Tuesday, 8 March 2016

China’s Crack-up Boom Arrives.

Baltic Dry Index. 354 +07        Brent Crude 40.35

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

Brexit odds checker. http://www.oddschecker.com/politics/british-politics/eu-referendum/referendum-on-eu-membership-result

Brexit Quote of the Day.
Cameron: His mother should have thrown him away and kept the Stork.

With apologies to Mae West.

We open today with China flirting with the dreaded “crack-up” boom that can crash a whole monetary system. China’s “markets” are nothing more than wild-west casinos and are now generating chaos, and not in theory, in practise.

“But it [the boom] could not last forever even if inflation and credit expansion were to go on endlessly. It would then encounter the barriers which prevent the boundless expansion of circulation credit. It would lead to the crack-up boom and the breakdown of the whole monetary system.”
Ludwig von Mises.

Iron Ore Jumps Most on Record as Market Goes 'Berserk'

March 7, 2016 — 11:45 AM GMT Updated on March 7, 2016 — 1:14 PM GMT
Iron ore soared the most ever after Chinese policy makers signaled their willingness to buttress economic growth, boosting the outlook for steel consumption in the top user and igniting speculation that some investors who’d bet against the market had been caught out.
Ore with 62 percent content delivered to Qingdao jumped 19 percent to $63.74 a dry metric ton, Metal Bulletin Ltd. data show. That’s the biggest gain in daily data going back to 2009 and the highest price since June. The surge was preceded in Asia by a rally in futures, with the most-active contract on Singapore Exchange Ltd. climbing 21 percent to $60 and prices on the Dalian Commodity Exchange rising by the daily limit.
“The iron ore and steel markets have gone berserk -- they’ve departed from fundamentals and are heavily driven by sentiment,” Zhao Chaoyue, an analyst at China Merchants Futures Co. in Shenzhen, said before the Metal Bulletin price was published. “Investors are expecting further monetary easing by the Chinese government to boost steel demand.”
----Iron ore has powered higher in 2016 as steel prices have have strengthened, undermining forecasts for further losses driven by mounting low-cost supply from Australia and Brazil and weakening demand in China. At the annual National People’s Congress at the weekend, the authorities said they’d allow a record high deficit and higher money-supply target to support growth of 6.5 percent to 7 percent. At the same time, they also vowed to help cut overcapacity in steel, potentially curbing demand for iron ore.
“There may be some short-covering in the futures markets today,” said Xu Huimin, an analyst at Huatai Great Wall Futures Co. in Shanghai, referring to investors closing bets on declines. “The crazy surge in futures prices has surprised traders and steel mills, as they haven’t seen a corresponding increase in physical orders.”
----Recent gains in iron ore probably won’t last, Goldman Sachs Group Inc. said in a report received on Monday, forecasting a drop back to $35 a ton in the final quarter. This year’s rally has been driven by rising steel prices in China, a reversal of the normal relationship seen between the raw material and the manufactured product, Goldman said.

 “We expect the current rally to be short-lived,” analysts Christian Lelong and Amber Cai said in the note, which was dated March 6, predicting further growth in iron ore supply in the quarters ahead. “The causality will revert sooner rather than later, and steel raw materials will one again drive steel prices rather than the other way around.”

China crude oil imports hit record 8 mln bpd in February

Tue Mar 8, 2016 12:25am EST
China's February crude oil imports jumped 20 percent on year to their highest ever on a daily basis, as prices at their lowest in more than a decade drove buying from a group of new importers and state and commercial stockpiling.

The world's second-largest oil consumer imported 31.80 million tonnes of crude last month, or a record 8.0 million barrels per day (bpd), data from China's General Administration of Customs showed on Tuesday. C-CNIMP-PRM

China's robust crude demand has been supported by independent refiners, also known as teapots, that have been receiving import quotas from Beijing over the past nine months.

"This is the teapot effect," said Virendra Chauhan, an analyst at Energyhttp://images.intellitxt.com/ast/adTypes/icon1.png Aspects in Singapore.

"Higher teapot demand and stronger refining margins which encouraged higher refinery throughputs have contributed to increased imports," he said.

On a daily basis, February's imports also jumped roughly 27 percent from 6.29 million bpd in January.

---- Last week, Beijing-based consultancy SIA Energy said it expects China's 2016 crude imports to rise by 860,000 bpd, or nearly 13 percent, boosted by storage needs, robust gasoline demand and fuelhttp://images.intellitxt.com/ast/adTypes/icon1.png exports.

The country's top energy group state-owned China National Petroleum Corporation (CNPC) [CNPET.UL] forecast in January that the China's net crude imports would rise 7.3 percent this year.

China Debt Bubble Goes Full Frontal—-$1 Trillion Of New Credit In First Two Months of 2016

by ZeroHedge • 
Two weeks ago we reported that one month after China created a record $520 billion in total credit (TSF), through February 18 Chinese banks had followed through with another CNY2 trillion according to MarketNews, meaning that in the first two months of the year China will have created a gargantuan $1 trillion in new credit between loans and unregulated shadow banking issues.
A question that emerged is what China is spending all this newly created money on. One answer emerged overnight when Bloomberg reported that after tumbling in the first half of 2015, copper inventories at the Shanghai Futures Exchange had been steadily rising, and in the most recent week soared by 11% to an all time high of 305,106 tons.

At the same time reserves at the London Metals Exchange declined for 11 days to the lowest level in more than a year, in other words China is shifting idle inventory from Point A to Point B.

Bloomberg adds that as a result of this massive spending spree, inventories tracked by the Shanghai Futures Exchange are higher than stockpiles monitored by the London Metal Exchange for the first time in a more than a decade.

This explains two things:
  • for all talk of reform, China is once again building a bubble in excess capacity and stockpiling surplus commodities, which will likely last as long as China floods the economy with newly created bank loans;
  • The recent surge in the price of copper, which has been a direct function of China’s recent massive restocking

China Export Slump Shows Growth Push Hinges on Local Demand

March 8, 2016 — 2:44 AM GMT Updated on March 8, 2016 — 3:46 AM GMT
China’s export slump deepened in February, highlighting the challenge for policy makers seeking to keep the economy humming at home while trade acts as a brake on growth.

Overseas shipments tumbled 25.4 percent in U.S. dollar terms from a year earlier, the biggest decline since May 2009. Imports extended a streak of declines to 16 months, slumping 13.8 percent, leaving a trade surplus of $32.6 billion. The week-long Chinese new year holidays fell in February this year, closing factories and curbing shipments.

A slowdown in global trade is making it harder for China’s leaders, who are gathered in Beijing this week to set the nation’s economic plans, to keep growth at the targeted 6.5 percent to 7 percent range. China’s stocks fell for the first time in six days.

"Exports got pummeled again in February, highlighting the downturn in global demand," said Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong. "Hopes for a global rebound need to be tempered with numbers like these. It’s easy to blame Chinese New Year distortions, but there is a much deeper malaise that is becoming apparent in the numbers."

Reflecting uncertainties over the global outlook, the government didn’t set a specific target for trade at the annual congress meeting after it failed to meet the goal last year.

----Shipments to all major trading partners declined, plunging more than 20 percent to the U.S., Brazil, Canada, Germany, France, Hong Kong, Japan, and Asean nations.

----Separate data also raised concern over domestic demand, with auto sales down 3.7 percent in February from a year earlier.

Asian Stocks Slide as Japan GDP, China Exports Shrink; Yen Gains

March 7, 2016 — 10:44 PM GMT Updated on March 8, 2016 — 4:50 AM GMT
Asian stocks dropped the most in about three weeks, oil fell and South Korea’s won weakened as data showed Japan’s economy and Chinese exports are shrinking. The yen gained with U.S. Treasuries on demand for haven assets.

Equities benchmarks retreated across most of Asia, while U.S. and U.K. stock index futures declined. Brent crude fell, after closing on Monday above $40 a barrel for the first time this year, as nickel led losses in industrial metals and iron ore tumbled. Australia’s dollar weakened with South Korea’s won, while the yen gained ground against all 31 major peers. Gold traded near a 13-month high as Japan’s 10-year bond yield sank to a record.

Sustained demand for precious metals and sovereign debt highlights a lack of confidence in rebounds in global stocks and commodities that took hold over the last three weeks, adding $4.6 trillion to the value of equities worldwide. Goldman Sachs Group Inc. recommends betting on declines in copper and aluminum prices, while Citigroup Inc. said it’s still bearish on iron ore. Japan announced on Tuesday a drop in fourth-quarter gross domestic product and China reported the biggest tumble in exports in almost six years.

----Japan’s economy contracted an annualized 1.1 percent last quarter, and while the drop was less than analysts predicted it underscored growing concern over Prime Minister Shinzo Abe’s reflation program.

There can be few fields of human endeavour in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.

J. K. Galbraith.
At the Comex silver depositories Monday final figures were: Registered 26.19 Moz, Eligible 125.42 Moz, Total 151.61 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.

The ETF Files

How the U.S. government inadvertently launched a $3 trillion industry.
By Eric Balchunas | March 7, 2016
The 840-page report from the U.S. Securities and Exchange Commission contained an unexpected present.
It arrived on Nathan Most’s desk at the American Stock Exchange in February 1988. Four months earlier, on Oct. 19, Wall Street had collectively gasped as the Dow Jones industrial average plummeted 508 points, or 22 percent. Black Monday, as the rout became known, remains the biggest one-day crash in history, and this 5-pound white paper, titled The October 1987 Market Break, was the SEC’s postmortem on the event.

The report couldn’t have found a more receptive audience. Most, a pragmatic 74-year-old industry veteran, was vice president of new product development at AMEX, a once-dominant exchange that had settled behind the New York Stock Exchange and Nasdaq in equity trading. By the late 1980s, only a handful of Standard & Poor’s 500-stock index companies even listed on the AMEX, Hasbro Toys and Forest Laboratories among them. “We were not really first in anything,” says Steven Bloom, who’d recently graduated from Harvard University with a Ph.D. in economics and worked alongside Most. In Black Monday’s wake, AMEX Chairman Arthur Levitt needed Most and Bloom, his two-person product development team, to come up with a winner that could attract institutional investors and help the exchange remain relevant.

----The culprits, the report noted, were portfolio insurance and program trading. Many institutional investors had started using portfolio insurance—a strategy that involved selling stock index futures once the market had declined by a specified percentage, allowing them to hedge the large amount of stocks they had accumulated. When stocks started to decline on Black Monday, institutions went to sell those futures, only to discover that the sudden rush of sellers vastly overwhelmed those willing to buy. This forced the futures to trade at discounts to the stocks they represented, triggering program traders to enter the market with automated sell orders for stocks underlying the index futures. Chaos ensued. The selling and volatility in the futures market had, in essence, been transmitted to individual stocks, increasing the panic and exacerbating the selloff.

One particular section of Chapter 3 caught Bloom’s attention. There, the SEC suggested that “an alternative approach be examined” and posited that if well-capitalized specialists and supplementary market makers could have turned to a single “product” for trading baskets of stocks, the market damage—and volatility—may have been significantly smaller. Indeed, such a product might even have prevented the crash by providing a liquidity buffer between the futures market and individual stocks. “I walked into Nate’s office and said, ‘Here’s an opening we could drive a truck through,’ ” Bloom says.

Of course, today we do have what the report refers to as basket-trading products. We call them exchange-traded funds, or ETFs, and they’re a $3 trillion global industry, with more than 6,780 products on 60 exchanges to choose from. In the U.S. last year, ETFs traded about $20 trillion worth of shares—more than the country’s gross domestic product. ETFs allow people to invest in every asset class they can think of, and their tickers range from TAN, which tracks solar stocks, to SVXY, which provides inverse exposure to VIX futures.
But for all their charm, ETFs are an increasing concern to regulators. On Monday, Aug. 24, for instance, the S&P 500 fell as much as 5.3 percent in the opening minutes of trading. It was the market’s worst day in four years. #BlackMonday started trending on Twitter. Of the 1,278 securities halted for trading, 80 percent involved ETFs, according to the SEC. On a typical day, ETFs make up about 25 percent of equity trading volume. That day, they made up almost 40 percent. In the months since, the SEC has published a research note about the day’s volatility, proposed new rules to enhance liquidity and limit derivatives in certain ETFs, and indicated that additional oversight may benefit the financial industry.
Brexit Quote of the week.

Cameron: He knows nothing and thinks he knows everything. That points clearly to a political career.

With apologies to George Bernard Shaw

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?

Fleet and fast test for nanomanufacturing quality control invented

Date: March 4, 2016

Source: National Institute of Standards and Technology (NIST)

Summary: Manufacturers may soon have a speedy and nondestructive way to test a wide array of materials under real-world conditions.
Manufacturers may soon have a speedy and nondestructive way to test a wide array of materials under real-world conditions, thanks to an advance that researchers at the National Institute of Standards and Technology (NIST) have made in roll-to-roll measurements. Roll-to-roll measurements are typically optical measurements for roll-to-roll manufacturing, any method that uses conveyor belts for continuous processing of items, from tires to nanotechnology components.
In order for new materials such as carbon nanotubes and graphene to play an increasingly important role in electronic devices, high-tech composites and other applications, manufacturers will need quality-control tests to ensure that products have desired characteristics, and lack flaws. Current test procedures often require cutting, scratching or otherwise touching a product, which slows the manufacturing process and can damage or even destroy the sample being tested.
To add to existing testing non-contact methods, NIST physicists Nathan Orloff, Christian Long and Jan Obrzut measured properties of films by passing them through a specially designed metal box known as a microwave cavity. Electromagnetic waves build up inside the cavity at a specific "resonance" frequency determined by the box's size and shape, similar to how a guitar string vibrates at a specific pitch depending on its length and tension. When an object is placed inside the cavity, the resonance frequency changes in a way that depends on the object's size, electrical resistance and dielectric constant, a measure of an object's ability to store energy in an electric field. The frequency change is reminiscent of how shortening or tightening a guitar string makes it resonate at a higher pitch, says Orloff.
The researchers also built an electrical circuit to measure these changes. They first tested their device by running a strip of plastic tape known as polyimide through the cavity, using a roll-to-roll setup resembling high-volume roll-to-roll manufacturing devices used to mass-produce nanomaterials.
----Alternatively, a manufacturer could use the new method to monitor the electrical properties of a less well-characterized material of known dimensions. Orloff and Long demonstrated this by passing 12- and 15-centimeter-long films of carbon nanotubes deposited on sheets of plastic through the cavity and measuring the films' electrical resistance. The entire process took "less than a second," says Orloff. He added that with industry-standard equipment, the measurements could be taken at speeds beyond 10 meters per second, more than enough for many present-day manufacturing operations.
The new method has several advantages for a thin-film manufacturer, says Orloff. One, "You can measure the entire thing, not just a small sample," he said. Such real-time measurements could be used to tune the manufacturing process without shutting it down, or to discard a faulty batch of product before it gets out the factory door. "This method could significantly boost prospects of not making a faulty batch in the first place," Long noted.
And because the method is nondestructive, Orloff added, "If a batch passes the test, manufacturers can sell it."
Films of carbon nanotubes and graphene are just starting to be manufactured in bulk for potential applications such as composite airplane materials, smartphone screens and wearable electronic devices.

The monthly Coppock Indicators finished February

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

No comments:

Post a Comment