Monday, 31 August 2015

The Wait.

Baltic Dry Index. 903 -02   Brent Crude 49.16

LIR Gold Target in 2019: $30,000.  Revised due to QE programs.

“The boom can last only as long as the credit expansion progresses at an ever-accelerated pace. The boom comes to an end as soon as additional quantities of fiduciary media are no longer thrown upon the loan market.”

Ludwig von Mises.

It is month end and “dress up” Monday. How will US stocks close out the month? UK stocks have already closed for the month, it’s the last summer bank holiday here in Merrie Olde England. The early indication from Asian stocks suggest a weaker close. But the Fedster’s Plunge Protection Team is sure to be buyers today. Even so, at the Fed’s weekend junket for their favoured cronies, the word seems to be that the Fed’s rate hike next month is back on. There ought to be plenty of sellers today needing the Fed’s PPT. Professional money managers will want to drop all stocks in a correction or worse. No professional money manager wants to show clients that he held on while his more adroit competitors sold out. It may not be investing, but it sure is survival in the world of professional money managing.

Below, Asia wobbles, as rumours spread that China has given up on trying to rig its stock markets. If true, and if Uncle Scam’s markets swoon today, PPT or not, my guess is that global stock markets head into an autumn of an unrelenting reconnect with Main Street reality. Even if the Fed’s PPT manage to stage a rally today, a hurricane is fast approaching the global economy. Deflation is the new game in town.

Asian stocks set for worst monthly drop in three years on global rout

Sun Aug 30, 2015 10:54pm EDT
Asian shares fell on Monday and looked set for their worst monthly performance in three years after top Federal Reserve officials kept the door open for an interest rate hike in September and Chinese stock markets took a fresh tumble.

Global markets are bracing for Chinese data on Tuesday which is expected to show the world's second-largest economy is continuing to lose momentum.

A Reuters poll showed China's official factory sector activity likely fell to a 3-year low.

U.S. business surveys, factory orders, trade data and non farm payrolls will also be released this week, keeping investors on edge after one of the wildest trading weeks of the year.

MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.8 percent and is set to fall 10 percent this month, its worst monthly drop since May 2012.

Japan's Nikkei .N225 was down more than 1 percent and South Korea's Kospi shed 0.6 percent. Australian shares lost 1.2 percent.

Selling intensified as China markets extended declines. By midmorning, Shanghai stocks .SSEC, the epicenter of this month's whip-saw action, were down 3 percent. They have plunged more than 40 percent since mid-June.

China's yuan up on suspected intervention, set for August loss

Mon Aug 31, 2015 12:08am EDT
SHANGHAI China's yuan firmed on Monday after the central bank set a stronger guidance rate while it also appeared to continue using state-owned banks to support the Chinese currency, traders said.

For August, the currency is set to depreciate 2.7 percent if it closes at the midday level. Most of the losses came after the People's Bank of China (PBOC) surprised markets by devaluing the yuan by nearly 2 percent on Aug. 11.

"Major state-owned banks bought a large amount of yuan this morning," said a trader at an Asian bank in Shanghai.

These banks were suspected of intervening on behalf of the central bank around 6.38 against the dollar, several traders said.

The PBOC set the midpoint rate CNY=SAEC at 6.3893 per dollar prior to market open, 0.15 percent firmer than the previous fix 6.3986.

The spot market CNY=CFXS opened at 6.3890 per dollar and was changing hands at 6.3805 at midday, 0.13 percent stronger than the previous close.

After the abrupt devaluation on Aug. 11, Beijing appears to have been so surprised by the global reaction that it tends to keep the yuan on a tight leash to head off a currency war that could spark a broader financial crisis, policy insiders say.

Premier Li Keqiang reiterated at the weekend earlier remarks that there's no basis for continued depreciation of the yuan following its devaluation.

Chinese shares lead Asia bourses lower

August 31, 2015 4:10 am
Monday 03:20 BST. Chinese shares took a dive, weighing on regional benchmarks, following reports that Beijing has scrapped large-scale share purchases as a method of propping up markets.

The Shanghai Composite fell 3 per cent while the Shenzhen Composite slid 2.7 per cent. That took declines for the month to 14.5 per cent and 14.9 per cent, respectively, putting both indices on pace for their worst monthly performances since August 2009.

Chinese authorities are estimated to have spent about $200bn trying to support the crumbling equities market, but with questionable and short-lived results.

In recent weeks, the withdrawal of some government support prompted a sharp sell-off, and the two primary benchmarks had both fallen below the levels of early July at which the government initially stepped in to shore up confidence. Beijing will now focus its efforts on punishing those suspected of destabilising the market.

Global benchmarks roared back after the People’s Bank of China cut benchmark interest rates last Tuesday — but “if the Thursday/Friday Shanghai rally proves to be a flash in the pan, we have no doubt so too will the recent rebound in global stocks”, said Ray Attrill, National Australia Bank global co-head of FX strategy, “in which case we’ll have greater confidence in our current view that the Fed will not be moving next month”.

Regional equities continued their downtrend for August, which has been the worst monthly performance in years for many benchmarks.

Japan’s Nikkei, down 1.1 per cent on Monday morning, is off 8.1 per cent for August, its worst month since January 2014.

Also weighing on the Japanese market were data showing industrial production contracted 0.6 per cent in July after expanding 1.1 per cent in June. This fell short of expectations for a 0.1 per cent increase and points to only post modest overall economic growth in the September quarter. The yearly pace of production slowed to 0.2 per cent from 2.3 per cent in June.

In Australia, a morning drop of 0.9 per cent took declines for the S&P/ASX 200 to 8.5 per cent for the month, the worst performance since October 2008.

Hong Kong’s Hang Seng was sporting a monthly fall of 12.6 per cent, its worst since September 2011, with a 0.4 per cent slide.

---- The price of oil was retreating after strong gains on Thursday and Friday. Brent crude was down 1.7 per cent at $49.18 a barrel while West Texas Intermediate was 1.6 per cent lower at $44.47.

Fed at Jackson Hole: Gearing Up to Hike Amidst Rocky Terrain

August 30, 2015 — 8:53 PM BST
Central bankers aren’t a group that’s easily spooked.

Whether looking through low inflation or brushing aside financial market turmoil, U.S. policy makers at the Kansas City Federal Reserve’s annual retreat in Jackson Hole, Wyoming, had a largely consistent message: We’re staying the course.

Federal Reserve Vice Chairman Stanley Fischer, in the most anticipated remarks of the two-day event, proclaimed his faith that inflation is poised to move upward.

“There is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further,” he said Saturday on a panel on inflation dynamics with other top central bankers from Europe and India that wrapped up the conference.

While Fischer was careful to announce that he wasn’t signaling an impending rate increase, the remarks suggested a move wasn’t ruled out when the Federal Open Market Committee gathers in Washington September 16-17.

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

Ludwig von Mises.

At the Comex silver depositories Friday final figures were: Registered 54.77 Moz, Eligible 116.39 Moz, Total 171.16 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, more fallout from China’s slowdown. When China sneezes we all catch flu. Atishoo, atishoo, we all fall down.

Brazil tumbles into recession

August 29 2015
Rio de Janeiro (AFP) - Brazil has slipped into recession, the government said Friday, deepening the gloom in the world's seventh largest economy already battered by falling commodity prices, political crisis and a corruption scandal.

In the second quarter of this year, gross domestic product fell 1.9 percent, according to official figures.
GDP had already been down 0.7 percent in the first quarter, the government statistics agency IBGE said, revising that figure down further from the earlier estimate of minus 0.2 percent.
Year-on-year, the second quarter growth was down 2.6 percent.
Brazil is now in its biggest contraction for six years and with the 2015 slump forecast to extend in milder form through 2016, economists believe the country is headed for the longest recession since 1931.
Brazil's economy has been tailing off for four years, ever since the end of a boom fueled by commodity exports, principally to China. Falling prices for oil and other commodities have punched huge holes in the budget.
Adding to the economic malaise is a growing political crisis in which President Dilma Rousseff faces calls for her impeachment and discontent -- even among many of her own supporters -- over attempts to push through austerity measures.
Rousseff dismissed talk of a growing financial crisis
----“The GDP points to what Brazil has been experiencing recently: a strong recession, a pretty turbulent political situation, with inflation rising, with rates rising," said Alex Agostini, chief economist at Austin Rating.
"This has impacted on the confidence of investors, or businesses and consumers."
- No quick fix -
A quick recovery is not expected, with unemployment now at 7.5 percent and rising and the national currency, the real, down about 25 percent this year against the US dollar. Inflation is forecast at 9.56 percent this year.
----Friday's figures showed the steepest second quarter shrinkage in the industrial sector, which includes the troubled oil industry centered on Petrobras, at 4.3 percent.
Agriculture, where Brazil is one of the world's main producers of commodities like soybeans, sugar and poultry, slipped 2.7 percent.
Family spending fell 2.1 percent, the second consecutive quarterly drop.
Moody's has cut Brazil's credit rating to near junk status, reflecting growing struggles with debt and investor caution in a country that as part of the BRICS nations was once considered a lucrative bet.

“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.

Solar  & Related Update.

With events happening fast in the development of solar power and graphene, I’ve added this new section. Updates as they get reported. Is converting sunlight to usable cheap AC energy mankind’s future from the 21st century onwards? DC? A quantum computer next?

'Super batteries' to be 3D printed from graphene ink

10 August 15 by Katie Collins
Manchester Metropolitan University is embarking on a project to 3D print "super batteries" from graphene ink.

Wonder material graphene has been widely talked about in terms of its suitability for use in batteries, due to its impressive conductivity, but scientists have struggled with the fact it also has a relatively small surface area, which affects capacity.

3D printing, where layers of graphene are assembled on top of one another, maximising surface area in the process, offers a solution. Now researchers at MMU are analysing techniques for printing with conductive graphene ink, in order to try and create batteries, supercapacitors and other energy storage devices with the help of a grant from the Engineering and Physical Sciences Research Council. 

"We're trying to achieve a conductive ink that blends the fantastic properties of graphene with the ease of use of 3D printing to be manipulated into a structure that's beneficial for batteries and supercapacitors," explains Craig Banks, a professor of electrochemical and nanotechnology and leader of the three and a half-year project. The batteries and supercapacitors would be used to power phones and tablets, or for solar, wind and wave power storage.

"Energy storage systems (ESS) are critical to address climate change and, as clean energy is generated through a variety of ways, an efficient way to store this energy is required," says Banks, whose work on graphene's conductivity has been cited over 9,000 times, making him one the world's most-cited scientists. "Lithium and sodium ion batteries and super/ultracapacitors are promising approaches to achieve this. This project will be utilising the reported benefits of graphene -- it is more conductive than metal -- and applying these into ESS."

The combination of the conductivity from the graphene and the 3D nature of the structures, which have "high surface areas, good electrical properties and hierarchical pore structures/porous channels", should increase the storage capabilities of batteries to meet future demands. 

The monthly Coppock Indicators finished July

DJIA: +88 Down. NASDAQ: +189 Down. SP500: +116 Down. 

Saturday, 29 August 2015

Weekend Update – When All Goes Wrong.

"If you see a line forming in front of a bank, what do you do? Get in line." 

Wall Street adage

A tumultuous week that proved once and for all that our central banks are deliberately trying to rig our global stock markets, but with less and less effect. Some as in China have already lost control. So too in the emerging market nations and in the commodity market nations. They have simply been overwhelmed by the slowdown in China collapsing demand for industrial commodities. The jury’s still out in the USA and UK, where the central bankster remain barely in control, but a few more days like Monday and control will become a meaningless word. 

With the public long gone from our stock markets, most of the action now comes from high frequency trading algorithm computers. Since these are mostly all programed to watch for the same signals, namely order flow, and to try to front run it for fractions of a penny, for a fraction of a second, when margin call selling hits the markets, HFT front running leaves the Fed’s Plunge Protection Team out of the loop and so far behind the curve as to not actually be in the game. In theory, HFT is allowed for “the liquidity” they bring to stock markets. In practise, when trouble hits, they are all on the same side and programed to pull bids. They have become wealth destruction machines in a two speed casino. As more and more stocks lock up, forced margin call sellers, often hedge funds and Exchange Traded Funds, must use the highest liquid stocks still trading as proxies. Our developed market stock exchanges are one HFT event away from a terminal collapse.

For better or worse, and I would say worse, we are living in the end game of the Great Nixonian Error of fiat money. Communist money. We are living in the perverse age of Zero Interest Rate Policy and Negative Interest Rate Policy. Both are about to come to their end. Whether the Fed dare raise its key interest rate by a meaningless quarter of one percent next month in these circumstances is open to question. What is not open to question is that sooner or later, and my guess is sooner, that interest rates will start the long march back towards normalised interest rates. The great 34 year bond bubble will come to its end. In global stock markets, Monday’s chaotic action will look like the good old days. In the developed world we will witness wealth destruction unlike anything seen since the Second World War. With our national economies now globally integrated and at the speed of a nano-second, it’s a time bomb ticking down to destruction. Our central banks are simply increasingly irrelevant at stopping the damage they have created. Thirty four years of their malinvestment bubble is about to get unwound. The Great Nixonian Error of fiat currency will get swept away.

None of this is likely to come up at the current Fedster’s annual junket at Jackson Hole Wyoming. There, they actually think it’s still central bank bubble business as usual  down on the casino floor.

Though I’m not a chartist, many professional money managers are. It’s easier to stay grazing with the herd that way. Staying with the herd allows them to keep their jobs when all goes wrong.  And all’s now going wrong in global stocks.

"The trend is your friend, until it isn't." 

Wall Street adage

‘Death cross’ patterns spread like a bearish virus

Published: Aug 28, 2015 4:34 p.m. ET

S&P 500 index’s chart produces first death cross in 4 years

The “death cross” pattern is spreading fast through the stock market like a bearish virus.
On Friday, the S&P 500 index SPX, +0.06%  became the latest victim. The broad-market barometer’s 50-day moving average fell to 2,074.42, according to FactSet, to cross below the 200-day moving average, which slipped to 2,075.39.

The S&P 500’s last death cross appeared on Aug. 12, 2011. It bottomed about six weeks later after falling a further 6.3%. The opposite bullish crossover, known as a “golden cross,” appeared 5 1/2 months later.
Many chart watchers believe a death cross indicates that a shorter-term decline has developed into a longer-term downtrend.

There were 263 stocks within the S&P 500, or about 53%, that had a 50-day moving average (MA) below their 200-day MAs through afternoon trade Friday.

Shares of the biggest S&P 500 company by market capitalization, Apple Inc. AAPL, +0.33% produced a death cross on Aug. 26.

Among other major market indexes, the Dow Jones Industrial Average DJIA, -0.07%  produced a death cross on Aug. 11. The blue-chip index was down 47 points in recent trade, and had lost nearly 800 points since the pattern appeared.

On Friday, 18 Dow stocks, or 60%, had death crosses hanging over them.

Many have questioned whether a well-telegraphed moving average crossover is really a bearish signal or not. But at the end of 2008, three months before the market bottomed, all 30 Dow stocks had produced death crosses.

Among other notable indexes in which the bearish pattern has appeared recently, the NYSE Composite NYA, +0.11%  produced one on Aug. 11, the Dow Jones Transportation Average DJT, +0.53%  produced its death cross on May 26, the Dow Jones Utility Average DJU, -0.27%  produced one on May 7 and the Wilshire 5000 W5000, +0.22%  produced one on Friday.

The Russell 2000 RUT, +0.81%  could produce one within a week and the S&P MidCap 400 MIV, +1.02%  should produce one on Monday, while the Nasdaq Composite COMP, +0.32%  could be about three weeks away from producing one.

Four Things We Learned This Week: What Goes Up Must Come Down

August 28, 2015 — 5:21 PM BST

1) China is not a one-way bet

It's been the most volatile week for equities in years. Fears of a slowdown in China have been snowballing all month, and culminated Monday in a global stocks crash not seen since 2011 – and not seen in Europe since the depths of the financial crisis. Chinese government intervention and relief rallies tussled with renewed concerns about China throughout the week, triggering wild swings. Those fluctuations were further complicated by Fed comments that cast doubt on a September rate hike.

The markets jarred investors so much that many pulled their money out of equities – and almost every other asset class – altogether.


"Markets take the stairs up and the elevator down"

Wall Street adage