Monday, 1 February 2016

Fading Fast.

Baltic Dry Index. 317 - 09        Brent Crude 35.35

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

“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”

“Adam Smith” aka George Goodman.

February is getting off to a very wobbly start. Bad news is good news is so last year. Below this morning news from Asia and the oil patch. The Bank of Japan’s panicky adoption of negative interest rates last week, coming just 8 days after issuing a denial in Davos that NIRP was in planning, looks from London as cynical desperate attempt to rig the month-end stock markets higher. For more on Japanese perfidy, scroll down to Crooks Corner.

"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."

William F. Rickenbacker

Asia stocks edge up after Japan policy boost; debt shines

HONG KONG | Sun Jan 31, 2016 10:09pm EST
Asian stocks started a new month on a cautious note on Monday, with the Bank of Japan's surprise policy easing sparking some buying but further signs of economic weakness in China and a fall in oil prices keeping investors on guard.

The greenback continued to benefit from the growing monetary policy divergence between the U.S. and its counterparts in Europe and Asia while bonds, especially investment grade debt, received a boost after Japan's surprise decision to introduce negative interest rates last week.

MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.2 percent, after losing 8 percent in January.

Australia and Japan leading regional markets with gains of more than 1 percent each, while Chinese stocks slipped in early trade.

"In the short term, the surprise move by Japan will be a catalyst for global equities but it only underlines the weakness of the global economy and we need to see some strong economics data for a sustainable rally," said Cliff Tan, head of global markets research with Bank of Tokyo-Mitsubishi UFJ.

Oil prices slip on weak Asian data, fading prospect of output cut

Mon Feb 1, 2016 12:15am EST
Oil prices dropped on Monday after China and South Korea posted surprisingly weak economic data, while fading prospects for a coordinated production cut by leading crude exporters also dragged on the market.

Economic data from China, showing its manufacturing sector contracted at its fastest pace in almost three-and-a-half years in January, added to worries about demand from the world's top energy consumer at a time when the market is already weighed down by a supply overhang.

Numbers coming out of South Korea were also gloomy, with the country's exports down at levels last seen at the height of the global financial crisis in 2009.

Reflecting an accelerating slowdown in Asia's biggest economies, front-month Brent crude was down 56 cents at $35.43 per barrel at 0507 GMT. U.S. West Texas Intermediate was down 42 cents at $33.20 a barrel.

Oil prices came under further pressure because of the dim prospects of a coordinated cut in production by leading exporters like the Organization of the Petroleum Exporting Countries (OPEC) and Russia due to their differences.

"We do not expect such a cut will occur unless global growth weakens sharply from current levels, which is not our economists' forecast," Goldman Sachs said.

Also, OPEC-member Iran, which last month was allowed to fully return to markets after years of sanctions, is not willing to participate in any cuts.

China Jan factory activity falls at fastest pace since 2012: official PMI

Sun Jan 31, 2016 10:41pm EST
China's manufacturing activity contracted at its fastest pace in almost three-and-a-half years in January, an official survey showed, suggesting the world's second largest economy is off to a weak start in 2016 and adding to the case for near-term stimulus.

The official Purchasing Managers' Index (PMI) stood at 49.4 in January, compared with the previous month's reading of 49.7 and below the 50-point mark that separates growth from contraction on a monthly basis. It is the weakest index reading since August 2012 and below the median 49.6 forecast from a Reuters poll of economists.

The PMI marks the sixth consecutive month of factory activity contraction, highlighting a manufacturing complex under severe pressure from falling prices and overcapacity in key sectors including steel and energy.

"The electricity production remained sluggish and the crude steel output continued the weak trend in January, reflecting an ongoing deleveraging process in the industrial sectors," said Zhou Hao, an economist at Commerzbank.

"In the meantime, China has started an aggressive capacity reduction in many sectors, which could add downward pressure on the bulk commodity prices over time."

The Markit/Caixin factory PMI also showed activity deteriorating, although at a slower pace than in December. The index was 48.4, higher than economists' median forecast of 48.0, and above the December figure of 48.2.

The Markit report focuses more on small- and medium-sized firms as opposed to larger state-owned firms in the official survey.

In other bad news stories you won’t find much coverage of in main stream media, all measures that track the shipping of goods to manufacturers and consumers suggest that we have entered a new global recession. Friday’s dress up the month end rally in stocks, just makes the great disconnect from reality that much larger. Getting out early always trumps getting out last. At some point not too far ahead, even main stream media will be covering the arrival of the new recession. How it will impact the US Presidential election is impossible to say at this point. But impact it, it will.

Below, more updates from David Stockman’s ever relevant excellent newsletter.

The Shipping News Says the World Economy Is Toast

by Bloomberg Business • January 29, 2016

By Mark Gilbert at Bloomberg
In October 2008, as the repercussions of the financial crisis were starting to ripple through the global economy, I noticed a press release from Swedish truckmaker Volvo saying that its European order book had fallen by more than 99 percent between the third quarters of 2007 and 2008 — to just 155 from 41,970.
That prompted me to study various other real-world activity measures ranging from shipping to air freight, and to conclude that “the news is all bad and getting worse, fast.” The same exercise today, I’m afraid to say, leads me to a similar conclusion about the growth outlook.

Here’s a chart showing what’s happening to the cost of shipping containers from China’s ports, one for the country and one for Shanghai. Both indexes are compiled by the Shanghai Shipping Exchange and cover shipments to the rest of the world including Europe, the U.S. and Africa; the broader China index is down more than 40 percent from its peak in mid-2012:

The traditional global shipping measure is called the Baltic Dry Index. Shipping purists (who rival gold bugs in their dedication to minutiae) will tell you it mostly reflects how many vessels are afloat on the world’s oceans; a glut of shipbuilding means more boats available, which drives down the cost of shipping bulk raw materials such as iron ore, steel and coal. But given the fragile state of the global economy, it’s hard to shake the feeling that the index has been trying to tell us something important about global demand in recent years:

There’s a similarly contractionary pattern in the available data on air freight. Here’s a chart showing tons of goods shipped per mile across U.S. skies since the start of the decade:

Watch The Wafers—-The Global Semi-Conductor Demand Has Collapsed

by Contributor • January 29, 2016

Silicon wafers are the raw material used for semiconductors. It’s the pig iron that gets turned into steel, the concrete that becomes roads. Except that semiconductors have a far broader and deeper reach in the 21st century economy. That is, demand for silicon is a pure reflection of economic demand, but just slightly in the near future since that silicon has to be turned into semiconductors first and then integrated into things to then get sold.
Simply put, in a growing economy where production and durable goods demand is expanding, silicon wafer demand is growing.
Demand for semiconductors has stopped growing.  If we were talking about automobiles and I said that car tire sales have stopped growing, you would immediately say, “Then that means car sales have stopped growing.” In this case, I’m saying that silicon wafer sales are a proxy for the entire global economy, and it has stopped growing, and conditions are worsening.
The wafer market is very concentrated: 97% of wafers are made by just five companies, dominated by Japan. Shin Etsu and SUMCO deliver 60% of the world’s demand for silicon.
The latest Japanese data from the Ministry of Economy, Trade and Industry shows that Japan’s silicon wafer production in October contracted -6% y/y, and that’s in unit terms. The implication is that 4Q will see wafer sales go from no growth to outright contraction.
The Big Picture
Collapsing silicon wafer growth comes against a background of rising smartphone sales (and by default growing silicon demand). Either smartphone sales are weaker than expected, or non-smartphone demand has crashed… or some of both.
For Asia, this is terrible news.
Taiwan, Korea, and China depend on semiconductor and high tech exports.
Almost 100% of China’s marginal export growth is coming from smartphone exports.

"a company for carrying out an undertaking of great advantage, but nobody to know what it is".

The South Sea Bubble 1720

At the Comex silver depositories Friday final figures were: Registered 28.53 Moz, Eligible 129.73 Moz, Total 158.26 Moz.  Almost 7.8 Moz of silver was moved Friday from the deliverable Registered category to the non-deliverable eligible category. Something’s afoot.

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
As the BOJ joins the ECB in imposing negative interest rates, we turn to Ludwig von Mises to see the likely result.
“Not the impossible disappearance of originary interest, but the abolition of payment of interest to the owners of capital, would result in capital consumption. The capitalists would consume their capital goods and their capital precisely because there is originary interest and present want-satisfaction is preferred to later satisfaction.
Therefore there cannot be any question of abolishing interest by any institutions, laws, and devices of bank manipulation. He who wants to “abolish” interest will have to induce people to value an apple available in a hundred years no less than a present apple.
What can be abolished by laws and decrees is merely the right of the capitalists to receive interest. But such laws would bring about capital consumption and would very soon throw mankind back into the original state of natural poverty.”

The Bank of Japan’s Lunacy——-Ringing in the Endgame?

by Pater Tenebrarum • January 29, 2016


It appears to us that the ever more desperate monetary policy measures adopted by the BoJ are coming closer and closer to crossing a point of no return. In other words, the BoJ seems to be entering what is popularly known as the “Keynesian endgame”. Once the threshold beyond which confidence is finally lost is crossed, the long maintained sophisticated fiat money Ponzi scheme and the associated three card Monte played between central banks, commercial banks and government treasuries will come to a screeching halt.

Naturally, we cannot tell you where this threshold precisely lies or how quickly said “endgame” will be playing out. Nor do we know with any precision what gyrations we may yet see as the situation evolves. We do however know that Kuroda’s decision has brought the world another step closer to the end. It would be a dangerous error to believe that such policies can be adopted without inviting severe consequences.

Kuroda is a member of a small coterie of central planners running the worlds currency systems, who are completely divorced from reality and are playing with the savings and lives of millions. They are implementing extremely risky experiments and evidently haven’t even the faintest inkling of what the ultimate outcome will be.

Unfortunately, none of us can do anything to stop them. It is therefore vitally important that one make a plan for oneself. It is quite ironic actually: the very people the economy depends on the most with respect to wealth creation are also most likely to be terrified by these developments. Consequently they are likely to withdraw more and more from genuine wealth creation activities. They will simply be far too busy trying to save themselves while it’s still possible.

"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise. The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."

Hans F. Sennholz

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?

Putting silicon 'sawdust' in a graphene cage boosts battery performance

Approach could remove major obstacles to increasing the capacity of lithium-ion batteries

Date: January 28, 2016

Source: DOE/SLAC National Accelerator Laboratory

Summary: Scientists have been trying for years to make a practical lithium-ion battery anode out of silicon, which could store 10 times more energy per charge than today's commercial anodes and make high-performance batteries a lot smaller and lighter. But two major problems have stood in the way: Silicon particles swell, crack and shatter during battery charging, and they react with the battery electrolyte to form a coating that saps their performance.
Scientists have been trying for years to make a practical lithium-ion battery anode out of silicon, which could store 10 times more energy per charge than today's commercial anodes and make high-performance batteries a lot smaller and lighter. But two major problems have stood in the way: Silicon particles swell, crack and shatter during battery charging, and they react with the battery electrolyte to form a coating that saps their performance.
Now, a team from Stanford University and the Department of Energy's SLAC National Accelerator Laboratory has come up with a possible solution: Wrap each and every silicon anode particle in a custom-fit cage made of graphene, a pure form of carbon that is the thinnest and strongest material known and a great conductor of electricity.
In a report published Jan. 25 in Nature Energy, they describe a simple, three-step method for building microscopic graphene cages of just the right size: roomy enough to let the silicon particle expand as the battery charges, yet tight enough to hold all the pieces together when the particle falls apart, so it can continue to function at high capacity. The strong, flexible cages also block destructive chemical reactions with the electrolyte.
"In testing, the graphene cages actually enhanced the electrical conductivity of the particles and provided high charge capacity, chemical stability and efficiency," said Yi Cui, an associate professor at SLAC and Stanford who led the research. "The method can be applied to other electrode materials, too, making energy-dense, low-cost battery materials a realistic possibility."
The Quest for Silicon Anodes
Lithium-ion batteries work by moving lithium ions back and forth through an electrolyte solution between two electrodes, the cathode and the anode. Charging the battery forces the ions into the anode; using the battery to do work moves the ions back to the cathode.
When it comes to making silicon anodes, scientists have been stymied by the fact that the silicon swells to three times its normal size during charging. For Cui and his collaborators, the quest first led to anodes made of silicon nanowires or nanoparticles, which are so small that they are much less likely to break apart. The team came up with a variety of ways to confine and protect silicon nanoparticles, from structures that resemble pomegranates to coatings made of self-healing polymers or conductive polymer hydrogels like those used in soft contact lenses. But these were only partly successful; the efficiency of the resulting anodes was still not high enough, and nanoparticles are expensive and hard to manufacture.
"This new method allows us to use much larger silicon particles that are one to three microns, or millionths of a meter, in diameter, which are cheap and widely available," Cui said. "In fact, the particles we used are very similar to the waste created by milling silicon ingots to make semiconductor chips; they're like bits of sawdust of all shapes and sizes. Particles this big have never performed well in battery anodes before, so this is a very exciting new achievement, and we think it offers a practical solution."

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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