Friday, 4 March 2016

Nothing Is Impossible!

Baltic Dry Index. 342 +07        Brent Crude 37.25

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

Brexit odds checker.

Brexit Quote of the Day.
“People say nothing is impossible, but I do nothing every day.”

David Cameron, with apologies to A.A. Milne, and Winnie-the-Pooh

We open for the end of the week with Canada going all out for roads and bridges to nowhere.  When this fails in the real world economy, coming next, teams digging holes for other teams to come along later to fill in. Of course, we could all just take in each other’s laundry, or all open nail boutiques. GDP soars. Canada, turns Japan lite. The Great Nixonian Error of fiat money, communist money, looks like it’s going to end USSR style. Don’t just sit there, do something!
"In economics, hope and faith coexist with great scientific pretension."

J. K. Galbraith.

Trudeau's Message to World: Let Government Spending Do the Work

March 3, 2016 — 10:00 AM GMT
Canadian Prime Minister Justin Trudeau is urging global leaders to rely more on government spending and less on monetary policy to spur growth as he prepares a budget that will push his country into deficit.
In a wide-ranging interview Wednesday in Vancouver, Trudeau highlighted the importance of infrastructure spending and measures to bolster incomes of middle classes he says are critical to driving growth. He also defended his plan to go willingly into the red.
“My message to other government leaders is don’t fall into the trap that thinking that balancing the books” is an end in itself, he said. “It’s a means to an end.”

Trudeau’s arrival on the global scene and his endorsement of deficits marks a sharp about face from his predecessor, Stephen Harper. Along with German Chancellor Angela Merkel and U.K. Prime Minister David Cameron, Harper championed the budget austerity alliance within the Group of Seven that often clashed with the U.S. on fiscal policy.

President Barack Obama will hear a new message next week when he hosts a state dinner for Trudeau at the White House. The Canadian leader’s debut also coincides with an increasing sense in global circles that monetary policy is reaching its limit, fueled in part by Japan’s surprise move to adopt negative interest rates that caused turmoil in currency markets.

----At a Group of 20 meeting in Shanghai last week attended by Trudeau’s finance minister, Bill Morneau, officials from the world’s top economies committed their governments to doing more to boost growth amid mounting concerns over the potency of monetary policy.

Trudeau, 44, hinted he is considering expanding on pledges that have his country on pace for a deficit of nearly C$30 billion ($22.3 billion) in the fiscal year that begins April 1. Having promised C$10.5 billion in new spending during the campaign, Morneau delivered a fiscal update last month showing the government is starting from a deficit of C$18.4 billion as Canada grapples with the oil-price shock.
In the EUSSR, things are getting serious again. Draghi has a week to roll out his “masterplan” next Thursday. In between, the Pound and the euro are benignly devaluing again. G-20 or not, it looks like a competitive devaluation is quietly underway.
“When it becomes serious, you have to lie.”

Jean-Claude Juncker. Failed former Luxembourg P.M., serial liar, president of the European Commission.

From Schengen to 'Brexit,' Risks to the Euro Are Stacking Up

March 4, 2016 — 12:00 AM GMT
It’s not only European Central Bank stimulus that has the potential to hurt the euro.

From the possibility that Britain might leave the European Union and the impact of refugees flooding the region, to concerns over the economic outlook and political turmoil in Ireland as well as Spain, the euro is facing a slew of hazards. Set alongside economists’ expectations for lower interest rates and more asset purchases from the ECB, investors are wondering how low it can go.

“There are monetary policy risks, there are political risks within the EU, there’s the geopolitical risks from outside with migration, and underlying it all you’ve got a pretty lackluster growth picture,” said Frances Hudson, an Edinburgh-based global thematic strategist at Standard Life Investments, which oversees $356 billion. “You could quite easily see a negative spiral developing.”

The euro is the worst-performing major currency after the pound over the past month, and touched a four-week low against the dollar this week. In a further sign of unease, a gauge of traders’ expectations for price swings in the world’s most-traded currency pair over the next six months climbed this week to the highest since 2012, when ECB President Mario Draghi pledged to do whatever it takes to preserve the euro.
While a falling currency may bolster the region’s economy by stimulating exports, the recent declines reflect a troubled outlook for the bloc. A decision by the U.K. to exit in a June 23 referendum would further damage trade and present unprecedented political challenges for the EU, while efforts to manage an influx of refugees from countries such as Syria by reducing free movement within the EU’s passport-free Schengen area also threaten to hamper the transfer of goods.
More than 100,000 people have crossed the sea to Greece, Italy and Spain in the first two months of this year, according to the United Nations’ refugee agency UNHCR, after about a million made the journey in 2015. European leaders will meet on March 7 to try to hammer out a solution

Eurozone Deflationary Pressures Intensify; France PMI Back in Contraction

Posted by mishgea | March 3, 2016 12:17:37
Eurozone deflationary pressures intensified in February. Manufacturers reported the steepest drop in their purchase prices in over six-and-a-half years with France leading the way. Moreover, Markit reports France is back in contraction with the Eurozone Composite PMI still positive but weakening.

Eurozone Economic Growth at 13-Month Low as France Contracts
  • Final Eurozone Composite Output Index: 53.0 (Flash 52.7, January 53.6)
  • Final Eurozone Services Business Activity Index: 53.3 (Flash 53.0, January 53.6)
February saw a broad-based slowdown of the eurozone private sector economy. Rates of output expansion eased across Germany, Italy, Spain and

Ireland, while France fell back into contraction for the first time in 13 months. Price pressures also remained on the downside, with modest reductions registered for both output charges and input costs.

Deflationary pressures intensified in February. Average prices charged for goods and services both declined at faster rates, as companies competed to win new business.

Selling price reductions were seen in France, Spain and Italy, with the decrease especially sharp in France. Germany and Ireland both registered higher output prices, as increases at service providers offset reductions at manufacturers.

Meanwhile, average input costs fell for the second month running and to a slightly greater extent than in January. Manufacturers reported the steepest drop in their purchase prices in over six-and-a-half years.
In other news, whoever becomes America’s next President, is going to face a regional challenge in Asia.

Inside China’s Plan for a Military That Can Counter U.S. Muscle

Chinese President Xi Jinping seeks a ‘tectonic’ shakeup of the world's largest fighting force

March 3, 2016 — 11:00 PM GMT Updated on March 4, 2016 — 5:07 AM GMT
With a series of edicts, speeches and martial ceremonies, President Xi Jinping has over the past six months unveiled China’s biggest military overhaul since the aftermath of the Korean War.

The plan seeks to transform the 2.3-million-member People’s Liberation Army, which features 21st-century hardware but an outdated, Soviet-inspired command structure, into a fighting force capable of winning a modern war. China is shifting from a “large country to a large and powerful one,” Xi explained in November.
The restructuring will be a major focus of the country’s new defense budget, which will be announced Saturday as the annual National People’s Congress gets under way in Beijing.

“A lot of countries do military reforms, but they are rarely as tectonic as what we are seeing in China,” said Dean Cheng, a senior research fellow at the Heritage Foundation in Washington who specializes in military capabilities. “Any single one of these elements constitutes a bureaucratic overhaul of the first order.”

Here are the key elements of Xi’s plan:

Fewer Singers, More Sailors

The first piece of the overhaul — announced by Xi during a grand military parade through Tiananmen Square on Sept. 3 — calls for eliminating 300,000 PLA personnel by 2017. While Xi presented the cutbacks as proof of China’s commitment to peace, they’ll largely target non-combat personnel and should make the country’s forces more focused and efficient.

Out are military cooks, hospital workers, journalists and some 10,000 members of the PLA’s famed troops of singers and dancers. Even so, China’s military will remain by far the world’s largest, with more than 600,000 more active service members than the U.S., according to estimates by the International Institute for Strategic Studies.
We end for the week awaiting the US dodgy employment stats. As with China’s scripted economic statistics, few any longer take them at face value. Below the rosy spin going in. Below that, reality.

U.S. employment gains seen accelerating in February

Fri Mar 4, 2016 1:09am EST
U.S. employers likely stepped up hiring in February, in a sign of labor market strength that could further ease fears the economy is heading into recession and allow the Federal Reserve to gradually raise interest rates this year.

Nonfarm payrolls probably increased by 190,000 jobs last month in the U.S. Labor Department's report due on Friday, with the unemployment rate holding at an eight-year low of 4.9 percent, according to a Reuters survey of economists.

The labor market gained 151,000 jobs in January, after the warmest temperatures in years boosted hiring in weather-sensitive sectors like construction, helping payrolls to rise by an average 279,000 jobs per month in the fourth quarter last year.

"The employment data should reinforce that the recession debate is premature and overdone, and could strengthen the case for the Fed not waiting too long," said Ryan Sweet, senior economist at Moody's Analytics in Westchester, Pennsylvania.

Fears of a recession in the wake of poor economic reports in December and slowing growth in China sparked a global stock market rout at the start of the year, causing financial market conditions to tighten.

Financial markets have priced out bets of an interest rate rise at the Fed's March 15-16 policy meeting and the probabilities for rate increases for the rest of the year remain rather small.

Significant data such as consumer and business spending improved strongly in January though, leading to predictions that economic growth in the first quarter could rise by at least a 2.5 percent at an annualized rate. The economy grew at a 1.0 percent pace in the fourth quarter of 2105.

Economists say the improved growth outlook, together with signs of inflation creeping up, could prompt the U.S. central bank to lift borrowing costs in June. The Fed raised its key overnight interest rate in December for the first time in nearly a decade.

Malaise Spreads to Services: US Services PMI Contracts for First Time Since October 2013

Posted by mishgea | March 3, 2016 11:38:19
For the first time in 27 months, the Markit Services PMI went into contraction. This is yet another signal the US economy is on the verge of recession if not in recession. I believe the latter.

Markit U.S. Services PMI™ – Final Data (with Composite PMI™)
Key Points

Weakest service sector performance for almost two-and-a-half years

New business and employment growth sustained in February

Business confidence slips to its lowest since August 2010
Adjusted for seasonal influences, the final Markit U.S. Services Business Activity Index registered 49.7 in February, down from 53.2 in January and below the neutral 50.0 value for the first time in almost two-and-a-half years. As a result, the latest reading indicated the weakest service sector performance the government shutdown disrupted business activity in October 2013.
“We'll be EUSSR Friends Forever, won't we, Juncker?' asked Cameron.
Even longer,' Juncker answered ominously.”

David Cameron, with apologies to A.A. Milne, and Winnie-the-Pooh
At the Comex silver depositories Thursday final figures were: Registered 25.72 Moz, Eligible 126.46 Moz, Total 152.18 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, deep into voodoo economics, the ECB is drying up liquidity in the sovereign bond markets. What could possibly go wrong with that?

Negative Rates + QE = Less Liquidity in Government Bond Markets

March 3, 2016 — 12:00 AM GMT Updated on March 3, 2016 — 8:22 AM GMT
Add negative interest rates to the list of monetary-policy tools hampering liquidity in sovereign-bond markets.
One measure of market liquidity in Europe has fallen by more than half since late 2014, according to JPMorgan Chase & Co. The aberration may worsen as the European Central Bank contemplates pushing rates further into record-low levels. The ECB, whose quantitative easing already removed 595 billion euros ($645 billion) of public and private debt from the market, is forecast to cut its deposit rate further below zero on March 10.
The ECB’s policy tools have crushed yields, eroding government bonds’ appeal for new investors and making current holders less likely to sell. And liquidity is suffering, meaning it’s harder for investors to trade without moving prices significantly.
Market depth in two-year German note futures -- one of the most sensitive securities to ECB policy -- has fallen 56 percent since November 2014, as measured by the number of contracts traded within the three tightest bid and ask spreads, data from JPMorgan show.
“You can’t disregard the impact that the negative-rates policy has had on liquidity in bond markets,” said Nandini Srivastava, a global market strategist at JPMorgan. “That’s likely to persist. Any deterioration in market liquidity indicates investors are less willing to hold or trade these securities.”
From Frankfurt to Tokyo, central banks’ push below zero adds to Basel III regulations, primary-dealer withdrawals and the growth of electronic bond-trading, which have curtailed liquidity in global markets. Less dealer participation removes a buffer that historically curbed price swings, and at a time when more investors are piling into crowded trades.
In Japan, the world’s second-largest debt market, trading in two-year bonds is so thin that the securities did not open on time for most of February and they did not trade at all on Feb. 23. That means investors are increasingly forced to look elsewhere for bonds that are easy to trade.
The month after the ECB set its first negative deposit rates in June 2014, investors could still trade 24,073 German two-year note futures contracts within the three tightest bid and ask spreads, based on a five-day average, according to JPMorgan. That number even climbed to 28,947 in November 2014.
Yet as traders grow weary of a market that’s more vulnerable to price swings, the figure has plummeted to 12,680 contracts on Feb. 25 this year, according to the most recent data from JPMorgan.

“Cameron: A slur upon the moral government of the world.”

With apologies to John Quincy Adams.

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?

Using graphene to fight bacteria

Date: March 2, 2016

Source: Biophysical Society

Summary: Scientists are studying graphene oxide in the hopes of one day creating bacteria-killing catheters and medical devices. Coating surgical tools with this carbon-based compound could kill bacteria, reducing the need for antibiotics, decreasing the rates of post-operative infections and speeding recovery times.
New research on graphene oxide may one day transform our ability to fight infections acquired in the hospital and elsewhere.
Scientists at the Università Cattolica del Sacro Cuore in Rome are studying graphene oxide in the hopes of one day creating bacteria-killing catheters and medical devices. Coating surgical tools with this carbon-based compound could kill bacteria, reducing the need for antibiotics, decreasing the rates of post-operative infections and speeding recovery times.
Graphene is a new wonder material first characterized in the last decade -- work recognized with the 2010 Nobel Prize in physics. This single-atom-thin sheet material holds promise in future electronics, battery and manufacturing technologies.
"We want to make materials that will help patients and medical professionals," said Valentina Palmieri a biotechnologist at the Università Cattolica del Sacro Cuore in Rome.
Graphene oxide, a form of graphene with molecular oxygen incorporated into it, protects against infection by destroying bacteria before it gets inside the body. The graphene oxide wraps around the bacteria, puncturing its membrane. A broken membrane prevents the bacteria from growing and often kills it. "The bacteria lose their complex structure and die," Palmieri added. "And since graphene is just carbon -- a building block of life -- its cytotoxicity against human cells is much lower compared to any drug-based antimicrobial therapy."
Researchers decided to use graphene oxide because it is very stable in a water solution, making it safe to interact with human cells. Graphene specifically attacks bacterial cells, while sparing human cells, and the mechanism behind this specificity is still unclear, Palmieri said. Current theories include that the material interacts more favorably with the bacterial cell wall or that mammalian cells have evolved multiple repair mechanisms to survive the chemical oxidation damage that graphene induces.

Another weekend and only 16 of them left before Brexit, freedom, sanity and the start of a serious return to prosperity.  Have a great weekend everyone.

Juncker: Do you realize what I'm doing here?
Cameron: No. Your every action has been a mystery to me.
Juncker: That is as it should be. The process by which the EUSSR arrive at the solution to a mystery is, in itself, a mystery.
With apologies to Joe Orton and Loot.

The monthly Coppock Indicators finished February

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

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