Tuesday, 23 February 2016

Reality Returns.

Baltic Dry Index. 316 +01        Brent Crude 34.35

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

Brexit odds checker. http://www.oddschecker.com/politics/british-politics/eu-referendum/referendum-on-eu-membership-result

Gold and silver, like other commodities, have an intrinsic value, which is not arbitrary, but is dependent on their scarcity, the quantity of labour bestowed in procuring them, and the value of the capital employed in the mines which produce them.

David Ricardo

The crude oil short squeeze over, from the news that Russia and the Saudis will cap their production at near record levels, sanity returned to the stock markets once again. Increasingly the realisation is spreading that “buy the dips” has been replaced with “sell the rips.”  A US and global economy that looks all too likely to be stumbling into another recession, is no place to be assuming a “risk on” stance no matter what our deadbeat central banksters say. Words are cheap, and Draghi and the talking chair, are all out of ammo and pushing on a string. That’s why they’ve taken to the fiscal equivalent of tossing rocks, like negative interest rates and starting a war on cash. Very bad choices lie directly ahead. The end game of the Great Nixonian Error of fiat money, communist money is not pretty. Think of Russia after the fall of the Soviet Union, or Japan trapped in the never ending 25 year recession, and Abenomics failing. 

Eventually the graphene revolution and cheap energy from super-efficient solar power will reboot the global economy, and our present growing nightmare will be over, but that’s still about a decade away. A tsunami of bankruptcies comes first. Getting from here to there will be difficult, to use good old fashioned British understatement.

Global stock rally stalls in Asia

Published: Feb 22, 2016 10:47 p.m. ET
A global rally struggled to extend into Asian hours on Tuesday, although gains in energy and material stocks capped the extent of losses.

Shares in the region were mixed.

Japan’s Nikkei Stock Average NIK, -0.23%   pared earlier gains, last up 0.1%, while the Hang Seng Index HSI, -0.38%   traded near flat. The Shanghai Composite Index SHCOMP, -0.98%   was down 0.6%, Australia’s S&P/ASX 200 XJO, -0.43%   was down 0.2% and South Korea’s Kospi SEU, -0.24%   was off by 0.1%.

Australian mining giant BHP Billiton Ltd. BHP, +2.62%   rose 2.4%, as bargain-buying lifted some of the region’s most battered stocks from this year’s global market rout.

BHP’s stock, which has lost about 42% in the past 12 months amid a prolonged downturn in commodity prices, was up, even after the firm slashed its dividend, the clearest sign yet of the deteriorating backdrop for the global mining industry.

Shares of Noble Group Ltd. N21, +2.70%   were down 2.7% in Singapore, after the commodities trader said it will record a one-time loss of $1.2 billion in its fourth-quarter to reflect lower assumptions of long-term coal prices. The stock is off 65% in the past 12 months.

On Monday, global stocks had rekindled their rally from last week, spurred by rising commodity prices overnight. The Dow industrials gained 1.4% on Monday, also led by energy and raw materials companies.

That gave Asia a lift in the morning. But Chinese markets opened slightly weaker.

Brent crude oil was down 1.1% at $34.32 a barrel in early Asia trade. That followed U.S. crude futures gaining 6.2% to $31.48 a barrel overnight, after the International Energy Agency said it expects U.S. shale-oil production to fall by 600,000 barrels a day in 2016.

Eurozone Economic Activity Slows, Composite PMI Weaker Than Expected

02/22/16 AT 7:27 AM
Economic activity in the eurozone slowed for the second straight month in February, as modest recovery in the 19-nation bloc lost momentum and stubbornly low oil prices weakened the outlook for inflation.

The Composite Purchasing Managers’ Index (PMI) — a monthly gauge of economic activity compiled by Markit Economics — fell to its lowest level in 13 months in February, to 52.7 from 53.6 in the previous month.

The manufacturing PMI in February stood at a 12-month low of 51.0 in February — down from 52.3 in January — while the PMI for the services sector dropped to a 13-month low of 53.0 from January’s 53.6. A reading above 50 indicates an increase in activity, while a reading below that level indicates a decline.

“Not only did the survey indicate the weakest pace of economic growth for just over a year, but deflationary forces intensified. Economic growth is likely to slow below 0.3 percent in the first quarter unless we see a sudden uplift in March, which on the basis of the forward-looking components of the PMI seems unlikely,” Chris Williamson, chief economist at Markit, said in a statement. “In fact, growth looks more likely to slow further than accelerate.”

The surveys also indicated that activity in France — the eurozone’s second-largest economy —declined in February for the first time since January 2015, with the PMI for both manufacturing and services sectors slipping below the 50 mark. Germany, meanwhile, saw activity increase at the slowest pace in seven months.
“France is flat-lining and German growth is being held back by weak global demand hitting its manufacturers. Elsewhere across the region, growth slowed to the weakest since the start of last year as companies struggle in the face of waning demand both at home and abroad,” Williamson said, in the statement.
The PMI data, coupled with a weak outlook for inflation, is expected to further pressure European Central Bank policymakers to boost growth and shock inflation back to the 2 percent target — a yet-to-be-achieved goal that the ECB has undershot for almost three years now.

Oil prices fall as global glut offsets prospect of lower U.S. output

Mon Feb 22, 2016 11:01pm EST
Oil futures fell more than 1 percent on Tuesday amid worries rising Iranian output would deepen a global crude oversupply, offsetting expectations of a drop in U.S. production that had spurred sharp price gains in the prior session.

Key oil exporters, led by Saudi Arabia and Russia, have proposed to freeze output at January levels, but only if others joined in. While Iran, now free of international sanctions that hurt its oil trade, has welcomed the move, the country has stopped short of pledging to act itself. It is thus unclear whether the freeze will actually happen.

"Without concrete actions (to cut production), we remain highly skeptical that prices could be moving higher," Singapore-based brokerage Phillip Futures said, adding that prices would instead face strong downward pressure.

Oil Glut Will Persist Into 2017 as IEA Sees Prices Capped

February 22, 2016 — 11:28 AM GMT Updated on February 22, 2016 — 12:24 PM GMT
The global oil glut will persist into 2017, limiting any chance of a price rebound in the short term as the surplus takes even longer to clear than previously estimated, according to the International Energy Agency.
While U.S. shale oil production will retreat this year and next as the price slump hits drilling, its subsequent recovery will ensure America remains the biggest source of new supply to 2021. The Organization of Petroleum Exporting Countries will expand its market share slightly this decade, with Iran, newly released from international sanctions, displacing Iraq as the organization’s biggest contributor to supply growth.
“Only in 2017 will we finally see oil supply and demand aligned but the enormous stocks being accumulated will act as a dampener on the pace of recovery in oil prices,” the Paris-based adviser to 29 countries said in its medium-term report Monday. “It is hard to see oil prices recovering significantly in the short term from the low levels prevailing.”
The IEA’s new outlook is the latest sign that oil forecasters are bracing for a “lower-for-longer” price environment. The agency acknowledged that the industry’s expectations -- and its own predictions -- that oil markets would recover in 2015 proved “very wide of the mark.” The report also signals that while OPEC will succeed in its policy of defending market share, the group will have to endure an extended period of reduced revenues.

Sovereign Wealth Funds May Sell $404 Billion of Equities

February 22, 2016 — 10:40 AM GMT Updated on February 22, 2016 — 1:04 PM GMT
Sovereign wealth funds may withdraw $404.3 billion from global stock markets this year if crude prices stay between $30 to $40 per barrel as oil-rich nations seek to shore up their finances, according to the Sovereign Wealth Fund Institute.

The value of listed equities held by the world’s largest wealth funds will probably drop to $2.64 trillion this year, from about $3.04 trillion at the end of 2015, the Las Vegas-based SWFI said in an e-mailed report sent Monday. Withdrawals are set to approximately double from last year, when sovereign funds sold about $213.4 billion of equities, it said.

"The era of petrodollar-filled wheelbarrows being dumped into giant vats seems to be numbered," according to the Institute. "Commodity wealth funds have to be concerned about the state of their country’s finances, since many were created to either be stabilization funds, intergenerational savings vehicles or a combination thereof."

Sovereign funds from Qatar to the United Arab Emirates and Russia, which amassed about $7 trillion of assets as oil soared higher than $100 a barrel, are now liquidating investments after a more than 70 percent slump in crude since 2014. During the boom, oil countries led a surge in investments in the U.S. and Europe, buying stakes in iconic companies such as Barclays Plc as well as trophy assets including Manhattan hotels, European soccer clubs and London luxury homes.

 “The commodity-price scenario changed sovereign institutional investor behavior from their heydays starting in 2004, which include investing in the Chrysler Building, Chicago Parking Meters and bailing out banks like Citigroup to make them more focused on where capital is being allocated," according to the report.

Direct investments by sovereign funds also dropped to $113.9 billion in 2015 from $122.9 billion a year earlier, the report said.

Funds based in the oil-rich Persian Gulf, such as the Abu Dhabi Investment Authority and Qatar Investment Authority, are facing the most "financial distress", the report said, while Russia has also "steadily been depleting its sovereign wealth fund to finance large-scale projects, fund parts of government and attract direct investment," it said.

More http://www.bloomberg.com/news/articles/2016-02-22/sovereign-wealth-funds-seen-selling-404-billion-of-equities

Gold and silver are no doubt subject to fluctuations, from the discovery of new and more abundant mines; but such discoveries are rare, and their effects, though powerful, are limited to periods of comparatively short duration.

David Ricardo

At the Comex silver depositories Monday final figures were: Registered 28.90 Moz, Eligible 126.29 Moz, Total 156.19 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, the Japanese being Japanese yet again. It might be a good time to test the radars in Hawaii.

S. Korea urges Japan to stop provocations over disputed islets

SEOUL, Feb. 22 (Xinhua) -- South Korea on Monday urged Japan to stop provocations over disputed islets lying halfway between the two countries as Japan sent a senior government official to attend the controversial "Takeshima Day" event.

Japanese Prime Minister Shinzo Abe's cabinet has dispatched a vice ministerial-level official to the event for four straight years. This year, Sakai Yasuyuki, parliamentary vice minister of the Cabinet Office, attended the ceremony.

The Takeshima Day was launched in 2005 by Japan's Shimane prefecture to lay territorial claims to the disputed islets, known as Dokdo in South Korea and Takeshima in Japan.

Seoul's foreign ministry spokesman Cho June-Hyuk said in a statement that Seoul strongly protests and calls for the prevention of recurrence over Japan's repeated dispatch of a senior government official to the Takeshima Day event hosted by a provincial government.

The spokesman denounced the dispatch as a defiance of agreed efforts to open a new bilateral relation through the agreement reached in late 2015 for "comfort women," an euphemism for Korean women forced into sexual servitude for Japanese military brothels during World War II.

Under the Dec. 28 agreement, Japan renewed an official apology for the wartime sex slavery, pledging to pay 1 billion yen (about 8.3 million U.S. dollars) from its state coffers to build a new foundation in South Korea to support the former comfort women. In return, South Korea agreed on a "final and irreversible" resolution on the issue.

Cho said that the Dokdo islets are clearly an inherent part of South Korea's territory historically, geographically and by international laws, toward which Tokyo should stop provocations. He strongly urged the Abe cabinet to humbly and squarely face the Imperial Japan's history of disseizing the Korean peninsula.
South Korea has said that Japan unilaterally incorporated the Dokdo islets into its territory before and during the 1910-45 Japanese colonial rule of the Korean peninsula. After Seoul's liberation from the colonization, the Dokdo islets were re-incorporated into South Korea's territory.

Seoul's foreign ministry summoned a Japanese diplomat in Seoul to protest Japan's dispatch of a senior government official to the Takeshima Day event.

Lee Sang-deok, director-general in charge of Northeast Asian affairs at South Korea's foreign ministry, delivered the government's strong protest against the celebration after summoning Hideo Suzuki, a minister at the Japanese Embassy in Seoul.

Hundreds of South Korean civic group activists gathered in front of the Japanese Embassy in Seoul, denouncing the Takeshima Day celebrations and calling for Japan to scrap the history-distorting event.
The rocky outcroppings have been a major source of diplomatic rows and even emotional battle both between the general public and governments of Seoul and Tokyo. South Korea has deployed security guards on the islets since 1954.

Gold, on the contrary, though of little use compared with air or water, will exchange for a great quantity of other goods.

David Ricardo.

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?

US has a record-breaking year for solar power

Anmar Frangoul | Special to CNBC.com  2 Hours Ago
The U.S. solar industry installed 7,286 megawatts of solar power in 2015, according to data from GTM Research and the Solar Energy Industries Association (SEIA).
The figures, announced Monday, represent an increase of over 1,000 megawatts of solar photovoltaic installations compared to 2014. Photovoltaic technology is able to directly convert sunlight into electrical energy.
According to the data, solar beat natural gas capacity additions for the first time ever, with 29.5 percent of all new electric generating capacity met by solar power in 2015.
Rhone Resch, president and CEO of the SEIA, described 2015 as a "monumental year for the U.S. solar industry." Resch added that the next few years would see, "solar continue to reach unprecedented heights as our nation makes a shift toward a carbon-free source of energy that also serves as an economic and job-creating engine."
The potential of solar power as a clean energy source is significant. In 2014 the International Energy Agency stated that the sun could be the planet's biggest source of electricity by 2050.
In the U.S., the Office of Energy Efficiency and Renewable Energy says that in states such as California, Hawaii, Texas and Minnesota, solar electricity is now "economically competitive with conventional energy sources."

If a commodity were in no way useful, - in other words, if it could in no way contribute to our gratification, - it would be destitute of exchangeable value, however scarce it might be, or whatever quantity of labour might be necessary to procure it.

David Ricardo.

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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