Weekend Update – Peter Pan’s World.

“All the world is made of faith, and trust, and pixie dust.”

Madman Mario Draghi, with apologies to Peter Pan.

After 44 years off mal and misinvestment on the Great Nixonian Error of fiat money, communist money irredeemable in anything but hot air, we have magically arrived at Peter Pan Land. Here the gambling dens payoff the punters on every bet, while the casinos themselves magically replace the cash every night. While stocks and the one percenter’s  quaff Pol Roger, munch on caviar and fatten up on foie gras, it’s humble pie out in the real world, where this old Scots commodities dinosaur thinks he sees the next global recession or worse arriving. Now where did I leave my scotch?

The EUSSR is now so dead in the water that the ECB now thinks that even 1.1 trillion euros a year of QE madness can’t save the sinking economy. It now suggests that more super-sized QE might be needed as soon as their December Christmas meeting!!! QE presents for banksters all round. QE hasn’t worked anywhere else, but in the mad asylum of continental Europe, now thanks to Merkel’s folly, the super magnet of choice for all the world’s economic migrants, it just might work here if they all wish hard enough. And if those silly continentals all wish hard enough, all Mrs Merkel’s new found friends might just simply go away.

“Dreams do come true, if only we wish hard enough.

Madman Mario Draghi, with apologies to Peter Pan.

ECB set to 're-examine' stimulus policy at next meeting

22 October 2015

The European Central Bank (ECB) says it will "re-examine" its €1.1 trillion quantitative easing (QE) stimulus programme at its December meeting.

It has embarked on a scheme of bond purchases at €60bn per month designed to bring eurozone inflation back up.

But consumer prices fell by 0.1% in the euro area in September, prompting speculation there may be changes to the bank's QE policy.

The comments came as the bank left its key interest rate unchanged at 0.05%

---- The degree of monetary policy accommodation - that's QE - "will need to re-examined" at the December meeting.

International developments and financial markets "continue to signal downside risks to the outlook for growth and inflation". None of this completely boxes the ECB in.

If the situation improves sufficiently in the meantime, they could still hold fire. But the odds have moved a bit further towards expanded QE in December. A sure sign that the eurozone's economic recovery remains decidedly lacklustre.

Mr Draghi also said that the eurozone inflation rate was set to remain very low in the near-term.

More

http://www.bbc.co.uk/news/business-34602603

And in the world’s third largest national economy, if badly wilting, the rising sun now seems to be setting on all of East Asia. In the Great China Crash, things now look dire.

“The moment you doubt whether you can fly, you cease for ever to be able to do it.”

Haruhiko Kuroda with apologies to Peter Pan.

Japan export growth slows sharply, raising fears of recession

Wed Oct 21, 2015 2:57am EDT

Japan's annual export growth slowed to a crawl in September as shrinking sales to China hurt the volume of shipments, raising fears that weak overseas demand may have pushed the economy into recession.

Ministry of Finance data showed exports rose just 0.6 percent in the year to September, against a 3.4 percent gain expected by economists in a Reuters poll.

That was the slowest growth since August last year, following the prior month's 3.1 percent gain. The weak yen helped increase the value of exports, but volume fell 3.9 percent, the third straight month recording an annual decline.

Wednesday's data was the first major indicator for September and is part of the calculation of third quarter gross domestic product. A third quarter contraction would put Japan into recession, following the second quarter's negative GDP result, and could force policy makers to offer further stimulus.

----China's economic growth has dipped below 7 percent for the first time since the global financial crisis, despite a barrage of stimulus measures.

Flow-on effects of the slowdown are spreading though Asia, with South Korean exports tumbling while Taiwan's export orders continued to slide recently, sapping Asia’s trade powerhouses.

The MOF data showed China-bound exports fell 3.5 percent year-on-year in September, down for a second straight month on falling shipments of light oil and car parts.

Shipments to Asia - which account for about a half of Japan's overall exports - fell 0.9 percent in September, the first annual decline in seven months.

More

http://www.reuters.com/article/2015/10/21/us-japan-economy-trade-idUSKCN0SE30T20151021

China Cuts Interest Rates as Policy Divergence With U.S. Widens

October 23, 2015 — 12:26 PM BST Updated on October 23, 2015 — 3:18 PM BST

China stepped up monetary easing with its sixth interest-rate cut in a year to combat deflationary pressures and a slowing economy, moving ahead of anticipated fresh stimulus by central banks from Europe to Japan and possible tightening in the U.S.

The one-year lending rate will be cut to 4.35 percent from 4.6 percent effective Saturday the People’s Bank of China said on its website on Friday, while the one-year deposit rate will fall to 1.5 percent from 1.75 percent. Reserve requirements for all banks were lowered by 50 basis points, with an extra 50 basis point reduction for some institutions.

Authorities are seeking to cushion an economy forecast to grow at the slowest annual rate in a quarter century as old growth drivers such as manufacturing and construction falter and new drivers like consumption struggle to compensate. China’s reduction to record-low rates and anticipated stimulus in Europe and Japan add to monetary policy divergence with the U.S., where the Federal Reserve is considering its first rate increase in nine years.

More

http://www.bloomberg.com/news/articles/2015-10-23/china-cuts-interest-rates-reserve-ratios-to-counter-slowdown

Iron Ore Prices Buckling Again As Supply Surges, China Demand Falters

by Bloomberg Business • October 24, 2015

Iron ore is showing signs of buckling again. Prices slumped to the lowest level in three months as the top producers announced increases in low-cost supply while data and comments from China pointed to further weakness in demand.

“All of this extra production out of ‘the big three’ will keep a lid on prices,” said Gavin Wendt, founding director and senior resource analyst at MineLife Pty Ltd. in Sydney. “China demand remains tepid and its steel industry is hurting under margin pressures.”

Iron ore is headed for a third year of losses, and the recent decline risks tugging prices below the trading range of $50 to $60 a metric ton that’s held since July, according to Westpac Banking Corp. Rio Tinto Group, BHP Billiton Ltd. and Vale SA, the three largest suppliers, all announced increases in quarterly output this month. China’s central bank on Friday cut benchmark rates and banks’ reserve requirements to boost a faltering economy after data this week showed crude-steel output contracted. The chairman of the second-largest producer flagged the potential for the country’s production to eventually slump 20 percent.

“The downtrend in seaborne iron ore prices is accelerating,” according to a report from Australia & New Zealand Banking Group Ltd. on Friday. “Chinese steel mills are tightening their spending on the back of weak steel prices.”

Ore with 62 percent content delivered to Qingdao slid 1.1 percent to $51.62 a dry ton on Friday, dropping for a fifth day to the lowest since July 24, according to Metal Bulletin Ltd. Prices are 4 percent lower this week, having dropped for five of the past six weeks. The raw material bottomed at $44.59 on July 8, a record in daily price data dating back to May 2009.

BHP, the world’s biggest miner, said on Wednesday iron ore output jumped 7 percent to 61.3 million tons in the three months to Sept. 30, two days after Brazil’s Vale said it produced a record 88.2 million tons in the period. In mid-October, Rio reported third-quarter output rose 12 percent.

More

http://davidstockmanscontracorner.com/iron-ore-prices-buckling-again-as-supply-surges-china-demand-falters/

 

And in the Fed’s booming America, I’ll leave that subject to a real pro.

“Oh, the cleverness of me!”

Greenspan, Bernocchio, and  Yellen, with apologies to Peter Pan.

US Economy Faltering———More Ominous Data Points

by Pater Tenebrarum • October 22, 2015

As we have pointed out on occasion of last week’s economic data update, we tend to focus on the manufacturing sector for a number of reasons. These are: 1. the manufacturing sector is in fact the largest sector of the economy in terms of gross output; 2. given that the various stages of production of the sector are temporally removed from the consumption stage, it is susceptible to attracting a lot of malinvestment during boom periods (often as a boom progresses, malinvestment will later also flow to the consumer stages as overconsumption surges, but this has only been selectively the case in the current cycle); 3. wealth is generated by savings, investment and production (all of which appear to be in trouble).

Our friend Michael Pollaro has mailed us two more charts pointing to growing weakness in the sector which we are reproducing below. Meanwhile, another hat tip is due to our friend BC, who has pointed out a recent development to us we were actually unaware of and that we show below as well. As you will see, we can actually observe a few oddities in the current cycle, which were not in evidence in previous cycles.

The first chart depicts the change in national ISM new manufacturing orders compared to the percentage change of the dollar value of core new factory orders according to US census data lagged by 6 months (for all manufacturing and manufacturing ex aircraft). As Michael remarked to us, the ISM data may be skewed by survivor bias in the current cycle.

As can be seen, normally the 6 months lagged change in the dollar value of core factory orders is aligned quite well with the ISM new order index (meaning, the latter is usually leading by about 4 to 6 months), but not this time. Instead, the two series have drifted apart quite a bit. We would argue that apart from survivor bias, there may also be a flaw in the seasonal adjustments to ISM data due to the large swings of the 2007-2009 recession (this is just a hunch).

Of course, the actual dollar value is what these new orders are worth to manufacturers in money terms. The recent plunge has already reached levels last seen during the 2000-2002 recession.

More
 http://davidstockmanscontracorner.com/us-economy-more-ominous-data-points/

We close for the weekend with commodities, which are suggesting to this old relic trading since the late 1960s, something worse than a recession now seems to be at hand. How many of the commodity behemoth flotilla, I wonder, will be left to sail out of the growing hurricane, at the other side?

“Ivan, who and what art thou?" Carney cried huskily.
"I'm youth, I'm joy," Ivan answered at a venture, "I'm a little bird that has broken out of the egg.”

With apologies to Peter Pan.

Meet the `Miserable' Metal: Aluminum Sinks to `09 Low on Surplus

October 23, 2015 — 2:49 AM BST Updated on October 23, 2015 — 5:30 AM BST

Dwight Anderson had a point when it came to aluminum. The price sank to the lowest level in more than six years on Friday on concern that a global glut will endure, extending a losing run after the hedge fund manager dubbed the metal as miserable.

Three-month futures fell as much as 0.4 percent to $1,484.50 metric ton on the London Metal Exchange, the lowest level since June 2009, and traded at $1,486 at 12:28 p.m. in Singapore. The metal is set for an eighth daily loss.

Aluminum fell 20 percent this year as global supply exceeded demand, with output from top producer China surging even as economic growth slowed, spurring increased exports. Anderson, founder of hedge fund Ospraie Management LLC, described aluminum in an interview this week as “miserable,” probably forcing closures and bankruptcies. BNP Paribas SA expects a surplus of 1 million tons this year.

“The fundamental outlook is weak for the metal with some miserable factors like oversupply not easing in China even as prices keep falling,” Wang Rong, an analyst at Guotai & Junan Futures Co. in Shanghai, said on Friday. Speculation about government subsidies for local producers worsened sentiment in recent days as smelters were seen continuing producing with the policy encouragement, according to Wang.

Primary aluminum production in China expanded 12 percent in the first nine months of this year while the expansion of the country’s gross domestic product was the weakest since 2009. Shipments of unwrought aluminum and aluminum products from Asia’s top economy surged 18 percent between January and September.

More

http://www.bloomberg.com/news/articles/2015-10-23/aluminum-sinks-to-2009-low-as-glut-hurts-the-miserable-metal

Iron ore price risks fall below $US50

Daniel Palmer 13 hours ago

The price of iron ore is flirting with the $US50 mark with a near two-week-long red streak showing no sign of ending as BHP Billiton warns high-cost producers have been slow to trim production.

At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US51.40 a tonne, down 1 per cent from $US51.90 a tonne in the prior session.

The commodity has lost around 10 per cent during an eight-session run of losses, bringing it to its lowest mark since the end of July.

The weakness of late has been pegged to soft Chinese economic data and comments from industry giant Baosteel that warned Chinese steel production could slump as much as 20 per cent in the years ahead.

"If we extrapolate the previous experience in Europe, the United States, Japan, their steel sectors have all gone through painful restructuring in the past, with steel output all contracting by about 20 per cent," Baosteel chairman Xu Lejiang said on Wednesday.

"China will eventually get there as well, regardless how long it takes."

----The comments were seen as very bearish for iron ore, a key steel-making component.

The depressed outlook was not helped overnight as mining giant BHP said high-cost rivals had failed to respond to market forces as quickly as it expected, ensuring a higher risk of a glut in the near-term.

More

http://www.businessspectator.com.au/news/2015/10/23/commodities/iron-ore-price-risks-fall-below-us50

Teck takes $2.2B writedown on coal, oilsands, copper

Falling commodities prices force Vancouver firm to declare loss in Q3

The Canadian Press Posted: Oct 22, 2015 12:40 PM ET

Teck Resources Ltd. is reporting a $2.1-billion loss for the third quarter, mostly because of a writedown of its coal assets.

The Vancouver-based company — which has one of Canada's largest mining and smelting operations — says the writedowns reflect lower expectations for commodity prices.

"We are taking significant steps to meet the challenge of low commodity prices," Tech chief executive Don Lindsay said in a statement.

In fact, excluding the writedowns, Teck's adjusted earnings and revenue did better than analyst estimates.

The third-quarter including $2.2 billion of writedowns resulted in a net loss of $3.73 per share, compared with a profit of 14 cents per share or $84 million last year.

Excluding the writedowns — which are a non-cash expense reflecting the lower long-term value of the business — Teck had an adjusted profit of $29 million or five cents per share, down from $159 million or 28 cents per share last year.

Revenue totalled $2.1 billion in the three months ended Sept. 30, down from $2.250 billion a year earlier.

More

http://www.cbc.ca/news/business/teck-resources-writedown-1.3283968

If the G-7 plus China are all hitting the rocks and the EM economies have already hit the rocks and are sinking, I suspect that the banksters and Squids will soon leave Peter Pan Land in flotsam.

We end with the infamous threat that prompted a bankster bailout.

“I’ve got news for you. If the financial system goes down, our business is going down and, trust me, yours and everyone else's is going down, too.”

Lloyd Blankfein. CEO Goldman Sacks? 2009.