Baltic Dry Index. 383 -11 Brent Crude 30.56
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
By means of glasses, hotbeds,
and hotwalls, very good grapes can be raised in Scotland, and very good wine
too can be made of them at about thirty times the expense for which at least
equally good can be brought from foreign countries. Would it be a reasonable
law to prohibit the importation of all foreign wines, merely to encourage the
making of claret and burgundy in Scotland?
Adam Smith. The Wealth Of
Nations, 1776.
Even in the dying days of the Great Nixonian Error of fiat money, communist money, the Great Game of financial three card Monte continues. The great RMS Titanic may well be sinking fast, but that’s of no concern to the wheeler dealer great vampire squids and banksters frolicking in the casinos once known as stock markets.
A Towering Chinese Debt Mountain Looms Behind Market Gyrations
January 14,
2016 — 9:00 AM GMT
Lost in all the Chinese stock
and currency
market gyrations, policy missteps and mixed data is this economic reality: The
government is constrained by a credit bubble that has ballooned to $28 trillion
in an economy growing at its slowest pace in 25 years.Policy zig-zags have left investors divided over how wedded President Xi Jinping and Premier Li Keqiang are to financial sector reform and shifting their $10 trillion-plus economy from one powered by investment and exports to one more focused on consumption and services.
China has appeared to backtrack on pledges to make its management of the yuan more market driven and there’s uncertainty over the government’s willingness to remove stock price supports imposed during a $5 trillion sell-off last summer. Amid the confusion, the benchmark CSI 300 Index, down 14 percent in 2016, has revisited the lows of last year’s rout and pressure on the currency continues.
Against that backdrop, Chinese officialdom faces the high-wire act of trying to keep the economy growing rapidly enough to repay past obligations, without resorting to a fresh pick-up in debt to fund more stimulus. It was China’s reliance on credit-fueled growth in the wake of the 2008 global financial crisis that resulted in one of the biggest debt expansions in recent history, and today’s hangover.
"China is nowhere close to reining in its debt problems," said Charlene Chu, the former Fitch Ratings Ltd. analyst known for her warnings over China’s debt risks and now a partner of Autonomous Research Asia Ltd. "It is one of the key factors weighing on GDP growth and one of the reasons why foreign investors are so concerned about China’s trajectory."
A report Tuesday [Jan 19] is forecast to show China’s 2015 expansion slowed to 6.9 percent -- the weakest pace since 1990.
More
http://www.bloomberg.com/news/articles/2016-01-14/a-towering-chinese-debt-mountain-looms-behind-market-gyrations
Hey, Wall Street——-This Bud’s For You!
by David Stockman •
The hordes of Washington politicians promising to boost the
nation’s economic growth rate and the posse of monetary
central planners and their Keynesian economists (excuse the redundancy)
lamenting that “escape velocity” appears to have gone MIA have
one thing in common. To wit, they have never looked at the chart below, or
don’t get it if they have.
Plain and simple, the sum of Washington policy
is to induce the business economy to eat it seed corn and bury itself in debt. Capitol Hill
does its part with a tax code which provides a giant incentive for debt
finance, and the Fed completes the job through massive intrusion in the money
and capital markets. The result of systemic financial repression is deeply
artificial, subsidized interest rates and free money for carry trade
gamblers—–distortions which have turned the C-suites of corporate America into
stock trading rooms.
As a case in point, the $46 billion of bonds sold by the owners of
Budweiser last night where priced at a ten-year yield of 3.67%, which means
that after taxes and inflation, the company’s borrowing cost was hardly
1%. Yet, as explained more fully below, the only point of this
massive offering was to fund with nearly free long-term capital the huge
payday for speculators in SABMiller stock that will result from the
$120 billion Anheuser-Busch InBev (BUD) takeover transaction.
But consider the economic context. As astounding as it
may seem, US net business investment in fixed assets last year was 10%
below its turn of the century level. And that’s in nominal
dollars—-in real terms its down by nearly one-fifth.
Moreover, net investment is the right measure, and
its not at all comparable to the what Wall Street stock peddlers, who
claim to be economists, are always bloviating about. Their favorite metric
is the quarterly gains in the nonresidential
investment component of the GDP accounts, which they trot
out as evidence that all is awesome. Actually, that’s just gross!
Stated more clinically, it represents gross investment. Upwards
of 85% of the $2.3 trillion annual rate for private nonresidential fixed
investment is needed just to replace the capital consumed or
depreciated in current production. If you don’t do that, you slide back to
horse and buggy times real fast.
So what counts for growth is the net investment in machinery, equipment
and technology, but that has been sliding southward for 15 years. Now it’s just
a shadow of its former self. Thus, US net investment by business
in 2014 amounted to just 2.3% of GDP or barely half the 4-5% range that
prevailed during the high growth era of the 1950s and 1960s.
Needless to say, over any sustained period of time, tepid investment
means tepid productivity growth; and that, in turn, means a stagnant economy.
Unless, of course, you have booming labor force growth, which is the
very opposite of the US, where 102 million or 41% of the adult
population is not gainfully employed.
At the same time, the going nowhere green line in the chart
below is not for want of available capital. In fact, business debt
securities outstanding have doubled since 2000, and have been growing at a 6.4%
annual rate since 2008. Indeed, the blue line in the chart betrays not even a
semblance of the Great Financial Crisis (GFC) or the supposed deleveraging
response to it.
----Like the monumental bond deal priced by BUD last night, all these borrowed trillions have gone into financial engineering—–both to stock buybacks and to perfectly pointless M&A deals like the BUD purchase of SABMiller.
Believe me, from an economic efficiency and wealth creation point of
view merging the #1 beer behemoth of the world with the #2
giant is truly pointless. Consumers everywhere are voting with
their dollars for craft beer by the pint from micro-breweries, not suds by the
tanker load from yesterday’s dinosaurs.
Indeed, this combination of AB InBev with a 20% global market
share and SABMiller with 10% will have a $340 billion TEV——–a
magnitude-roughly double the GDP of Greece. That is, it will constitute
an unmanageable globe spanning monstrosity with $60 billion in sales
spread among scores of highly differentiated regional and
national beer markets——lumbering toward centralization in just
the opposite direction from where the consumer market is going.
More
In other news, no American banksters ever go to jail. What a lucky lot, apparently. Why be a metal basher or hamburger flipper rather than a bankster? Don’t worry, it’s not real money only fiat money, and there’s plenty more where that comes from, according to fallen former guru Greenspan, Bernocchio, and the talking chair.
“Call
it the Goldman Sachs test. If this is something Goldman would do to its
clients, don't do it."
Felix
Salmon
Goldman Sachs reaches deal to pay $2.38 billion fine over mortgage securities
Published: Jan 14, 2016 4:47 p.m. ET
Goldman
Sachs Group Inc. GS, +1.51%
said Thursday it will pay a $2.385 billion civil penalty, make $875 million in
cash payments, and provide $1.8 billion in consumer relief in relation to its
mortgage securities dealings before the Great Recession. The agreement will
result in fourth-quarter earnings being cut by $1.5 billion, the investment
bank said. The consumer relief will be in the form of principal forgiveness for
"underwater" homeowners and distressed borrowers, financing for
construction, rehabilitation for affordable housing, and others. The agreement
resolves "actual and potential" civil claims by the U.S. Department
of Justice, the New York and Illinois attorneys general, the National Credit
Union Administration, and the Federal Home Loan Banks of Chicago and Seattle, the
bank said. It relates to Goldman's securitization, underwriting, and sale of
mortgage-backed securities from 2005 to 2007. Shares of Goldman Sachs were flat
late trading Thursday after ending the regular session up 1.5%.
In the parallel
universe of the one percenter’s, it’s time to fuel up the private jet and head
off to Davos next week, to rig up and fix the rest of 2016.
People
of the same trade seldom meet together, even for merriment and diversion, but
the conversation ends in a conspiracy against the public, or in some
contrivance to raise prices.
Adam
Smith, The Wealth of Nations, 1776.
Climate Change and Immigration Head Davos List of Global Risks
January 14, 2016 — 9:00 AM GMTClimate change and large-scale forced migration are the greatest risks facing the world according to a survey by the World Economic Forum, the organizer of next week’s meeting in Davos.
The 2016 report, published Thursday, highlighted the most significant threats expected over the next decade, based on a survey of more than 750 experts. Not dealing with climate change is seen as the risk with the greatest potential impact, ahead of weapons of mass destruction and water crises in second and third place. Migration tops the list in terms of likelihood.
“Climate change is exacerbating more risks than ever before in terms of water crises, food shortages, constrained economic growth, weaker societal cohesion and increased security risks,” Cecilia Reyes, chief risk officer at Zurich Insurance Group AG, said in a statement. “Meanwhile, geopolitical instability is exposing businesses to canceled projects, revoked licenses, interrupted production, damaged assets and restricted movement of funds across borders. These political conflicts are in turn making the challenge of climate change all the more insurmountable.”
The report, which is in its 11th year, shows a broader range of risks than ever before, the WEF said, with environmental, geopolitical, societal and economic threats all featuring in the top five in terms of impact for the first time. There is also evidence of increased connections between risks as they feed off each other, the report said.
“We know climate change is exacerbating other risks such as migration and security, but these are by no means the only interconnections that are rapidly evolving to impact societies, often in unpredictable ways,” said Margareta Drzeniek-Hanouz, the WEF’s head of global competitiveness and risks. “Mitigation measures against such risks are important, but adaptation is vital.”
The list of most likely risks, topped by “large-scale involuntary migration,” continues with extreme weather events in second place, failure to tackle climate change in third and interstate conflict, which topped last year’s list, in fourth. The highest ranking for a technological risk was cyber-attack, which came in 11th place for both likelihood and impact, though it was seen as the greatest risk to doing business in North America.
“Events such as Europe’s refugee crisis and terrorist attacks have raised global political instability to its highest level since the Cold War,” said John Drzik, president of Global Risk and Specialties at Marsh LLC. “The need for business leaders to consider the implications of these risks on their firm’s footprint, reputation and supply chain has never been more pressing.”
http://www.bloomberg.com/news/articles/2016-01-14/climate-change-and-immigration-head-davos-list-of-global-risks
We end for the week with ever more sign of the great Bilderberger United States of Europe Project disintegrating. The EUSSR has turned into a great jobs and wealth destruction project that only banksters gain from. From Portugal to Poland a great popular anti-EU movement is building. Fiat euros anyone?
Dutch Populist Wilders Says EU Finished, Netherlands Must Leave
January 14, 2016 — 11:01 PM GMT
The European Union is teetering, and Dutch Freedom Party leader Geert
Wilders wants to tip it over the edge.Wilders, 52, whose party leads opinion polls with calls to close Dutch borders to refugees, pledged to immediately pull the Netherlands out of the 28-nation EU should he become prime minister in elections due in March next year. The EU is unraveling and that’s to be encouraged, he said, urging the U.K. to quit the bloc in its forthcoming referendum.
“We are not sovereign any more; we are not even allowed to form our own immigration policy or even close our borders and I would do that," Wilders said Thursday in an interview in the Dutch parliament building in The Hague. “I would wish the Dutch to be more like Switzerland. In the heart of Europe, but not in the European Union.”
A household name in the Netherlands since 2004, when he split from the mainstream Liberal party to form his own on an anti-Islam platform, the bouffant-haired blond has enjoyed a swell of support as voters have grown increasingly alarmed at the arrival in Europe of more than a million refugees from Syria and elsewhere. The latest poll showed him winning the most parliamentary seats -- as many as Prime Minister Mark Rutte’s
Liberals won in 2012 -- if elections were held now.
After years of turbulence surrounding Greek membership of the euro, the focus of uncertainty in the EU has shifted to Britain, where Prime Minister David Cameron is set to call a referendum as early as June on whether the U.K. should stay in or leave. Wilders said he “hopes" Britons will opt to quit, with a knock-on effect on the Netherlands.
In the event of a so-called Brexit, “you will see that it will be easier for other countries to make the same decision,” Wilders said. “The beginning of the end of the European Union has already started. And it can be an enormous incentive for other countries if the United Kingdom would leave."
Wilders’s Freedom Party is at the vanguard of a movement of populist parties on both right and left that are making inroads across Europe espousing a mixture of anti-austerity, often euro-skeptic and sometimes anti-immigration policies.
More
http://www.bloomberg.com/news/articles/2016-01-14/dutch-populist-wilders-says-eu-finished-netherlands-must-leave
It is the highest impertinence
and presumption… in kings and ministers, to pretend to watch over the economy
of private people, and to restrain their expense… They are themselves always,
and without any exception, the greatest spendthrifts in the society. Let them
look well after their own expense, and they may safely trust private people
with theirs. If their own extravagance does not ruin the state, that of their
subjects never will.
Adam Smith, The Wealth Of
Nations, 1776.
At the Comex silver depositories
Thursday final figures were: Registered 35.76 Moz, Eligible 123.97 Moz, Total
160.74 Moz. Suddenly someone is draining
the silver pool.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, big trouble in the Middle Kingdom. Once
burnt twice shy.
Giving up on stocks: China's retail investors seek safety first
As China's legions of retail investors flee the country's tumultuous
equity markets, pushing stock prices down around 15 percent so far this year,
money is flowing into perceived safe-haven assets such as domestic bonds, gold
and the dollar.
Unlike Western markets where institutional investors dominate,
individuals account for 80 percent of transactions on Chinese exchanges. Nearly
100 million people have trading accounts.
Their enthusiasm for stocks drove China's main indexes to record highs
in the first half of 2015, but after enduring a summer bust that saw prices
plunge around 40 percent, the January sell-off has been the final straw for
many.
"I just have a small amount of money in the stock market. I had
planned to sell when indexes got a little bit higher, but soon it dropped to
this situation," said Zhou Junan, a 22-year-old retail investor in
Guangdong.
"I don't have faith in the stock market any more. I think it's
better to buy dollars."
Weekly data from the Shanghai Stock Exchange shows money shifting into
exchange traded funds (ETFs) tracking bonds, gold and money markets at the
start of January.
Funds that provide a vehicle for Chinese individuals to invest in
overseas stocks and bonds through the Qualified Domestic Institutional Investor
(QDII) scheme were also popular, continuing a trend that began late last year.
On Thursday, the official Securities Times newspaper reported that 10
mutual funds under QDII had suspended or restricted taking subscriptions after
strong demand led to quota shortages. The measures followed a nearly 10 percent
jump in assets of such funds in December alone.
"IN A MESS"
Alongside the renewed slide in stocks, ordinary Chinese investors have
been shaken by last week's acceleration in the decline of the yuan, which has
fallen nearly 5 percent since August.
"The stock market is in a mess," said a 48-year-old woman from
Kunshan, a city near Shanghai, working in the accounting department of a bank,
who said she had bought 500,000 yuan ($76,000) worth of U.S. currency.
"Dollar is far less risky."
That has also fuelled demand for gold.
"Except for gold, all other assets are just bubbles to me,"
said a 24-year-old female investor in Beijing. "I guess I am a pessimist.
If there are really some global conflicts, even dollars and bonds could not buy
a meal."
In just seven trading days at the start of this year, assets under
management at HuaAn Gold ETF, China's biggest gold ETF, jumped 8 percent, after
doubling during the previous six months.
MoreSolar & 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 Flakes Make Laser Neuron Superfast
By Neil Savage
Tiny flakes of graphene
may hold the key to building computer chips that can
process information similar to the way the human brain does—only far
faster—potentially leading to everything from better image recognition to
control systems for hypersonic aircraft.Researchers are developing so-called neuromorphic chips consisting of networks of transistors that interact the way neurons do, allowing them to process analog input, such as visual information, more quickly and accurately than traditional chips can.
One way of building such transistors is to construct them of lasers that rely on an encoding approach called “spiking.” Depending on the input, the laser will either provide a brief spike in its output of photons or not respond at all. Instead of using the on or off state of the transistor to represent the 1s and 0s of digital data, these neural transistors rely on the time intervals between spikes.
“We’re essentially using time as a way of encoding information,” says Bhavin Shastri, a Banting postdoctoral fellow in electrical engineering at Princeton University. Computation is based on the spatial and temporal positions of the pulses. “This is sort of the fundamental way neurons communicate with other neurons,” he says.
Shastri describes his work, done along with Paul Prucnal, a professor of electrical engineering at Princeton University, in the current issue of Nature Scientific Reports. One of the challenges to building such chips, he says, is to get the laser to spike at picosecond time scales, one trillionth of a second. The team achieved this by placing a tiny piece of graphene inside a semiconductor laser. The graphene acts as a “saturable absorber,” soaking up photons and then emitting them in a quick burst.
Graphene, it turns out, makes a good saturable absorber because it can take up and release a lot of photons extremely fast, and it works at any wavelength; so lasers emitting different colors could be used simultaneously, without interfering with each other—speeding processing. It also stands up very well to all the energy produced inside a laser. The team demonstrated the effect using a relatively large fiber laser sitting on a benchtop, but it shouldn’t be difficult to scale it down to place many such lasers on a single chip, Shastri says.
To see the advantages of this kind of processing, Shastri says, just try to swat a fly. The fly’s neural network processes the shifting pattern of light it sees as your hand moves to strike it, allowing it to quickly take evasive action. A similar system could be useful to control supersonic jets, or it could activate an ejector seat when a fighter pilot is only just registering that a missile is about to hit. Such potential applications led the Defense Advanced Projects Research Agency to fund similar research into this kind of processor.
http://spectrum.ieee.org/nanoclast/semiconductors/optoelectronics/graphene-flakes-make-laser-neurochip-superfastb
Snow forecast for tomorrow in my part of God’s Great Planet. The south
of England’s drivers are pretty much snow duffers if it happens. Thankfully the
Thames Valley is pretty much flat. It’s why George Clooney’s toney pad in ritzy
Sonning-on-Thames has just had its garden flooded. Have a great weekend
everyone.
The
statesman who should attempt to direct private people in what manner they ought
to employ their capitals, would not only load himself with a most unnecessary
attention, but assume an authority which could safely be trusted, not only to
no single person, but to no council or senate whatever, and which would nowhere
be so dangerous as in the hands of a man who had folly and presumption enough to
fancy himself fit to exercise it.
Adam Smith, The Wealth Of
Nations, 1776.
The monthly Coppock Indicators finished December
DJIA: +18 Down. NASDAQ:
+110 Down. SP500: +36 Down.
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