Monday, 28 December 2015

The Wrong Sort of Firsts.



Baltic Dry Index. 478  +03     Brent Crude 37.75

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

"For more than two thousand years gold's natural qualities made it man's universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper."

Hans F. Sennholz

We open with held over news for last week. In America’s oil patch it’s back to the Great Recession time. Not to worry though, 2016 will generate its own new first.

Oil Bankruptcies Reach Highest Quarterly Level Since Recession

December 24, 2015 — 7:12 PM GMT
Bankruptcies among oil and gas companies have reached quarterly levels last seen in the Great Recession, according to the Federal Reserve Bank of Dallas.

At least nine U.S. oil and gas companies that accounted for more than $2 billion in debt have filed for bankruptcy in the fourth quarter, the bank said Wednesday in its energy economic update for the final three months of the year.

"Lower oil prices have taken a significant financial toll on U.S. oil and gas producers, in part because many face higher costs of production than their international counterparts do," according to the note written by Navi Dhaliwal, a research assistant, and Martin Stuermer, a research economist. "If bankruptcies continue at this rate, more may follow in 2016."

Since peaking in October 2014, U.S. oil and gas employment has fallen by 70,000 jobs, the analysts wrote in the report.

OPEC Sees Demand for Its Crude Oil Falling for Rest of Decade

December 23, 2015 — 10:00 AM GMT
OPEC said demand for its crude will slide to 2020, though less steeply than previously expected, as rival supplies continue to grow.

The organization will need to pump 30.7 million barrels a day by the end of the decade, OPEC said Wednesday in its annual World Oil Outlook. That’s 1.7 million barrels more than projected a year ago, and 1 million less than the group pumped in November.

The forecast underlines the struggle faced by the Organization of Petroleum Exporting Countries as it seeks to defend market share against a surge in output from rivals such as the U.S. and Russia. While OPEC is slowly taming the expansion of competitors, the collapse in oil prices means the financial costs of its strategy are immense. Brent crude futures touched an 11-year low of $36.04 a barrel on Dec. 21.

“Although lower oil prices continue to foster some demand growth, their impact seems to be limited by other factors,” the group said. “The removal of subsidies and price controls on petroleum products in some countries and ongoing efficiency improvements will all likely continue restricting oil demand growth.”

The 30.7 million barrels of daily output needed from 12 of OPEC’s members in 2020 is about 300,000 a day less than required this year, when it repeatedly pumped above its production target before scrapping the limit altogether earlier this month. The supply total excludes Indonesia, which formally rejoined OPEC on Dec. 4.
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In UK news, the exceptionally wet Christmas is likely to be a drag on the economy in Q1 2016.

UK flooding: 'too early' to know full cost to Britain but crisis could wipe 0.2pc off GDP

Insurance industry waits for flood waters to recede before estimating cost of damage but economist says emergency will impact economic growth

It is “too early” to estimate the cost of the flooding in the North of England, a spokesman for the insurance industry has said, but economists warn that the current crisis could hamper Britain’s economic growth by up to 0.2pc.

A spokesman for the Association of British Insurers (ABI) told the Telegraph that there was no way of putting a figure on the cost of the current flooding crisis, which is affecting vast swathes of Northern England, from Hull to Lancashire.

“Thousands of properties have been affected,” he said. “Parts of York have been evacuated. We still don’t know the extent of the damage and we won’t until the flood waters recede and the insurers can get in.”

PwC, the accountancy firm, also said that it was "too early to estimate losses" but said that an initial analysis of the economic impact of both Storm Desmond and Storm Eva showed an approximate cost of between £900m and £1.3bn, with the insurance industry bearing between £700m and £1bn of the total.

"After Saturday’s torrential rain, and with rare 'danger to life' warnings issued, the economic damage to the UK could be significant," said Mohammad Khan, general insurance leader at PwC.

"If rain continues to fall in large quantities, and the areas with warnings in place do indeed flood significantly, it could well be that the total economic losses could breach £1.5bn with an additional significant increase in insurer losses from our initial estimate."
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We close for the day with China. This year China made all the wrong kind of firsts.

A banner year: Financial scams in China nabbed at least $24 billion in 2015

December 23, 2015
It’s been a banner year for financial scams in China. Prominent among them was Fanya Metal Exchange—wringing $6 billion or so from duped investors—but it certainly wasn’t alone. Chinese investors lost about $24 billion to such chicanery this year. Many risked their entire life savings, regardless of unrealistic assurances of zero risk, or promises of high returns that should have sounded too good to be true. Following, a look back at this year’s “highlights,” and some expert analysis on why so many fell for empty promises.

Fanya Metal Exchange—about $6 billion
This week (Dec. 22) in Kunming the local government announced (link in Chinese) the launch of investigations into this infamous “trading platform,” which fleeced hundreds of thousands of investors and froze $6 billion in investor cash in April.

Awkwardly enough the local government itself backed Fanya, helping it get set up and officially endorsing it in 2011. Fanya gained more credibility by advertising on state television, which to many viewers conferred a sort official recognition. Some 220,000 investors flocked to Fanya’s flagship “product,” rare metals traded on its electronic platform. The company promised zero risk and an annual return of 13%.

--- The warehouses where Fanya supposedly stored its metals might never have existed, judging by both analyst observations and an investor’s first-person account. Many people, unsurprisingly, have concluded that the exchange was a Ponzi scheme. The head of Fanya disappeared last week.

E Zubao and other P2P financing platforms—at least $11 billion
Earlier this month, E Zubao, China’s biggest online peer-to-peer lending platform by amount, came under investigation for suspected illegal operations (link in Chinese). Police have seized assets and detained several suspects. Since its launch in mid-2014, the company has lent 70 billion yuan ($10.8 billion) through its financial products, and promised annual returns of between 9% and 14%, reports business magazine Caixin (link in Chinese).

E Zubao wasn’t alone. Many shady players took advantage of China’s largely unregulated P2P lending market.
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http://qz.com/576389/a-banner-year-financial-scams-in-china-nabbed-at-least-24-billion-in-2015/

China Telecom chairman detained in corruption probe

Published: Dec 27, 2015 10:05 p.m. ET
China Telecom’s 0728, -1.34%   chairman is the latest in a string of corporate executives to be hauled in front of the country’s anti-graft squad for questioning. A statement from the Central Commission for Discipline Inspection said Chang Xiaobing had been detained on suspicion of “severe disciplinary violations.”

The commission is China’s top anti-corruption body.

Details of specific allegations are thin on the ground, but the CCDI statement did mention Chang’s former gig as chairman of China Unicom 0762, -0.63% which could be telling.

Chang, who became chairman of China Telecom in August, had initially been reported “missing” by local Chinese media on Sunday. Guo Guangchang, chairman of conglomerate Fosun International, went missing in similar circumstances a few weeks ago. He later reappeared with the explanation he’d be helping out with a police investigation.

It’s estimated that about 70 executives at state-owned firms have been probed under suspicion of corruption since 2014, ranging from oil giants to car makers.

Shares in China Telecom were down as much as 1.9% in trading this morning. Shares in both China Telecom and Unicom have been rising recently on speculation the government could look to merge the two state-owned enterprises.

"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."

Antony C. Sutton

At the Comex silver depositories Thursday final figures were: Registered 40.20 Moz, Eligible 119.38 Moz, Total 159.58 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, the cashless society. Where Big Brother, and the central banksters want to take us as ZIRP turns into NIRP in the next recession.

"When paper money systems begin to crack at the seams, the run to gold could be explosive."
Harry Browne

Where even banks won’t take cash anymore: Sweden could become first cashless society

Liz Alderman, The New York Times Sunday, Dec. 27, 2015
STOCKHOLM — Parishioners text tithes to their churches. Homeless street vendors carry mobile credit-card readers. Even the Abba Museum, despite being a shrine to the 1970s pop group that wrote “Money, Money,” considers cash so last-century that it does not accept bills and coins.

Few places are tilting toward a cashless future as quickly as Sweden, which has become hooked on the convenience of paying by app and plastic.

This tech-forward country, home to the music streaming service Spotify and the maker of the Candy Crush mobile games, has been lured by the innovations that make digital payments easier. It is also a practical matter, as many of the country’s banks no longer accept or dispense cash.

At the Abba Museum, “we don’t want to be behind the times by taking cash while cash is dying out,” said Bjorn Ulvaeus, a former Abba member who has leveraged the band’s legacy into a sprawling business empire, including the museum.

Not everyone is cheering. Sweden’s embrace of electronic payments has alarmed consumer organizations and critics who warn of a rising threat to privacy and increased vulnerability to sophisticated Internet crimes. Last year, the number of electronic fraud cases surged to 140,000, more than double the amount a decade ago, according to Sweden’s Ministry of Justice.

Older adults and refugees in Sweden who use cash may be marginalized, critics say. And young people who use apps to pay for everything or take out loans via their mobile phones risk falling into debt.

“It might be trendy,” said Bjorn Eriksson, a former director of the Swedish police force and former president of Interpol. “But there are all sorts of risks when a society starts to go cashless.”

But advocates like Ulvaeus cite personal safety as a reason that countries should go cash-free. He switched to using only card and electronic payments after his son’s Stockholm apartment was burglarized twice several years ago.

---- The government has not sought to stem the cashless tide. If anything, it has benefited from more efficient tax collection, because electronic transactions leave a trail; in countries like Greece and Italy, where cash is still heavily used, tax evasion remains a big problem.

Leif Trogen, an official at the Swedish Bankers’ Association, acknowledged that banks were earning substantial fee income from the cashless revolution. But because it costs money for banks and businesses to conduct commerce in cash, reducing its use makes financial sense, Trogen said.
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"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium."

Murray N. Rothbard

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?

Morocco postpones opening of world's largest solar power project

No explanation given as inauguration of the Noor-1 plant – the first part of a massive new complex – in Ouarzazate is unexpectedly called off

Morocco has postponed without explanation the inauguration of Noor-1, a solar power plant due to open Sunday in Ouarzazate, part of what will eventually be the world’s largest solar power production facility.

When asked by AFP, the communications agency that organised the inauguration on behalf of Moroccan solar energy agency Masen gave no reasons for the last-minute delay.

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