Thursday, 25 February 2016

The G-20 Meets Tomorrow.

Baltic Dry Index. 322 +04        Brent Crude 34.36

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

Brexit odds checker.

“We all know what to do, but we don’t know how to get re-elected once we have done it.”

Jean-Claude Juncker. Failed Luxembourg Prime Minister and ex-president of the Euro 
Group of Finance Ministers. Confessed liar. EC President.

The G-20 meets tomorrow in Shanghai, amid increasing signs that the global economy is in deep trouble, with America, China and the EU all showing signs of a new recession, a hard landing, and stagnation, respectively. Will the G-20 meeting be able turn things around? Will the assembling alchemists finally turn lead into gold? Will the Great Nixonian Error of fiat money, communist money, have a happy ending after all? With NIRP replacing ZIRP and a new war on cash money by our central banksters developing, that doesn’t seem likely or even possible. Our alchemists are all too likely to be still left with lead.

China stocks dive in run-up to G20 meeting

Published: Feb 24, 2016 11:25 p.m. ET
Stocks in China fell sharply Thursday amid persistent worries about the health of the Chinese economy, just as global leaders prepare to meet tomorrow in Shanghai for the Group of 20 meeting.

The Shanghai Composite Index SHCOMP, -4.08%   slid during Thursday morning’s trading session, last off 3.6% at 2823.06. Stocks in military defense, construction and computer manufacturing slumped on profit-taking, said analysts.

The Shenzhen Composite Index 399106, -5.06%   dropped 4.76% and China’s Nasdaq-style ChiNext board was down 5%.

Elsewhere in the region, shares were mixed. The Hang Seng Index HSI, -1.24%   was down 1.2%, Australia’s S&P/ASX 200 XJO, +0.13%   was flat, but Japan’s Nikkei Stock Average NIK, +1.65%   up 0.6%. Meanwhile, South Korea’s Kospi SEU, +0.11%   was roughly flat.

Chinese “retail investors haven’t recovered from the stock market disaster early this year while institutions are incentivized to take profits once market recovers a bit,” said Zhang Xin, an analyst at Guotai Junan Securities. Transactions in Shanghai and Shenzhen fell below 600 billion yuan on Wednesday to 579.6 billion yuan, indicating low risk appetite.

The steep fall in Shanghai comes after the benchmark surged late in the session Wednesday. Investors had been watching for Beijing to unveil pilot programs aimed at improving state-owned enterprises.

A total of 960 billion yuan of reverse repurchase agreements — a kind of short-term loan to commercial banks — are due to mature this week, squeezing liquidity from the market. The People’s Bank of China withdrew 455.5 billion yuan of short-term loans from the financial system last week, the highest weekly net withdrawal level in three years.

Weidmann warns ECB against further easing

Published: Feb 24, 2016 6:05 a.m. ET
FRANKFURT--European Central Bank Governing Council member Jens Weidmann expressed reservations Wednesday about further expansionary monetary policy to combat very low rates of inflation in the currency bloc.
According to prepared remarks to present the annual report of the Deutsche Bundesbank, which he heads, Mr. Weidmann said "it would be dangerous to simply ignore" the longer-term risks and side effects of loosening already highly accommodative policy.
The Bundesbank head said that he isn't worried about very low inflation rates being passed through to the economy via lower wage growth, or what is called "second round effects." He said that some observers see current, "relatively low euro-area wage growth rates as a warning signal. However, I regard such fears as far-fetched at the moment," he said.
"Some countries will have to increase their price competitiveness further in order to recoup lost global market share. However, this means that wages in those countries will have to lag behind productivity growth," he said.
The comments from perhaps the ECB's most outspoken critic of very accommodative policy provide further evidence that ECB head Mario Draghi may have a tough time garnering unanimity for any effort to further expand the central bank's accommodative monetary policy.
The ECB is expected to cut its deposit rate further into negative territory beyond the minus 0.3% where it sits now, as well as expanding its bond buying program beyond the EUR60 billion ($66.12 billion) a month of mostly government bonds that it has purchased since last March.
Due to the central bank's voting rotation system, Mr. Weidmann won't have a vote at the March meeting.

New home sales sink 9.2% to 494,000 annual rate

Published: Feb 24, 2016 10:02 a.m. ET
Sales of new homes plummeted 9.2% to a seasonally adjusted annual rate of 494,000 in January, the Commerce Department said Wednesday.
January’s figure was the lowest since October and missed forecasts of a 520,000 annual rate from economists surveyed by MarketWatch. It was 5.2% lower than the same period a year ago.
The decline was led by a 32.1% plunge in sales in the West. Sales ticked up in the Northeast and South, and fell 5.9% in the Midwest.
The median price paid in January was $278,800, down from a revised $295,800 in December. There was 5.8 months’ worth of homes available for sale during the month, the most since September.

Biggest Wave Yet of U.S. Oil Defaults Looms as Bust Intensifies

February 25, 2016 — 2:15 AM GMT
In less than a month, the U.S. oil bust could claim two of its biggest victims yet.

Energy XXI Ltd. and SandRidge Energy Inc., oil and gas drillers with a combined $7.6 billion of debt, didn’t pay interest on their bonds last week. They have until the middle of next month to either pay the interest, work out a deal with their creditors or face a default that could tip them into bankruptcy.

If the two companies fail in March, it would be the biggest cluster of oil and gas defaults in a month since energy prices plunged in early 2015.

"We’re just beginning to see how bad 2016 is going to be," said Becky Roof, managing director for turnaround and restructuring with consulting firm AlixPartners.

Debt-Fueled Boom

The U.S. shale boom was fueled by junk debt. Companies spent more on drilling than they earned selling oil and gas, plugging the difference with other peoples’ money. Drillers piled up a staggering $237 billion of borrowings at the end of September, according to data compiled on the 61 companies in the Bloomberg Intelligence index of North American independent oil and gas producers. U.S. crude production soared to its highest in more than three decades.

Oil prices have now fallen more than 70 percent from a 2014 peak, and banks and bondholders are fighting for scraps. Bond prices reflect investors’ fears. U.S. high yield energy debt lost 24 percent last year, the biggest fall since 2008, according to Bank of America Merrill Lynch U.S. High Yield Indexes.

Both Energy XXI and SandRidge could still reach an agreement with creditors that will give them time to turn their businesses around. SandRidge said last week that it missed a $21.7 million interest payment. The company owes $4.2 billion, including a fully-drawn $500 million credit line. Energy XXI, which owes $3.4 billion, said in a filing last week that it missed an $8.8 million interest payment.

We end for the day with the best Brexit news yet. President Obama is about to lecture British voters to stay in the EU, because it’s in America’s interest for us Brits to stay in the EUSSR. Presumably being born in Kenya brings with it the right to boss Brits around. Presumably EU Cameron will in turn lecture American voters not to vote for the Casino Man. 

The Brexit debate gets sillier with each passing week. In or out, Britain will do very well, though in the short term largely depending on how the global economy does. And Britain has no right to tell Americans how to vote in the November election.

Brits are generally an enterprising, innovative, entrepreneurial, inventive, well educated, hard working lot, with a well developed sense of fair play and care of the poor and the needy. In or out that is not going to change. But if America, or the global economy stumbles into recession, Britain along with the EUSSR will stumble with it too.  That is just a feature of our largely integrated modern world. Each British voter should merely vote as they best see their own self interest and that of their children. In or out, GB will still remain a member of NATO, the UN, the IMF, the World Bank, the BIS, the WTO, the Commonwealth, and many more cooperative modern institutions. The sky won’t fall no matter how many silly Brexit scare stories are spun by special interests.

We did not conceive it possible that even Mr Cameron would produce a paper so slipshod, so loose-joined, so puerile, not alone in literary construction, but in its ideas, its sentiments, its grasp. He has outdone himself.

With apologies to the Chicago Times and the Gettysburg Address.

America, Stay Out of Britain's EU Debate

10 Feb 24, 2016 2:00 AM EST
President Barack Obama plans to deliver a message to the British people: Stay in the European Union and say no to “Brexit.” That’s what Bob Corker, the Republican chairman of the Senate Foreign Relations Committee, says he has been led to expect.

At a hearing earlier this month, his committee heard from two witnesses who had served in the Bush and Obama administrations. Both of them urged the U.S. to make it clear, as Britain prepares to vote on its membership in the EU, that Americans want it in.

As if the U.S. message wasn't clear already. The Obama administration’s mantra is that we want “a strong United Kingdom in a strong European Union.” It has even hinted that it would not sign a trade agreement with Britain if it left the EU.

Support for deeper British involvement in a more and more united Europe has been a bipartisan American policy since the early days of the Cold War. But it is time for us to back off. The British do not need the U.S. government’s advice on how to vote on their referendum. Moreover, the case that their staying in the EU advances U.S. interests is weak.

Perhaps the most common argument for European unity you hear in the U.S. is that it has kept the peace on a formerly war-torn continent. But this seems like a straightforward case of confusing cause and effect: Peace, backstopped by American security guarantees, is what allowed the European Union to form and develop.

The witnesses at that hearing warned that a British exit would reduce the influence of a strong ally of ours within the EU, and even in the world as a whole. This argument begins with the accurate assessment that we have a tighter and friendlier relationship with Britain than with France, Germany or other European countries.

But an important implication of that argument went unmentioned: Britain might become less pro-American the more it assimilates into Europe. From the standpoint of U.S. interests, there’s a trade-off. It can’t simply be assumed that further British integration into Europe is good for us. Britain has in recent years been the most frequently outvoted member of the European Union, and by a large margin, suggesting that the value of its influence may not be very high for itself, let alone for us.

Brexit Quote of the Day.
“Cameron: No more backbone than a chocolate éclair.”

With apologies to Teddy Roosevelt.

At the Comex silver depositories Wednesday final figures were: Registered 25.29 Moz, Eligible 129.97 Moz, Total 155.25 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Below, will Ireland repeat 2008?

Russian Bank Collapse Shines Light on Risks in Irish Shadows

February 24, 2016 — 2:01 AM GMT
Based in a drab office building in Dublin down the road from a pub frequented by Prime Minister Enda Kenny, VPB Funding Ltd. had no employees but one function: selling bonds. In 2013, it issued $225 million of unsecured notes.
The proceeds of that sale were funneled to Vneshprombank Ltd., a Moscow lender whose license was revoked last month when Russian authorities accused management of pilfering its assets and falsifying accounts. VPB’s notes have plunged to pennies on the dollar.
The entanglement of an obscure Dublin firm in the woes of a lender 2,000 miles away shows why Irish officials have begun shining a light on special purpose vehicles like VPB, unregulated entities that borrow on behalf of corporations throughout the world. The Irish capital, home of Europe’s costliest banking meltdown, remains a hub for the sort of opaque operations that contributed to the global financial crisis, threatening risks that policy makers are seeking to stamp out.
“There’s concern that Irish SPVs are exporting risk to other financial systems around the world and could have contagion effects,’’ said Shaen Corbet, a lecturer in finance at Dublin City University.
SPVs fall under the heading of shadow banking -- lending by entities outside the traditional banking industry. Ireland ranks with China as the biggest center for nonbank finance firms after the U.S. and the U.K., with 2.3 trillion euros ($2.6 trillion) of assets, based on a survey by the Financial Stability Board, a group of global regulators. The nation’s shadow-banking system -- including hedge funds, mutual funds and insurers -- is more than 10 times the size of the economy.
While most of the network falls under the purview of authorities in Ireland or elsewhere, unregulated vehicles -- including SPVs -- account for an estimated half a trillion euros, the survey found.
Gareth Murphy, who heads the Irish central bank’s markets-supervision unit, said authorities must increase cooperation in circumstances where a Dublin-based SPV, for example, is linked to “a German bank or a French bank which is prudentially regulated elsewhere.”
“Monitoring of the full financial landscape wasn’t good enough,’’ Murphy, who formerly worked at JPMorgan Chase & Co. and the Bank of England, said in an interview. “One of the lessons of the financial crisis is that a narrow, inwardly focused approach to the pursuit of one’s regulatory mandate really doesn’t work because of the global nature of financial services.”
The scenario has played out before. In 2007, Germany’s Landesbank Sachsen Girozentrale needed a 17 billion-euro emergency credit line from a group of German banks after its Dublin-based SPVs, loaded with toxic assets, were unable to pay their debts.
There are three kinds of lies: lies, Euro lies, and Irish statistics.
With apologies to Benjamin Disraeli.

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?

Researchers use 3D printing to make ultrafast graphene supercapacitor

February 22, 2016 by Tim Stephens
Scientists at UC Santa Cruz and Lawrence Livermore National Laboratory (LLNL) have reported the first example of ultrafast 3D-printed graphene supercapacitor electrodes that outperform comparable electrodes made via traditional methods. Their results open the door to novel, unconstrained designs of highly efficient energy storage systems for smartphones, wearables, implantable devices, electric cars and wireless sensors.

Scientists at UC Santa Cruz and Lawrence Livermore National Laboratory (LLNL) have reported the first example of ultrafast 3D-printed graphene supercapacitor electrodes that outperform comparable electrodes made via traditional methods. Their results open the door to novel, unconstrained designs of highly efficient energy storage systems for smartphones, wearables, implantable devices, electric cars and wireless sensors.

Supercapacitors also can charge incredibly fast, Zhu said, in theory requiring just a few minutes or seconds to reach full capacity. In the future, the researchers believe newly designed 3D-printed supercapacitors will be used to create unique electronics that are currently difficult or even impossible to make using other synthetic methods, including fully customized smartphones and paper-based or foldable devices, while at the same time achieving unprecedented levels of performance.

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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