Friday, 26 February 2016

Shanghai Hopium.

Baltic Dry Index. 325 +03        Brent Crude 35.16

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

Brexit odds checker.

In central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly and results far much less.

J. K. Galbraith.

It’s started, the professional dissembling, that is. The G-20 alchemists are meeting in Shanghai to try to turn lead into gold. Of course, few expect any such outcome, but that won’t stop most participants spinning like a whirling dervish, boasting like a drunken sailor, and promoting their brand of voodoo economics, like soon to be President Donald Trump.

Below, this morning’s opening gambits in China. Huffery-puffery ought to be good for another few hundred points in the stock markets. Our disconnected markets are all back on hopium again.

Asia shares nudge up as G20 talks, oil holds gains

Fri Feb 26, 2016 12:25am EST
Asian shares made guarded gains on Friday as a gathering of world finance leaders provided a welter of reassuring comments, but little in the way of actual policy stimulus.

Spreadbetters expect the positive momentum to extend to Europe, forecasting a higher open for Britain's FTSE .FTSE, Germany's DAX .GDAXI and France's CAC .FCHI.

Setting the tone for the Shanghai meeting of the Group of 20, China's central bank chief, Zhou Xiaochuan, said Beijing still had the room and tools to support the world's second largest economy.

---- The reaction in share markets was cautious. Shanghai stocks .SSEC added 0.5 percent, but the bounce looked unconvincing against Thursday's 6-percent slump.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.8 percent, while South Korea .KS11 rose 0.2 percent. Japan's Nikkei .N225 gained 1 percent but could not quite sustain a two-week top.

The S&P 500 had already scored its highest close since early January after oil staged a turnaround to end Thursday 3 percent higher on speculation a March meeting of major producers might stabilize prices.
U.S. crude CLc1 was trying to hold those gains on Friday, dipping just 3 cents to $33.04 a barrel. Brent LCOc1 was 16 cents lower at $35.13.

On Wall Street, the Dow .DJI rose 1.29 percent, while the S&P 500 .SPX added 1.14 percent and the Nasdaq .IXIC 0.87 percent. Data showing a 4.9 percent rebound in U.S. durable goods orders underpinned the better mood.

Germany Opposes Any G-20 Fiscal Stimulus; Focuses on Reform

February 26, 2016 — 3:30 AM GMT
Germany’s finance minister opposed any fiscal stimulus plan from the Group of 20, whose top economic officials gather Friday, and instead sought to focus on structural reforms to strengthen national growth rates.
Wolfgang Schaeuble, speaking hours before meeting with his counterparts from the G-20 developed and emerging markets, also said that the space for monetary policy has been exhausted. He warned that using debt to fund growth just leads to "zombifying" economies.

"Talking about further stimulus just distracts from the real tasks at hand," Schaeuble said at a conference in Shanghai. German policy makers "do not agree on a G-20 fiscal stimulus package, as some argue in case outlook risks materialize."

Schaeuble’s stance potentially puts him in conflict with other G-20 members. Treasury Secretary Jacob J. Lew said in an interview before heading to Shanghai that the U.S. wants a more serious commitment from other G-20 nations to use monetary policy, fiscal measures and structural reforms to stoke demand. China’s finance chief said that his nation for its part will be expanding its fiscal deficit.

Carney Warns G-20 Against `Zero Sum Game' of Negative Rates

February 26, 2016 — 12:05 AM GMT Updated on February 26, 2016 — 5:00 AM GMT
Mark Carney warned his colleagues at major central banks against getting embroiled in a currency war by pushing interest rates too low, saying targeting weaker exchange rates only causes problems for the world economy.

In a speech at the start of a two-day gathering of Group of 20 finance ministers and central bankers in Shanghai, the Bank of England governor said nations can’t simply export their problems through currency depreciation and that there is “no free lunch.”

"It is critical that stimulus measures are structured to boost domestic demand, particularly from sectors of the economy with healthy balance sheets," Carney said in a speech in Shanghai Friday. "There are limits to the extent to which negative rates can achieve this."

Weak growth and muted inflation pressures have pushed central banks around the world to cut interest rates below zero. While G-20 meetings have usually agreed on the need to refrain from competitive devaluations, it’s become a more pressing issue with about a quarter of global output now produced in economies where rates are, as Carney put it, “literally through the floor.”

“For monetary easing to work at a global level it cannot rely on simply moving scarce demand from one country to another,” Carney said. “For the world as a whole, this export of excess saving and transfer of demand weakness elsewhere is ultimately a zero sum game.”

Investor concern about the ability of monetary authorities to boost demand has helped spur market turmoil this year. Carney said that while it’s a “myth” that central banks are out of monetary-policy ammunition, G-20 leaders need to urgently co-ordinate supply-side initiatives as they are falling short on previous pledges.

“Since the start of the year, risk sentiment in financial markets has deteriorated sharply, stemming in large part from a renewed appreciation of weak medium-term global growth prospects accompanied by marked downside risks,” Carney said. “The global economy risks becoming trapped in a low growth, low inflation, low interest-rate equilibrium.”

The Bank of Japan adopted negative interest rates this year and the European Central Bank has indicated it may ramp up its stimulus next month, with one option being cutting its deposit rate further below zero.

But lookout below when it all goes terribly wrong, and we’re not talking Brexit, which for the moment is under attack from an army of orchestrated scare stories.

Citi: Risk of global recession rising

The risk of the global economy falling into a recession is rising as fundamentals remain poor, analysts at Citigroup said in a note Wednesday.
"We are currently in a highly precarious environment for global growth and asset markets after two to three years of relative calm," Citigroup said, noting that global growth was "unusually weak" in the fourth quarter at around 2.0 percent on-year.
"The most recent deterioration in the global outlook is due to a moderate worsening in the prospects for the advanced economies, a large increase in the uncertainty about the advanced economies' outlook (notably for the U.S.) and a tightening in financial conditions everywhere," the bank said.
At the same time, fundamentals remain poor, including concerns about a structural and cyclical slowdown in China and its "unsustainable" currency regime, excessive leverage and rising regional risks, such as the risk the U.K. may exit the European Union, it said.
To be sure, Citigroup is defining a global recession as growth below 2 percent, differing significantly from the usual requirement of gross domestic product (GDP) falling for two consecutive quarters.

Nikkei 225 in `Eerie' Parallel to Lehman Prelude in 2008: Chart

February 25, 2016 — 2:56 AM GMT
Japan’s Nikkei 225 gauge is tracing chart patterns seen in the 12 months through April 2008. A series of Federal Reserve rate cuts that began in September 2007 appeared too late, Norihiro Fujito, a strategist at Mitsubishi UFJ Morgan Stanley Securities, says in an interview today. The Nikkei fell 36% in the remaining eight months of 2008. The “eerie” parallel is unnerving, and may continue should U.S. and Japanese policy makers take the wrong actions, he said, referring to the recent Fed rate hike and a planned increase in Japan’s consumption tax.
Brexit Thought of the Day.

"Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be a more productive than energy devoted to patching leaks."

Warren Buffett.

Brexit Quote of the Day.

Damn your principles! Stick to your party.

D. Cameron with apologies to Benjamin Disraeli.

At the Comex silver depositories Thursday final figures were: Registered 25.30 Moz, Eligible 130.56 Moz, Total 155.86 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Yesterday, suddenly the tide went out for Japan’s Sharp. Is Sharp another Japanese Olympus?
"Only when the tide goes out do you discover who's been swimming naked."
Warren Buffett.

Foxconn deal to buy Japan's Sharp in doubt after last-minute hitch

Thu Feb 25, 2016 8:37am EST
Taiwan's Foxconn put its takeover of electronics maker Sharp Corp on hold on Thursday after discovering previously undisclosed liabilities, sources said, throwing into doubt what was set to be the biggest takeover by a foreign firm in Japan's technology sector.
Loss-making Sharp announced earlier in the day that it had agreed to be bought by Foxconn, a contract manufacturing firm that is a major Apple Inc supplier.
But, in a separate statement issued just hours later, Foxconn said it would not sign until it had clarified terms in a "new key document" from Sharp. It did not elaborate.
Two sources with direct knowledge of the matter said the Japanese group had contingent liabilities that amounted to "hundreds of billions of yen".
That issue would have to be resolved before a deal could be finalised, said the sources, who spoke on condition of anonymity as the talks are confidential.
The sources did not elaborate on the nature of the liabilities or the exact amount. Reuters has not seen a copy of the document.
A spokesman for Foxconn, known formally as Hon Hai Precision Industry Co Ltd, declined to comment on the issue. Sharp also declined to comment.
The 11th hour delay throws into doubt a deal that would have marked the conclusion to five years of courting by Foxconn founder and billionaire Terry Gou and the opening of Japan's insular tech sector to foreign investment.
The loss-making display maker said earlier in the day that it would issue around $4.4 billion worth of new shares to give Foxconn a two-thirds stake. Foxconn's investment is set to total more than 650 billion yen ($5.8 billion), a separate source familiar with the matter said.
If a deal does go through, it would boost Foxconn's position as Apple Inc's main contract manufacturer and enable Sharp to start mass-producing organic light-emitting diode (OLED) screens by 2018, around the time Apple is expected to adopt the next-generation displays for its iPhones.
Foxconn sees ownership of Sharp as a way to better compete with Asian rivals such as Samsung Electronics Co.
"Sharp has the technology to build out the components to compete with Samsung as an Apple supplier, which means that with Sharp under its umbrella Foxconn can help Apple wean itself off Samsung," said Gavin Parry, managing director of Parry International Trading, a brokerage in Hong Kong.
"This gives Foxconn better pricing power with Apple," he added.
Before Foxconn's late statement, Sharp's stock tumbled to end 14 percent lower as the share dilution looked larger than expected, with traders noting that the proposed deal included the issuance of a class of shares that would be convertible next year.

Olympus scandal

The Olympus scandal was precipitated on 14 October 2011 when British-born Michael Woodford was suddenly ousted as chief executive of international optical equipment manufacturer, Olympus Corporation. He had been company president for six months, and two weeks prior had been promoted to chief executive officer, when he exposed "one of the biggest and longest-running loss-hiding arrangements in Japanese corporate history", according to the Wall Street Journal.[2] Tsuyoshi Kikukawa, the board chairman, who had appointed Woodford to these positions, again assumed the title of CEO and president.[3][4] The incident raised concern about the endurance of tobashi schemes, and the strength of corporate governance in Japan.

Apparently irregular payments for acquisitions had resulted in very significant asset impairment charges in the company's accounts, and this was exposed in an article in the Japanese financial magazine FACTA and had come to Woodford's attention. Japanese press speculated on a connection to Yakuza (Japanese organised crime syndicates).[5][6] Olympus defended itself against allegations of impropriety.

Despite Olympus' denials, the matter quickly snowballed into a corporate corruption scandal[7] over concealment (called tobashi) of more than 117.7 billion yen ($1.5 billion) of investment losses and other dubious fees and other payments dating back to the late 1980s and suspicion of covert payments to criminal organisations.[6][8][9][10] On 26 October, Kikukawa was replaced by Shuichi Takayama as chairman, president, and CEO. On 8 November 2011, the company admitted that the company's accounting practice was "inappropriate" and that money had been used to cover losses on investments dating to the 1990s. The company blamed the inappropriate accounting on former president Tsuyoshi Kikukawa, auditor Hideo Yamada and executive vice-president Hisashi Mori.

By 2012 the scandal had developed into one of the biggest and longest-lived loss-concealing financial scandals in the history of corporate Japan;[2] it had wiped 75–80% off the company's stock market valuation,[11] led to the resignation of much of the board, investigations across Japan, the UK and US, the arrest of 11 past or present Japanese directors, senior managers, auditors and bankers of Olympus for alleged criminal activities or cover-up,[12] and raised considerable turmoil and concern over Japan's prevailing corporate governance and transparency [13] and the Japanese financial markets. Woodford received a reported £10 million ($16 m) in damages from Olympus for defamation and wrongful dismissal in 2012;[11][14] around the same time, Olympus also announced it would shed 2,700 jobs (7% of its workforce)[15] and around 40 percent of its 30 manufacturing plants by 2015 to reduce its cost base.[16]
"On the whole central banksters want to be good, but not too good, and not quite all the time.”

With apologies to George Orwell.

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?

N America’s infant vanadium-redox flow battery market looking for a champion

24th February 2016
Toronto ( – While several industry players are jostling to take advantage of the budding North American vanadium-redox flow battery (VRB) market, barriers to entry, such as raw material cost and equipment availability, are still issues, making input costs prohibitive.

“The industry is still looking for a champion. If battery producers can commercialise economic VRB production, there’s no reason this technology couldn’t become a major segment of the utility battery market in the longer term,” Benchmark Mineral Intelligence consultant Andrew Miller explained to Mining Weekly Online.

He saw a bright future for VRBs in the stationary storage market; however, this would ultimately hinge on production costs.

VRB showed that it had significant potential in this part of the market and was touted by World Economic Forum founder Klaus Schwab in a presentation during the recent event held in Davos, Switzerland. He underlined that batteries were core to the fourth industrial revolution. ". . .

[E]nergy storage and batteries that will make this possible on a mass scale, are key to a fourth industrial revolution," he said on February 1.

In the US alone, grid connected energy storage had been estimated as a $150-billion opportunity. Goldman Sachs also recently estimated that VRBs were 50% lower in cost than lithium-ion batteries on a level cost of storage basis.

According to Navigant Research, VRBs were expected to make up almost 20% of global storage markets; growing at more than 35% through to 2025.

The VRB is a type of rechargeable flow battery that employs vanadium ions in different oxidation states to store chemical potential energy. The VRB leveraged the ability of vanadium to exist in solution in four different oxidation states and used this property to make a battery that had just one electroactive element, instead of two.

VRBs, which were inclined to be bulky in size, were most suitable for grid energy storage solutions, such as when connected to renewable energy plants or used to shave peak power costs.

“[VRB] hasn’t yet overcome the barriers to adoption, which lithium-ion cell producers are addressing at the moment with mass-scale capacity expansions and [a drive to bring] down the cost of production,” noted Miller.

The scarcity of components and inputs, such as the vanadium electrolyte (VE) had, in some cases, prompted battery developers to lease their vanadium in the battery, rather than selling it outright, as it could also be recovered and recycled, which was one of the significant benefits of the technology.

“We at Benchmark see the utility storage market where electric vehicles were five years ago. The industry is still relatively immature and it’s unclear how the technologies here will evolve over the coming years. What we think is certain is that the range of technologies will be much more diverse than in electric vehicles – providing an opportunity for VRB producers,” he advised.

Miller said that lithium-ion had become the predominant technology in mobile storage because it is best fit for the use: lightweight and dense enough to carry the required energy for a vehicle.

However, in utility energy storage applications, this would not be an issue, as the batteries did not move – they were stationary. “So while the falling costs of lithium-ion cells could potentially open up a massive new market, it may not be the most efficient technology for stationary applications,” said Miller.

Another weekend, and the G-20 have assembled in Shanghai to definitively decide once and for all, just how many angels can dance on the head of a 21st century pin. Whether the Dow can make 30,000 is riding on it in our ever more disconnected world of crony casino capitalism. Have a great weekend everyone. Be sure to check in for the weekend update.

Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.

Warren Buffett.

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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