 2012.
The tumble in demand yesterday spurred CLSA Ltd. to call the program a “Ghost Train,” a reference to the so-called Through Train plan to let mainland investors buy Hong Kong shares in 2007. That proposal sent the Hang Seng Index (HSI) surging before being abandoned. While CLSA analysts said it’s too early to judge the sustainable level of trading through the link, they said usage so far has been disappointing and profit projections for Hong Kong’s bourse may be cut.
“While the bulls will point to rumors that many investors are waiting on the sidelines for now, the bears will point to the already huge visible fall in demand,” Marcus Liu, a Hong Kong-based analyst at CLSA, wrote in a report. “Our expectations on Stock Connect are at the bottom end of consensus.”
Hao Hong, a managing director for research at Bocom International Holdings Co., called the debut an “anticlimax,” while Yuliang Chang, the chief China and Hong Kong equities strategist at Deutsche Bank AG, said initial flows are disappointing on both sides of the link.
One reason for the weak demand is that share prices had already surged in anticipation of the link, said Wu Kan, a money manager at Shanghai-based Dragon Life Insurance Co., which oversees about $3.3 billion.
The Shanghai Composite reached a three-year high on Nov. 12, while the Hang Seng index of Hong Kong shares traded at the highest in almost two months on Nov. 14.
“News of the stock connect has already been fully digested and priced in,” Wu said. “Investors won’t enter the markets to buy shares at such levels now.”
More
"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."
Antony C. Sutton.
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