Monday, 22 February 2016

There May Be Trouble Ahead!

Baltic Dry Index. 313 +06        Brent Crude 33.47

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

Brexit odds checker.

"We will not have any more crashes in our time."

John Maynard Keynes in 1927

We open with tales of gloom, gloom, and yet more gloom. Sadly though, the rising gloom is justified, though that’s not the spin you’ll get on mainstream media and bubblevision. Cue Fred Astaire.

China's Yuan Bears Predict More Trouble Ahead

February 21, 2016 — 4:00 PM GMT Updated on February 22, 2016 — 2:46 AM GMT
Before China’s devaluation in August roiled global markets and spurred some of the hedge fund industry’s biggest names to bet against the yuan, a small cohort of researchers saw the whole thing coming.

Now, some of those same forecasters are warning that there’s more turmoil in store -- and it’s not just China they’re worried about.

Asianomics Group Ltd.’s Jim Walker, who predicted the yuan’s four-year advance would end a month before the currency peaked in January 2014, is forecasting a U.S. recession and says 10-year Treasury yields will plunge to all-time lows. Raoul Pal, publisher of the Global Macro Investor report and a yuan bear since 2012, says European bank shares will tumble by half. John Mauldin of Millennium Wave Advisors, who has argued since 2011 that the Chinese currency should weaken, sees the risk of heightened geopolitical instability in the Middle East as lower crude prices strain the budgets of oil-rich countries.

While all three forecasters see scope for further declines in the yuan, they’re also emphasizing risks outside the Chinese economy as the outlook for world growth dims and commodities trade near the lowest levels in more than 15 years. Their bearish stance has gained traction in global markets this year, with share prices from New York to Riyadh and Sydney sliding as investors shifted into gold and sovereign bonds.

“There’s a storm of troubles coming,” Pal, a former hedge-fund manager at GLG Partners whose clients now include pension plans and sovereign wealth funds, said in a phone interview from the Cayman Islands. “The risk of a very bad outcome in 2016 and 2017 remains the highest probability.”

Investors who followed the advice of early yuan bears got a head start on what’s become one of the hedge fund industry’s most popular trades. After the August devaluation, managers including David Tepper of Appaloosa Management and Kyle Bass of Hayman Capital Management publicized their pessimistic views on the currency, while the cost of wagering on yuan declines in the options market -- as reflected in so-called risk reversals -- has more than doubled.

----When he looks beyond the Middle Kingdom, Walker says a contraction in the American economy will send 10-year Treasury yields to 0.5 percent by the second quarter of 2017, from 1.74 percent on Friday. He predicts gold will surge more than 60 percent to $2,000 an ounce this year as investors flock to haven assets.

“It’s not looking good for the U.S.,” he said in an interview in Hong Kong.

New market storm could catch euro zone unprepare

Sun Feb 21, 2016 3:03am EST
Distracted by an unresolved migration crisis and negotiations on keeping Britain in the European Union, euro zone leaders could be caught unprepared by a new storm on financial markets.

Global market turmoil since the start of the year has helped set warning lights flashing in euro zone sovereign bond markets. In early February, the premium that investors charge to hold Portuguese, Spanish and Italian government debt rather than German bonds hit some of the highest levels since the euro zone crisis that peaked in 2011-2012.

European bank shares have been badly hit by concerns over their high stock of non-performing loans, new regulatory burdens and a squeeze on profits due to sub-zero official interest rates New EU banking regulations that force shareholders and bondholders to take first losses if a bank needs rescuing are further spooking the market, notably in Italy.

All this comes at a time when public resistance to further austerity measures has surged all over southern Europe, producing unstable results at the ballot box.

Furthermore, the storm clouds are gathering above a tenuous and slow euro zone economic recovery - growth is officially forecast to reach 1.9 percent this year versus around 1.6 percent in 2015. Southern periphery countries all face budget problems that are fuelling political tension with Brussels.

Inflation is also refusing to perk up despite the European Central Bank's bond-buying program and negative interest rates, making it harder for heavily indebted euro zone countries to pay down debt.

Yet euro zone governments transfixed by differences over sharing out refugees, managing Europe's porous borders and accommodating British demands for concessions on EU membership terms have a huge amount on their hands already.

One French government adviser said the EU had never faced such an accumulation of crises in the last 50 years.

GM could cancel $1.6 billion investment in Brazil

Sun Feb 21, 2016 10:24am EST
General Motors Co (GM.N) will reconsider plans for new investment in Brazil if the economic and political situation does not improve, the company's president Dan Ammann said in an interview published on Sunday.

Brazil was until recently one of the world's five biggest auto markets, but it has sunk into the worst recession in 25 years and business confidence has been undermined by political uncertainty and a bid to impeach President Dilma Rousseff.

"I hope to see political and economic advances in the next six to 12 months, which would allow us to stick to our investment plan," Ammann told the Estado de S.Paulo newspaper.

Otherwise, GM would "re-evaluate," he said.

GM announced last year that it plans to invest 6.5 billion reais ($1.62 billion) in new products and technology in Brazil through to 2019.

But recession has hit the auto sector badly. Production of cars and trucks dropped 29.3 percent in January from a year earlier, the lowest for the month since 2003, and sales fell 38.8 percent, the lowest monthly total in almost nine years, according to the national automakers association Anfavea.

We close for today with the Brexit referendum campaign. Stay is in the lead as the campaign opens with a flurry of scare stories if Britain leaves. I expect a four plus month long campaign of increasingly dire scare stories on the dangers of leaving the dying, wealth destroying EUSSR.

"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."

Irving Fisher, Ph.D. in economics, Oct. 17, 1929

Boris Johnson exclusive: There is only one way to get the change we want – vote to leave the EU

David Cameron has done his very best, but a vote to Remain will be taken in Brussels as a green light for the further erosion of democracy

I am a European. I lived many years in Brussels. I rather love the old place. And so I resent the way we continually confuse Europe – the home of the greatest and richest culture in the world, to which Britain is and will be an eternal contributor – with the political project of the European Union. It is, therefore, vital to stress that there is nothing necessarily anti-European or xenophobic in wanting to vote Leave on June 23.

And it is important to remember: it isn’t we in this country who have changed. It is the European Union. In the 28 years since I first started writing for this paper about the Common Market – as it was then still known – the project has morphed and grown in such a way as to be unrecognisable, rather as the vast new Euro palaces of glass and steel now lour over the little cobbled streets in the heart of the Belgian capital.

----As new countries have joined, we have seen a hurried expansion in the areas for Qualified Majority Voting, so that Britain can be overruled more and more often (as has happened in the past five years). We have had not just the Maastricht Treaty, but Amsterdam, Nice, Lisbon, every one of them representing an extension of EU authority and a centralisation in Brussels. According to the House of Commons library, anything between 15 and 50 per cent of UK legislation now comes from the EU; and remember that this type of legislation is very special.

It is unstoppable, and it is irreversible – since it can only be repealed by the EU itself. Ask how much EU legislation the Commission has actually taken back under its various programmes for streamlining bureaucracy. The answer is none. That is why EU law is likened to a ratchet, clicking only forwards. We are seeing a slow and invisible process of legal colonisation, as the EU infiltrates just about every area of public policy. Then – and this is the key point – the EU acquires supremacy in any field that it touches; because it is one of the planks of Britain’s membership, agreed in 1972, that any question involving the EU must go to Luxembourg, to be adjudicated by the European Court of Justice.

The U.K. Wasn't a Real EU Member Anyway

24 Feb 20, 2016 1:41 PM EST By Leonid Bershidsky
One could argue -- and some, like UKIP leader Nigel Farage, already do -- that the concessions British Prime Minister David Cameron obtained late Friday from other European Union leaders in order to stay in the bloc are meaningless. Or one could rejoice in a victory as Cameron does. That won't change a fundamental fact: The U.K. is not really part of the EU anyway.

The negotiations that resulted in Friday's deal were an elaborate public-relations charade played out for Cameron's domestic audience and for the international media with its "EU is falling apart" narrative.

Cameron asked for the right to curtail benefits for migrant workers from other EU countries for 13 years, but he got seven years instead. Cameron asked for an effective veto over EU legislation but instead got an assurance that any such legislation will take into account the interests of countries that aren't part of Europe's monetary and banking unions. Cameron wanted an opt-out of the EU treaties' goal of an "ever closer union" and got a declaration explaining that this only applied to those countries that wanted it.

German Chancellor Angela Merkel said the deal demanded "a lot of willingness for compromise." Cameron promised to campaign "with all my heart and soul to persuade the British people to remain in the reformed European Union that we have secured today." Everybody went home, and now the U.K. will vote on June 23 on whether to stay in the EU. I have little doubt that it will go with Cameron: The rest of the referendum drama will be as decorative as the talks on Friday's deal were.

In reality, the U.K. was, and remains, about as much of an EU member as Switzerland -- which is not formally part of the union -- and, arguably, even less. The U.K. doesn't subscribe to the EU's common-borders policy or borderless free movement, described by the Schengen agreement. Meanwhile, Switzerland has borderless travel with EU countries.

----It suits everyone fine that the U.K. is an EU member in name only. Both sides need a free-trade regime. Germany and France are the second- and third-biggest trade partners of the U.K., together accounting for greater trade volumes than the No. 1 partner, the U.S. For Germany, the U.K. is the No. 3 trading partner; for France, it's No. 4. Undermining that would do no one any good. At the same time, the EU would look woefully incomplete without Europe's third-most-populous country (if one only counts states located entirely on the European continent). It's OK to do without Norway, but the U.K. would be too big to keep outside the European orbit.

“The United States have developed a new weapon that destroys people but it leaves buildings standing. It’s called the stock market.”

Jay Leno

At the Comex silver depositories Friday final figures were: Registered 28.91 Moz, Eligible 126.29 Moz, Total 156.20 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Not the usual suspects today. Today where World War Three may start, due to the recklessness of Turkey’s new corrupt “Sultan” Erdogan.

Turkey’s increasingly desperate predicament poses real dangers

Liz Sly February 20 at 7:09 PM

ISTANBUL — Turkey is confronting what amounts to a strategic nightmare as bombs explode in its cities, its enemies encroach on its borders and its allies seemingly snub its demands.

As recently as four years ago, Turkey appeared poised to become one of the biggest winners of the Arab Spring, an ascendant power hailed by the West as a model and embraced by a region seeking new patrons and new forms of governance.

All that has evaporated since the failure of the Arab revolts, shifts in the geopolitical landscape and the trajectory of the Syrian war.

Russia, Turkey’s oldest and nearest rival, is expanding its presence around Turkey’s borders — in Syria to the south, in Crimea and Ukraine to the north, and in Armenia to the east. On Saturday, Russia’s Defense Ministry announced the deployment of a new batch of fighter jets and combat helicopters to an air base outside the Armenian capital, Yerevan, 25 miles from the Turkish border.

Blowback from the Syrian war in the form of a string of suicide bombings in Istanbul and Ankara, most recently on Wednesday, has brought fear to Turkish streets and dampened the vital tourist industry.

The collapse of a peace process with Turkey’s Kurds has plunged the southeast of the country into war between Kurds and the Turkish military just as Syrian Kurds carve out their own proto-state in territories adjacent to Turkey’s border.

The economy is in the doldrums, hit by fears of instability and by sanctions from Moscow targeting such goods and revenue sources as Turkish tomatoes and tourism in retaliation for the downing of a Russian plane in November.

Worries that the tensions could escalate further are spreading, both in Turkey and in the international community, prompting French President François Hollande to warn on Friday that “there is a risk of war between Turkey and Russia.”

“Turkey is facing a multifaceted catastrophe,” said Gokhan Bacik, professor of international relations at Ankara’s Ipek University. “This is a country that has often had problems in the past, but the scale of what is happening now is beyond Turkey’s capacity for digestion.”

A rift with the United States, Turkey’s closest and most vital ally, over the status of the main Syrian Kurdish militia, the People’s Protection Units (YPG), has further exposed Turkey’s vulnerability. A demand by President Recep Tayyep Erdogan that Washington choose between NATO ally Turkey and the YPG, its main Syrian ally in the fight against the Islamic State, was rebuffed by the State Department this month, despite Turkish allegations that the YPG had carried out the bombing in Ankara.
On Saturday, Turkey dug in, demanding unconditional support from the United States. “The only thing we expect from our U.S. ally is to support Turkey with no ifs or buts,” Prime Minister Ahmet Davutoglu told journalists in Ankara.
Turkey now stands completely isolated, trapped in a maze of quandaries that are partly of its own making, said Soli Ozel, professor of international relations at Istanbul’s Kadir Has University.
“It has so alienated everyone it cannot convince anyone to do anything,” he said. “It is a country whose words no longer carry any weight. It bluffs but does not deliver. It cannot protect its vital interests, and it is at odds with everyone, including its allies.
----Sending troops into Syria, as Ankara has hinted it might, would risk a confrontation with Russia that Turkey would almost certainly lose. The downing of a Russian plane in November was, in retrospect, a major miscalculation, analysts say, one that has hamstrung Turkey’s ability to project its influence into Syria and prevented it from flying missions there, even in support of the U.S.-led coalition against the Islamic State.


US-backed militia groups now fighting each other in Syria

President Barack Obama's confused strategy in Syria means towns are now being fought over by different US-backed groups

If anywhere can show the consequences of American foreign policy under President Barack Obama, it may be the small town of Marea, north of Aleppo.

In the course of the last five years, it has seen Assad regime tanks roll through from the south, firing shells through its houses.

It has been repeatedly attacked from the east by Islamic State of Iraq and the Levant (Isil). On occasion it has been bombed from the air by the regime and shelled from the ground by Isil on the same day.

Now its rebel defenders are fighting Isil, the regime, Russian bombers, and a new enemy, the Syrian Kurdish militia the YPG, all at once.

America is calling for a ceasefire. But it is not clear whether even if one were declared, it would stop any of those enemies from attacking Marea.

----It is not new to say that the war in Syria has become a complex mess, spiralling out of control.
Analysts – and many American diplomats who have left the administration, some in disgust – say that the mess is a consequence of President Obama’s decision to support the rebellion against President Bashar al-Assad, but only half-heartedly.
He sent in weapons to support the rebels – including in Marea. But he also refused to confront Russia and the regime, who had far more weapons, leaving the rebels lightly armed sitting ducks.
Then he also decided to support the Kurds. He wanted them to fight Isil, which they did, but they also took on anyone else who stood in the way of a Kurdish mini-state in northern Syria, and that now means rebel areas like Marea, north of Aleppo, which is between that mini-state’s western and eastern halves.

As a result, the town is being fought over by two western proxies. It is not surprising that Mr Obama wants a ceasefire.

This crash is not going to have much effect on business."

Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929

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?

What Does the JPMorgan Chase/Current LED Deal Say About the Future?

February 19, 2016 By Carl Weinschenk

The deal announced yesterday between Current – GE’s energy-focused startup – and JPMorgan Chase & Co. for a massive LED replacement project has the feel of being something of a milestone.

One thing that is for certain is that it’s about more than the LEDs. And that’s saying a lot: The deal, according to the company, is the “world’s largest single-order LED installation to date.” It could cover 25 million square feet at about 5,000 branches and has the potential to reduce the light-related energy use at the branches by more than half.

That’s an impressive LED project that would be significant news if that was it. But there is more – a lot more – suggested by the move. In short, this is an early example of a diverse and powerful energy-related company establishing a toehold for services that almost certainly will go far beyond its initial efficient lighting mandate. That mandate, however, likely will more than pay for the rollout.

What seems to be happening is that deep ecosystems are forming. There are two other elements of the press release that show GE is looking at even a bigger picture than re-lighting 25 million square feet. The steps are important – as is the fact that GE saw fit to put them in the same press release as the LED news.

The first is that GE is working with Capegemini, which provides access to more than 200 developers. That’s a lot more developers than are needed to figure out how to turn lights on and off:

The developers will be focused on creating software solutions that will help commercial and industrial customers reduce power consumption, generate power onsite, and drive new revenue streams through the use of sensors and networked systems in buildings and cities.

The second element is that Current is working with Intel on intelligent streetlamps. The lights will use Intel’s IoT platform, which “will process large and evolving data loads quickly with the reliability and flexibility demanded by cities today.”
Thus, the idea is that the deal could be the harbinger of the meshing of corporate and municipal LEDs, controlled by sophisticated software written by Capegemini and feeding the collected data back to GE’s Predix analytic cloud.
There are a lot of pieces to this, and how precisely how the vision is realized remains to be seen. The bottom line, however, is that it is clear that there is a massive transition underway. The deal announced by GE and JPMorgan Chase is another sign that the players are starting to coalesce in ecosystems that will create a fabrics that will control energy, among many other things.
LEDs are uniquely positioned. The business and environmental cases are well established, so return on investment and time to payback for the replacements of legacy lighting is clear. The cost of including IoT functionality that allows the gear to go beyond lighting seems to be incidental. On top of that, lighting is ubiquitous: It is needed in homes, on the streets and in businesses. It thus is the perfect touchpoint for the meshes these companies seek to create

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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