Thursday, 17 March 2016

Bear Stearns Anniversary Day.

Baltic Dry Index. 393 -03        Brent Crude 40.49

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

Brexit odds checker.

Brexit Quote of the Day.
Cameron: Why do you sit there looking like an envelope without any address on it?

With apologies to Mark Twain.

Later today, on the eight year anniversary of the spectacular implosion of Bear Stearns, who just three days before had assured all and sundry that all was well, we get the latest “wisdom” from the Bank of England and the Federal Reserve. The BOE is expected to do nothing, making seven years of doing nothing, a record in its over 300 year history. The Fedster’s are supposed to blind us with their sophistry with the English language.
Up first a reality check, but don’t let on to our central bank leveraged casinos, where risk on is back in spades.

Impaled On Its Own Petard——The Fed’s Folly Festers Further

by David Stockman • 
----After all, the Fed is now 87 months into its grand experiment with the lunacy of zero interest rates. If our monetary central planners still can’t see their way clear to more than 38 bps of normalization, then, apparently, they intend to keep the casino gamblers in free carry trade money until they finally blow themselves up——just like they have already done twice this century.
----In other words, if a recession has not already commenced, they are using up the recovery phase runaway real fast. But never mind the very real risk that the entire global economy is sliding into a deflationary contraction, and that normalization would then be put off indefinitely.

By her own assertion Yellen espies no such danger, and even asserted during the presser that there are “upside risks to global growth”.

Let’s see. In the most recent months, the three bellwether economies of Asia reported plunging exports. Japan was down 13% from last year, South Korea was off by 20% and China’s exports tumbled by 25%.

Beyond that, there is a veritable CapEx depression underway throughout the global energy, mining, shipbuilding, steel, aluminum and most other heavy industrial sectors; China is drifting ever closer to a spectacular credit collapse and violent labor unrest; and its satellite economies like Brazil are rapidly becoming economic basket cases.

Yet Simple Janet could not explain why the Fed has lapsed again to a “hold” position or when global economic conditions would actually permit it to resume its path toward normalization.

The unstated effect of the Fed’s perpetual “hold” policy, therefore, would seem to be free gambling chips for the Wall Street casino, world without end.

And we do know how that ends.

But in Fedsterland, just as at Bear Stearns all those years ago, things have never been better, and can only get better. I asked my grand armchair for its opinion, but it never replied. St Patrick help, pray for us!

Yellen steers Fed with cautious hand, despite hints of inflation

Thu Mar 17, 2016 1:04am EDT
Federal Reserve policymakers urging caution over interest rate hikes have gained the upper hand in the central bank's internal debate, but the risk for the U.S. economy is that they are wrong to downplay a recent rise in inflation.

In words that echo those of colleagues on the Fed's dovish wing, Fed Chair Janet Yellen told a news conference on Wednesday that "caution is appropriate" when it comes to raising interest rates. She said she was not convinced underlying inflation had accelerated.

If Yellen is right, financial markets have ample warning for the gradual pace of rate hikes she said was likely.
But many private economists buy into the argument by an opposing faction within the Fed that U.S. inflation is indeed stirring.

They point to a range of recent data to back their view, including a reading Thursday showing underlying U.S. inflation rose 2.3 percent in the 12 months through February, the biggest increase in more than three years. The Fed's target is 2-percent inflation.

Faster price gains would likely trigger more aggressive rate hikes which Yellen in the past has warned could cause a recession.

"If we got to a point where the Fed had to raise (rates) quickly, it could be very destabilizing," said Northern Trust economist Carl Tannenbaum, formerly an economist at the Chicago Fed

---- However, the chair's assessment that inflation may not yet have turned the corner to a more healthy trajectory runs counter to the view of Fed Vice Chairman Stanley Fischer, who warned this month that faster inflation might well be stirring.

If Fischer is right, Fed Chair Janet Yellen may have to change her tone as soon as the next policy meeting in April.
Next the new normal in commodities. The super-cycle is well and truly over, says BHP Billiton’s CEO. The commodity depression looks like staying around for some time to come.

BHP Billiton CEO: Days of super profits are over

Published: Mar 15, 2016 7:14 p.m. ET
MELBOURNE, Australia--BHP Billiton Ltd.'s (BHP.AU) chief executive on Wednesday said prevailing commodity prices are representative of a return to reality, suggesting the world's largest miner doesn't expect a meaningful recovery in resources markets soon.
"The return to normality in prices and demand in the commodities sector today is not cause for long-term pessimism," Andrew Mackenzie said at a business conference in Melbourne, according to prepared speech notes. "The super profits of the past decade simply could not be sustained--sooner or later natural market forces would bring prices back down to earth."
Resources companies including BHP have been grappling with an abrupt and sharp downturn in the value of commodities from copper to oil as supplies from new operations increase at a time when growth in China, the top buyer of many natural resources, is at its weakest in a quarter century.
Last month, BHP slashed its dividend, scrapping a pledge to keep the payout steady or rising, after recording a US$5.67 billion first-half loss due in part to a massive write down of U.S. energy assets.
Mr. Mackenzie said BHP will invest "heavily in new technologies and productivity" to strengthen the company, which runs iron-ore pits in Australia to gas fields in the U.S., during the current slump. He also described the ongoing expansion of Asia's middle class as a profound economic change that will continue to affect global markets for years to come.
Mr. Mackenzie said the way the global commodities boom evolved--which led iron ore, for one, to surge from about US$40 metric ton a decade ago to nearly US$200 in 2011, before erasing that increase in recent times--was tough to forecast.
"Many, including BHP Billiton, were unprepared for what has been the greatest commodities boom of our time and, while BHP Billiton anticipated emerging trends that signaled the end of the boom, we didn't expect the scale and the speed with which it happened," Mr Mackenzie said.
He said the rapid change playing out in the resources sector has taught him a valuable lesson: "There are no certainties in the 21st century, and the state of the global economy reflects this."

Peabody Says It May Need to File Bankruptcy Amid Coal Rout

March 16, 2016 — 10:24 AM GMT Updated on March 16, 2016 — 12:51 PM GMT
Peabody Energy Corp., the largest U.S. coal miner, said it may not be financially strong enough to remain in business in its current form and that the company may seek bankruptcy protection.

Peabody’s ability to operate as a “going concern” is in doubt, the company said in a regulatory filing with the U.S. Securities and Exchange Commission Wednesday. “Going concern” is an accounting term used to describe a business that has the resources it needs to continue running.

The St. Louis-based company, which has been ravaged by the coal market’s worst downturn in decades, is seeking ways to ease its debt burden as rivals including Alpha Natural Resources Inc. and Arch Coal Inc. filed for bankruptcy. Peabody in recent months has struggled to close the sale of three coal mines in the western U.S. to Bowie Resource Partners and to renegotiate payment terms with its creditors.

“There can be no assurance that our plan to improve our operating performance and financial position will be successful,” Peabody said in the filing. “We may need to voluntarily seek protection under Chapter 11.”

The company elected to skip $71 million in semi-annual coupons that were due Tuesday and has entered a 30-day grace period to make the payments. The interest is due on Peabody’s $1 billion of 10 percent second lien notes maturing in March 2022 and its $650 million of 6.5 percent unsecured bonds coming due in September 2020, according to the filing.

Energy sector defaults could go like dominos

Published: Mar 16, 2016 4:25 p.m. ET

Energy issuers may be headed for $40 billion in defaults this year, Fitch says

Energy-sector bond defaults — and for some producers, bankruptcy risks — are piling up and coal liabilities aren’t the only culprit. Oil-and-gas producers, suffering with low crude prices after a shale revolution made the U.S. a viable energy producer, are smothered under their own junk bonds.

Small- and medium-sized U.S.-based producers, especially those that expanded with the shale boom, are most vulnerable; any small blip in oil prices may not be high enough or fast enough to protect all producers. And just this week at least two more have warned about their near-term future. It’s a climate that’s driven some of this sector’s high-yield paper to trade at 30 cents on the dollar or less.

But Linn Energy LINE, +25.00% — which on Tuesday filed its own “going concern” after missed interest payments now in a grace period — is primarily an oil-and-gas producer with shale interests in western U.S. states. If it files for bankruptcy protection, its $10 billion in debt would make it the largest U.S. oil company to do so since oil prices began their sharp decline in 2014.

In all, about 40 oil and gas producers have filed for bankruptcy protection globally since 2014, according to a February report from Deloitte. Crude traded to 12-year lows, below $30 a barrel, in February before a recent, mild rebound. Energy consulting firm Rystad Energy says smaller players typically need a minimum $50-a-barrel oil price to make a profit.

Last week, Fitch said it’s raising its 2016 forecast for U.S. high-yield bond defaults to 6% from 4.5%, and said it expects energy and materials issuers to default on $70 billion of debt this year, including $40 billion for energy alone. The new rate of default is the highest that Fitch has ever forecast during a non-recessionary period, beating the 5.1% it forecast for 2000.

Oil Investors See $7.4 Billion Vanish as Dividends Are Targeted

March 17, 2016 — 12:00 AM GMT Updated on March 17, 2016 — 5:00 AM GMT
The check is not in the mail.

Bludgeoned by falling energy prices, at least a dozen oil and natural gas companies have opted to cut dividends this year to preserve cash, cannibalizing payouts considered sacrosanct by many investors.

The cost to shareholders: more than $7.4 billion in lost income, compared to what they would have received this year if the payouts remained the same.

It’s another painful measure -- along with tens of thousands of layoffs and more than $100 billion in canceled investments -- of the toll taken on the industry by the worst oil and gas price slump in decades. The quarterly payments, prized by conservative shareholders as a source of steady income, are unlikely to be restored any time soon.

“It really reinforces the necessity of having a margin of safety if you are buying a stock primarily for its dividend," said Josh Peters, editor of Morningstar Inc.’s DividendInvestor newsletter. “What we have found for some of the energy companies is that the margin of safety was either slim or nonexistent."
We end with the rout or rot, in European banking. The “next Lehman” is out there and getting closer by the day.

Deutsche Bank Shares Fall After CEO Forecasts Unprofitable Year

March 16, 2016 — 11:19 AM GMT Updated on March 16, 2016 — 12:17 PM GMT
Deutsche Bank AG shares dropped as much as 5.5 percent after co-Chief Executive Officer John Cryan said he doesn’t expect the German lender to report a profit this year.
“We’ve said this year is not going to be a profitable year, we may make a small profit, we may make a small loss, we don’t know,” Cryan said at a conference in London on Wednesday. “There’s a lot of stuff we have to get done this year, so this year we’re not going to be profitable.”
Since taking over last year, Cryan has announced measures to boost profitability and raising capital buffers by eliminating thousands of jobs, scrapping the dividend and selling assets in consumer and investment banking. Rising charges linked to past misconduct have undermined his efforts, sapping equity reserves and helping spark the first annual loss since 2008 last year.
Deutsche Bank fell 5 percent to 17.15 euros at 1:15 p.m. in Frankfurt. They have decreased about 24 percent this year.
Cryan said earlier this month he expects to resolve the largest of the lender’s legal cases in coming months.
“There may be some more charges,” he said at a conference in Frankfurt on March 2. “I would be incredibly disappointed if they were huge.”

A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done.

Walter Bagehot. Lombard Street. 1873
At the Comex silver depositories Wednesday final figures were: Registered 30.49 Moz, Eligible 124.96 Moz, Total 155.45 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
As its Bear Stearns Day, today a little trip down memory lane. You couldn’t get the truth out of “Wall Street’s Finest,” if you put a gun to their head, and Treasury Secretary Paulson probably  tried. Despite all the deceit on an unsuspecting American and global public, no one so far has gone to jail. US banksters lead a charmed life.

"We shouldn't pour cold water on everything. We, the eight or nine players in global investment banking, have a very good future."

Deutsche Bank, CEO Josef Ackermann. Davos, January 2007.

12 key dates in the demise of Bear Stearns

By Daniel Burns March 17, 2008
1: Dec 14, 2006
Bear Stearns posts record earnings, touting huge profit gains from then-booming businesses advising on mergers and arranging credit derivatives, distressed debt and leveraged finance deals.
Bear stock closes at $159.96. The average price target from Wall Street research analysts covering the stock is $166.24 according to Reuters Estimates.
2: Jan 12, 2007
Bear shares close at a record $171.51 on momentum from its strong earnings report the previous month. The average price target: $174.
3: May 24, 2007
Bear shares close at $147.55, a six-week low, after Goldman Sachs slashed its quarterly earnings target for its rival investment bank, citing concern about Bear’s heavy exposure to the mortgage securitization business. The average price target: $181.73.
4: June 14, 15 & 16, 2007
On June 14, Bear reports earnings declined for the first time in four quarters on weaker results from its mortgage securities business. On the 15th, the Wall Street Journal reports a hedge fund run by Bear has suffered big losses on soured subprime mortgage investments. (A second fund with similar troubles would soon emerge.) The next day, the 15th, the Journal reports that Merrill Lynch, a creditor to the fund, seized some of its assets. The stock closes at $150.09 on the 15th, a Friday. The average target price: $181.
5: July 17, 2007
As losses from subprime mortgages begin to begin to threaten credit markets around the world, Bear Stearns informs investors in its two struggling hedge funds that the funds have “very little value” remaining. Bear shares end the day at $139.91. The average target price: $178.23.
6: Aug 5, 2007
Warren Spector resigns under pressure as co-president and co-chief operating officer, having lost the confidence of long-time CEO James Cayne for his handling of the subprime mortgage crisis. The stock closes at $113.81 on Aug 6, a Monday. The average target price: $164.29.
7: Oct 5, 2007
Prosecutors launch a criminal probe into the collapse of the two Bear Stearns hedge funds. The stock closes at $131.58. The average target price $144.17.
8: Dec 20, 2007
Bear reports its first-ever quarterly loss, driven by $1.9 billion of bad debt write downs. It also says executives will not receive annual bonuses. Bear shares close at $91.42. The average target price: $121.67.
9: Jan 8, 2008
James Cayne is replaced as CEO by investment banker Alan Schwartz. The stock closes at $71.01. The average target price; $111.36.
10: March 12, 2008
Responding to market rumors of a cash crunch at the bank, Bear CEO Schwartz goes on CNBC television and assures viewers that the firm has ample liquidity. The stock closes at $61.58. The average target price: $98.87.
11: March 14, 2008
JPMorgan, backed by the Federal Reserve, provides an undisclosed amount of emergency financing to Bear Stearns. Bear says its liquidity position had deteriorated dramatically in the previous 24 hours. The stock plunges to close at $30.85. The average target price: $93.62.
12: March 16 & 17, 2008
JPMorgan agrees on March 16 to buy Bear for $236 million, or $2 a share, representing just over 1 percent of the firm’s value at its record high close just 14 months earlier. The deal essentially marks the end of Bear’s 85-year run as an independent securities firm. Bear shares end March 17, a Monday, at $4.81 on optimism another buyer may emerge. The average target price: $2.

And the next Bear is? My pick is Deutsche Bank, but your guess is as good as mine.

“There’s danger in just shovelling out money to people who say, ‘My life is a little harder than it used to be, at a certain place you’ve got to say to the people, ‘Suck it in and cope, buddy. Suck it in and cope.’”

Proper Charlie Munger. Inoperative for banksters.

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?

Africa gets its first solar-powered airport

By Milena Veselinovic, for CNN Updated 1217 GMT (2017 HKT) March 4, 2016
CNN)South Africa has ramped up its green credentials by unveiling the continent's first solar-powered airport.
Located halfway between Cape Town and Port Elizabeth, George Airport will meet 41% of its energy demand from a brand new 200 square meter solar power plant built on its grounds.
The facility, which was officially launched last week, has 3,000 photovoltaic modules, and will gradually increase capacity to deliver 750Kw power when it reaches full production.
It cost just over a million dollars to build, and is part of South Africa's commitment to introduce a mix of energy sources to all its airports.
"As an airports management company running nine airports nationally, part of our strategic objective is to minimize our environmental impact," Skhumbuzo Macozoma, chairman of the Airports Company South Africa Board said in a statement.
"Harnessing solar power is a viable cleaner energy source which contributes towards diversifying the energy mix. This plant will ensure that the airport is self-sustaining in terms of its power needs, and will eventually extend to the broader community within the George municipality," he added.
The airport serves the Western Cape town of George which lies in the heart of the scenic Garden Route, famous for its lush vegetation and lagoons which are dotted along the landscape.
It handles over 600,000 passengers a year, many of them tourists, but it's also a national distribution hub for cargo such as flowers, fish, oysters, herbs and ferns.
The clean energy initiative follows in the footsteps of India's Cochin International airport -- the world's first entirely solar powered airport, and Galapagos Ecological Airport, built in 2012 to run solely on Sun and wind power.

The George Airport project is the latest in the string of alternative energy investments designed to help relieve the burden of irregular electricity supply, which has long plagued parts of Africa.

The world's first solar airport no longer pays for electricity

  @CNNTech March 14, 2016: 9:52 PM ET

Fed up with their hefty electricity bill, managers at Cochin International Airport in southern India took matters into their own hands.

Three years ago, they began adding solar panels -- first on the roof of the arrivals terminal, then on and around an aircraft hangar. The success of those initial efforts led to a much bigger endeavor.

"We wanted to be independent of the electricity utility grid," Jose Thomas, the airport's general manager, told CNNMoney.

Last year, the airport commissioned the German company Bosch to build a vast 45-acre solar plant on unused land near the international cargo terminal.

The plant came online in August, making Cochin the world's first fully solar-powered airport.

The tens of thousands of panels generate on average slightly more than the roughly 48,000-50,000 kilowatts of power that the airport -- the seventh busiest in India -- uses per day, according to Thomas. Surplus energy is fed into the wider electricity grid.

The big project cost around 620 million rupees ($9.3 million), a sum the airport expects to save in less than six years by not having to pay electricity bills anymore. It also estimates the solar plant will avoid more than 300,000 metric tons of carbon emissions from coal power over the next 25 years.

Related: India's big move into solar is already paying off

At a time when solar power has become much cheaper in India, Cochin's initiative has drawn national and international attention.

Indian Civil Aviation Minister Ashok Gajapathi Raju visited Cochin in January and told reporters that authorities have directed other airports around the country to start using at least some solar power.

The monthly Coppock Indicators finished February

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

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