Friday, 13 November 2015

Bad News Suddenly Stops Being Good News.

Baltic Dry Index. 579 -20        Brent Crude 44.10

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

“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.

The commodities depression continued apace yesterday, led by a crude oil rout. Brent traded at 44 dollars a barrel, while West Texas Intermediate traded with a 41 dollar handle. Get ready for a great wave of US fracking defaults and associated junk bond failures. Get ready for some spectacular hedge fund losses. Will Friday the thirteenth turn into yet another Black Friday? Will the Fed’s NY Plunge Protection Team of riggers and fix-its, now have to start buying commodities alongside stocks? They might have to start chartering some rapidly sinking shipping too. All over planet earth this morning, everyone is ignoring the central banksters’ script.

What is needed for a sound expansion of production is additional capital goods, not money or fiduciary media. The credit expansion is built on the sands of banknotes and deposits. It must collapse.

Ludwig von Mises.

Asian Stocks Join Selloff on Commodity Slump With Oil Below $42

November 12, 2015 — 10:53 PM GMT Updated on November 13, 2015 — 6:00 AM GMT
As a rout in commodities deepened in Asia, stocks in the region slumped with mining and energy companies dragging Australia’s benchmark to a seven-week low and Chinese shares dropping on slowing credit growth.

A gauge of Asian shares fell for the first time in three days as U.S. oil lingered below $42 a barrel and copper futures traded near a six-year low. The dollar headed for the biggest weekly loss in a month after Federal Reserve officials emphasized the need for a cautious approach to monetary policy, even as they reiterated their preference for an interest-rate rise this year. Australia’s currency was headed for its first weekly advance since mid-October.

----Data this week has provided a mixed picture on China’s economy, adding to concern demand for raw materials will wane. The country’s broadest measure of new credit tumbled to a 15-month low, data late Thursday showed, as rate cuts failed to ignite borrowing.

----Crude’s slump drove the Bloomberg Commodity Index down to the lowest level since 1999. Gold was near a five-year low as investors sold bullion-backed funds on expectations that a U.S. rate increase will happen this year, damping the appeal of the metal. Bullion for immediate delivery retreated 0.2 percent to $1,082.70 an ounce. Copper fell 0.1 percent.

OPEC Says Oil-Inventory Surplus Is Biggest in at Least a Decade

November 12, 2015 — 11:45 AM GMT
Surplus oil inventories are at the highest level in at least a decade because of increased global production, according to the Organization of Petroleum Exporting Countries.
Stockpiles in developed economies are 210 million barrels higher than their five-year average, exceeding the glut that accumulated in early 2009 after the financial crisis, the organization said in a report. Slowing non-OPEC supply and rising demand for winter fuels could “help alleviate the current overhang,” enabling a recovery in prices, it said. The group’s own production slipped last month because of lower output in Iraq.
“The build in global inventories is mainly the result of the increase in total supply outpacing growth in world oil demand,” OPEC’s Vienna-based research department said in its monthly market report.
Oil prices have lost about 40 percent in the past year as several OPEC members pump near record levels to defend their market share against rivals such as the U.S. shale industry. While inventories peaked in early 2009 as OPEC implemented record production cuts, this time the group has signaled it won’t pare supplies to balance global markets and U.S. production is buckling only gradually in response to the price rout.
The current excess is bigger than the surplus of 180 million barrels to the five-year seasonal average that developed in the first quarter of 2009, according to the report. The 2009 glut was the only other occasion in the past 10 years when the glut has topped 150 million barrels, it said.

Emerging market credit crunch could haunt 2016

Wed Nov 11, 2015 11:10am EST
A world getting comfortable again with high debt but few defaults looks set for a rude awakening next year, and not just in the United States.
As the Federal Reserve prepares to jack up interest rates next month and the dollar climbs again, anxiety over an alarming accumulation of corporate and household debt in emerging economies from China to Malaysia, Russia to Turkey, Mexico and Brazil has been building for the past five years.
Characterized by Goldman Sachs as a possible third wave of the credit crash - the first being a sub-prime housing bust and serial banking collapse of 2007/08 and the second the euro sovereign debt crisis of 2011/12 - emerging market borrowing is now vulnerable to any reversal of the easy money policies the rich world adopted to cope with the first two waves.
And the reality of default and debt repayment stress will be a stark reminder of just how little deleveraging, or paying down of debt, has actually happened worldwide since 2007.
According to Barclays research, default rates among sub-investment grade firms in emerging markets will almost double next year to as high as 7 percent from virtually zero just five years ago and well above 20-year averages of about 4 percent.
High-yield emerging market default rates are already above U.S. corporate "junk" equivalents - also likely to double next year to more than 5 percent. And the gap is rising.
Barclays points out this phenomenon is pretty rare without sovereign debt crises, notably absent in developing countries right now. But the unusual confluence of a China-led slowdown just as the West picks up is creating all sorts of currency and interest rates tremors that have sunk commodity prices and exaggerated local currency slumps alongside creeping dollar interest rates.
That sort of default horizon is jarring given the scale of debt built up and the concern of an emerging credit crunch related to capital outflows over the past two quarters, estimated by JPMorgan to be unprecedented $570 billion. Almost two thirds of that came from China.

In luxury goods, America isn’t picking up the slack demand in Asia. This morning, the real world far from Wall Street’s gambling dens, looks to be all spent out.

Burberry, Hermes Signal U.S. Slowdown on Heels of Asian Slump

November 12, 2015 — 10:13 AM GMT
Hermes International SCA and Burberry Group Plc reported sputtering sales growth in America, adding to the woes of luxury-goods makers already reeling from an Asian slump.

Hermes’s revenue in the Americas rose 2 percent in the third quarter, slowing from 11 percent in the preceding three months, the French maker of Birkin bags said Thursday. London-based Burberry reported decelerating second-quarter sales in the U.S., the world’s biggest luxury market.

The region “remains very volatile and quite difficult to read,” Burberry Chief Financial Officer Carol Fairweather said on a call to reporters.

Makers of high-priced jewelry and designer fashions are increasingly signaling a slowdown in the U.S. market, which Bain & Co. estimates is worth 79 billion euros ($85 billion). Globally, the luxury-goods industry is set to post its worst year since 2009 as a combination of stock market turmoil, a strong dollar and a commodity-price rout curb demand. While local consumption in the U.S. is rising, it’s not enough to offset a drop in demand from tourists, according to Bain.

Danish jeweler Pandora A/S reported third-quarter earnings Tuesday that missed estimates as U.S. growth weakened. Pandora said the change was due to a shift in focus from bracelets to charms. Last week, Cartier owner Richemont said currency-neutral sales barely grew in the Americas, as sales of Swiss watches dropped.

We close on Friday the thirteenth leaving the last word to Credit Swiss. Watch out in 2016, they think. Things could get a lot worse before they get better.  Things must be pretty bad in China when it’s not just Graeme talking about a potential China financial crisis. Suddenly on Friday the thirteenth, bad news no longer seems to be good news.

Credit Suisse: Here Are the Two Biggest Threats to the Global Economy in 2016

A cut in China's investment spending and the return of U.S. core inflation could derail the global economy.

November 12, 2015 — 4:03 PM GM
Credit Suisse has published its 2016 Global Outlook, in which economists and strategists offer their favorite trades and base-case view for economic activity around the world, as well as possible developments that could derail their prophesied path from being realized.

The title—"The Fed Awakens"—would seem to imply that the U.S. central bank looms large as a source of potential downside for the global economy. While chief economist James Sweeney believes the Federal Reserve will have hiked rates four times by the end of 2016, he doesn't see this tightening cycle as one of the two most noteworthy gray swans on the horizon. The unwelcome scenarios Credit Suisse sees as substantial sources of downside risk for the global economy are if Chinese investment spending goes comatose or U.S. core inflation revives.

Getting to a Goldilocks level of investment spending poses a challenge for Chinese policymakers that is sure to spill over into the global economy, Credit Suisse says. In the midst of a reorientation of economic growth toward domestic demand, Beijing will be sure not to fully switch off the credit spigots that have driven investment spending. On the other hand, the marginal efficacy of these expenditures has waned, with investment threatening to exacerbate existing imbalances and raising the specter of a Chinese financial crisis.

True, governments can reduce the rate of interest in the short run, issue additional paper currency, open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late and to bring about a depression. 

Ludwig von Mises.

At the Comex silver depositories Tuesday final figures were: Registered 43.34 Moz, Eligible 118.70 Moz, Total 162.04 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, the usual suspects. Everyone from China to France, though not Uncle Scam is setting up for a business bonanza in 2016 withIran.

France says will sign deals during Iranian president's Paris visit

Tue Nov 10, 2015 2:37pm EST
France and Iran will sign several agreements, including in the air transport, during a visit by President Hassan Rouhani to Paris next week, the French presidency said on Tuesday.
France has a long history of commercial, political and social links with Iran - in the 1970s revolutionary leader Ayatollah Ruhollah Khomenei lived in exile near Paris. But France also took one of the hardest lines of the six powers negotiating an agreement on curtailing Iran's nuclear program.
However, French officials have said they do not believe that will hurt its business in Iran and potential deals are likely to back that opinion.
"Several accords will be signed by French and Iranian ministers covering a variety of sectors, in particular political dialogue, economic cooperation, air transport, health and agriculture," President Francois Hollande's office said in a statement.
A senior French economic and political delegation headed to Tehran in mid-September to lay the groundwork for the first business contracts between France and Iran since an accord to curb its nuclear program was struck in July.
France's main business lobby group, the Medef, sent a delegation comprising more than 100 firms to Iran. It included such companies as oil major Total, planemaker Airbus and car manufacturer Peugeot.
Officials say Paris may initially secure deals in areas that were not specifically hit by European Union and U.S. sanctions, most notably in agriculture and livestock, where France has relatively little activity in Iran.
The lifting of sanctions imposed on Iran by the West could begin in the first quarter of 2016 if Iran meets its obligations under the deal struck with major powers, which was intended to stop it acquiring nuclear weapons.
Rouhani will be in the French capital from Nov 16-17. Speaking on RFI radio, Iran's ambassador to France Ali Ahani said Tehran expected a great deal from the visit.
"We are preparing certain agreements and memorandums of cooperation in industry in general, automobile, the energy sector which is important ... in the air and rail transport sectors. There are a lot of contacts in the automobile sector and things are progressing. I'm optimistic in different fields."
Iran's transport minister said in June about $80 billion worth of business was up for grabs in his sector, including the renewal of the country's air fleet.

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 or DC energy mankind’s future from the 21st century onwards? DC? A quantum computer next?

Graphene-Powered Paper Bots Walk and Crawl

Origami-inspired graphene paper that can fold itself could be used to create anything from miniature robots to artificial muscles, according to a new study.

Scientists from Donghua University in China have demonstrated that gently heating a sheet of graphene paper, which is extraordinarily strong (about 200 times stronger than steel by weight), could make it fold into a device that is able to walk forward and backward. And, in a first for this kind of self-folding material, they showed it could also change directions.

The research could help scientists develop self-folding structures and devices for modern applications, including wirelessly controlled micro robots, artificial muscles and devices for tissue engineering, said Jiuke Mu, a Ph.D. student at Donghua University and one of the material’s inventors.

"In the near future, it even could bring changes to people's lives," Mu told Live Science, giving the example of smart clothing, "which could change its shape and style in response to body temperature, environmental changes or other gentle stimulations.”

The technology relies on specially treating sections of graphene paper so that they naturally absorb water vapor from the atmosphere, the researchers said. When the paper is heated, this water is released, causing those sections to shrink and bend. When the heating stops, this process is reversed.

Careful placement of these treated sections made it possible to create various self-folding objects, including the walking device, a self-assembling box and an artificial hand that can grasp and hold objects five times heavier than itself.

The researchers determined the 3-D shape into which the paper folds simply by altering the placement and width of the specially treated areas, with wider sections bending more than narrower ones.

The caterpillarlike walking device was created by building a rectangular sheet of graphene paper with three treated bands running across it that got progressively wider from front to back. When the sheet was lit with a near-infrared light, the bending of these sections caused the sheet to curve into an arch.

Another weekend, and an iffy one too. Check in with the LIR blog for the weekend update. Have a great weekend everyone.

“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 essentially no cost…We conclude that under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”

Dr. Ben Bernanke. 2002

The monthly Coppock Indicators finished October

DJIA: +31 Down. NASDAQ: +125 Down. SP500: +53 Down. 

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