More EUSSR Brexit Agitprop.

Baltic Dry Index. 310 - 04        Brent Crude 32.55


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

“The boom can last only as long as the credit expansion progresses at an ever-accelerated pace. The boom comes to an end as soon as additional quantities of fiduciary media are no longer thrown upon the loan market.”

“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.

For more on the EUSSR’s latest Brexit agitprop campaign, scroll down to Crooks Corner.

Finally main stream media seems to be getting it. Commodities, especially oil, plus a plethora of leading indicator shipping indexes, all seem to be signalling an arriving global recession. The Great Disconnect between global stock markets and the underlying reality of the global economy is about to reconnect. And Iran hasn’t produced or sold one meaningful extra barrel of crude oil yet, to put further downward pressure on crude oil prices. If ever there was a time to be out of leveraged risk it is now. While a global recession isn’t yet a 100 percent certainty, the probability is that it has already started, with my guess that it started after either OPEC’s November 2014 meeting, or alternatively after China’s stock market crash of last summer.

Below, main stream media and bubblevision belatedly gets it. In a Great Reconnect will most global stock markets “round trip.” The “next Lehman” is out there. Be prepared for a tidal wave of energy and commodity restructurings and bankruptcies.

Recession risks warn of ‘severe’ drop in the stock market

Published: Feb 2, 2016 1:08 p.m. ET

Most S&P 500 stocks could fall 50% or more if a ‘worst-case’ recession unfolds

Another brokerage firm has used the “R” word on Tuesday, warning investors to wake up to the idea that rising risks of a recession could send the stock market over a steep cliff.

Based on current valuations, the prices of most stocks don’t appear to have factored in a recession scenario, “hence the downside should we see a recession could be rather severe,” RBC Capital Markets’ global equity team wrote in a research note to clients.

Applying a stress test to their coverage universe, using worst-case, price-to-earnings valuations seen during the 2008-to-2009 recession, RBC analysts said they believe the shares of most companies could still fall another 50% or more from current levels.

The concern for RBC analysts stems from the recently volatility in the stock market, caused by macro weakness, softness in China and commodity market challenges.

On Monday, Deutsche Bank strategist David Bianco said the second-half of 2015 was “clearly a profit recession” for S&P 500 companies, and suggested it probably won’t be until the second half of this year that “healthy” growth returns.
More
http://www.marketwatch.com/story/recession-risks-warn-of-severe-drop-in-the-stock-market-2016-02-02?dist=tcountdown

Stock Slump Deepens in Asia as Nomura Tumbles; Yen, Bonds Climb

February 2, 2016 — 11:23 PM GMT Updated on February 3, 2016 — 4:28 AM GMT

Asian stocks tumbled for a second day as Nomura Holdings Inc. reported disappointing earnings and oil’s slump below $30 a barrel eroded investor confidence in global economic growth. Demand for the safest assets boosted the yen and government bonds.

Japan’s Topix index sank the most in two weeks as Nomura plunged 11 percent, the biggest decline since 2011. Every major benchmark equity index in Asia retreated, while Standard & Poor’s 500 Index futures signaled a third day of losses in American shares. Oil slipped after its biggest two-day drop in almost seven years, with industry data showing rising stockpiles. The yen strengthened against all but one of its major peers, while U.S. 10-year Treasury yields touched the lowest level in 10 months.

U.S. crude’s 44 percent retreat over the past year has weighed on growth in oil-rich emerging economies, fueled speculation of defaults by commodity producers and battered profits at corporate giants from BP Plc to Exxon Mobil Corp. In the latest sign that business conditions are deteriorating beyond the commodities industry, Nomura postponed a target for making its overseas operations profitable. The rout in Japanese stocks has undone almost all of the gains from the Bank of Japan’s surprise move to cut interest rates below zero on Friday.

----The Hang Seng China Enterprises Index of mainland companies in Hong Kong sank 2.8 percent, despite a move by the central bank late Tuesday to prop up the Chinese real estate sector. Lenders in the country will be allowed to cut the minimum required mortgage down payment to 20 percent from 25 percent for first-home purchases, the People’s Bank of China said.

----“Since the BOJ cut last week, markets have been on edge, concerned that the global situation is considerably worse than initially envisaged and that global central banks will be unable to combat deflationary risks driven by plummeting oil prices,” Mark Smith, a senior economist in Auckland at ANZ Bank New Zealand Ltd., said in a client note.
More
http://www.bloomberg.com/news/articles/2016-02-02/bonds-in-asia-jump-with-yen-as-crude-angst-sinks-stock-futures

For Once, Low Oil Prices May Be a Problem for World's Economy

February 2, 2016 — 9:04 AM GMT

For the last 75 years, almost every economic crisis has been preceded by an oil price spike. The worry now is that low energy prices are pushing the global economy into a tailspin.

While the idea is counter-intuitive, it’s gaining traction because a growing share of the world’s consumers and investors are in the very places getting hammered by the rout in commodities prices. Apple Inc., for example, blamed weaker sales last quarter on lower economic growth in some oil-rich countries.

“I never thought I would wish, let alone pray, for higher oil prices, but I am,” said Han de Jong, chief economist at ABN Amro Bank NV in Amsterdam. “The world badly needs higher oil prices.”

The problem is that the world’s economy relies far more today on emerging countries than 15 or 25 years ago -- the last periods of ultra-low oil prices. In another twist, the U.S. has emerged to vie with Saudi Arabia and Russia as the world’s biggest oil producer. In the past, the harm done to exporters was more than offset by importers’ gains.

And with the exception of China and India, most big emerging countries are oil and commodities rich. Such economies now account for about 40 percent of global gross domestic product, about double their share in 1990, according to the International Monetary Fund.

From Russia to Saudi Arabia, Nigeria to Brazil, economic growth is slowing down to a crawl and, in many cases, is contracting.

“Many oil exporters face very difficult circumstances,” said Gian Maria Milesi-Ferretti, the IMF’s deputy director of research. “So now they have to cut spending significantly, and this will have an impact on economic growth.”

More
http://www.bloomberg.com/news/articles/2016-02-02/for-once-low-oil-prices-may-be-a-problem-for-world-s-economy

Think Crude's Cheap? Biodiesel's Going for Free in Some Places

February 1, 2016 — 10:54 PM GMT Updated on February 2, 2016 — 5:00 AM GMT

Biodiesel’s become so cheap in the U.S. that some refiners are being paid to use it.

Midwest refiners are paying as little as 64.5 cents a gallon for the fuel after factoring in a $1-a-gallon tax subsidy and other credits. Add further incentives offered by California into the mix and some customers are effectively getting biodiesel for free in the Golden State.

The cause is twofold. Crude oil’s 71 percent slump since 2014 has dragged down the price of everything from diesel to gasoline. At the same time, the U.S. has shown a renewed commitment to renewable fuels in the battle against climate change, with the Obama administration mandating their increased use.

“They got the tax credit and the higher mandate,” Wallace Tyner, an agricultural economist at Purdue University in West Lafayette, Indiana, said. “They’re coming out looking like roses.”

In November, the government raised the amount of biodiesel refiners must use to a record. Congress reinstated a $1-a gallon tax credit for using the fuel a month later. 

The Environmental Protection Agency tracks compliance with the consumption mandate using certificates that are attached to each gallon of biofuel. The tax credit and the value of those certificates lowers the final costs of the fuel, akin to a rebate. 

California renewable fuel programs such as the Low Carbon Fuel Standard combine with federal subsidies to bring costs down even more. Theoretically, refiners may be getting money back on every gallon, according to Eric De Bruin, a broker at StarFuels Inc. in Milwaukee.

When refiners buy a gallon of biodiesel, they’re essentially getting the fuel as well as the credits and subsidies, said Jennifer Case, chief executive officer of New Leaf Biofuel, a San Diego-based company.

More
http://www.bloomberg.com/news/articles/2016-02-01/think-crude-s-cheap-biodiesel-s-going-for-free-in-some-places

Getting redder: More state economies may be contracting

Published: Feb 2, 2016 3:44 p.m. ET

Philly Fed data show Alaska, Louisiana, North Dakota, Wyoming, Illinois, Mississippi and Wisconsin are in negative territory

A measure of state economic performance suggests the U.S. economy is losing steam.

The Philadelphia Fed each month publishes what it calls state coincident indexes. Based on four variables — nonfarm payrolls employment, average hours worked in manufacturing, the unemployment rate and real wages — they are designed to set to the trend of gross domestic product.

This animated version shows seven states were in negative territory for the three months ending in December — the most states in the red since May. Another 41 have gains, and the remaining two are stable.

Four of the states are heavily exposed to the energy industry: Alaska, Louisiana, North Dakota and Wyoming. The other three were Illinois, Mississippi and Wisconsin.

The combination of weak oil prices and the strong dollar has put a damper on U.S. manufacturing. At the same time, U.S. consumer spending, while solid, hasn’t really accelerated.
http://www.marketwatch.com/story/getting-redder-more-state-economies-may-be-contracting-2016-02-02

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 Monday final figures were: Registered 28.53 Moz, Eligible 127.71 Moz, Total 156.24 Moz. 

Crooks and Scoundrels Corner

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

Today the usual suspects start up a Brexit scare propaganda campaign.  The sky will definitely fall. The sun will never rise. All the moslems will leave for Mad Merkel’s Caliphate. No one in the UK will ever again be able to get a taxi.

Below, one of the first of Europe’s soon to be many scare propaganda blitzes. This scare campaign focuses on EIB funding for windmills and their ilk. Of course if GB wasn’t a member of the EIB, we could take our contribution back and spend it how we liked. More cheap-to-build and operate coal power stations for one. A westerly wind takes the smoke mostly to the east.

Brexit May Lose U.K. Billions in Funding for Climate, Renewables

February 2, 2016 — 9:47 AM GMT

The U.K. risks losing out on billions of pounds of investment in renewable energy projects such as wind farms and grid upgrades if it quits the European Union and ditches its stake in the European Investment Bank.

Britain is the biggest recipient of the EIB’s Climate Awareness Bond Project, taking 24 percent of the 7.2 billion euros ($7.9 billion) invested by the Luxembourg-based development bank in renewable energy and energy efficiency projects around the world since 2007, according to the EIB.

It is unclear if the U.K. would still get EIB funding if it left the EU, said Peter Munro, head of investor relations for the bank. Countries outside the EU have received just 12 percent of the total Climate Awareness Bond proceeds since 2007. It’s a “devilishly complicated” issue and would depend on whether the U.K. wanted to remain a stakeholder and whether other member states would allow that, he said.

“If you’re not a shareholder or you’re not part of the EU, you wouldn’t derive the same privileges as a shareholder or an EU member,” Munro said in an interview.

The EIB is the world’s largest issuer of green bonds, and has pledged to lend 100 billion euros for climate action over the next five years to a wide range of projects including sustainable transport, energy efficiency and helping countries adapt to the impacts of warming temperatures.

Prime Minister David Cameron is preparing to hold a referendum as early as June on the U.K.’s EU membership after months of negotiations with member states to seek reforms of the union. He pledged to hold the vote by the end of 2017 at the latest.

More

http://www.bloomberg.com/news/articles/2016-02-02/brexit-may-lose-u-k-billions-in-funding-for-climate-renewables

Sir Humphrey: Minister, Britain has had the same foreign policy objective for at least the last five hundred years: to create a disunited Europe. In that cause we have fought with the Dutch against the Spanish with the Germans against the French, with the French and Italians against the German, and with the French against the Germans and Italians. Divide and rule, you see. Why should we change now, when it's worked so well?

Hacker: That's all ancient history, surely?

Sir Humphrey: Yes, and current policy. We 'had' to break the whole thing [the EEC] up, so we had to get inside. We tried to break it up from the outside, but that wouldn't work. Now that we're inside we can make a complete pig's breakfast of the whole thing: set the Germans against the French, the French against the Italians, the Italians against the Dutch. The Foreign Office is terribly pleased; it's just like old times.

Hacker: But surely we're all committed to the European ideal?

Sir Humphrey: [chuckles] Really, Minister.

Hacker: If not, why are we pushing for an increase in the membership?

Sir Humphrey: Well, for the same reason. It's just like the United Nations, in fact; the more members it has, the more arguments it can stir up, the more futile and impotent it becomes.

Hacker: What appalling cynicism.

Sir Humphrey: Yes... We call it diplomacy, Minister.

Yes Minister.  TV Series.

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 21^st century onwards? DC? A quantum computer next?

Solar ready to compete with fossil fuel alternatives, says Lightsource CEO

By David Pratt 01 February 2016, 14:30 Updated: 01 February 2016, 14:38

The solar industry is looking at an “extremely positive landscape” over the next five years despite recent cuts to government support, according to Nick Boyle of Lightsource.

Speaking this morning at Solar Media’s Solar Finance and Investment event, the chief executive claimed the UK industry now stands in a better position than it did five years ago due to changes in electricity pricing.

“The negatives when we were raising money five years ago were what if the government decide to stop paying the feed-in tariff? The reason why there was a fear the government wouldn’t pay the 33p was because you could buy the electricity for 6 or 7p. That's not the case today; that risk is no longer there because the individuals that are buying electricity off us are doing it because it’s cheaper than the other technologies that are vying for their business.

“That is the change and the thing that turns this industry on its head and puts us in the perfect position to completely change the way people contract to buy electricity going forward.”

With work on subsidy-free projects already underway, Boyle believes the viability of solar as an alternative to fossil fuel power providers is now a reality.

"The fact that solar is now at grid parity if you're hard-wired into the electricity users brings into question the other investments that we've been competing with. Who in their right mind is going to invest in a 50-year gas pipeline or a large oil-fired power station now?

“The fact that solar is now able to undercut those, and the price continues to drop so it's only going to get worse, says to me that there are a significant number of financial institutions that are saying gas and other fossil fuel technologies are not the sure thing that they were before and that maybe we should look at other technologies that have got this future-proofing.”

Boyle also claimed that due to this new found viability of solar when tied to a power purchase agreement (PPA), the technology can also vie for opportunities in infrastructure. He argued that as risks associated with other forms of generation become more prevalent – changes in electricity price, transport and delivery costs etc. – the predictable returns offered by solar are now far more attractive.

More

http://www.solarpowerportal.co.uk/news/solar_ready_to_compete_with_fossil_fuel_alternatives_says_lightsource_2873 

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.