Baltic Dry Index. 298 - 05 Brent Crude 34.45
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
“God created war so that Americans would learn geography.”
Mark Twain
We end for the week with Turkey preparing to invade Syria according to Russia. If Turkey invades, NATO isn’t bound to defend Turkey if Russia defends Syria and its own forces in Syria. Each NATO member is only obligated to defend an attacked NATO member not an attacker. Russia would probably take any war right back into Turkey. Not that anyone in Washington, London, or Brussels seems to care. It's Superbowl weekend in America. If a real shooting war breaks out, expect Turkey’s currency and economy to collapse. More economic migrants headed for Germany. Will greater Kurdistan finally get its chance?
In better news, the price of crude oil would probably rise.
“War is peace. Freedom is slavery. Ignorance is strength.”
George Orwell, 1984
Russia and Turkey trade accusations over Syria
Russia said on Thursday it suspected Turkey was preparing a military
incursion into Syria, as a Syrian army source said Aleppo would soon be
encircled by government forces with Russian air support.
Turkey in turn accused Moscow of trying to divert attention from its own
"crimes" in Syria, and said Aleppo was threatened with a "siege
of starvation". It said Turkey had the right to take any measures to
protect its security.
In another sign of the spreading international ramifications of the
five-year-old Syrian war, Saudi Arabia said it was ready to participate in
ground operations against Islamic State in Syria if the U.S.-led alliance
decided to launch them.
The United Nations on Wednesday suspended the first peace talks in two
years, halting an effort that seemed doomed from the start as the war raged
unabated. Washington said on Thursday however it was hopeful they would resume
by the end of the month, and Russia said it expected that no later than Feb.
25.
Donors convened in London to tackle the refugee crisis created by the
conflict. British Prime Minister David Cameron said they raised $11 billion for
Syrian humanitarian needs over the next four years.
Turkey said at the conference up to 70,000 refugees from Aleppo were
moving toward the border to escape air strikes.
Footage online showed hundreds of people, mostly women, children and the
elderly, marching towards Turkey's Onucpinar border gate, carrying carpets,
blankets and food on their backs.
Four months of Russian air strikes have tipped the momentum of the war
Assad's way. With Moscow's help and allies including Lebanon's Hezbollah and
Iranian fighters, the Syrian army is regaining areas on key fronts in the west.
Russia's defense ministry said it had registered "a growing number
of signs of hidden preparation of the Turkish Armed Forces for active actions
on the territory of Syria".
Any Turkish incursion would risk direct confrontation between Russia and
a NATO member.
Morehttp://www.reuters.com/article/us-mideast-crisis-syria-idUSKCN0VC169
Next, as China goes off on a week long holiday for the lunar New Year, today apparently is the world’s busiest travel day, we take another look at greatly troubled China. Facing the inevitable sinking float ahead, will China throw in the towel and devalue the Yuan in the week ahead?
“I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones.”
Albert Einstein
SocGen claims China is only months away from burning through its currency reserves
Published: Feb 4, 2016 1:47 p.m. ET
Beijing may be forced to float the yuan within six months
China is burning through its foreign-currency reserves at such a
blistering pace that the country will run down its cushion in a few months,
forcing the government to wave the white flag and float the yuan, says Société
Générale global strategist Albert Edwards.
“The market remains content that massive firepower remains to support
the renminbi. It does not,” Edwards, a perma-bear with a propensity for
doom-and gloom-prognoses, said in a report published Thursday.
Société Générale, using the International Monetary Fund’s rule of thumb
on reserve adequacy, estimates that China’s foreign-currency reserves are at
118% of the recommended level. But that cushion is likely to evaporate soon on
a combination of capital flight and the continuing effort by financial authorities
to stem a dramatic drop in the currency.
China’s reserves totaled $3.33 trillion in December, according to
official government data. Edwards estimated that China’s foreign-exchange
reserves fell by about $120 billion in January, a trend that is likely to
continue in the foreseeable future.
“When foreign exchange reserves reach $2.8 trillion—which should only
take a few more months at this rate—foreign exchange reserves will fall below
the IMF’s recommended lower bound,” he said.
That is likely to trigger a “tidal wave of speculative selling,” which
in turn will force the People’s Bank of China to allow the yuan to freely float
within six months.
The yuan currently moves within a trading band set by the People’s Bank
of China that the central bank can change at will.
“We estimate that if capital outflows maintain their current pace, the
PBoC would be unable to defend the yuan for more than two to three quarters,”
Wei Yao, Société Générale’s China economist, said in a report published earlier
this month.
“China’s reserves have already fallen by $663 billion from mid-2014, and
a further decline of this scale would start to severely impair the Chinese
authorities’ ability to control the currency and mitigate future balance of
payments,” she said.
Morehttp://www.marketwatch.com/story/socgen-claims-china-is-only-months-away-from-burning-through-its-currency-reserves-2016-02-04?dist=tcountdown
And in oil news, the bad news just keeps getting badder. Probably time to trot out rumours once again, of Russia and the Saudis about to cut production. They’re not, no matter how many times desperate US oil frackers run out the bull story. Neither want to gift market share to Iran and Iraq, nor bailout Uncle Scam’s frackers. In the oil patch, chaos and anarchy are now the rule. Get ready for a tidal wave of bankruptcies in 2016.
“It
is forbidden to kill; therefore all murderers are punished unless they kill in
large numbers and to the sound of trumpets.”
Voltaire
Battle of Three Oil Benchmarks Upending Crude Flows Across Globe
February 4, 2016 — 11:52 PM GMT Updated on February 5, 2016 — 4:00 AM
GMT
The oil tanker Tofteviken is set to sail from the U.K. this month
carrying the first shipment of North Sea Ekofisk crude to the U.S. Gulf Coast
in five years.
More than 7,000 miles away, the Syros Warrior is due to deliver Siberian
oil to the Chinese port of Qingdao, part of a record surge of cargoes that’s
helped Russia overtake Angola as the Asian nation’s second-biggest supplier.
Back in Texas, a tanker of crude is scheduled to sail for China in what will be
one of the first shipments to leave the U.S. after an export ban was lifted.
These journeys illustrate how the global oil market has been upended by
the collapse in prices that was triggered in 2014 by the U.S. shale boom.
They’re a reflection of the fluctuating relationship between the three global
crude benchmarks being buffeted by a glut of supplies from producers determined
to keep their taps open.
“Increased volatility in spreads among three benchmarks is eroding the
stable relationships buyers used to maintain with sellers,” said Hong Sung Ki,
a Seoul-based commodities analyst at Samsung Futures Inc. “Ultimately, this
will further intensify the price war among oil producers as they compete
against one another to maintain market share. When spreads fluctuate, it often
changes the flow of oil trade.”
The cost of crude from around the world is typically linked to the price
of regional benchmarks. West African oil, for example, gets its value from
North Sea Brent, while supplies from the Middle East are linked to the Dubai
grade and U.S. crude to West Texas Intermediate. Changes in the relative value
of those benchmarks therefore decide what crude goes where.
The gap between Dubai and Brent prices, reflected in a spread known as
the exchange of futures for swaps or EFS, widened to as much as $4.55 a barrel
on Jan. 5, making the Middle East grade the cheapest in 1 1/2 years relative to
North Sea crude, data from PVM Oil Associates Ltd. show. It was as little as 60
cents in July 2015, the smallest in five years.
----The
widening spread helps explain why China’s buying more Siberian crude, linked to
Dubai, than Angolan oil, which is linked to Brent. Russia’s shipments to China,
the world’s second-biggest oil consumer, jumped 28 percent last year to 42.4
million metric tons, with December exports reaching a record, customs data from
the Asian nation show.
MoreCiti: 'We Should All Fear Oilmageddon'
A feedback loop of the U.S. dollar, crude, capital flows, and emerging markets.
February 5, 2016 — 2:39 AM GMT
Markets are currently in a well-oiled "death spiral,"
according to Citigroup Inc. analysts led by Jonathan Stubbs."It appears that four inter-linked phenomena are driving a negative feedback loop in the global economy and across financial markets," the analysts write, citing the resilient U.S. dollar, lower commodities prices, weaker trade and capital flows, and declining emerging market growth.
"It seems reasonable to assume that another year of extreme moves in U.S. dollar (higher) and oil/commodity prices (lower) would likely continue to drive this negative feedback loop and make it very difficult for policy makers in emerging markets and developing markets to fight disinflationary forces and intercept downside risks," the analysts add. "Corporate profits and equity markets would also likely suffer further downside risk in this scenario of Oilmageddon."
Their case is bolstered by a collection of charts showing the linkages between the four factors cited above, including the importance of lofty oil prices to the ready supply of petrodollars circulating in the world economy and flowing to financial assets. Oil exporters have enjoyed more than $6 trillion flowing into their current accounts, according to Citi's estimates, implying some $4 trillion of capital in sovereign wealth funds (SWFs).
"In turn, this is likely to put pressure on SWF and broader emerging market liquidity as governments and emerging market economies would need to 'lean' on reserves in order to maintain economic, political and social stability. This has clear feedback loops across emerging markets."
More
http://www.bloomberg.com/news/articles/2016-02-05/citi-we-should-all-fear-oilmageddon
Oil Seen `Lower for Longer' by Morgan Stanley as Forecasts Cut
February 4,
2016 — 6:48 AM GMT
Low oil prices will persist for longer than previously expected, according
to Morgan Stanley, which reduced its quarterly crude forecasts for this year by
as much as 51 percent.Morgan Stanley now sees oil mostly falling through 2016, compared with a previous outlook for prices to rise each quarter, analysts including Adam Longson said in a report Thursday. Brent crude is expected to average $29 a barrel in the three months to December, compared with an estimate for $59 in a Jan. 18 note.
“Weaker-than-expected demand, higher-than-expected supply, rising inventories and increased hedging incentives all work to delay rebalancing, and slow the rise in prices immediately thereafter,” Longson wrote in the Feb. 4 report.
Venezuela said five other members of the Organization of Petroleum Exporting Countries would join non-OPEC producers Russia and Oman should an extraordinary meeting be called. There are growing calls for producers around to world to act to stem the decline in oil prices, which plunged to the lowest level in more than a decade last month. OPEC effectively abandoning its production ceiling in December and Russia pumping at a record is exacerbating a global glut, with U.S. inventories at the highest level since 1930 as the nation’s shale fields remain resilient.
Morgan Stanley expects Brent to average $31 a barrel in the first three months of this year and $30 in the second and third quarters. This compares with earlier targets of $42, $45 and $48, respectively. The contract for April settlement rose 32 cents, or 0.9 percent, to $35.36 a barrel at 2:10 p.m. Singapore time.
http://www.bloomberg.com/news/articles/2016-02-04/oil-seen-lower-for-longer-by-morgan-stanley-as-forecasts-cut
Texas Isn't Scared of $30 Oil
February 3,
2016 — 9:01 PM GMT Updated on February 4, 2016 — 6:39 AM GMT
Texas has a message for $30 crude doomsayers: Bring it on.
A handful of shale patches in the state, which would be the world’s
sixth-largest oil producer if it were a country, are profitable with crude
below $30 a barrel, according to an analysis by Bloomberg Intelligence. In the
Eagle Ford’s DeWitt County, which produced more than 100,000 barrels a day in
November, the average well can be profitable with U.S. benchmark crude at
$22.52 a barrel, $4 below the lowest level this year.
Drive 200 miles southwest to Dimmit County, and drillers need $58 oil.
The wide range of break-evens, a term for the price at which a well goes from
profitable to unprofitable, illustrates one reason why shale production from
exploration and production companies has been more resilient than expected,
filling storage tanks in the U.S. to levels not seen in 85 years.
“It may be harder to kill many U.S. E&Ps than analysts originally
thought,” Bloomberg Intelligence analyst William Foiles said in the
presentation. “The wide range of break-evens undermines efforts to come up with
a single threshold for U.S. shale producers.”
Since prices started falling in June 2014, U.S. shale drillers have
dodged countless death warrants by cutting costs, experimenting with new
techniques and technology and boosting output to keep their wells competitive.
Morehttp://www.bloomberg.com/news/articles/2016-02-03/texas-toughness-in-oil-patch-shows-why-u-s-still-strong-at-30
“Older men declare war. But it is youth that must fight and die.”
Herbert Hoover
At the Comex silver depositories Thursday final
figures were: Registered 28.53 Moz, Eligible 127.74 Moz, Total 158.27
Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Ding, ding, ding, today move over Bernie, make way
for China’s Ponzi Ding Ning. State sponsored or not, and nearly everyone
thought that he was, Ding Ning managed to lose far more people their life
savings and far faster, than anything America’s Madoff accomplished in a
lifetime of theft.
It’s a Chinese Ponzi scheme that should really scare us
Forget Bernie Madoff - China's Ding Ning is the face of an industry which is beginning to crumble
----But, while the fascination with that Ponzi scheme is undiminished almost eight years on, the spotlight on a similar fraud has dimmed after just a few days.This is despite the fact that the Ezubao scheme, which has been uncovered in China, could have far bigger ramifications than anything Madoff did.
The 34-year-old Ding Ning only founded Ezubao in 2004. But he was quick to manoeuvre his business into the heart of Chinese society.
Last year, Ezubao, a peer-to-peer lending platform which claimed to match investors with companies looking for finance, sponsored the online broadcasts of the National People’s Congress by a subsidiary of state-owned news agency Xinhua.
With its logo adorning the Great Hall of the People in Beijing, how could savers doubt it was a trustworthy brand? Ding also managed to secure advertising slots on state-owned CCTV.
He also encouraged employees to make ostentatious displays of opulence. In November, some 800m RMB (£83.5m) was distributed to staff, in part to ensure they wore designer clothes and jewellery to work and made the company look more successful.
But Ding’s “perp’” walk on Chinese state television this week – following his arrest along with 20 fellow executives – suggests Ezubao was nothing more than a financial house of cards.
One of the company’s executives has since been reported as saying that
95pc of the projects it claimed to invest in were fake. Reports suggest that
some 880,000 people have collectively lost £5.3bn after falling for Ding’s
hype.
The lessons of Ezubao are far more important than those of the Madoff
fraud. This wasn’t wealthy individuals taking advantage of the greed of other
wealthy individuals; this was a near-state sponsored company capitalising on
Chinese citizens who could least afford to lose their money.
Ezubao’s customers appear to have been from rural areas. More than 1,000
sales agencies were opened across the country to promote the company in local
communities.
It is these investors who began protesting in December after the
business’s activities were first suspended – protests which went largely
unreported in Western media.
And Ezubao might just be the tip of the proverbial iceberg when it comes
to fraud among China’s burgeoning wave of financial technology players.
Last March, Dagong, China’s credit rating agency, warned that some 1,250
online financial platforms were at risk of going bankrupt. Its president, Xu
Zhipeng, cautioned that “a storm of credit risks is brewing in the peer-to-peer
lending industry”, which had grown threefold the previous year to $17bn.
In November, a Chinese financial website reported some 79 online lenders
had problematic business activities, up from 32 a month earlier.
That same month, and not before time, the Chinese government
acknowledged internet finance for the first time in its 13th five-year plan.
This followed attempts by the People's Bank of China to begin regulating the
sector.
More
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?
Cheaper, longer-lasting perovskite solar cells could be on the way
February 2, 2016
Perovskite solar cells are one of the most exciting green energy
technologies to emerge in recent years, combining low cost with high energy
conversion rates. Now, researchers at the Swiss Federal Institute of Technology
in Lausanne (EPFL) have found a way to cut their cost even further by
developing a charge-carrying material that is much cheaper, highly efficient,
and could even help address the technology's current major weakness by
significantly lengthening the lifespan of the panels.Record efficiencies for solar cells tend to grab all the headlines, but it is other less flashy metrics – such as price per watt – that provide a much fairer assessment of whether a new technology can produce clean energy on the global scale. Perovskite solar cells excel in this area by combining low cost with efficiencies that have already surpassed the 20 percent mark, rivaling standard silicon-based panels while also being, according to a recent study, easier on the environment than any of the best-known alternatives in the solar arena.
But before perovskite cells can make it to mass production, one big issue still remains to be addressed: the outer shell of the panel, the function of which is to conduct electric charge, is made from organic compounds that will quickly wither away in real-life conditions, cutting the life of the cell to a few short months.
Researchers led by Mohammad Nazeeruddin at EPFL have now developed a new inorganic conductive material for perovskite cells that is cheaper, still allows for high energy conversion rates and, more importantly, offers plenty of wiggle room for experimentation, paving the way for longer-lasting, cost-effective perovskite panels.
The new material, dissymmetric fluorene–dithiophene (FDT), is said to cost less than one fifth to synthesize than previous compounds (US$60 versus $500 per gram) while still retaining a very competitive energy conversion rate of 20.2 percent.
"The previous material (Spiro) was rather difficult to synthesise and purify in large scale, preventing perovskite solar cells market penetration," Nazeeruddin told Gizmag. "It is also well known in the literature that the stability of Spiro is limited. We are doing stability measurements of the new material: if the stability is established, the economic benefits would be enormous."
While no determination has yet been made on the stability of the compound used in the study, two considerations leave room for optimism. First, the inorganic nature of the compound is expected to make it more resistant to weather and biodegradation. And secondly, the FTD core material can be reportedly modified with ease, creating not one, but a family of compounds.
The hope is that this amount of wiggle room will be enough for researchers to engineer a material that is both cheap, long-lasting, and still allowing for efficiencies that are competitive with respect to the final price of the panel.
Another weekend and war looms
on an epic scale. Will anyone really gain from a Turkey v Syria/Russia war?
Stay long fully paid up physical gold and silver.
“Only the dead have seen the
end of war.”
Plato
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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