Baltic Dry Index. 1151 +20 Brent Crude 49.68
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
I was borrowing money from 30 leading banks. How could they all be wrong? I’m only a simple businessman.
Sir Freddie Laker.
Stock markets now seem to be flirting with joining their cratering cousins commodities, as crude oil prices resumed their downward flight yesterday. With supply still exceeding demand by between one and two million barrels a day, depending on who’s counting, and Iran’s increased production still to come in 2016, few will volunteer to try to catch this falling sword. Sooner or later, and my guess is sooner, our Fedster over-priced, bubbly stock markets, will take over the lead from commodities in the coming reset back to the arriving new normal. Get ready for the downward leg of the round trip.
"This crash is not going
to have much effect on business."
Chairman Arthur Reynolds Continental
Illinois Bank of Chicago October 24th 1929.
Stocks finish lower, weighed down by oil slump
Published: Aug 3, 2015 4:44 p.m. ET
U.S. stocks finished lower Monday following weak economic data and a further
slump in crude-oil prices, but managed to pare early losses.Stocks had been in clear retreat after the Institute for Supply Management’s closely watched manufacturing survey for July, along with a similar report from Markit, came in weaker than expected.
Also, June construction spending grew 0.1%, well below expectations. Ahead of the opening bell, data from the Commerce Department showed personal spending rose slightly less than expected in June, while income was slightly above forecasts.
----August historically has been “among the worst performing months,” and some indicators suggest more volatility ahead, Stovall said. Investors also “have been in a ‘risk-off’ mind-set since the final new high was established in May.”
More
http://www.marketwatch.com/story/us-stocks-on-pace-for-lower-open-2015-08-03
Below, the best (as in worst,) is still yet to come, for Chinese stocks which have entered a bear market, despite Beijing’s Politburo ordering them not to. Like Olde King Canute before them, they are all too likely to get wet feet, but not before throwing in the kitchen sink at getting the Muppets to buy more. But every buyer needs to find a seller, something China's Politburo seems to have forgot in this new game of let’s all rig China’s stocks.“A Chinese slowdown will put energy and commodity prices under pressure, which will benefit U.S. consumers and U.S. manufacturers as input prices fall, and should help support earnings in the near term,” Minerd said.
I have my doubts. US consumers are tapped out and loaded with debt. A commodity depression is only likely to have a marginal impact on manufacturing earnings at best. At worst, dumping is likely to breakout in a race to raise cash. The new normal on the way down, for at least the next few years, is likely to be near the exact opposite of the old normal on the way up.
The chart that shows the worst may be yet to come for Chinese stocks
Published: Aug 3, 2015 2:04 p.m. ET
The Chinese stock market ballooned over the past year on the back of
borrowed money, with margin debt climbing to a high of 9.6% of market cap as
equities peaked in June, according to Guggenheim Chief Investment Officer Scott Minerd.
This is an alarming level, both historically and globally, and as you can see by the chart, it puts China in some unsettling territory. Even after the latest spiral.
“While margin debt has begun to unwind in the midst of the latest stock selloff, there is still a great deal of margin debt outstanding, meaning more turbulence could lie ahead for China’s stock market,” Minerd wrote in a blog post cited in Monday’s “Need to Know” column.
“If Chinese policy makers don’t alter course soon, the current Chinese equity-market correction could turn into a stock market plunge similar to what happened in the United States in 1929,” he wrote. For comparison, the U.S.’s margin figure is currently below 3%.
Minerd said the best case for China may be what we saw in the U.S. in 1987, when a steep market drop and rebound ultimately established a base for the next big rally. But if the worst-case 1929 scenario were to unfold, it may not be so bad for U.S. investors.
“A Chinese slowdown will put energy and commodity prices under pressure, which will benefit U.S. consumers and U.S. manufacturers as input prices fall, and should help support earnings in the near term,” Minerd said.
China stock exchanges step up crackdown on short-selling
China stepped up its crackdown on short-selling of shares on Tuesday,
unveiling rules that make it harder for speculators to profit from hourly price
changes, as some of the nation's major brokerages suspended their short-selling
businesses.
China's stock exchanges and market watchdogs are cracking down on
short-selling as part of a broad government-orchestrated effort to prevent a
collapse in the country's markets, which have lost about 30 percent of their
value since peaking in June.
The sell-off, which followed a dizzying rally, has shattered investor
confidence in Chinese stocks and shaken the faith of some foreign investors in
the ability of the ruling Communist Party to maintain stability of the
financial system.
The Shanghai and Shenzhen exchanges said in separate statements on
Monday night that new rules, effective immediately, banned traders from
borrowing and repaying stocks on the same day - a step that raises risks for
short-sellers.
More
We close out the day with supply
and demand in gold. Unsurprisingly, the lower gold price is driving demand
higher, aided by the prospect of an arriving commodity depression, forcing the
biggest reconnect back to reality in the Fedster’s Ponzi stock market bubbles.
US gold coin sales soar, turnover up twofold in China
3rd August 2015 By: Martin Creamer
JOHANNESBURG (miningweekly.com) – Eagle gold bullion coin sales were up
fourfold-plus in the US in July and gold volumes up twofold-plus on the
Shanghai Gold Exchange, Mitsubishi Corporation International noted on Monday.
Last month the US Mint sold 170 000 oz, the highest number of coins in
more than two years, government data showed, and gold withdrawals from the
Shanghai Gold Exchange were well up on previous months. Gold is somewhat
rolling with the punches of positive US economic data while taking strength
from evidence of deflation, Mitsubishi said in its Precious Metals Weekly
Update, and The Wall Street Journal reported on Sunday that gold sales were
regaining their sparkle in China, where the precious metal had traditionally
been prized as a store of value to tide over the worst of times. Bulk customers
in mainland China procure their gold through the Shanghai Gold Exchange, so
data on withdrawals provides one of the strongest indications of the nation’s
demand. “We attribute this to a combination of attractive gold prices and
liquidations to meet margin calls on equity market losses,” Mitsubishi
commented.
While physical demand continues to cushion further price declines, gold
awaits a catalyst to break out of its price doldrum convincingly. The surge in
coin demand this month came as spot gold prices fell. American Eagle silver
coin sales jumped to 5.5-million ounces in July, the highest since January,
bringing year-to-date sales to 27.3-million ounces
http://www.miningweekly.com/article/us-gold-coin-sales-soar-turnover-up-twofold-in-china-2015-08-03
http://www.miningweekly.com/article/us-gold-coin-sales-soar-turnover-up-twofold-in-china-2015-08-03
"Stock prices have
reached what looks like a permanently high plateau".
Yale Economist Irving Fisher, October
16th 1929.
At the Comex silver depositories Monday
final figures were: Registered 56.57 Moz, Eligible 118.06 Moz, Total 174.63
Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Below, why buy WTI at $45, if next week it’s headed
for $35. We are headed for an autumn of US fracking bankruptcies.
Oil CEOs’ Grim Outlook Rubs Off on Speculators Fleeing Market
August 3,
2015 — 12:01 AM BST Updated on August 3, 2015 — 12:36 PM BST
The world’s biggest oil companies are painting a grim picture of the
future and speculators are listening.
Hedge funds reduced bullish bets to the lowest level in five years as
oil capped the worst month since the financial crisis. The net-long position in
West Texas Intermediate contracted 7 percent in the seven days ended July 28,
U.S. Commodity Futures Trading Commission data show. Speculators curbed their
bullish stance in Brent, the global benchmark, by the most in a year.
BP Plc said oil prices will be lower for longer and Royal Dutch Shell
Plc said it’s preparing for a prolonged downturn. Exxon Mobil Corp. and Chevron
Corp. reported their worst earnings in years. Supply will outpace demand by 1
million barrels a day through 2016, according to Bank of America Corp. Prices
need to stay below $40 a barrel for months for U.S. output to fall enough to
erode the global surplus, IHS Inc. said.
“The speculators are looking at the bad earnings and the oil executives’
negative tone of commentary, and taking it as a bearish sign,” Phil Flynn,
senior market analyst for Price Futures Group Inc. in Chicago, said by phone
July 31. “Everybody is running out of this market in droves.”
WTI dropped $2.38, or 4.7 percent, to $47.98 a barrel on the New York
Mercantile Exchange in the period covered by the CFTC report. Futures slid 62
cents to $46.50 a barrel in electronic trading at 12:13 p.m. London time, after
capping a 21 percent drop in July, the biggest monthly decline in almost seven
years.
Exxon, the biggest U.S. energy producer, reported July 31 its lowest
profit since 2009 while No. 2 Chevron posted its worst results in 12 years.
Chevron earlier last week said it would eliminate 1,500 jobs in an effort to
cut $1 billion in spending.
BP, Shell, Schlumberger Ltd. and Halliburton Co. have announced
thousands of job cuts in recent weeks as they prepare for a prolonged stretch
of low prices. Since the crude rout began last summer, the industry has
eliminated 150,000 jobs, according to Graves & Co., a Houston-based adviser
that has closely tracked the cutbacks.
“We’re hearing less talk about prices being unsustainably low and
somewhat more talk about prices being lower for longer,” Tim Evans, an energy
analyst at Citi Futures Perspective in New York, said by phone July 31. “That’s
a more realistic expectation.”
U.S. crude supplies are 95 million barrels above the five-year average,
according to the Energy Information Administration. Inventories in Cushing,
Oklahoma, the delivery point for U.S. futures, are at a record high for the end
of July.
Drillers have halted their record retreat from oil fields, increasing
the number of active oil rigs by five to 664 last week, Baker Hughes data show.
Even with less than half as many rigs in the field as last year, oil production
has climbed as companies have focused on richer fields and more efficient
drilling methods.
“Costs are lower this year by about 20%, so that a break-even cost of
$60 in 2014 is now in the upper $40s per barrel for WTI,” James Burkhard, a
vice president at Englewood, Colorado-based energy consultant IHS, said in a
report July 31.
More
"There is no cause to
worry. The high tide of prosperity will continue."
Secretary of Treasury, Andrew Mellon, September
1929.
Solar & Related Update.
With events
happening fast in the development of solar power, 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? A quantum computer
next?
Below, Edison tries
a comeback against Westinghouse.
Direct Current Powers Building
Adolfson & Peterson Construction is beginning Phase I of a project to redevelop the city of Fort Collins, Colorado’s municipal services complex. The first project is the erection of a new 3-story, 37,500-sq-foot Utilities Administration Building that will rely on Direct Current Power, as opposed to traditional Alternating Current. This will make the building unique as the first building in the US designed with a full DC distribution system, according to Bob Lachenmayer, chief operating officer of Pos-En, a Fort Collins company that is designing and installing the system.Lachenmayer says the traditional ways of powering a building make it difficult to cost effectively integrate on-site generation and do not take advantage of improvements in resiliency, reliability and safety that are technologically available today. The system being designed for the Utilities Administration Building will have its primary loads run entirely off of a battery storage system that will allow the facility to take advantage of these system improvements.
The unique architecture of the system eliminates the need to have generation and load synchronized, which is inherent to the traditional grid system. The building is being designed around a battery system that will be charged from multiple sources, including the grid, allowing the building to leverage every energy source available.
The system will be automated to pick and choose when to use available energy resources. This will take advantage of low demand/low cost opportunities from the grid, and allow the building to use onsite resources, such as solar, whenever they are available. The use of battery storage also allows for the use of onsite and renewable energy even when the renewables are not available.
Surprisingly, the up-front cost of the system for the project came in about 5 percent lower than traditional AC costs. This was largely because the team was able to capture a number of cost savings associated with a DC system including eliminating the need for a backup generator. “Because the battery gives you a minimum of an hour of full load capacity, you no longer need a diesel generator backup system,” says Lachenmayer.
Additionally, the solar system does not require an inverter system, which is also a common failure point for traditional solar systems. Because all of the lighting is being distributed at 24 volts DC, which is Class 2 wiring, there is no longer a need for conduit. The cable trays that are used in place of conduit are much less expensive.
Once installed, operating costs may also be lower. In buildings today, the majority of the loads are native DC, including Variable Frequency Drives (VFDs) that feed many AC motors. Using DC distribution allows for the elimination of the conversion losses associated with powering these native DC devices.
When asked why similar systems are not more common, Lachenmayer says, “A number of factors have come together in just the last couple of years that have made this very compelling. Significant advances in technology, along with the lowering cost of renewable energy and the increasing cost of the utility makes this technology a no brainer.”
One significant technological advance is the science behind the life of the batteries, making them extremely cost effective. For example, initial tests on the battery system being installed on the project show it could last approximately 100 or more years before needing to be replaced. This is compared to a battery life of only 10 years less than a decade ago.
The War of the Currents: AC vs. DC Power
November 18, 2014
Starting in the late 1880s, Thomas
Edison and Nikola Tesla were
embroiled in a battle now known as the War of the Currents.Edison developed direct current -- current that runs continually in a single direction, like in a battery or a fuel cell. During the early years of electricity, direct current (shorthanded as DC) was the standard in the U.S.
But there was one problem. Direct current is not easily converted to higher or lower voltages.
Tesla believed that alternating current (or AC) was the solution to this problem. Alternating current reverses direction a certain number of times per second -- 60 in the U.S. -- and can be converted to different voltages relatively easily using a transformer.
Edison, not wanting to lose the royalties he was earning from his direct current patents, began a campaign to discredit alternating current. He spread misinformation saying that alternating current was more dangerous, even going so far as to publicly electrocute stray animals using alternating current to prove his point.
The Chicago World’s Fair -- also known as the World’s Columbian Exposition -- took place in 1893, at the height of the Current War.
General Electric bid to electrify the fair using Edison’s direct current for $554,000, but lost to George Westinghouse, who said he could power the fair for only $399,000 using Tesla’s alternating current.
That same year, the Niagara Falls Power Company decided to award Westinghouse -- who had licensed Tesla’s polyphase AC induction motor patent -- the contract to generate power from Niagara Falls. Although some doubted that the falls could power all of Buffalo, New York, Tesla was convinced it could power not only Buffalo, but also the entire Eastern United States.
On Nov. 16, 1896, Buffalo was lit up by the alternating current from Niagara Falls. By this time General Electric had decided to jump on the alternating current train, too.
It would appear that alternating current had all but obliterated direct current, but in recent years direct current has seen a bit of a renaissance.
Today our electricity is still predominantly powered by alternating current, but computers, LEDs, solar cells and electric vehicles all run on DC power. And methods are now available for converting direct current to higher and lower voltages. Since direct current is more stable, companies are finding ways of using high voltage direct current (HVDC) to transport electricity long distances with less electricity loss.
The monthly Coppock Indicators finished July
DJIA: +88 Down. NASDAQ:
+189 Down. SP500: +116 Down.
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