Thursday, 3 March 2016


Baltic Dry Index. 335 +03        Brent Crude 37.04

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

Brexit odds checker.

Brexit Quote of the Day.
There are three kinds of lies: lies, Euro lies, and EUSSR statistics.
With apologies to Benjamin Disraeli.

We open today with Asia and yet more sign of rising disconnect between stock markets and a slowing global economy stumbling towards recession. In Japan insanity rules. Japan keeps doing the same thing over and over again and expecting a different result.

Japanese households urged to take ‘bold steps’ to help economy

Published: Mar 2, 2016 10:28 p.m. ET
TOKYO — A Bank of Japan deputy governor said he wants companies and households to take “bold steps” to help bring the economy back to prosperity, as the central bank continues to struggle to rejuvenate listless growth and inflation.

“I hope that households and firms will take bold steps towards economic prosperity, making full use of the current financial environment, which is more accommodative than ever,” Hiroshi Nakaso said in a speech to executives in Okinawa prefecture.

Nakaso also called on the government to move more quickly in tackling structural impediments in the economy.

“I expect the original third arrow of Abenomics, the growth strategy, to fly higher and faster,” Nakaso said as he referred to Prime Minister Shinzo Abe’s “three arrow” growth-revival plan.

Monetary easing by the Bank of Japan is the first arrow, flexible fiscal policy is the second.

S&P: Large Japan economic stimulus would raise concerns

Wed Mar 2, 2016 12:28am EST
Japan's government is unlikely to be able to launch a stimulus package to support its struggling economy without raising concerns about the size of its spending, ratings agency Standard & Poor's said on Wednesday.

Faced with a flagging economy, Japan is laying the groundwork for new government spending to pre-empt any weakness in household consumption, which would add to its already heavy debt burden.

S&P cut its rating on Japan from AA- to A+ in September, which is four notches below its top rating of AAA, because it doubts the government can reverse the country's economic deterioration. The agency also raised its outlook to stable from negative.

"The size of any stimulus will have to be carefully calibrated. At this point I don't think the government can put out a package big enough to support the economy without triggering concerns," Kim Eng Tan, S&P's Asia-Pacific senior director of sovereign ratings, said in an interview.

Tan said continued yen strength could remove the external support, such as the receipts inbound tourism bring in, which Japan's budget balance enjoys. If domestic demand and inflation are unable to make up for the loss of this external support, the fiscal balance could again deteriorate and pose a credit negative factor in the long run, he added.

---- Japan plans to increase its sales tax in April 2017 and that would lift government revenue and lower its outstanding debt burden. Speculation has lingered among some market players, however, that Japan could postpone hiking taxes amid worsening demand.

"It really depends on the economic situation at that time. If you introduce a consumption tax hike when the economy is already weak or heading downwards, you are worsening the economic trend. You may not bring in that much revenue," Tan said.

Japanese government bond yields through the 10-year maturities have sunk to record lows below zero percent under the Bank of Japan's negative interest rate policy, introduced in January, potentially lightening the government's debt-servicing cost.

"In the short term, it can definitely reduce the government's financing cost, but whether it does so in the long term depends on people's continued confidence in monetary policy," Tan said.

Singapore's PMI slips on weaker demand

Published: Mar 2, 2016 11:21 p.m. ET
SINGAPORE--An indicator of Singapore's business activity slowed down in February from the previous month, as overseas demand weakened and output expanded at its slowest pace since October 2013 as new orders rose only marginally.

The Nikkei Purchasing Managers Index, which measures private-sector and manufacturing activity, was at 51.6 in February, from 52.5 a month earlier. A reading above 50 indicates an expansion in manufacturing activity, while a reading below that signals contraction.

The Nikkei PMI, which is the outcome of a private survey by Nikkei and research firm Markit, is higher than the 48.5 PMI reading for February from the Singapore Institute of Purchasing & Materials Management.

Operating conditions faced by Singaporea's private-sector companies improved at the slowest pace in four months in February, it added.

"The headline PMI indicated only a modest improvement in Singapore private sector operating conditions during February, as the pace of output growth weakened to 28-month low and new order books expanded only slightly," Annabel Fiddes, Economist at Markit said.
She said the latest data also indicated that external demand showed signs of weakening, with new export work rising at a much slower pace than at the start of the year.

Moody's cuts China outlook on eve of NPC, cites reform, fiscal risks

Wed Mar 2, 2016 5:14am EST
Moody's downgraded its outlook on Chinese government debt to "negative" from "stable" on Wednesday, citing uncertainty over authorities' capacity to implement economic reforms, rising government debt and falling reserves.
The Moody's downgrade comes just days before the National People's Congress (NPC) is due to vote on China's 13th five year plan, a closely held development blueprint for the next five years, which policymakers began formally drafting in 2015.
Analysts will closely scrutinize the NPC's final text for hints on the likely trajectory of reform and policymakers' thinking on the appropriate growth strategy for China - key factors highlighted by Moody's in the report issued on Wednesday.
"Without credible and efficient reforms, China's GDP growth would slow more markedly as a high debt burden dampens business investment and demographics turn increasingly unfavorable. Government debt would increase more sharply than we currently expect," Moody's said.
The agency said its rating committee had discussed China's status at a meeting on Feb. 9, during which the country's institutional and fiscal strength, as well as its susceptibility to event risk, were reviewed.
The agency said the downgrade was driven by expectations that China's fiscal strength will continue to decline, as well as the fall in its foreign exchange reserves which have shrunk by $762 billion over the last 18 months.
---- Moody's, however, retained China's Aa3 rating, noting the country's sizeable reserves gave it time to implement reforms and gradually address economic imbalances.
But the agency warned that it could further downgrade China's rating if it saw slowing down of reforms needed to support sustainable growth and to protect the government's balance sheet.

In EUSSR news, it’s the same old bad news story. Just don’t let on to the “stay” Muppets or the Prime Minister.

Fresh recession will cause eurozone collapse, warns French bank

Mehreen Khan2 March 2016 • 12:59pm
A new recession in Europe could lead to the collapse of the eurozone, as the single currency would buckle under the political turmoil unleashed by a fresh downturn, a leading investment bank has warned.
In a research note titled "Close to the edge", economists at French bank Credit Suisse warned the fate of monetary union hangs in the balance if Europe's policymakers are unable to ward off another global slump and keep in check anti-euro populism. 
"The viability of the euro is contingent on the current recovery," said Peter Foley at Credit Suisse. 
"If the euro area were to relapse back into recession, it is not clear it would endure."
Although the bloc's nascent recovery was likely to persist in the coming months, Credit Suisse said there were worrying signs of deterioration emanating from Europe's economies. These include heightened credit stress in the banking sector and market volatility. 
"The near-term outlook for economic activity, as well as the risks around it, has shifted materially downwards," said the seven-page report.

The eurozone's 19 member states only managed to grow by 0.3pc in the last three months of 2015, despite asset purchases from the European Central Bank and the collapsing price of oil.

Euro depression is 'deliberate' EU choice, says former Bank of England chief

Mehreen Khan1 March 2016 • 9:46pm
Europe's deep economic malaise is the result of "deliberate" policy choices made by EU elites, according to the former governor of the Bank of England.

Lord Mervyn King continued his scathing assault on Europe's economic and monetary union, having predicted the beleaguered currency zone will need to be dismantled to free its weakest members from unremitting austerity and record levels of unemployment.
Speaking at the launch of his new book, Lord King said he could never have envisaged an economic collapse of the depths of the 1930s returning to Europe's shores in the modern age.

But the fate of Greece since 2009 - which has suffered a contraction eclipsing the US depression in the inter-war years - was an "appalling" example of economic policy failure, he told an audience at the London School of Economics.
"In the euro area, the countries in the periphery have nothing at all to offset austerity. They are simply being asked to cut total spending without any form of demand to compensate. I think that is a serious problem.
"I never imagined that we would ever again in an industrialised country have a depression deeper than the United States experienced in the 1930s and that's what's happened in Greece. 
"It is appalling and it has happened almost as a deliberate act of policy which makes it even worse". 
Lord King - who spent a decade fighting the worst financial crisis in history at the Bank of England - has said the weakest eurozone members face little choice but to return to their national currencies as "the only way to plot a route back to economic growth and full employment". 
"The long-term benefits outweigh the short-term costs," he writes in The End of Alchemy. 
The former Bank governor has said popular disillusion with EU economic policies are likely to lead to disintegration of the single currency rather than a move towards "completing" monetary union. 
Two of the eurozone's debtor nations - Ireland and Spain - are currently locked in electoral stalemate after their pro-bail-out governments failed to win the backing of voters. 

Cameron: I'm innocent till I'm proved guilty. This is a free country. The law is impartial.
Juncker: Who's been filling your head with that rubbish?
Cameron: I can't be had for anything. You've no proof.
Juncker: When I make out my report I shall say you've given me a confession. It could prejudice your case if I have to forge one.
With apologies to Joe Orton and Loot.
At the Comex silver depositories Wednesday final figures were: Registered 24.79 Moz, Eligible 127.77 Moz, Total 152.56 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, China 2016.

Overcapacity in China: An Impediment to the Party’s Reform Agenda

The European Chamber of Commerce in China has released a new major report that addresses the problems arising from increased overcapacity in China’s industrial economy. Overcapacity in China: An Impediment to the Party’s Reform Agenda provides a detailed examination of the causes and consequences of overcapacity in eight key industries and analyses the developments that have taken place since the European Chamber published its original report on this topic in 2009.

The new report explains how central government efforts to address excessive production capacity have been ineffectual due to regional protectionism, weak regulatory enforcement, low resource pricing, misdirected investment, inadequate protection of intellectual property rights and an emphasis on market share.

The report provides 30 recommendations that should be taken to address this deep-rooted problem. The European Chamber hopes that they will also contribute to a strengthening of the government’s resolve to implement the core tenet of the Third Plenum’s Decision – establishing the market as the decisive force in China’s economy.

Please click here to view English press release or click here to view the Chinese version.
---- Overcapacity has been a blight on China’s industrial landscape for many years now, affecting dozens of industries and wreaking far-reaching damage on the global economy in general, and China’s economic growth in particular. Yet when the European Chamber released its first report on this topic in 2009, it was a seldom-examined phenomenon. Unfortunately, during the last six years, overcapacity in China has only continued to worsen.

The scale of overcapacity in China’s steel, aluminium and cement industries highlights the severity of the problem: steel production has become completely untethered from real market demand, and is now more than double the combined production of the four next leading producers: Japan, India, the United States (US) and Russia;2 in China’s aluminium industry, 60 per cent of production capacity has negative cash flow;3 and according to data from China’s National Bureau of Statistics and the US Geological Survey, in just two years—2011 and 2012—China produced as much cement as the US did during the entire 20th century.

Due to the effect of overcapacity on industry profits, and in conjunction with weak commodity and energy prices, during the 45 months up to December 2015, China saw its producer price index continually decline.4 This trend has seriously influenced the profitability of China’s industrial producers.

China's National People's Congress: What You Need to Know

March 2, 2016 — 10:00 PM GMT
Each year, some 3,000 of China’s most powerful officials descend on Beijing for about 10 days of parliamentary pageantry known as the National People’s Congress.

While the country’s top legislature is constitutionally charged with vast powers, the mechanics of one-party rule ensure most important decisions are hashed out in closed-door Communist Party meetings long before reaching the floor. That said, the public proceedings at the Great Hall of the People represent the one time each year that many of the people who run the world’s second-largest economy face the press, providing rare insight into their thinking and policy plans.

This year’s NPC consists of 2,943 party chiefs, government officials, company executives and military commanders hailing from 35 constituencies, including provinces, regions, municipalities and the semi-autonomous former colonies of Hong Kong and Macau. Members include everyone from so-called model workers to President Xi Jinping.

Delegates have even been assigned to represent Taiwan, which China still considers a province even though it’s been ruled independently for almost seven decades. The party officially holds 72 percent of the seats, with the remainder occupied by eight authorized "non-Communist" parties and people with no affiliation. In reality, only one party picks the delegates.

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?

Stanford Researchers Build Solar-Powered Battery Using Simple Metal Oxides

Published on February 26, 2016 at 11:10 AM

An economy that depends solely on fossil fuels seems unsustainable in the current global scenario. Oil prices are crashing, and supplies of coal, oil, and similar fuels are limited.

The situation is complicated further with the rising issues related to global warming. The leading solution is limitless solar power, however there is the issue of storing and supplying solar energy when sunlight is not available.
According to energy experts solar power has to be made "dispatchable" by engineers, meaning the it requires the ability to increase or decrease power output based on demand. Recently a team of researchers headed by William Chueh, an assistant professor of materials science and engineering, and Nicholas Melosh, an associate professor in the same department, have made a breakthrough which may make large-scale storage of solar power a reality.
The team discovered that common metal oxides, such as rust, can be used to form solar cells that can split water into oxygen and hydrogen. Using solar cells to split H2O by day is one method to store energy to use at night. The photons trapped by the cell are converted into the electrons, which supply the energy to split water.
Energy can be reclaimed by recombining oxygen and hydrogen at night. Then it can be "dispatched" back into the electrical grid. No fossil fuels need to be burnt and no excess carbon is released into the atmosphere.
The concept of metal oxides possessing solar power potential was already known However compared to silicon solar cells, metal oxide solar cells were also identified as being less efficient at converting photons to electrons.
A report in the Energy & Environmental Science journal stated that metal oxide solar cells were a better option for energy storage. The Stanford team illustrated that when the metal oxide solar cells grew hotter, they tend to convert photons into electrons in a more efficient manner. It is exactly the opposite with silicon solar cells, which tend to lose efficiency as the heat increases.
This unanticipated breakthrough may pave the way for a radical change in the way energy is produced, stored, and consumed.
We've shown that inexpensive, abundant and readily processed metal oxides could become better producers of electricity than was previously supposed. By combining heat and light, solar water-splitting cells based on metal oxides become significantly more efficient at storing the inexhaustible power of the sun for use on demand.
Until now it has been unfeasible to utilize water-splitting as a method to store solar energy, as cost was an issue. Silicon-based solar cells, which are used in rooftop solar arrays, are suitable to convert visible and UV light into electricity. The downside is that silicon cells waste the infrared light, which bears the heat, falling upon it.
Standard cells utilize a relatively small portion of the spectrum, and the rest is lost as heat.
Until the Stanford discovery, metal oxides were thought to be less efficient when they became hotter. Another reason it was not considered was due to the fact that they were less efficient compared to silicon, which made them unappealing as a water-splitting technology.
This misconception was rectified by the experiments conducted by the Stanford team. They worked with three metal oxides- titanium oxide, iron oxide (which is generally known as rust), and bismuth vanadium oxide. They tested the efficiencies of these oxides to convert photons to electrons, and splitting water into oxygen and hydrogen at varying temperatures.

The monthly Coppock Indicators finished February

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

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