Friday, 18 March 2016

A Modest Correction?

Baltic Dry Index. 392 -01        Brent Crude 41.47

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

Brexit odds checker.

Brexit Quote of the Day.
Cameron: He was distinguished for ignorance; for he had only one idea, and that was wrong.
With apologies to Benjamin Disraeli.
Don’t worry, it’s only a modest correction. What is? Falling luxury home prices and sales in New York’s “Hampton’s,” the summer playground of Wall Street’s billionaires and millionaires. Last year, and this year’s poor start to stocks and bonds, has dropped even the one percent to the edge of relative poverty. It’s tough when the central banksters start raising rates and your trophy summer  palace drops by 20 percent. But don’t worry, it’s only a modest correction. Still as Chairman Mao was fond of saying, “ a journey of a thousand miles, starts with a single step.”  Is this that step to a thousand mile correction? I suspect that this is a sign of something more than just “a modest correction.”

"If the financial system goes down, our business is going down and, trust me, yours and everyone else's is going down, too."

Lloyd Blankfein. CEO Goldman Sachs. November 8, 2009. The Goldman Threat.

Hamptons luxury home sales soften as Wall Street weakness takes a toll

Thu Mar 17, 2016 11:15am EDT
The market for luxury homes in the Hamptons, the summer playground for Wall Street's wealthiest, is losing some of its luster as financial markets limp along for a second year.

The average price of the 10 most expensive homes sold in this cluster of towns, villages and hamlets on Long Island's east end was $35.5 million in 2015, 20 percent lower than the $44.6 million recorded the year before, according to real estate brokers Town & Country Real Estate in East Hampton.

For a graphic showing Hamptons luxury home prices in recent years, see

That is far from calamitous given it is the second-highest average top 10 price ever and up from just $15.9 million in 2009, the year the market bottomed during the financial crisis.

But for Judi Desiderio, who has been active in Hamptons real estate for three decades and is now Town & Country's chief executive, it is still a meaningful decline.

Her maxim is that record sales prices are only shattered following outstanding years for U.S. stocks and that the Hamptons real estate market goes in cycles in lockstep with Wall Street's fortunes. Excluding dividends, the S&P 500 benchmark stocks index lost 0.7 percent last year and is down about 1 percent so far this year.

The top 10 numbers may be skewed by one or two of the highest priced sales but the softness is also reflected in a wider survey by brokerage Corcoran Group that shows the median price for the most expensive 10 percent of Hamptons sales (57 homes), declined about 4 percent to $7.6 million in the fourth quarter of 2015 from a year earlier.

Desiderio said the next boom may not happen for some years. "We won't see this again until 2021 as it seems to run in seven-year cycles," she predicted.

Wall Street's performance and luxury home prices in the Hamptons are inextricably linked, especially the level of bankers' bonuses as they often finance second homes, said Anthony DeVivio, managing director in the Hamptons for another brokerage, Halstead Property.

The average bonus from a Wall Street bank was likely 5 percent to 10 percent lower in 2015 than the previous year, the first decline since 2011, said Alan Johnson of compensation consulting firm Johnson Associates Inc.

Hedge funds also have struggled, with an average return of just 0.04 percent last year, according to the Barclay Hedge Fund Index. In 2014, it wasn’t much better – with a 2.88 percent gain.

Still, real estate brokers see the weakness in the Hamptons as a modest correction rather than something much worse.
Back before it became the plaything of the super-rich, the area was famous for its potato fields and potato farms. I rented my summer home in further out Amagansett, famous then as the place a German U-boat dropped off on Atlantic beach, 4 of the most incompetent spies and saboteurs, before they were caught and executed. My summer home was on Atlantic Avenue.

The Hamptons

The Hamptons, also called the "East End" (of Long Island), are a group of villages and hamlets in the towns of Southampton and East Hampton, which form the South Fork of Long Island, New York, U.S. The Hamptons form a popular seaside resort, one of the historical summer colonies of the American Northeast. The area features some of the most expensive and luxurious residential properties in the U.S.; in 2016, according to Business Insider, the 11962 zip code encompassing Sagaponack, within Southampton, was listed as the most expensive in the U.S., with a median home sale price of $8.5 million.

In other news, China squeezes the Yuan shorts. This could get quite interesting.  Along with many others, I expect a Yuan devaluation of 30 to 50 percent over the next two years. But in our 21st century world of endlessly rigged markets, China can play cat to the rest of the world’s Yuan short mice. Brazil’s crisis grows like Topsy. In Japan, a new twist to an old accounting scandal surfaces. Westinghouse issues a weak denial. Italy opens a new investigation. A global slow motion train wreck is underway. Just don’t let on to bubblevision, main stream media, nor the lemmings in the casinos, nor anyone running in America for POTUS. Where’s that ancient Greek with his lamp?

China strengthens yuan with largest increase since November

Published: Mar 17, 2016 11:00 p.m. ET
SINGAPORE -- China on Friday set its currency 0.52% stronger against the U.S. dollar, in the yuan’s steepest one-day fixing increase since November, reflecting the broad weakness in the dollar after the U.S. Federal Reserve moved to a more dovish tone.

The People’s Bank of China fixed the yuan’s daily mid-point at CNY6.4628, reaching the currency’s strongest level against the U.S. dollar since December 16. The yuan now trades at CNY6.4645 versus its last official closing of CNY6.4930 to the dollar.

Friday’s 0.52% strengthening of the yuan was only surpassed by the 0.54% gain in the daily benchmark on Nov. 2, which remains the biggest daily adjustment since the yuan was de-pegged from the dollar in 2005.

Analysts have linked the November appreciation to China’s efforts to have the yuan included in the International Monetary Fund’s basket of reserve currencies. The IMF announced its decision to include the yuan at the end of November.

For Friday’s move, however, the steep gain for the yuan is being attributed by traders to the strength of major currencies in the valuation basket used by the PBOC in determining the daily currency benchmark.

Lula, Brazil's tarnished hero, loses more luster in return to government

Thu Mar 17, 2016 7:55pm EDT
Nine years ago, during Brazil's economic boom, Josemar Vieira Oliveira moved from the historically poor northeast to the sprawling industrial suburbs of São Paulo, the country's economic powerhouse.

He found a job with an auto-parts manufacturer, started a family and moved to a bigger apartment with his wife and two children. "Those were good times," he recalls.

But six months ago, he and 300 colleagues were dismissed.

Now the 33-year-old spends his days knocking on factory doors across São Bernardo do Campo, the cradle of Brazil's labor movement and political base for the leader millions like Oliveira once thought had ended their economic exclusion: Luiz Inácio Lula da Silva.

Six years after he left Brazil's presidency with approval ratings approaching 90 percent, the leftist icon, now 70, is again front-and-center in Brazilian politics.

True, Lula never abandoned the game, strategizing and negotiating on behalf of President Dilma Rousseff, his hand-picked successor, ever since he left office.

But a widening corruption scandal, in which he faces criminal charges, this week led Lula to accept a role as Rousseff's chief of staff, where he is legally shielded from prosecution unless the Supreme Court decides to press a case.

The move, derided by critics as a cynical evasion of prosecutors, surprised admirers who once held Lula in saint-like esteem. Even long-time supporters, disillusioned by ongoing economic and political turmoil, say their allegiance is strained.

"I would not vote for Lula now," says Oliveira, who twice cast votes for the former president and twice more for Rousseff.

Until recently, Lula symbolized a working class whose ascent became a metaphor for Brazil itself. After decades of instability, the story of the metalworker-turned-president represented a transformation in Latin America's biggest country.

Riding a boom in commodity exports, the former union leader presided over a period when 40 million Brazilians left poverty.

So popular was Lula that he convinced voters to elect Rousseff, a lifelong bureaucrat, even though she had never before run for office. Despite her lackluster first term, Lula's imprimatur helped re-elect Rousseff in 2014 and give their Workers' Party a fourth consecutive term.

But an economic slowdown hadn't yet hurt most Brazilians and the corruption scandal had tainted neither leader.

Involving over a billion dollars worth of kickbacks by contractors to executives and party officials in exchange for work with the state-run oil company, the scandal worsened after Rousseff's re-election.

Now, Lula faces fraud and money laundering charges, Rousseff's opponents are aiming to impeach her and Brazil's economy is in recession, shedding 1.5 million jobs last year even as inflation surpassed 10 percent.

Toshiba U.S. units probed, report says Westinghouse writedown possible

Thu Mar 17, 2016 10:34pm EDT
Japan's Toshiba Corp (6502.T) is considering a large writedown for its Westinghouse nuclear power unit, a newspaper report said on Friday, while the company confirmed that U.S. authorities are probing accounting at its U.S. units.

The developments cast a shadow over Toshiba's efforts to draw a line under last year's $1.3 billion accounting scandal by streamlining its bloated businesses, whose poor performances had been masked by years of false bookkeeping.

The Asahi newspaper reported that Toshiba is considering a 200 billion yen ($1.8 billion) writedown for Westinghouse, reviving concerns among investors that the value of assets and goodwill related to Westinghouse were overstated.

Nuclear power has become less popular since Toshiba's acquisition in 2006, especially in the aftermath of the Fukushima disaster which prompted many countries to freeze nuclear energy expansion plans.

The company said last November that such a writedown was not needed because the subsidiary was profitable, despite losses at parts of the operations in 2012 and 2013. A spokesman said on Friday that its last stress test conducted in January showed no need for a writedown.

But the spokesman confirmed several U.S. units have received a request for information from the U.S. Department of Justice and the Securities and Exchange Commission regarding accounting issues.

Bloomberg news agency reported a day earlier that U.S. authorities are opening a case on the conglomerate even though it had already been investigated in Japan, and could exert jurisdiction because the case involved U.S.-based Westinghouse.

Westinghouse denied its finances were under investigation.

"To our knowledge, Westinghouse financial reporting is not under investigation," Chief Executive Danny Roderick said in a statement.

Italy tax police search Hitachi, Finmeccanica, Ansaldo STS offices: sources

Wed Mar 16, 2016 3:49pm EDT
Italy's tax police searched the offices of Hitachi (6501.T), Finmeccanica (SIFI.MI) and Ansaldo STS (STS.MI) on Wednesday as part of an investigation into the acquisition by the Japanese group of a stake in Ansaldo STS, several sources said.

Prosecutors are looking into alleged collusion between Hitachi and Finmeccanica over the price paid Finmeccanica for its 40 percent stake in Ansaldo STS.

Hitachi has rejected any allegations of collusion saying the price was set in full compliance with laws.

The sources said the tax police had searched Hitachi's offices in Naples, Finmeccanica's offices in Rome and Ansaldo STS offices in Genoa.

Hitachi was not immediately available for a comment while Finmeccanica and Ansaldo STS declined to comment.

The tax police were acting on behalf of Milan prosecutors who are looking into allegations of market rigging and obstructing regulators, the sources said.

The investigation was opened at the request of Bluebell Partners, a shareholder of Ansaldo STS.

In January Hitachi launched a 9.5 euro per share mandatory public offer to buy out Ansaldo STS minorities after buying the 40 percent stake in Ansaldo STS last year at the same price.

But in February Consob forced Hitachi to raise its bid to 9.899 euros per share after complaints by some investment funds that the price was too low.

The whole history of civilization is strewn with creeds and institutions which were invaluable at first, and deadly afterwards.

Walter Bagehot.
At the Comex silver depositories Thursday final figures were: Registered 30.49 Moz, Eligible 124.04 Moz, Total 154.53 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, forget any uncertainty and skittishness over Brexit. In Spain, Catalonia is threatening to take down Spain! Take down Spain and you take down France and Italy, and Deutsche Bank, and the EUSSR! Apparently no one in bubblevision is aware. They wouldn’t really do that for their independence would they?
“I have not yet begun to fight.”
John Paul Jones

Catalonia Said to Court Default in Game of Chicken With Spain

March 17, 2016 — 1:12 PM GMT
Catalonia is deliberately flirting with default on its bank loans as the region’s separatist government tries to force the Spanish state to deliver aid payments, according to two people familiar with the situation.

Officials in the regional capital Barcelona are counting on Spain to step in and supply the funds they need to meet loan repayments coming due this year, betting the central government will be forced to back down because the costs of a default would be greater for the Spanish sovereign, the people said, asking not to be identified discussing confidential matters. The region already missed payments on at least two bank loans, Regional President Carles Puigdemont said earlier this month according to El Mundo newspaper.

Albert Puig, a spokesman for the Catalan government, said the region is trying to persuade Spain to release aid money due from 2014. He said Wednesday there’s “no scenario” in which Catalonia would default.
Catalan bonds maturing in February 2020 plunged the most since June 2013 on Wednesday after El Mundo reported that the region could be placed on selective default by credit rating company Standard & Poor’s. The yield on the debt rose by 15 basis points to 4.12 percent at 12:54 p.m. in Madrid after jumping by 84 basis points during the previous session.

S&P didn’t respond to calls seeking comment.

The separatist government in Catalonia, Spain’s biggest regional economy, is locked in a battle with the authorities in Madrid as it fights for independence. Puigdemont has pledged to prepare for secession by the middle of next year, though caretaker Prime Minister Mariano Rajoy says his plans are illegal.

The latest skirmish between the two administrations is over Catalonia’s plan to extend the maturity of approximately 1.6 billion euros ($1.8 billion) of bank loans coming due this year. Such modifications require approval from the central government under the terms of the region’s 2012 bailout deal and Spain has been dragging its feet. Those loans are from Banco Santander SA, Banco Bilbao Vizcaya Argentaria SA, CaixaBank SA and Banco Sabadell SA, the two people said.
“Give me liberty or give me death."
Patrick Henry
Brexit Quote of the week.

The world is weary of statesmen whom democracy has degraded into politicians.

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?

Nuclear techniques reveal 'tunability' of membranes for enhanced electrical conductivity in graphene

March 17, 2016
ANSTO research has contributed to an understanding of the ion transport mechanism in graphene, a highly electrically conductive material that has been investigated for use in flexible electronics and innovative forms of energy storage and conversion.

Small angle neutron scattering (SANS) using the Quokka instrument has brought insight into how ions are transported at the nano level in stacked membranes of graphene, materials that have many unique properties.

The research was aimed to develop graphene into a more versatile material.

Instrument Scientist Chris Garvey, who undertook the SANS measurements on Quokka, and co-authors from Monash University have published their findings in Science Advances.

Using the complementary power of neutron scattering experiment and computer simulation they found a robust quantitative relationship between the macroscopic permeation properties of the graphene based membranes and their complex nanoslit structure.

They reported that both the diffusion of ions and electrokinetic effects are different when length scales between the sheets are smaller than 10 nanometres.

Co-author and graphene pioneer Prof Dan Li, also of Monash University, has previously stated that the challenge of making useful things out of graphene has been overcoming its tightly packed structure, only one atom thick, in order for other molecules, such as ions, to interact with it.

Because graphene sheets are prone to restack into graphite when placed close together, Prof Li developed a graphene gel film as a stable platform. Graphene can be used as an electrode when liquid electrolytes are added.

The researchers assembled a bulk layered graphene membrane structure with nanochannels in a process developed by lead author Dr Chi Cheng at the Monash Centre for Atomically Thin Materials for the study. The membrane material houses a series of cascading slits. The ions must move through the minute slits in the membrane.

Structural imperfections, the height of the nanoslits (channel size), the lateral size of individual nanosheets and the gap between the ends of the sheets, affect ion transport.
For the investigations, the researchers modified channel size from 10 nanometres down to less than a nanometre.

Analysis using SANS measurements confirmed that the nanospace between the sheets did not fully collapse when compressed and the cascading nanoslits remain largely continuous.

----The Monash University team found that by manipulating weak interactions among neighbouring graphene layers allows interlayer spacing to be adjusted.

They devised a range of scenarios of ion transport through the cascading nanoslit system and how it was affected by structural geometry, which agreed with experiment data.
Simulations devised by the authors suggested that the material could be made tunable by adjusting the size of the spacings in the nanochannels.

"Although it was known that the behaviour of ion transport confined in nanochannels could be different to that in bulk, this had not been exploited in the context of an electrically conductive pore. Such materials based on graphene open exciting possibilities in materials science" said Garvey.

Another weekend, and Brexit one week closer. Closer still if the Catalonians pull the trigger. Have a great weekend everyone.

"Get a good night's sleep and don't bug anybody without asking me."

President Richard N. Nixon.

The monthly Coppock Indicators finished February

DJIA: 16517 -23 Down. NASDAQ:  4558 +45 Down. SP500: 1932 -17 Down. 

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