Thursday, 10 March 2016

Draghi Day.

Baltic Dry Index. 376 +10        Brent Crude 40.90

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.

It is Draghi day, which unfortunately rhymes with tragedy, the day that Goldmanite, Magic Mario, is supposed to push EUSSR interest rates even further into negative territory and greatly expand the ECB’s bond buying open market operations. Everyone and their dog has front run the ECB in the bond and stock markets in anticipation of the helicopter drop of free money to the banksters. And not before time too. Both the IMF and BIS have started to panic about the state of Europe’s banks, with the IMF focusing on France and Italy, while the BIS is focusing on the Eurozone as a whole and the emerging markets. Silly me, I keep looking at Deutsche Bank, and their rising loan losses and their gargantuan derivatives leveraged gambling book, which makes them “the next Lehman” it seems to me.
In a sign of growing central bankster desperation, Marketwatch proposes a helicopter drop of cash to every citizen of the Eurozone. That ought to get the migrant movement flowing to Berlin on steroids it seems to me, plus fiat money cash flowing into gold and silver by the bushel load.  Brexit gets better with each passing day.
“The boom can last only as long as the credit expansion progresses at an ever-accelerated pace. The boom comes to an end as soon as additional quantities of fiduciary media are no longer thrown upon the loan market.”

“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.

Here’s what a ‘radical’ European Central Bank would do

Published: Mar 9, 2016 3:35 p.m. ET

Buying nonperforming loans would unclog system: analysts

Even if European Central Bank policy makers deliver all the goods expected of them Thursday, their extraordinary monetary-policy efforts still might not be enough to move the needle on inflation and the economy, say skeptics.

In a Wednesday note, analysts at Montreal-based Pavilion lay out the case, arguing that ECB President Mario Draghi and his policy-making cohorts need to think more “radical” thoughts.

See: 5 things to watch for at Thursday’s ECB meeting.

They argue that the ECB’s current approach, even if significantly expanded, isn’t going to do much good, for the following reasons:

--Pushing the deposit rate further into negative territory only reinforces disinflationary expectations—the opposite of the ECB’s objective—and they’re also brutal on the banking sector, which means they end up undercutting lending. See: Charts show how bad negative rates have been for stock markets.

--A weaker euro EURUSD, -0.2091% —a presumed byproduct of negative rates and other easing measures—would be a boon for eurozone exporters in a world of expanding global trade. Unfortunately, global trade flows are shrinking amid global “currency wars,” the analysts noted.

--Increased asset purchases seem, by design, aimed at boosting the prices—and lowering the yields—of assets that are already expensive (think German bunds).

So, what do the Pavilion analysts recommend?

They argue that purchases of nonperforming loans at a discount would go a long way toward fixing the broken monetary transmission channel. They would do so by ensuring that the benefits of ultraloose monetary-policy flow through to the real economy by taking the bad loans off bank balance sheets, freeing up lending.

Draghi Has Banking Chiefs Bemoaning ECB's Negative-Rate Push

March 9, 2016 — 5:00 PM GMT Updated on March 10, 2016 — 4:00 AM GMT
The euro area’s bankers, battered by falling trading revenue and weak profitability, are predicting more pain as the European Central Bank gets ready to cut interest rates further below zero.

While lenders managed over the past 18 months to counter the impact of the ECB’s push into negative territory, executives said a deeper descent threatens to upend banking’s centuries-old model of safeguarding deposits and charging interest on loans. In a world of subzero rates, depositors are charged and credit is almost free, with the goal of spurring economic growth and inflation.

“We can cope with the current interest-rate environment or even a bit lower,” Gerrit Zalm, chief executive officer of ABN Amro Group NV, said in an interview in Shanghai last week. “But if we were really going into the very negative interest-rate environment, a lot of banks including us will have a difficult period.”

In an increasingly urgent effort to stave off deflation, the ECB will probably cut its deposit rate from minus 0.3 percent and step up its 60 billion-euro ($66 billion) monthly bond-buying program, a Bloomberg survey of economists shows. The rate decision will be announced at 1:45 p.m. in Frankfurt on Thursday, and President Mario Draghi may reveal further measures in his press conference 45 minutes later.

By charging for idle cash, the ECB intends to reduce market borrowing costs and encourage lending. The problem for banks is that they can’t easily pass the cost onto retail clients for fear that they’ll withdraw their savings, which are a crucial source of funding and make up the bulk of deposits. That threatens to erode banks’ main profit driver, the gap between their cost of funding and their revenue from lending. The farther rates fall, the greater the pressure.

----The situation is putting bankers in the unusual position of turning away deposits. Stuart Gulliver, CEO of HSBC Holdings Plc, said the London-based firm had begun discouraging banks and non-bank financial institutions from depositing with them in the euro area.

The challenge of ever-lower rates comes as the region’s biggest banks are already overhauling their businesses and firing staff to lift profitability and meet tougher capital and regulatory requirements. More pressure on profits means more pruning is likely.

Deutsche Bank AG posted its first annual loss since 2008 last year after writing down the value of its securities unit and consumer-banking divisions. Commerzbank AG, Germany’s second-biggest bank, scrapped profitability targets for 2016, while Societe Generale SA of France indicated it may miss its goal for returns this year.

While we await Magic Mario’s words of wisdom or otherwise, in commodities the euphoria of hopium seems to be wearing off.

Oil prices dip as global oversupply outweighs strong demand

Thu Mar 10, 2016 1:10am EST
Oil prices dipped early on Thursday after U.S. crude hit 2016 highs the day before and Brent shot back over $40 per barrel, with analysts warning that larger gains would be unwarranted as a global glut continues to outweigh strong demand.

Expectations of more stimulus from the European Central Bank (ECB) this week, which would strengthen the dollar against the euro and potentially hamper dollar-traded oil imports, also weighed on markets, analysts said.

"The ECB will cut deposit rates by 20 bps (basis points) and extend its bond buying program by one year. This could be bullish for the dollar and bearish for oil," French bank Societe Generale said.

"Moreover, recent price gains are somewhat tenuous, because they've been driven by market sentiment, which can change quickly, and by supply disruptions, which are temporary," it added.

Energy XXI says may file for bankruptcy if oil prices stay low

Wed Mar 9, 2016 4:24pm EST
U.S. oil and gas producer Energy XXI Ltd may seek Chapter 11 bankruptcy protection as soon as next week if oil prices remain low and it fails to refinance its debt, the company said in a regulatory filing.

Brent crude has rallied in recent weeks to above $40 a barrel, but prices are still far below the $60 per barrel break-even level for the Houston-based company

With some $4 billion in liabilities as of Dec. 31, a bankruptcy filing by Energy XXI would be the second biggest energy-related failure since a prolonged slump in oil prices has put a slew of oil and gas producers at risk of default.

"Absent a material improvement in oil and gas prices or a refinancing or some restructuring of our debt obligations or other improvement in liquidity, we may seek bankruptcy protection to continue our efforts to restructure our business and capital structure," Energy XXI said in the U.S. Securities and Exchange Commission filing on Monday.

The company, with oilfields in South Louisiana and the Gulf of Mexico, also said in the filing that it may have to liquidate assets for less than their value on its balance sheet. It had a $1.3 billion loss in the second quarter ended Dec. 31.

“It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity. If there must be madness something may be said for having it on a heroic scale."

J. K. Galbraith. The Great Crash: 1929.
At the Comex silver depositories Wednesday final figures were: Registered 27.49 Moz, Eligible 125.92 Moz, Total 153.41 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, more on why you don’t want a nuclear power plant anywhere near where you live and drink water. How long before the Manatees and tourists start to glow in the dark?
And thank you most of all for nuclear power, which is yet to cause a single proven fatality, at least in this country.
Homer Simpson.

Miami’s oceanfront nuclear power plant is leaking

March 8, 2016 5:13 p.m
What is arguably America’s least-well-placed nuclear power plant is leaking radiation into the sea.

The University of Miami has found that the Turkey Point Nuclear Power Plant, located just south of Miami, has caused levels of tritium, a radioactive isotope, in Biscayne Bay to spike to 200-times higher than normal levels.

“This is one of several things we were very worried about,” South Miami Mayor Philip Stoddard, who is also a biological sciences professor at Florida International University, told the Miami New Times. “You would have to work hard to find a worse place to put a nuclear plant, right between two national parks and subject to hurricanes and storm surge.”

Turkey Point came online in the early 1970s; it supplies power to more than one million homes in South Florida. The new study blames the leaks on the reactor’s cooling canals, which were recently found to have caused a massive underground saltwater plume to migrate west, threatening a wellfield that supplies drinking water to the Florida Keys.

Critics alleged the canals began running too hot and salty after Florida Power and Light (FPL), which operates the plant, overhauled two reactors to produce more power, the Miami Herald reports. A judge already recently found that FPL had failed to prevent hundreds of thousands of gallons of wastewater from seeping into the bay.

Mayor Stoddard argues the new study might point to violations of the federal Clean Water Act, and says only two solutions are viable: Building new cooling towers to replace the canals or shutting down the plant, the New Times reports.

“There’s a certain validation to critics in seeing this result in the study,” he says, “but more importantly, it’s now crossed the threshold of federal law here.”

Turkey Point is not the sole leaky plant in America. Last month, New York Gov. Andrew Cuomo acknowledged that the state’s Indian Point Nuclear facility was leaking tritium into groundwater. Meanwhile, The Vermont Department of Health has noted ongoing investigations into leaks at Vermont Yankee since 2010, while New York’s FitzPatrick Plant has been “plagued by water leaks” in 2014, Gizmodo notes.

FPL is not responding to requests for comment.
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?

GE To Design Wind, Solar Energy Storage Project In India

March 8th, 2016 by Saurabh Mahapatra 
In what could be a significant step towards integration of large-scale wind and solar energy projects in the existing power grid, General Electric will design a storage-equipped hybrid renewable energy project in India.
General Electric recently announced that it received an order from India-based IL&FS Energy Development Company Limited to examine the feasibility of hybrid renewable energy projects equipped with energy storage facility. The hybrid projects will include wind and solar power units.
IL&FS Energy Development Company Limited is looking to develop such projects in Andhra Pradesh and Gujarat. These projects are in-line with the Central Government’s initiative to have large-scale renewable energy parks that include wind and solar power units to optimise resource utilisation and reduce project cost.
The contract to GE is the result of IL&FS winning a grant from the US Trade and Development Agency for studying energy storage projects.
The Indian Government is planning to set up over 20 GW of ultra mega solar power parks. Integration of these power units into the existing grid is possibly the largest challenge the country faces. Energy storage will be critical for the success for this program. Already 21 such solar power parks have been approved by the government.
As part of the feasibility study, GE will design an integrated wind, solar, and energy storage plant, estimate its capital and operating costs, and develop a business plan that includes the viability gap funding that will be required for the commercialization of the project.
In addition to possible breakthroughs in the field of energy storage, the Indian government has already started work on a dedicated power transmission network for catering to the planned large-scale renewable energy projects.

The monthly Coppock Indicators finished February

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

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