Baltic Dry Index. 601 +03 Brent Crude 61.64
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
Stock market
bubbles don't grow out of thin air. They have a solid basis in reality, but
reality as distorted by a misconception.
George Soros.
Forget worrying about tiny irrelevant Greece. Forget for the moment that
Portugal, Spain, Italy and France are all the next Greece but writ large.
Forget for the moment that John Bull is just two weeks away from a general
election, constitutional crisis, that seems all too likely to begin the end of
the UK. Ignore for the moment that America’s war mongers have spread out over
the planet peddling the need for a real war in the Ukraine to curb Putin’s “aggressive”
new version of the USSR. Ignore for now that some 300 fully equipped US
paratroops are in the Ukraine training the neo Nazi militia. Leaving behind all
their state of the art murderous equipment when they leave in a few months.
Start worrying instead about the tulip mania deliberately let loose in China.
When this bubble bursts, as it will, global economic Armageddon roils the planet.
And no talking chair is going to stop it. We have reached the end game of the
Great Nixonian Error of fiat money. Get long physical gold and silver.
“I am hard-pressed to recall when any sort of
bubble was accurately identified in real time on the cover of a major media
publication. If anything, the opposite is true.”
Barry Ritholtz
China Manufacturing Gauge Drops to Lowest Level in 12 Months
2:45 AM BST April 23,
2015
A Chinese manufacturing gauge
fell to a 12-month low in April, suggesting government efforts to cushion a
slowdown are yet to revive the nation’s factories.
The preliminary Purchasing
Managers’ Index from HSBC Holdings Plc and Markit Economics was at 49.2,
missing the median estimate of 49.6 in a Bloomberg survey, which was also
March’s final reading. Numbers below 50 indicate contraction.
The first reading of the
economy’s health in April may deepen concern over a slowdown after
first-quarter data showed the weakest economic expansion since 2009. Policy
makers have stepped up efforts to halt the slide, cutting banks’ reserve
requirements by 1 percentage point this week.
----Highlighting the strains on China’s traditional growth drivers, revenue at state-owned enterprises declined 6 percent to 10.3 trillion yuan ($1.7 trillion) in the January to March quarter from a year earlier, the Finance Ministry said in a statement Thursday. Profits fell 8 percent, weighed by steel, non-ferrous metal, coal and petrochemical industries.
The reserve-requirement ratio was
lowered 1 percentage point Monday, the People’s Bank of China said. While that
was the second reduction this year, the new level of 18.5 percent is still high
by global standards. The cut will allow banks to boost lending by about 1.2
trillion yuan.
The reduction added to the PBOC’s
own monetary easing and that of about 30 counterparts around the world this
year as policy makers confront the risk of excessively low inflation.
Economists are forecasting further RRR and interest-rate reductions this year,
according to economists surveyed by Bloomberg this week.
“The soft number implies
continued underlying weakness in the manufacturing sector despite stimulative
policies rolled out since last November,” said Dariusz Kowalczyk, senior
economist at Credit Agricole SA in Hong Kong. “Markets will now expect more
easing, including on the monetary front.”
It’s A Mania—–Behold The Red Chips And The Big Macs
by David Stockman •
When $5.3 trillion of government
debt trades at negative interest rates in today’s fiscally profligate world it
is a thundering tell. What it signifies is nothing less
than financial regime change. There are no markets left in any
meaningful sense of the word—–just a raging casino infected with the madness of
the herds and the central bank pied pipers who intoxicate them.
Every day there are new
confirmations of the mania. Last night, for instance, the Shanghai stock market
closed up another 2.4%, meaning that it is now 114% above its level of
just 9 months ago!
And what has transpired in
the land of red capitalism during that parabolic move? Why everything has gone
virtually straight south because the most fantastic credit bubble in recorded
history is beginning to burst. That is, notwithstanding Wall Street’s sell
side propaganda, China’s vaunted $10 trillion GDP is not capitalist GDP in any
familiar or meaningful sense; nor is it the product of organic market-based
economic growth.
Instead, it is “constructed
GDP” which has been fabricated out of centrally issued and allocated
fiat credit. Over the past two decades the People’s
Printing Press of China issued virtually unlimited bank reserves in the
process of buying up dollars to peg the RMB exchange rate in support of its
national policy of export mercantilism. This, in turn,
has enabled China’s total public and private credit outstanding
to soar from $2 trillion at the turn of the century to $28 trillion today.
In short, the overlords of red
capitalism in Beijing caused the entire nation to borrow itself silly in order
to fund a construction and investment mania that has no historical parallel.
Indeed, the 14X explosion of debt in 14 years has resulted in not
only trillions of artificial “printing press GDP”, but, more
importantly, in a stupendous accumulation of over-valued and
uneconomic “assets” on both public and private accounts.
There are currently an estimated
70 million empty high rise apartment units in China, for
example, because under the baleful influence of unlimited
credit these apartments were built for asset appreciation, not
occupancy. In fact, most of China’s tens of million of
punters who have invested in these units have taken pains to keep them empty
and spanking new; like contemporary works of art, appreciation
potential can be impaired by damage and scrapes.
Needless to say, there is a huge
problem when you turn rebar, concrete and wallboard into tulip bulbs.
Namely, when the price mania finally stops, not only do the speculators who put
their savings into empty apartment units get crushed, but, more importantly,
demand for new units quickly evaporates, causing an devastating contraction up
and down the building supply chain.
More
We're Just Learning the True Cost of China's Debt
5:00 PM BST April 22,
2015
The true cost of the debt that China’s real estate developers peddled to
eager international investors during a five-year property boom is now becoming
clear.Having found themselves shut out of local bond and loan markets seven years ago, a band of developers began looking elsewhere for funds. First an initial public offering, and then a dollar bond sale. It became a well-trodden path. By 2010, a core group of four -- Kaisa Group Holdings Ltd., Fantasia Holdings Group Co., Renhe Commercial Holdings Co., Glorious Property Holdings Ltd. -- raised a total of $5.6 billion. On Monday, Kaisa buckled under $10.5 billion of debt and defaulted.
China’s home builders became the single biggest source of dollar junk debt in Asia amid government measures to prevent a property bubble. Developers already funneled $78.8 billion from international equity and bond markets into an industry that’s grown to account for one third of the world’s second-biggest economy. Most of the first rush of dollar offerings, in 2010, falls due in the next two years.
“It was an unintended consequence of the Chinese government that property developers are selling equity and debt to offshore investors,” said Ben Sy, a Hong Kong-based managing director in JPMorgan Chase & Co.’s private banking division. “There happened to be huge demand from international investors in the past few years driven by the intense search for yield.”
Kaisa was the first to debut in the dollar note market in 2010, selling $650 million of five-year bonds that April. The securities paid a 13.5 percent coupon, more than twice the 6.3 percent average yield for Bank of America Merrill Lynch’s U.S. Real Estate index at the time.
The Shenzhen-based developer was among nine real estate companies that raised $4 billion selling offshore bonds that year, a record at the time and fourfold the previous high. Six of the nine had listed their shares on the Hong Kong stock exchange in the previous 24 months.
Chinese developers’ move into the international capital markets started in earnest in 2007. From January to December, as the rest of the world slid deeper into recession, homebuilders raised $7.2 billion. Since 2008, another $11.5 billion has been raised via IPOs in Hong Kong.
Investor interest was, for the main part, strong. The retail portion of Glorious’s IPO was 51.4 times oversubscribed. Fantasia received orders from individual investors for 160 times the number of the shares it was selling, triggering a claw back mechanism that allowed it to allocate more stock. The retail component of Renhe’s share sale was undersubscribed with investors only applying for 7.25 percent of the shares offered to them, leaving institutional investors to take up the slack.
The shift offshore was precipitated to a large degree by happenings within China. In July 2008, the China Banking Regulatory Commission had issued circular 214 banning the use of borrowed money to buy land in an effort to stem rising property prices. The year prior, the China Securities Regulatory Commission had begun turning down IPO and bond issue requests for the same reason.
Having tapped equity investors, most developers followed up with a dollar bond sale.
More
“Speculative bubbles do not end like a short story, novel, or
play. There is no final denouement that brings all the strands of a narrative
into an impressive final conclusion. In the real world, we never know when the
story is over.”
Robert Shiller
At the Comex silver
depositories Wednesday final figures were: Registered 62.64 Moz, Eligible 112.60
Moz, Total 175.24 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today more on the man who allegedly, single handedly, caused America’s 2010 “flash crash,” using nothing more than an off the shelf trading program and beginner’s luck. No coincidence then that America’s 5 year statute of limitations was about to kick-in in a few weeks. Unwilling to bring charges in the UK, America’s desperate criminal and civil prosecutors seek to bury the hapless Mr Sarao in the US labyrinthine “justice” system. I have no idea on the truth or otherwise of the charges. But it seems highly improbable that one amateur geek trader caused the flash crash. What happened to all those earlier explanations that were trotted out? Why does Goldie and others, waste all those billions on hundreds of nerds and geeks? Personally, I think Putin did it.
October:
This is one of the peculiarly dangerous months to speculate in stocks. The
others are July, January, September, April, November, May, March, June,
December, August and February.
Mark Twain
Flash Crash trader Navinder Singh Sarao 'a prankster who always got away with it', friends say
Brunel University graduate Navinder Singh Sarao, who allegedly helped trigger the £500 billion Wall Street 'flash crash' in 2010, is granted £5m bail as he fights extradition
The British trader accused of helping to trigger a £500 billion Wall Street crash was a school prankster who always “got away with it”, a former classmate has said.Navinder Singh Sarao, 36, had a reputation for being “cheeky” and was notorious for being late for lessons, but his teachers turned a blind eye because he was “really bright”.
Mr Sarao is accused of illegally making £26.7 million trading from a computer in the suburban semi he shares with his parents in Hounslow, west London, over a five-year period, but neighbours said he showed no outward signs of wealth and did not even have a car. US investigators claim he transferred the money to companies he set up in the Caribbean, including one called Nav Sarao Milking Markets.
He
is now fighting extradition to the US after being charged there with 22 counts
of fraud and market manipulation which carry maximum sentences totalling 380
years.
At a preliminary extradition hearing at Westminster Magistrates’ Court in London, he was granted bail conditional on providing a security of £5 million and being fitted with an electronic tag. Because of the complex conditions attached to his bail, he is not expected to be freed from custody until the end of the week.
He is alleged to have used a computer programme to manipulate the US markets to such an extent that he helped cause the so-called 'flash crash' of May 6, 2010, when £500 billion was wiped off the value of the Dow Jones Industrial Average in a matter of minutes.
Mr Sarao was born and raised in London and attended his local comprehensive, Heston Community School, before studying at Brunel University in west London. He worked in banking for several years before setting up his day trading company at the family home in 2005.
More
Testimony kicks off in ex-Goldman programmer code theft trial
(Reuters) - The trial of a former Goldman Sachs Group Inc computer programmer accused of stealing code from the investment bank got underway Wednesday with testimony from Goldman technology employee Joseph Yanagisawa.Sergey Aleynikov, a dual citizen of Russia and the United States, is charged by state prosecutors with stealing computer code as he prepared to leave Goldman for a high-frequency trading startup in Chicago.
The defense has argued that the case should be barred by double jeopardy given a previous federal trial, conviction and dismissal. Aleynikov's lawyers also argue that what he did was not illegal.
Yanagisawa is one of the people who spoke with federal agents who first investigated Aleynikov. He testified Wednesday about the security of Goldman's computer systems.
Testimony is expected to continue on Thursday in the case, which inspired Michael Lewis' best-selling book "Flash Boys."
Aleynikov, 45, first arrested by federal agents in 2009, was already tried and convicted in federal court.
An appeals court threw out the conviction in 2012, saying the anti-espionage law did not apply and setting him free after about a year.
More
I
think that stocks have been this tremendous, tremendous equalizer for people in
this country. Guys who can't make a lot of money at their jobs have been able
to make a lot of money in the stock market.
Jim
Cramer, stock peddler.
Solar Update.
With events
happening fast in the development of solar power, I’ve decided to create a new
section. Updates as they get reported.
Following a rare fire
this week, in a solar panel at the UK’s Green Party’s offices in Hove on the
south coast, today an update of solar PV and fire.
Fire safety and solar PV
By Peter Bennett 20 April 2015, 15:43
Updated: 20 April 2015, 16:16
The UK solar industry’s meteoric rise to the top of the European solar totem
pole has seen half-a-million homes across the UK fitted with solar panels. But
for fire services, that means half a million homes that present a number of
different challenges when compared to the average home. The presence of solar
panels can fundamentally change a firefighter’s approach to tackling a blaze,
irrespective of whether the fire is PV-related or not.First and foremost, it is important to put the scale of risk associated with solar-related fires into perspective. As with any electrical appliance, solar panels can present a fire risk – albeit an extremely small one
According to the latest figures from the Office of National Statistics, there were 8,531 accidental fires caused by faulty electrical equipment in 2011-12.
BRE Global, who the Department for Communities and Local Government (DCLG) charged with solar PV fire investigation activities until 2015, reports that over the last two years it has only been notified of eight incidents involving solar modules which concerned fire and rescue services.
Ray Noble, director of Solar BIPV, explains that the actual risk of a fire caused by solar PV is “incredibly small”. He stresses that “there are obviously a lot more house fires caused by faulty electrical components (TVs, kettles etc.) than there are from anything to do with solar. Solar is probably less likely to start a fire than other electrical appliances. The way that things are made and the standards that we apply tend to better than some of the cheap electronics you can buy.”
Andy O’Leary, business development manager at Sibert Solar goes further, stating that there is “zero” risk of fire associated with PV “if the correct installation methods and materials are used”. He adds: “The ‘fine-tuning’ of good-practice/recommendations put forward in documents such as the PV Installation Guide help to mitigate the propensity of fires occurring directly due to a PV installation, but evidence has shown that they can and do happen, particularly where poor product selection has taken place, or where DC string cable termination methods have resulted in series-arcing breaking down, and ultimately setting fire to plastic insulation materials.”
The vast majority of solar fires are a consequence of installer fault – through poor install practices, incorrect equipment or poor products.
So what can go wrong?
One of the more common mistakes installers make is erroneously installing an AC isolator on DC circuits. This can lead to an extremely significant build up of heat that can eventually melt the isolator switch and trigger a fire.
O'Leary explains: “Solar PV installations tend to involve relatively high levels of DC voltage and current during normal operating conditions. Making and breaking DC is not as simple as when dealing with AC as the current is constant/direct and doesn’t oscillate through a zero value point (AC = alternating current/sinusoidal waveform that passes through zero 100 times per second, for 50hz AC supply). Because of this fact, making or breaking DC tends to be done either on-load or off-load.
“During daylight hours, the PV array is always producing power ‘on-load’ unless the inverter is switched off or the DC output from the PV array is made ‘open-circuit’ thus rendering any current flowing (and therefore, power) effectively to a zero value. When a DC current is passing between two conductive points, if they are separated at all then the DC current will try to maintain its contact with both conductive parts – this is manifested as an ‘arc’. DC arcs can be quite fierce and involve a high degree of energy being emitted as heat and light,” says O’Leary. This can break down insulating materials over time and create a serious fire risk.
Solar from a firefighter’s perspective
Research commissioned by the DCLG and carried out by BRE on fire safety and solar electric/photovoltaic systems, identifies the major obstacle facing firefighters: “In contrast to the power used by conventional mains electrical equipment, the power that PV systems generate is DC (direct current) and parts of the system cannot be switched off. DC installations have a continuous current, making them more hazardous (volt for volt) than normal AC (alternating current) electrical installations.”
The issue is that a household’s AC supply can easily be shut off by firefighters, however, the DC current supplied by the solar panels will also be generating as long as the sun is out.
More.
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