Baltic Dry Index. 994 -20 Brent Crude 44.62
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done.
Walter Bagehot. Lombard Street. 1873
Oh well, easy come easy go. And it’s only fiat money after all. In our
new 21st century world of central bank rigged markets and unlimited
crony bailouts, there’s plenty more fiat money where that comes from. At least
that’s the Gospel according the Nobel economist Paul Krugman. To solve an
unrepayable debt crisis, Mr Krugman thinks we all need to load up on much more
debt. Well not us individually, us collectively as in our nations, to be doled
out by our bent politicians and crooked central banksters to the people and causes
that need it. Just like Greece apparently. And we all know how well that’s
working out. In case no one is paying attention, the Baltic Dry (shipping) index
is falling again dropping back into line with what’s happening in the Shanghai
Containerized Frieght Index.
Below, the 21st century version of how many angels can dance
on the head of a pin.
Debt Is Good
AUG. 21, 2015 Paul Krugman
Rand
Paul said something funny the other day. No, really — although of course it
wasn’t intentional. On his Twitter
account he decried the irresponsibility of American fiscal policy,
declaring, “The last time the United States was debt free was 1835.”
Wags quickly noted that the U.S. economy has, on the
whole, done pretty well these past 180 years, suggesting that having the
government owe the private sector money might not be all that bad a thing. The
British government, by the way, has been in
debt for more than three centuries, an era spanning the Industrial
Revolution, victory over Napoleon, and more.
But is the point simply that public debt isn’t as bad
as legend has it? Or can government debt actually be a good thing?
Believe it or not, many economists argue that the
economy needs a sufficient amount of public debt out there to function well.
And how much is sufficient? Maybe more than we currently have. That is, there’s
a reasonable argument to be made that part of what ails the world economy right
now is that governments aren’t deep enough in debt.
More
Back in the real world, “commodity prices have fallen and can’t get back
up.” Unfortunately they weren’t wearing their fiat currency, central bank alert pendant when they fell, so there’s no
“LifeCall” central bank despatcher ready to send “Mrs Fletcher,” or in this
case Glencore’s Ivan Glasenberg, help as in a truck load of newly minted cash.
Poor Ivan, along with Mexico, Brazil, Australia and all the rest, will as a
consequence, likely be on the floor for quite some time.
A decade of bingeing on raw materials may leave an even longer hangover
Aug 22nd 2015
IT WAS only a decade or so ago that Scotland was hit by the “Great Drain
Robbery”, the disappearance of 50 manhole covers in Fife. It gave an inkling of
the emergence of a new era in commodity markets, spurred by insatiable demand
from China. Scrap-metal prices—and so scrap-metal thefts—soared. Africa was
over-run by Chinese engineers; Australia elected a Mandarin-speaking prime
minister; and emerging markets from Argentina to Zambia relished the rising
values of their farmland and mines. The boom was fanned by a weak American
dollar, the currency in which most stuff that comes out of the ground is
priced.
The gears have now gone into reverse. A resurgent dollar has hammered commodity
prices: many have recently fallen below their levels of a decade ago. That is a
fate not shared by other tradeable assets: not since the late 1990s have
commodity prices been so weak compared with shares (see chart 1). The American
economy is strengthening, but by no means enough to encourage thieves to filch
bronze bells from Chinese temples to send as scrap to the United States. The
impact of its recovery is dwarfed by slowing demand in China, which still
consumes about half the world’s metals such as iron, aluminium, and zinc.
The real curse for producers is over-supply in almost all raw materials.
Yet they continue to act as if they are blithely unaware of it. Capital is
still pouring into holes in the ground, creating a hangover that may last at
least a decade. Jeff Currie of Goldman Sachs, a bank, says past cycles suggest
it can take up to 15 years to work through the over-investment. “The world has
just flip-flopped,” he says.
Analysts point out that not all commodities act the same way. Coal
prices started falling in 2011; crude oil hung on until mid-2014; agricultural
prices hinge on the weather. But a generalised whiff of fear about China’s
economic prospects has re-emerged in recent weeks, partly caused by sliding
stockmarkets and by the unexpected devaluation of the yuan this month. So far
this year, almost all major commodities—energy, industrial metals and
agriculture—have fallen in a 10-20% range, a fairly homogenous performance.
More
Mexico wraps $1.1 billion oil options hedge to lock in $49 floor
Mexico has concluded its vast oil hedging program for next year, paying
more than $1 billion to guarantee it will get at least $49 a barrel for about
half of its exported crude in 2016.
Announcing the unusually early completion of the biggest sovereign oil
derivatives trade in the world, Mexico's finance ministry said late on
Wednesday it had bought options based on Maya and Brent crude oil prices that
will cover 212 million barrels of oil, at a cost of $1.09 billion.
Mexico is "very unlikely" to reopen the hedge, a source close
to the operation told Reuters, adding the program centered on Maya crude.
Counterparties to the program included Barclays and JPMorgan, the source added.
The program, a longstanding part of the country's strategy for
safeguarding oil revenues from market volatility, ended on Aug. 14, the
ministry said, suggesting it had purchased most of the options as oil prices
entered a second deep slump.
Oil traders who watch the market carefully for any signs of
Mexico-related trades, which can be large enough to affect prices, said they
first noticed the hedging in late July, at least a month earlier than it
usually enters the market.
With U.S. crude plumbing six and a half year lows at nearly $40 a barrel
and many analysts bracing for a prolonged downturn, Mexico paid a higher
premium for lower-priced options this year.
In its hedge program for 2015, Mexico ensured an average oil price of
$76.40 per barrel, covering 228 mln barrels of crude oil at a cost of $773
million.
Mexico has long been one of the few major oil producing nations that
uses derivative markets to hedge, a policy that paid off handsomely after the
2008 oil price crash and has also helped protect this year's budget revenues.
Oil sales have traditionally made up about a third of Mexico's budget.
The current price of crude oil is $38.15 per barrel, the ministry said,
significantly below the $79 per barrel that the government had estimated for
its 2015 budget.
Buying put options, rather than simply selling forward production, costs
more up front for Mexico, but also allows it to enjoy the upside if prices
rebound next year.
The trading is also a boon for the banks involved in executing the
deals. The finance ministry does not comment on its counterparties, but another
person familiar with the transactions said this year's banks included Morgan
Stanley, Citigroup Inc, JPMorgan Chase & Co and Goldman Sachs Group Inc.
Mexico, the world's 10th biggest crude producer, pumps about 2.3 million
barrels per day (bpd) and exports around half of that. The 2016 hedge is
equivalent to around 580,000 bpd.
In March, Mexico announced that it would cut 2016 spending by 4.3
percent because of lower crude production and a drop in oil prices.
Last week, a finance ministry official told Reuters that Mexico will
need to make additional cuts to the 2016 budget amid lower crude output.
Nostalgic for the Financial Crisis? Only in the Oil Business
August 21,
2015 — 8:12 PM BST Updated on August 22, 2015 — 5:01 AM BST
America’s suffering shale patch is about the only place in the U.S.
where there’s nostalgia for the dark days of the financial crisis.
While the global economy started to unravel in 2008, it was also the
beginning of the biggest oil boom in U.S. history.
Domestic production, which had been steadily declining since the bust of
1986, began to climb in 2009. OPEC cut output to an average of 28.5 million
barrels a day that year, putting a floor under prices. And at the heart of the
shale revolution, states like North Dakota, Texas and Oklahoma enjoyed lower
rates of unemployment than the rest of the U.S.
Sure, crude plummeted to $32 a barrel in December 2008, but it didn’t
stay there for there for long. Analysts described it as a V-shaped bust, and by
May the following year oil was back above $65. Plenty of people counted on a
repeat in 2015.
“There was a false sense of confidence early this year, and this second
beat-down is really going to leave its mark,” said John Kilduff, a partner at
Again Capital LLC, an energy hedge fund in New York. “The prospects are kind of
bleak.”
This year, thousands of oilfield workers have been laid off. OPEC is
pumping 32 million barrels a day and letting their higher-cost competitors in
the U.S. sweat it out. And instead of a rebound, oil tumbled below $40 a barrel
again for the first time since 2008.
More
In 1989, LifeCall began running commercials which contained a scene wherein an elderly woman, identified by a dispatcher as "Mrs. Fletcher", uses the medical alert pendant after having fallen in the bathroom. After falling, Mrs. Fletcher speaks the phrase "I've fallen, and I can't get up!", after which the dispatcher informs her that he is sending help.
Taken at its face value, the commercial portrays a dangerous situation for a senior, with perhaps dire consequences: an elderly person suddenly incapacitated at home, unable to get help, perhaps for hours or even days.
The "I've fallen, and I can't get up" ad had the double misfortune of being unintentionally campy and appearing often on cable and daytime television. The fact that the commercial was a dramatization (as clearly stated in the beginning of the commercial) using bad acting also contributed to the humor. The combination made "I've fallen... and I can't get up!" a recognized, universal punchline that applied to many comedic situations.
https://en.wikipedia.org/wiki/I've_fallen,_and_I_can't_get_up!
Quite.
And so on to what comes next in stocks and commodities. In stocks, more
desperate rigging by the panicked central banks, led by China’s PBoC. The stock
market rout threatens to bring on the next Lehman. But other than a temporary
respite, I think it’s over for rigging stocks. Events in the real world have
taken over. A new global slowdown is underway, and in the fiat currency wars to beggar thy neighbour, there
is no end in sight now that China has joined in. In commodities, we are nowhere
near a bottom. Oil and the industrial commodities are in vast oversupply
relative to a falling demand, with no one willing or able to cut production, if
only for a need to service the debts incurred in the central banks Great
Malinvestment Bubble.
My rough back of the envelope calculation suggests that so far in 2015
we have wiped out about 20 trillion dollars worth of phony wealth. But about
half that has come since June. The consequences from that are going to roll
through the global economy for many months to come. With Brent crude trading
this morning below 45 dollars a barrel, there won’t be the usual petrodollar
recycling cushion to turbocharge the central bankster’s Plunge Protection
Teams. A wave of corporate bankruptcies is in store for H2 2015.
Asia stocks slump as China falls gather pace, yen rallies
Asian stocks slumped to 3-year lows on Monday as a slump in Chinese
equities gathered pace, hastening an exodus from riskier assets as fears of a
China-led global economic slowdown churned world markets.
A 2.6 percent fall in S&P 500 mini futures ESc1 to a 10-month trough
during Asian trading hours suggested the falls could continue later in the
global session.
Safe-haven government bonds and the yen rallied on the widespread unrest
in the financial markets, set in motion nearly two weeks ago when China sharply
devalued the yuan and stoked concerns about the state of its economy.
More
Mideast Stocks Rout Signals No Let-Up in Emerging-Market Selloff
August 23, 2015 — 5:10 PM BST
The worst
day for Middle East stocks this year put investors across the rest of the
world on stand-by for another day of selling in global markets.Saudi Arabia’s Tadawul All Share Index fell into a bear market Sunday, and Dubai’s DFM General Index suffered its biggest loss of the year. Egypt’s EGX 30 Index slid the most in almost three years, making it the world’s second-worst performer in 2015. Israel’s TA-25 Index registered its largest retreat in almost four years.
More than $3.3 trillion has been erased from the value of global equities since China’s Aug. 11 decision to devalue its currency spurred a wave of selling across emerging markets already under pressure from falling commodity prices and expectations for U.S. interest-rate increases. The Dow Jones Industrial Average fell into a correction on Friday, fueling the biggest losses since 2011 for other gauges.
The Saudi bear market “is a big deal for any investor in the region,” said Rami Sidani, a Dubai-based money manager who oversees $1.7 billion as head of Frontier Markets Investments at Schroders Plc. “But this is a storm hitting all Gulf markets, starting with low oil prices to the extreme volatility hitting emerging markets. Our view is that until we see relative stabilization in oil markets, we will continue to see high volatility across the Gulf.”
The slide in Brent crude, the benchmark grade for more than half the world’s oil, to the lowest close since March 2009 is piling pressure on Gulf states that rely on exports of the commodity to underpin economic growth.
----Saudi Arabia’s Tadawul is now down 24 percent since hitting its 2015 peak in April, marking its second bear market in less than a year. Fitch Ratings on Saturday cut the outlook on the nation’s AA debt rating to negative from stable, indicating its next decision may be to lower its assessment.
More
Any
sudden event which creates a great demand for actual cash may cause, and will
tend to cause, a panic in a country where cash is much economised, and where
debts payable on demand are large. In such a country an immense credit rests on
a small cash reserve, and an unexpected and large diminution of that reserve
may easily break up and shatter very much, if not the whole, of that credit.
Walter Bagehot. Lombard Street. 1873
At the Comex silver depositories Friday
final figures were: Registered 55.87 Moz, Eligible 114.50 Moz, Total 170.37
Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
So you want in on “the next Big Thing?” Be careful
what you wish for. Today from boom to bust competing with China in “rare
earths.”
Thank China for Rare Earth Minerals Not Being So Rare Anymore
August 21,
2015 — 5:19 PM BST
Rare earth minerals aren’t so rare anymore, thanks to China.
Chinese exports of the minerals doubled in July from a year earlier,
reaching the highest level in more than four years, according to government
data. Shipments advanced after the country last year scrapped its 15-year-old
export controls, and then in April removed a tax on ore shipments.
The group of 17 rare earths are used in everything from smart phones to
electric cars to cruise missiles. China accounts for more than 80 percent of
global production.
“This trend has been brewing for some time,” said Kevin Starke, an
analyst at CRT Capital Group in Stamford, Connecticut. “It’s because of the
termination of the export quotas. If there’s less demand for rare earths in
China, as ostensibly there is, that stuff is going to leave the country. Those
factors are all conspiring.”
Rare earth prices have been slumping along with other commodities and
the rout is poised to deepen, according to Starke. China is the biggest user of
raw materials and the country’s economy is expanding at the slowest pace in a
quarter of a century.
Prices for
neodymium oxide, found in magnets, and praseodymium oxide, used in lasers, are
at the lowest in more than four years. Lanthanum oxide, used in hybrid-car
batteries, and yttrium oxide, which goes into microwave filters, are at the
lowest since at least 2010.The price collapse has already claimed some victims. Molycorp Inc., a U.S. producer of rare earths, filed for bankruptcy protection in June having run out of cash.
How a Bet on Rare Earths Flopped as Scarcity Was a Mirage
June 29,
2015 — 12:01 AM BST Updated on June 29, 2015 — 9:19 PM BST
In late 2010, two questions were on the minds of many commodities
investors: What are rare earths? And where could they buy some?
The group of 17 obscure, difficult-to-pronounce minerals, used in
hot-ticket items like smart phones, electric cars and wind turbines, were
beginning to post the kind of price gains not seen even in the traditionally
volatile energy and metals markets. For many investors, the only way to get in
on the action was to buy shares of U.S. producer Molycorp Inc. Its market
capitalization had shot up to $4 billion after an initial public offering
earlier that year.
On Thursday, [June 25] Molycorp filed for bankruptcy protection, having
run out of cash after a precipitous and sustained slide in rare-earth prices.
The company has become a cautionary tale for investors looking for the next hot
thing, a lesson in how excessively high commodity prices can quickly reverse.
“In hindsight it was an absolute commodity bubble,” said Jon Hykawy, an
analyst at Stormcrow Capital Ltd. in Toronto who tracks the rare earths
industry.
The trigger for the rally was the decision by China in 2010 to suddenly
restrict exports, sending users scrambling for supplies of lanthanum,
neodymium, cerium and other rare earths. Yet grave predictions of a shortage of
these critically important materials proved to be flawed. Rare earth consumers
such as Toyota Motor Corp. simply switched to cheaper alternatives.
More
How Oaktree Wound Up Pouring More Cash Into Failing Molycorp
August 20,
2015 — 11:00 AM BST Updated on August 20, 2015 — 6:51 PM BST
Oaktree Capital Group LLC’s $400 million investment in Molycorp Inc.,
the largest U.S. rare-earths miner, looked like a win last year. The
asset-management firm ended up having to put in another $130 million to save
it.
The world’s biggest distressed-debt investor threw a lifeline to
troubled Molycorp last August with financing at 12 percent, higher than all but
two of more than 6,000 dollar-denominated revolving loans tracked by Bloomberg.
By the spring, Molycorp realized that it couldn’t sustain its debt as
prices for rare-earth minerals -- a group of 17 obscure elements used in
technology ranging from smartphones to nuclear reactors -- remained depressed.
It started talking to creditors about a bankruptcy loan that would see it
through a restructuring in court.
----The hedge fund also wanted to be senior to the Oaktree loan in order to
protect itself from the risk that Oaktree would demand to be repaid at a
premium, citing a clause in the loan, according to a person with knowledge of
JHL’s thinking.Two days after Liang learned this on the phone call, Oaktree offered Molycorp a competing loan that would finance its operations in bankruptcy.
Molycorp didn’t pick the Oaktree deal. On June 25, it filed for bankruptcy using the financing plan from the JHL-led bondholders.
Delaware bankruptcy Judge Christopher Sontchi ruled against the JHL plan -- saying the assets securing it shouldn’t be used for that purpose -- sending Molycorp back to Oaktree, which improved its terms. The rare-earths miner went with Oaktree’s loan, agreeing to pay a yield of 14 percent.
Molycorp shares were down nearly 3 percent to 13.9 cents at 1:47 p.m. in New York Thursday.
The company’s first-lien 10 percent bonds owned by JHL last traded at 16 cents on the dollar on July 22, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That’s down 65 percent since the hedge fund sank more than $130 million into the notes in January, according to a person familiar with the transaction.
More
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? DC? A quantum
computer next?
New record energy efficiency for artificial photosynthesis
As the world moves towards developing new avenues of renewable energy, the efficiencies of producing fuels such as hydrogen must increase to the point that they rival or exceed those of conventional energy sources to make them a viable alternative. Now researchers at Monash University in Melbourne claim to have created a solar-powered device that produces hydrogen at a world-record 22 percent efficiency, which is a significant step towards making cheap, efficient hydrogen production a reality.Efficiency records for solar-powered hydrogen production have continued to rise over the years, and much more rapidly as the technology and techniques improve. Even as late as December last year Gizmag reported a solar-driven hydrogen record efficiency at the time of just 12.3 percent, so this new record shows a very healthy 10 percent improvement on that and beats out the previous record of 18 percent.
Splitting water using electricity to produce hydrogen and oxygen has been an established scientific technique for many decades. However, the rate at which hydrogen has been produced in this way has not been commercially viable due to the relatively low conversion rates compared to the input energy costs. Ideally, solar-powered water-splitting would be one of the best ways to produce hydrogen as its energy input cost is effectively zero.
On the downside, however, the low efficiencies of past solar devices have kept this technology largely in its infancy. The Monash researchers believe that may all soon change as increased efficiencies in the process and in the devices themselves improve.
"Electrochemical splitting of water could provide a cheap, clean and renewable source of hydrogen as the ultimately sustainable fuel." said Professor Leone Spiccia from the School of Chemistry at Monash who led the research. "This latest breakthrough is significant in that it takes us one step further towards this becoming a reality."
----- To help achieve the required solar-input efficiencies, the team utilized the very best commercial-grade multi-junction (indium gallium phosphide, gallium arsenide, and germanium) solar cells available to ensure the maximum sunlight to electricity conversion.
However, an even greater contribution to efficiency was on the material
side, where the use of expanded foam nickel electrodes increased the available
electrolysis surface area with such efficiency that the electrolyte in which
they were immersed was simply local river water with the addition of a standard
pH buffer (generally a salt solution containing sodium phosphate and sodium
chloride).
In this combination of high-efficiency cells and high-yield electrodes,
the team claims the 22 percent record for conventional solar-cell to
electrochemical production of hydrogen.
MoreThe monthly Coppock Indicators finished July
DJIA: +88 Down. NASDAQ:
+189 Down. SP500: +116 Down.
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