Baltic Dry Index. 1201 -21 Brent Crude 49.80
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
The numbers are certainly sobering. All told, developing-nation currencies have fallen to their lowest levels since 1999, and bonds denominated in those currencies have wiped out five years’ worth of gains.
We open at the close of the week with yet more sign of an accelerating global slowdown. “It’s a rollover,” we all like to hear when playing the lottery. “Rollover” also works when teaching the dog new tricks. In the global economy, “rollover” threatens a giant, painful “reconnect” to reality, in our central bank fuelled stock market bubbles.
While the media covered this week the opening of the “new” Suez Canal that has increased capacity to 99 ships a day, up from 75, traffic using the canal is still down 20 percent from its 2008 peak. In 2014 the canal averaged just 47 ships a day. A slowing China, collapsing commodities, an EUSSR that is dying under its mind numbing incompetent bureaucracy, a never ending Greek tragedy, idiotic Russian sanctions, and an American economic recovery that is long on words but short on recovery, have all put the world on the cusp of a new recession or worse. Worse, central bankster policies have loaded up corporations everywhere with mountains of unrepayable debt if a new recession is arriving. The oil market suggest that a recession is arriving, or has actually arrived.
Below, some of the less trumpeted, wobbly economic news of the week. The next Lehman is out there and rapidly heading for the limelight, it seems to me.
“The Federal Reserve is not currently forecasting a recession.”
Bernocchio, January 10, 2008.
Egypt revives Suez dream amid global trade slump and escalating insurgency
Ordinary Egyptians funded the $8.2bn blitz to expand the Suez Canal in a blaze of patriotic fervour but there may not be enough fresh ships to cover the cost
Egypt has revived the Suez Canal on a grand scale with a flourish of patriotic fervour, vowing to reignite world trade almost a century and a half after the legendary waterway first opened.The $8.2bn construction blitz adds a second shipping lane along a 45-mile stretch, allowing traffic to move in both directions. It shaves 11 hours off the journey and increases capacity by a quarter to 99 vessels a day.
The project was rushed through in less than a year – a third of the original estimate – in an engineering coup that enlisted three-quarters of all dredgers in existence to scoop out a new passage through the Great Bitter Lake.
President Abdel Fattah al-Sisi called the enlarged canal a “gift to the world” at an opening event with global leaders in the port of Ismailia, protected by a massive security blanket to fend off possible terrorist attacks from ISIS forces in the Sinai.
While the Egyptian government was at pains to stress that the country is safe, the event was overshadowed by ISIS threats to execute a Croatian engineer seized on the streets of Cairo if the state fails to release “Muslim women” prisoners within 48 hours.
Funding for the canal was raised by the Egyptian people in just eight days, with even the poorest buying interest-bearing certificates for as little as 80p. Cairo hopes to boost canal earnings from $5.3bn to $12.3bn by 2023.
Despite the display of national esprit – what the great Arab philosopher Ibn Khaldoun termed "asabiyah" - it is far from clear whether the venture will pay for itself.
“It’s all propaganda. There was no viability study done,” said Ahmed Kamaly, an economist at Cairo’s American University.
The average number of ships last year was 47, well below the maximum capacity. The growth in world trade has stalled as China comes off the boil and shifts from heavy industry to a service-led economy.
The Swiss bank UBS says the "import-component" of China’s exports has dropped to 33pc from 60pc in the mid-1990s, cutting reliance on shipped goods to drive economic growth.
The canal can no longer hope to attract booming shipments of liquefied natural gas (LNG). America plans to export LNG directly to Europe in growing volumes, effectively pushing LNG from Qatar and Asian suppliers towards markets in the Far East.
More
Lost Decade in Emerging Markets: Investors Already Halfway There
August 5, 2015 — 10:10 PM BST Updated on August 6, 2015 — 3:44 PM BST
Just 14 years ago Wall Street fell in love with the BRICs, the tidy
acronym for four major emerging economies that, to many, looked like sure
winners.
Today, after heady runs and abrupt reversals, most of the BRICs -- in
fact, most developing nations -- look like big-time losers.
The history of emerging markets is a history of booms and busts, but the
immediate future may hold something more prosaic: malaise. Investors today
confront what could turn out to be a lost decade of returns, with four or five
more meager years ahead.
“These are very much the lean years after the bonanza decade,” said
Harvard Kennedy School economist Carmen Reinhart, one of the world’s top
experts on financial crises and developing economies.
Not long ago the BRICs -- Brazil, Russia, India and China -- were
celebrated as engines of global growth. Now Brazil and Russia face deep
recessions brought on by the collapse in global commodities, while China
is slowing and struggling to prop up its fast-sinking stock market.
The prospect of higher U.S. interest rates only adds to the gloom.
Currencies from the South African rand to the Malaysian ringgit fell anew on
Wednesday amid worries the U.S. Federal Reserve might move as early as
September.
To Ruchir Sharma, the turnabout suggests the outsize investment returns
of the early 2000s -- the MSCI Emerging Markets Index nearly quadrupled between
2002 and 2010 -- now look like an anomaly.
“Very few emerging markets historically have ever been able to make it
to the developed countries,” said Sharma, head of emerging markets at Morgan
Stanley Investment Management Inc. “This is a return to normalcy.”
The
numbers are certainly sobering. All told, developing-nation currencies have
fallen to their lowest levels since 1999, and bonds denominated in those
currencies have wiped out five years’ worth of gains.
More
Currencies in Freefall Handcuff Bankers From Chile to Colombia
August 6, 2015 — 12:17 AM BST Updated on August 6, 2015 — 5:18 PM BST
Central bankers in commodity-dependent Andes economies aren’t even
considering interest-rate cuts to revive growth, even as prices for oil, copper
and other raw materials collapse.That’s because the deepening price slump is also dragging down currencies in Colombia and Chile -- a swoon that’s fanning inflation and tying policy makers’ hands. Fixed-income traders have now ratcheted up cost-of-living expectations for Colombia and Chile after their tenders sank more than 10 percent in the past three months.
“It’s causing a headache,” Luis Oscar Herrera, the chief Andean region economist at BTG Pactual SA, said by telephone from Santiago. “All the Andean countries have headline and core inflation above their target ranges.”
In an interview with local newspaper La Tercera published Sunday, Chile central bank President Rodrigo Vergara said rate cuts are completely off the table as the sinking peso fuels price acceleration. That’s even after Chile’s economy shrank 0.07 percent on a seasonally adjusted basis in the first five months of the year, buffeted by the nosedive in copper prices. Chile is the world’s biggest exporter of the metal, which has tumbled 26 percent in the past year.
The decline in the peso to close to a 12-year low has helped push annual consumer price increases in Chile to 4.4 percent, exceeding the central bank’s target range for the 14th month in 15.
More
NUM says 11 000 members could lose jobs
6th August 2015
JOHANNESBURG – South Africa's largest mining union, the National Union of Mineworkers (NUM), said on Thursday 11 000 members could lose their jobs after getting notifications from companies. "That is not a final confirmation all of them will be fired," said William Mabapa, the deputy general secretary of the NUM. The mining industry, which contributes around 7% to Africa's most developed economy, is struggling with sinking commodity prices, rising costs and labour unrest
http://www.miningweekly.com/article/num-says-11-000-members-could-lose-jobs-2015-08-06
JOHANNESBURG – South Africa's largest mining union, the National Union of Mineworkers (NUM), said on Thursday 11 000 members could lose their jobs after getting notifications from companies. "That is not a final confirmation all of them will be fired," said William Mabapa, the deputy general secretary of the NUM. The mining industry, which contributes around 7% to Africa's most developed economy, is struggling with sinking commodity prices, rising costs and labour unrest
http://www.miningweekly.com/article/num-says-11-000-members-could-lose-jobs-2015-08-06
Barrick cuts dividend by 60%, cuts capex and plans further asset divestures
6th August 2015TORONTO (miningweekly.com) – The world’s largest gold producer by output Barrick Gold has cut its dividend, lowered or deferred capital spending plans and will continue with noncore asset divestures as it seeks to repair and strengthen its debt-heavy balance sheet.
The Canadian company had slashed
its quarterly dividend by 60%, from $0.05 a share to $0.02 a share, in an
effort to increase financial flexibility in light of a muddled gold market
outlook.
Barrick would also start a
formal process over the next several weeks to sell various noncore assets in
Nevada and Montana, including Bald Mountain, Round Mountain (50% interest),
Spring Valley (70% interest), Ruby Hill, Hilltop and Golden Sunlight.
Further, the company announced that it would cancel or defer spending that did not meet its capital allocation objectives, which included the ability to meet a hurdle rate of 15%. In the second quarter, the company had identified $240-million in reductions that had now been removed from its spending plans. Capital expenditure (capex) for 2015 was now expected to range between $1.6-billion and $1.9-billion, 20% lower than 2014.
Further, the company announced that it would cancel or defer spending that did not meet its capital allocation objectives, which included the ability to meet a hurdle rate of 15%. In the second quarter, the company had identified $240-million in reductions that had now been removed from its spending plans. Capital expenditure (capex) for 2015 was now expected to range between $1.6-billion and $1.9-billion, 20% lower than 2014.
Exploration expenditure was
pared down by 17% to between $180-million and $220-million, with 65% allocated
to brownfield exploration and 35% to greenfield projects, namely on the company’s
newest discovery Alturas, on Chile's prolific El Indio belt.
Barrick was looking to cut
company-wide spending by $1-billion in anticipation of potentially weaker
prices in the second half of 2015, increasing this target to $2-billion by the
end of 2016. These reductions would come from operating expenses, capital
spending and corporate overhead, of which it had already identified
$1.4-billion in potential opportunities to date.
more
http://www.miningweekly.com/article/barrick-cuts-dividend-by-60-cuts-capex-and-plans-further-asset-divestures-2015-08-06
more
http://www.miningweekly.com/article/barrick-cuts-dividend-by-60-cuts-capex-and-plans-further-asset-divestures-2015-08-06
Turks Hoard Dollars as Lira Heads for Biggest Tumble in 14 Years
August 5, 2015 — 10:00 PM BST Updated on August 6, 2015 — 1:09 PM BST
As Turkey’s security risks escalate and squabbling
politicians threaten early elections, even Turks are bolting from the lira.Households and companies have increased foreign-currency savings to 43 percent of total deposits, a level not seen in a decade, according to the latest data from the Banking Regulation and Supervision Agency in Ankara. The lira has plunged 16 percent against the dollar this year, the most for the period since 2001.
The erosion of domestic confidence signals the biggest laggard among major currencies in Europe, the Middle East and Africa has further to fall, driving a deeper selloff in the worst-performing emerging-market bonds. The exodus from the currency also constrains the central bank from stimulating Turkey’s flagging economy by cutting interest rates, despite a third month of improvements in inflation.
“Dollarization is an animal that’s hard to tame,” Manik Narain, a foreign-exchange strategist at UBS Group AG in London, said by e-mail on Wednesday. “Typically it requires forceful monetary tightening to contain it, which the central bank may be reluctant to engage in right now.”
Two months after the inconclusive June 7 parliamentary election, there’s no sign of agreement between parties on forming a government. Failure to agree on a coalition by the end of this month will trigger fresh elections -- and there’s no indication from opinion polls the result would be any different.
More
http://www.bloomberg.com/news/articles/2015-08-05/turks-hoard-dollars-as-lira-heads-for-biggest-tumble-since-2001
Malaysia Scandal Fuels Fastest Foreign Exodus as Stocks Sink
August 6, 2015 — 5:00 PM BST Updated on August 7, 2015 — 2:34 AM BST
International investors are selling Malaysian stocks at the quickest pace in
Asia as Prime Minister Najib Razak struggles to contain a political scandal and
doubts grow over the outlook for the economy.Foreign funds have pulled a net 11.7 billion ringgit ($3 billion) of the nation’s shares this year as the benchmark FTSE Bursa Malaysia KLCI Index retreated 4.1 percent. The ringgit has slumped to its lowest level since 1998 after tumbling 11 percent against the dollar, the biggest decline among Asian currencies.
Overseas money managers are paring holdings amid concern the crisis will distract Najib as a commodities rout and the prospect of higher U.S. interest rates threaten economic growth. The prime minister is fighting off a scandal linked to 1Malaysia Development Bhd., a debt-ridden state investment company. A probe into about 2.6 billion ringgit that was deposited into Najib’s personal accounts found that the funds were legal donations from the Middle East.
“Already shaky trust of foreign investors is being eroded,” said Mixo Das, a strategist at Nomura Holdings Inc. in Singapore. “Further outflows are possible.”
Net foreign sales in Malaysian stocks this year are almost double the 6.9 billion ringgit for the whole of 2014, exchange data show. Overseas investors have been net sellers for 14 straight weeks through the week ended July 31, the longest selloff since 2008, according to MIDF Amanah Investment Bank Bhd.
More
http://www.bloomberg.com/news/articles/2015-08-06/malaysia-scandal-triggers-fastest-foreign-exodus-as-stocks-slide
“The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.”
Bernocchio, November 21, 2002.
At the Comex silver depositories
Thursday final figures were: Registered 55.83 Moz, Eligible 116.55 Moz, Total
172.38 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
In booming Great Britain, a reality check from City
A.M. The West Midlands is worse off than Greece, and gets less sun but more
rain.
An artificial "currency" shows those in UK regions including the West Midlands have less spending power than parts of Greece, Slovakia or Slovenia
6 August 2015 10:27am
Those living in the capital have more disposable income than anyone in
almost any region of Europe - although if you live in the West Midlands, you
may actually be worse off than people living in parts of debt-stricken Greece,
analysis by City A.M. has found.
A bit like an egghead version of the Economists' Big Mac Index, the
official European statistics authority's Purchasing Power Standard (PPCS) is an
"artificial currency" which compares how much people are able to
afford in 25 European countries - and while those living in Germany and the UK
have the highest disposable income, the spread suggests those living in some
parts of the UK might be better off elsewhere... The bubbles are scaled by the
population density of a region, so urban areas appear bigger.
Inner London is slightly behind Oberbayern in Germany and the city of
Luxembourg when it comes to disposable income - people living in the capital
have purchasing power of 23,500 PPCS, although it does have the highest
population density in Europe. In terms of unemployment, there are places that
do better, but with an unemployment rate of 7.4 per cent, it’s performing well.
Meanwhile, Luxembourgers have disposable income of 23,800 PPCS, while
those in Obayern have 23,700 PPCS. They both also have a lower rate of
unemployment at 5.9 per cent and 2.5 per cent respectively.
At the other end of the spectrum of UK regions lies the West Midlands,
where disposable income is a mere 12,900 PPCS and the unemployment rate is 7.4
per cent. While it sits at the bottom of the UK's list primarily because it has
a higher cost of living than elsewhere, there are places in Greece, Slovakia
and Slovenia where the amount you can buy for the money you have is higher.
South Yorkshire and Tees Valley are also both at the bottom end of the
scale, with PPCS of 13,400 and 13,700 respectively.
Take Athens in Greece, where locals have 15,200 to spend (although
they're also grappling with a 27.3 per cent unemployment rate) or Bratislava in
Slovakia where they have 16,000 PPCS, with an unemployment rate of six per cent
– lower than in the West Midlands. In fact, there are 18 regions in the UK with
a lower PPCS than Athens, and 22 regions with a lower PPCS than Bratislava.
Morehttp://www.cityam.com/221723/london-nearly-tops-europe-purchasing-power-opposite-true-west-midlands?utm_medium=Email&utm_source=Email&utm_campaign=150806_CMU
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?
Below, what does
NASA know that we don’t?
Students rise to NASA electric aircraft design challenge
In a recent challenge issued by NASA, university students were asked to design an electric aircraft envisaged to enter service in the year 2020 and be commercially competitive with standard piston-engine craft. In response, the space agency received submissions from 20 universities across the United States that not only met the brief but, in many cases, went above and beyond to really the impress the judges. We take a look at the top five prize winners.
The
designs were assessed not only on their merit, but also considered in regard to
the student university level. As such, submissions were categorized into
graduate and undergraduate design studies and judged accordingly.
Graduate Level
The one-and-only winner of this section was Tom Neuman, a graduate student with a Master’s of aerospace engineering at the Aerospace Systems Design Laboratory at the Georgia Institute of Technology. His design brought in twin 8 ft (2.5 m) tail-mounted propellers that, according to Neuman, were computer-modeled to achieve 92 percent efficiency.With an efficient laminar flow fuselage design and retractable landing gear to further reduce drag, Vapor has a claimed 25 percent reduction in parasitic drag when compared to a Cirrus SR22 aircraft used as a standard light-aviation benchmark.
Designed to be powered by a proton exchange membrane fuel-cell (PEMFC), Neuman claims to have modeled a specific-energy of 800 Wh/kg in his design study at an impressive 55 percent efficiency. With this set-up, Vapor is expected to be capable of 800 nautical miles (1,482 km) at a cruising speed of around 150 knots (278 km/h).
More
Another weekend and
a bizarre one at that. In cricket, England are playing like Australia and
Australia are playing like England! The latest figures from the Pacific suggest
that the El Nino is strengthening. A stormy winter lies ahead for much of the
northern hemisphere. In the global economy, the El Nino seems to be here. As in
August 1914 as war broke out, few seem to be aware of impending calamity or to
care. Have a great weekend everyone. In the
Euromillions lottery today’s a rollover.
“It is not the responsibility of the Federal Reserve – nor would
it be appropriate – to protect lenders and investors from the consequences of
their financial decisions.”
Bernocchio,
October 31, 2007.
The monthly Coppock Indicators finished July
DJIA: +88 Down. NASDAQ:
+189 Down. SP500: +116 Down.
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