Baltic Dry Index. 762 +39 Brent Crude 46.08
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
There can be few
fields of human endeavour in which history counts for so little as in the world
of finance. Past experience, to the extent that it is part of memory at all, is
dismissed as the primitive refuge of those who do not have the insight to
appreciate the incredible wonders of the present.
J. K. Galbraith.
Dr. Copper is slumping again, which suggests that the global economy is
slowing again, which suggests that the crude oil price still has further to
fall, which suggests that oil patch lay-offs and capital expenditure cutbacks are
only just starting. A Great Retrenchment is about to take on our Great
Disconnect in global stocks. Dr. Copper is screaming lookout below.
It’s a funny old world in the Great Nixonian Error of fiat money. First
an inflation boom, followed by the Volker bust. Then a stock market boom, followed
by the 1987 Black Monday crash. Then the
Great Greeenspan years of serial bubbles and unlimited rigging of markets until
Nasdaq, “the stock market for the next hundred years” blew up, forcing fallen
guru Greenspan to set off the great real estate bubble and casino capitalism in
its place. We all know only too well how that Great Error came to its end. And
all along the Great Nixonian Error financed and built up communist China,
turning it into the massive malinvestment bubble that it is today, and made
possible unlimited, never ending war. We
have entered the last act of that Great Nixonian Error.
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.
Copper prices slump to 2009 levels, sparking growth concerns
Published: Jan 13, 2015 10:39 p.m. ET
LOS ANGELES (MarketWatch) — In the wake Tuesday’s whipsaw stock-market
reversal, copper prices added to the uneasiness by plunging 6% to pace a broad
selloff in the metals sector.By midday in East Asia, high-grade copper for March delivery HGH5, -5.86% had dropped 16 cents, or 5.9%, to $2.49 a pound, hitting levels not seen since mid-2009 though off its lows of the day. The futures had lost 8 cents in Tuesday trade on the New York Mercantile Exchange.
Copper also fell sharply on other markets early Wednesday, with Reuters reporting a 4.8% drop for London Metal Exchange copper amid stop-loss selling, while March copper lost 5% on the Shanghai Futures Exchange.
Concerns over a supply glut and slowing consumption in China have weighed on copper prices in recent months.
Before the swift retreat in copper, a triple-digit rally on the Dow Jones Industrial Average DJIA, -0.15% did an about-face to close lower, stoking investor jitters.
Weakness in copper is often seen as an omen for the economy because the metal is used in a wide array of construction and manufacturing activities. While many analysts are bullish on where the global economy is headed this year, the copper action suggested a different story.
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Suncor says it will cut 1,000 jobs as a result of oil-price slide
Published: Jan 13, 2015 5:04 p.m. ET
WASHINGTON
(MarketWatch) -- Calgary-based oil company Suncor Energy SU,
+1.50% said it will cut
1,000 jobs, primarily through its contract workforce, in addition to reducing
employee positions. There will also be an overall hiring freeze for roles that
are not critical to operations and safety, the company said. Suncor says in
response to sliding crude-oil prices, it will cut $1 billion in capital
spending, as well as make operating expense reductions of $600 million to $800
million that will be phased in over two years. Production guidance for 2015 has
not changed, Suncor added.
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Oil Collapse of 1986 Shows Rebound Could Be Years Away
Jan 14, 2015 12:00 AM GMT
The last time excess supply caused a plunge in oil, it took almost five
years for prices to recover. The CHART OF THE DAY shows how West Texas Intermediate, the U.S. oil benchmark, tumbled 69 percent from $31.82 a barrel in November 1985 to $9.75 in April 1986 when Saudi Arabia, tiring of cutting output to support prices, flooded the market. Prices didn’t claw back the losses until 1990. Oil has dropped 57 percent since June and OPEC members say they’re willing to let prices sink further.
Surging prices in the 1970s led to the development of the North Sea and Alaska oil fields. OPEC members also increased capacity, leaving the Saudis to trim output when demand softened.
In the 1980s, Saudi Arabia “was tired of the other members cheating and just opened the spigots,” Walter Zimmerman, the chief technical strategist for United-ICAP who predicted last year’s drop, said by phone from Jersey City, New Jersey yesterday. After the plunge in prices “the Saudis lost their nerve and they resumed the role of swing producer. If they hadn’t lost their nerve, we wouldn’t be seeing the shale oil boom today and North Sea production would be substantially lower because investment would have been less,” he said.
Investment in new production surged as futures averaged $95.77 a barrel in 2011 through 2013. The combination of horizontal drilling and hydraulic fracturing has unlocked supplies from shale formations, sending U.S. oil output to the highest level in three decades. Russian oil production rose to a post-Soviet record last month and Iraq exported the most oil since the 1980s in December.
“If they had allowed prices to stay lower they would have saved themselves many problems in the long run,” Zimmerman said. “Many reserves we take for granted would have never been developed.”
We leave the last word today to the learned, David Stockman. Look out
below he agrees.
The US Hasn’t “Decoupled” And There Ain’t No Giant “Oil Tax Cut”
by David Stockman •
The buy-the-dip crowd went on a
rampage last Thursday, lifting the Dow by 300 points in the first hour of
trading. So doing, it got the stock averages back into the green for
2015—-thereby making short shrift of another 4-5% “dip” at the turn of the
year.
But don’t think we are off to the
races once again. This year may be different, finally
Indeed, this time the Wall
Street touts have got the narrative so dead wrong that the day-traders and
robo machines who track them are likely to be smacked-down on the dips
over and over—– until there are no more dips left, only an
honest-to-goodness plunge.
The false narrative is an old
standby that is usually revived when worrisome clouds form on the global
horizon. Namely, that the US economy has “decoupled” from the troubles brewing
abroad; and that this time the collapse of crude oil amounts to a giant “tax
cut” that will send US consumers into a frenzy of new spending, thereby fueling
a surge of hiring, income and growth.
Nice theory—but it’s not going to
happen. In the first place, the plunge in oil prices is not a “tax cut” and its
doesn’t put a dime into the pockets of any consumer. That whole notion is just
one more example of ritual incantation—–a baseless repetitive refrain that
flows from Keynesian doctrine and Wall Street bullhorns.
What will happen is that total
“spending” in the US economy will be reallocated, not increased.
And now that net petroleum
imports have dropped to a 40 year low, the math is pretty straight forward; and
its not indicative of a windfall boon to the domestic economy, at all.
At the present time, total
US petroleum product consumption—including gasoline, heating oil, jet
fuel, chemical feedstocks and the rest of the refinery slate—is
about 19 million barrels/day or just about 7 billion barrels annually. Assuming
we get an average $60 per barrel price reduction in 2015—from the previous $100
trend to about $40—-the indicated annualized “savings” is about $420 billion.
Yes, that’s something. It amounts
to about 2.3% of GDP and 3.5% of personal consumption expenditures (PCE).
But net imports in the most recent month (November) were only 5.1 million
bbls/day, meaning that fully 14 million bbls/day was accounted for by
domestic crude oil, condensates, NGLs and refinery gains. So the domestic
revenue hit at $60 per barrel will amount to a thumping $300 billion.
Now the net gain to the US
economy of the $120 billion difference is nothing to sneeze at—even
if it does amount to only 1% of the current $12 trillion of PCE. Yet even that
is not all that meets the eye.
In the first place, net oil
imports are virtually certain to continuing falling in 2015—notwithstanding
lower prices to domestic producers. That is owing to the “sunk capital”
phenomenon, which is especially true in the capital intensive petroleum
industry, and especially in the shale patch. Based on fields already
opened, production infrastructure in place and wells already drilled, shale
oil production is likely to continue rising this year—- along with
condensates and NGLs from the wet gas fields.
Stated differently, what will be
hit hard in the short-run is oilfield investment spending on drilling rigs,
supplies, crews and new acreage leases. The multiplier from that will hit
restaurants, bars, car dealers and strip malls in Bakken,Eagle Ford and the
five big oil states generally— long before daily production peaks and
begins to roll-over owing to the steep decline curves on fracked wells.
As is by now well known, all the
net gain in US payroll jobs since January 2008 have been attributable to the
five shale states. Now, perforce, begins the great unwind.
More
"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium."
Murray N. Rothbard
At the Comex silver
depositories Tuesday final figures were: Registered 65.04 Moz, Eligible 108.32
Moz, Total 173.36 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, deflation. Be careful what you wish for.
Falling prices are good if you have a job, irrelevant if your job evaporates
due to malinvestment from mountains and years of QE for bankrupt banksters. And
last month Forbes reported malinvestment on a biblical scale in China.
"The
international monetary order is more precarious by far today than it was in
1929. Then, gold was international money, incorruptible, unmanageable, and
unchangeable. Today, the U.S. dollar serves as the international medium of
exchange, managed by Washington politicians and Federal Reserve officials,
manipulated from day to day, and serving political goals and ambitions. This
difference alone sounds the alarm to all perceptive observers."
Hans F. Sennholz
Even Britain may be falling prey to Europe's deflationary vortex
On the face of it, Britain is much better placed to weather deflationary threats than the eurozone
Rejoice! UK inflation has fallen
to its lowest level in nearly 15 years, and is heading lower still – down close
to zero, according to some forecasts. That’s a good thing according to the
Chancellor, George Osborne, and in many respects, it is hard to disagree.
Primarily, this is about falling prices for fuel, food and other
non-discretionary items of expenditure, so the effect is like a big tax cut.
When unavoidable costs fall in
price, it boosts disposable income, and by reducing input costs will, for many
firms, also increase profitability – in the short term at least. The upshot,
moreover, is that for the first time since the banking crisis, Britain is
beginning to see some significant real term wage growth. At around 1.5pc for
the private sector, it could indeed be back close to historic trends this year.
Great news all round, then? Well,
possibly it would be but for the fact that low inflation in the UK is part of a
global disinflationary story, and if the entire world is descending into
deflation, then it is very definitely not cause for celebration. The big worry
is that demand is also falling off the cliff edge along with prices, finally
swamped out by the overcapacity of Asia and other new entrants to global trade.
Too much production and not
enough consuming power can be a deeply destructive combination. In this sense,
the trials of Britain’s diary farmers, now having to contend with milk prices
that are lower than for some bottled waters, are just a proxy for a much wider
problem of over-production and under-consumption. Result: lots of dairy farmers
are going to have to go out of business in order to restore equilibrium.
----By contrast, the eurozone has shown minimal nominal GDP growth for at least five years now, and is paying the price in crippling levels of unemployment, rising debt burdens and gathering political chaos.
The clearest financial markets
manifestation of this divergence is in sovereign bond yields. Yields on 10-year
bonds for both the UK and the US are approximately double what they are for
France and getting on for five times higher than Germany. The yield on
five-year Japanese bonds is zero, and for German bunds of a similar maturity,
not that far off. Negative yields are fast approaching.
In part, this is because the
Japanese central bank is currently engaged in massive quantitative easing.
Rightly or wrongly, the European Central Bank (ECB) is widely expected to
abandon its scruples and go the same way. However, in the US and the UK, these
programmes are at an end. There is consequently less official support for bond
prices in the Anglo-Saxon world.
But there is a more important,
underlying reason; it is because markets basically don’t believe the ECB is
serious about meeting its inflation target. At every stage of the game, the ECB
has had to be dragged kicking and screaming into doing something about the
deflationary threat. With the governing council still in the grip of the hard
money men of the German Bundesbank, there is little evidence of a change of
heart. And even if the ECB’s president, Mario Draghi, does eventually get his
way, it is reasonable to question the effectiveness of massive asset purchases
at such a late stage in the day. Monetary union has locked the eurozone into a
deflationary vortex from which it is struggling to escape.
MoreChina Used More Concrete In 3 Years Than The U.S. Used In The Entire 20th Century
12/05/2014 @ 8:19AM
China produces and consumes about 60 percent of the world’s cement – the Three Gorges Dam alone required 16 million tonnes of it. To put China’s massive 21st century construction splurge and concrete consumption into perspective, Bill Gates made a mind blowing comparison.According to his blog, between 2011 and 2013, China consumed 6.6 gigatons of concrete – that’s more than the U.S. used in the entire 20th century. Look at what the U.S. built between 1901 and 2000: all those skyscrapers, the Interstate, the Hoover Dam, the list goes on and on but all that concrete only amounted to 4.5 gigatons.
*Click below to enlarge (charted by Statista)
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"If you don't trust gold, do you trust the logic of taking a beautiful pine tree, worth about $4,000 - $5,000, cutting it up, turning it into pulp and then paper, putting some ink on it and then calling it one billion dollars?"
Kenneth J. Gerbino
The monthly Coppock Indicators finished December.
DJIA: +138 Up. NASDAQ:
+247 Down. SP500: +198 Down.
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