Tuesday, 9 February 2016

Commodity Depression.

Baltic Dry Index. 293 - 04        Brent Crude 32.92

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

When the operations of capitalism come to resemble those of the casino, ill fortune will be the lot of the many.

John Maynard Keynes.

Gold and silver excepted, commodities, especially the industrial commodities together with shipping, are to all intents and purposes in a depression. And it looks like it will only get worse in the short term. Oil storage is starting to reach capacity in America, bearing in mind that it can never hit 100 percent for technical and safety reasons, while in yet more sign of rising distress, major metal companies are withdrawing from the London Metal Exchange. There are also lots of rumours again concerning the safety of Europe’s banks, most worryingly including the major German bank. China has picked a fine week to disappear to celebrate the Lunar New Year. I suspect that the commodity depression is just the start.

Below, how black can jet black get?

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.

Oil industry woes grow as storage levels hit ‘critical level’

Published: Feb 8, 2016 5:23 p.m. ET
The storage tanks at Cushing, Okla., the delivery point for the New York Mercantile Exchange crude contract, are edging closer to their limits, raising a new set of problems for an industry that has already suffered from a 70% drop in prices in the past year and a half.

Cushing, which represents about 13% of the nation’s oil storage, has a working capacity of about 73.014 million barrels of crude oil, according to data from Sept. 2015, the latest available from the Energy Information Administration.

As of the week ended Jan. 29, there was 64.174 million barrels of oil in storage at Cushing, so it is at about 88% full.

“Where inventories count the most—at the Nymex terminal complex in Cushing, Oklahoma—storage is already at a critical level,” said Stephen Schork, in The Schork Report published Monday. “Approximately 6 out of 7 barrels available storage capacity at the Nymex hub are now full.”

The report highlighted an article from Reuters that discussed delays in crude deliveries from storage tanks at Cushing because there wasn’t enough room to drain existing tanks to blend oil to meet West Texas Intermediate crude CLH6, +1.15% specifications.

Cushing serves as a blending station, where crude oil from the midcontinent is mixed to the specific grades required by different refineries, according to StateImpact Oklahoma.

World's Largest Energy Trader Sees a Decade of Low Oil Prices

February 8, 2016 — 6:00 AM GMT
Oil prices will stay low for as long as 10 years as Chinese economic growth slows and the U.S. shale industry acts as a cap on any rally, according to the world’s largest independent oil-trading house.
"It’s hard to see a dramatic price increase," Vitol Group BV Chief Executive Officer Ian Taylor told Bloomberg in an interview, saying prices were likely to bounce around a band with a mid-point of $50 a barrel for the next decade.
"We really do imagine a band, and that band would probably naturally see a $40 to $60 type of band," he said. "I can see that band lasting for five to ten years. I think it’s fundamentally different."
The lower boundary would imply little price recovery from where Brent crude, the global price benchmark, trades at about $35 a barrel. The upper limit would put prices back to the level of July 2015, when the oil industry was already taking measures to weather the crisis.
The forecast, made as the oil trading community’s annual IP Week gathering starts in London on Monday, would mean oil-rich countries and the energy industry would face the longest stretch of low prices since the the 1986-1999 period, when crude mostly traded between $10 and $20 a barrel.

Rio Tinto, 5 others quit London Metal Exchange

Published: Feb 8, 2016 2:28 a.m. ET
Six companies, including the world's second-biggest iron ore exporter, have all given up their membership of the London Metal Exchange, the metals bourse said Friday.
Anglo-Australian mining powerhouse Rio Tinto Ltd. resigned as a category five member of the LME effective immediately.
In an LME notice to members, no reason was given for the decision. A spokeswoman declined to comment.
Category five membership is one of the lowest levels, ahead of individual and honorary membership. Members have no trading rights, except as clients, according to an online LME guide on membership.
Europe's biggest metals exchange, which is owned by Hong Kong Exchanges & Clearing Ltd., also approved the resignations of Cargill International S.A., Nyrstar Budel BV, Enmetco LLC, Lonconex Limited and MetAlliance LLP.
There are 48 category five members remaining, including Rio Tinto rivals BHP Billiton Ltd and Glencore PLC.

Anglo CEO Sees No Respite to Mining Gloom Amid Tougher 2016

February 8, 2016 — 9:03 AM GMT Updated on February 8, 2016 — 10:35 AM GMT
Anglo American Plc, the worst performer on the U.K.’s FTSE 100 index last year, sees no respite in 2016 as a rout in commodity prices erodes revenues by $350 million a month.

“We can’t rely on a reversal of this price slump any time soon,” Chief Executive Officer Mark Cutifani told investors and other mining executives at an industry conference in Cape Town, South Africa on Monday. “For many of us in the industry, 2016 is already shaping up to be the most challenging yet.”
Cutifani is due next week to outline a plan to overhaul the company to try to turn around its fortunes. In December, the producer told investors it would dispose of more than half of its mines. Mining companies have been forced to scrap dividends and sell shares after taking on too much debt in the years when they could still get high prices for their output.
----“Opinions are divided on whether we have reached the bottom of the cycle,” Cutifani said. “Things may still get worse before they get better. If we don’t adapt, we perish.”
Cutifani also flagged significant technological changes at Anglo’s copper business, to be detailed this year.

And in stocks, the bad news just keeps coming.

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.

Bank of America: This Chart Shows 'Deteriorating Liquidity' Is at the Heart of Market Carnage

February 8, 2016 — 3:32 PM GMT
Ever since the Federal Reserve began to withdraw monetary stimulus, liquidity has steadily been drying up.
Therein lies the crux of the broader stress in financial markets, according to Bank of America Merrill Lynch, which have seen violent selloffs occur following the surprise revaluations of currencies in Switzerland and China, as well as Japan's introduction of negative interest rates.

Head of U.S. Mortgages Chris Flanagan and Strategist Mao Ding don't necessarily lay blame for market dislocations squarely on U.S. monetary policymakers. The two observe, however, that since early 2014—when the Fed began winding down its open-ended asset purchases—liquidity stress has "persistently risen" and served as the proximate cause of the episodic spikes in Merrill Lynch's Global Financial Stress Index that have since occurred.

The index is a composite measure of market-based indicators of risk, demand for hedging, and risk appetite, while the liquidity subindex tracks a variety of funding spreads, such as Libor-OIS.

"Compared to the broader GFSI, liquidity stress has somewhat methodically and steadily risen over the past two years: while the GFSI has moved higher in fits and starts, liquidity stress has more persistently risen, only pausing its rise at times, before moving higher," the strategists explained. "This persistence suggests to us that deteriorating liquidity is at the heart of and may be the primary driver of broader rising financial stress."

European Stocks Tumble as Greek Shares Fall to Lowest Since 1990

February 8, 2016 — 8:21 AM GMT Updated on February 8, 2016 — 5:26 PM GMT
The rout fueled by concern over the strength of the economic recovery took European stocks to their lowest levels in more than a year, with Greek shares again suffering the most.

The Stoxx Europe 600 Index slid 3.5 percent to 314.36 at the close of trading and Greece’s ASE Index plunged to its lowest level since 1990. No industry or market in western Europe was spared. While Greek lenders extended a record low, banks in the region dropped to their lowest levels since 2012.

With a 7.9 percent plunge today, Greece’s ASE Index has once again become the year’s worst performer of 93 global equity gauges tracked by Bloomberg. While national benchmark gauges of Italy and Spain lost at least 4.4 percent, the slides weren’t limited to so-called peripheral regions. Germany’s DAX Index fell 3.3 percent to its lowest level since 2014. Commerzbank AG plunged 9.5 percent, the most in almost three years, after Keefe, Bruyette & Woods lowered its rating on the stock to the equivalent of a sell.

“Investors can’t make up their minds about the global economy, but the risk of recession and deflation is rising,” said Francois Savary, the chief investment officer of Prime Partners SA, a Geneva-based investment manager. “It’s not enough that valuations have receded quite significantly and earnings haven’t been too bad -- sentiment is very low and there isn’t much visibility right now. That’s frightening.”

Gauges of construction-related companies and banks posted the worst performances of the 19 industry groups on the Stoxx 600. A measure of lenders closed at its lowest since 2012, led by Greece’s Eurobank Ergasias SA and Alpha Bank AE.

What the ‘Chart of Doom’ is saying about a global recession

Published: Feb 8, 2016 2:49 p.m. ET
“Three down, two to go.”

That is the sub-heading on a chart shared by author and blogger Charles Hugh Smith intended to illustrate the global economy’s precarious footing.

The Chart of Doom from Market Daily Briefing, a site devoted to charting economic indicators from around the world, shows credit dropping off in the U.K., Japan, and the eurozone while remaining expansionary in the U.S. and China.

“Once private credit rolls over in China and the U.S., the global recession will start its rapid slide down the Seneca Cliff,” wrote Smith in a post on his blog ‘Of Two Minds.’

Seneca Cliff is a reference to Lucius Annaeus Seneca, a Roman philosopher who is credited with saying: “As it is, increases are of sluggish growth, but the way to ruin is rapid.”

Smith argues that when businesses and households stop taking out loans and instead start paying off debt, it is a sign that a recession or a depression is ahead.

He told MarketWatch that while private debt isn't a sole barometer of a recession, it is still an important indicator. “An economy with declining private credit can stagnate with nominal GDP growth of sub-1% for quite some time. Eventually this stagnation hollows out the economy,” he said in emailed comments.

The upward trajectory of the trend line for the U.S. may also be a bit misleading from Smith’s view point. The $1.5 trillion growth in private credit since 2008 after trillions were spent on bank bailouts and liquidity injection is “paltry,” especially compared with the robust pace from the mid-1990s to 2008.

He opines that much of the global economic rebound since the 2008 financial crisis is due to the rise in debt in China.

“In other words, the faltering global ‘recovery’ and all the tenuous asset bubbles around the world both depend on a continued hyper-velocity rocket rise in China’s private credit,” said Smith.

The Institute of International Finance estimated that China’s total debt stood at a record 277% of gross domestic product at the end of 2015. “An eventual resolution of this record level of debt could be painful for the economy,” said the IIF recently.

“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

At the Comex silver depositories Monday final figures were: Registered 28.53 Moz, Eligible 127.53 Moz, Total 156.06 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.

Exclusive: Iran wants euro payment for new and outstanding oil sales - source

Fri Feb 5, 2016 5:15pm EST
Iran wants to recover tens of billions of dollars it is owed by India and other buyers of its oil in euros and is billing new crude sales in euros, too, looking to reduce its dependence on the U.S. dollar following last month's sanctions relief.
A source at state-owned National Iranian Oil Co (NIOC) told Reuters that Iran will charge in euros for its recently signed oil contracts with firms including French oil and gas major Total, Spanish refiner Cepsa and Litasco, the trading arm of Russia's Lukoil.
"In our invoices we mention a clause that buyers of our oil will have to pay in euros, considering the exchange rate versus the dollar around the time of delivery," the NIOC source said.
Lukoil and Total declined to comment, while Cepsa did not respond to a request for comment.
Iran has also told its trading partners who owe it billions of dollars that it wants to be paid in euros rather than U.S. dollars, said the person, who has direct knowledge of the matter.
Iran was allowed to recover some of the fundshttp://images.intellitxt.com/ast/adTypes/icon1.png frozen under U.S.-led sanctions in currencies other than dollars, such as the Omani rial and UAE dhiram.
Switching oil sales to euros makes sense as Europe is now one of Iran's biggest trading partners.
"Many European companies are rushing to Iran for business opportunities, so it makes sense to have revenue in euros," said Robin Mills, chief executive of Dubai-based Qamar Energy.
Iran has pushed for years to have the euro replace the dollar as the currency for international oil trade. In 2007, Tehran failed to persuade OPEC members to switch away from the dollar, which its then President Mahmoud Ahmadinejad called a "worthless piece of paper".
The NIOC source said Iran's central bank instituted a policy while the country was under sanctions over its disputed nuclear program to carry out foreign trade in euros.
"Iran shifted to the euro and canceled trade in dollars because of political reasons," the source said.
Iran has the world's fourth-largest proved reserves of crude oil, and expects to quickly increase production, which could lead to tens of billions of euros worth of new oil trade.
---- India owes Tehran about $6 billion for oil delivered during the sanctions years.
Last month, NIOC's director general for international affairs told Reuters that Iran "would prefer to receive (oil money owed) in some foreign currency, which for the time being is going to be euro."
Indian government sources confirmed Iran is looking to be paid in euros.
Tehran has asked to be paid using the exchange rates at the time the oil was delivered, along with interest for those payment delays, Indian and Iranian sources said.
Indian officials are working on a mechanism that could involve local banks United Commercial Bank (UCO) and IDBI Bank for handling payments to Iran, one Indian government source said.
Some people make things happen, some watch while things happen, and some wonder what happened?

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?

Welsh home installs UK's first Tesla Powerwall storage battery

Battery could revolutionise UK energy market by enabling people to store excess energy generated from rooftop solar panels

Friday 5 February 2016

The setting is decidedly modest: a utility room in a red-brick house at the end of a cul-de-sac in Wales. But if the hype turns out to be right, this may be the starting point for an energy revolution in the UK.

Householder Mark Kerr has become the first British owner of a Tesla Powerwall, a cutting-edge bit of kit that the makers say will provide a “missing link” in solar energy.

Like many owners of solar panels, Kerr and his family have a basic problem. They tend to be out at work and school when the sun is shining and the 16 solar panels on the roof of their home in Cardiff are producing power.

The excess they miss out on is fed into the grid and they make a return on it but it does not seem right that they do not get to use the power from their panels.

However, from now, energy produced but not used during the day will charge the Powerwall and can then be used to provide them with the energy they need when they’re at home and their lights, music centres, computers, televisions and myriad other devices need feeding.

A self-confessed tech-head and an electrician by trade, Kerr could hardly contain his excitement when the Powerwall arrived. “This is the future, definitely,” he said. “For me this is the logical next step. We have the solar panels but we need a way to make best use of the power they produce.”

“Me and my family are all out in the day, and we are not making use of the enormous amount of clean energy that our solar panels produce. The battery will allow us to store the energy we don’t use in the day to use when we need it in the evenings.”

There are other battery systems on the market, but since its launch in California last year by Tesla’s billionaire founder, Elon Musk, the Powerwall has gathered something of a cult following.

Kerr is clearly a disciple: “It’s a gorgeous-looking piece of technology, its design is very sleek and minimalistic and something you can hang on the wall like a piece of art, definitely nothing like some of the other clunky looking batteries.” If Kerr’s partner, Lyndsey, finds him missing one evening, it sounds like she may find him gazing at his new gizmo.

There is a growing school of thought that 2016 could be the year of energy storage. At one end of the scale are large schemes – such as Highview Power Storage project, due to start generating power next month by turning air to liquid and back again, driving a turbine in the process. At the other end of the scale is Kerr’s utility room.

I was borrowing money from 30 leading banks. How could they all be wrong? I’m only a simple businessman.

Sir Freddie Laker.

The monthly Coppock Indicators finished January

DJIA: -06 Down. NASDAQ: +75 Down. SP500: -02 Down.  Both the DJIA and the S&P 500 have now turned negative.

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