Thursday 31 March 2016

Phew! The End of Q1 16.



Baltic Dry Index. 414 +05        Brent Crude 38.85

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.
The quickest way of ending an EU war Dave, is to lose it.

With apologies to George Orwell.

While the Great Vampire Squids and their captive central banksters dress up the global casinos for the benefit of the one percent, and an increasingly futile attempt at building Potemkin Villages, in China’s real casinos the roof has fallen in. In yet another warning sign of rising distress in China, capital flight from China’s looming devaluation, has replaced hedonistic gambling trips to Macau.
Beyond that, the increasingly distressed real world far from the central bankster’s parallel planet world of ZIRP and NIRP voodoo economics.
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.

Wynn Macau 2015 profit tumbles 63%

Published: Mar 31, 2016 12:57 a.m. ET
Wynn Macau Ltd.'s (1128.HK) 2015 net profit plunged 63% from a year earlier, as high-spending gamblers shied away from the semiautonomous Chinese territory's tables.

The casino operator said after trading hours Wednesday that full-year net profit fell to 2.41 billion Hong Kong dollars ($310.9 million), from a net profit of HK$6.45 billion a year earlier. Full-year operating revenue was HK$19.10 billion, down 35% from HK$29.44 billion the previous year.

Welcome to New `Ice Age' as Top China Mill Sees Steel Crisis

March 31, 2016 — 3:01 AM BST Updated on March 31, 2016 — 4:12 AM BST
The crisis engulfing the global steel industry has become so severe that one of China’s top producers has warned of a new Ice Age as mills confront overcapacity and increased competition that threatens their survival.

“In 2015, China experienced a slowdown in economic growth and excess steel capacity, which caused the domestic and overseas steel industry to enter into an ‘Ice Age’,” Angang Steel Co. said after posting a net loss of 4.59 billion yuan ($710 million) for last year. There are severe challenges, fierce competition and difficult survival conditions, it said.

Steel demand in China is shrinking for the first time in a generation as growth slows and policy makers seek to steer the economy toward consumption. Faced with declining sales at home, mills in the top producer -- which accounts for half of global supply -- have shipped record volumes overseas, heightening competition from Europe to the U.S. Tata Steel Ltd. in India said this week it’s planning to sell off its loss-making U.K. plants, prompting Prime Minister David Cameron to call crisis talks on Thursday.

The steel industry is set for a “severe winter,” Angang said, describing the market that it and others faced as complex. Output of steel by the country’s fourth-biggest producer contracted 4.4 percent last year, and the company is seeking to reduce costs and boost efficiency, it said.

Benchmark steel prices sank 31 percent in China last year, pummeling mills’ margins and spurring the government to step up efforts to force the industry to shut overcapacity and shift workers to other jobs. While reinforcement bar has rebounded since November, Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd., forecasts the rally may not last.

“The short-term rally we’ve seen in steel prices will give way to the longer-term dynamic of weaker steel consumption in China,” Hynes said by phone on Thursday. “I suppose the positive thing is that maybe the restructuring we’re seeing in the steel industry will speed up the rationalization of the market.”

Other results from China this week showed the extent of the downturn. Baoshan Iron & Steel Co., China’s second-biggest producer, posted an 83 percent slide in net income last year, and Chongqing Iron & Steel Co. swung to a net loss of 5.99 billion yuan from a profit a year earlier.
More

We end with the ever more bizarre world of the Germanic Eurozone. Who other that the 5 European Presidents, and the horde of Eurorats would want to be in a monetary prison like this? Below, reading the chicken entrails, 21st century style.

"In economics, hope and faith coexist with great scientific pretension."

J. K. Galbraith.

How the Price of East German Butter Moves the Euro

From the cost of fresh butter in Dresden to a shirt in Leipzig or perfume in Chemnitz, each month the 60 data collectors in the German state of Saxony start gathering prices -- and end up moving the euro.

Figures that originate in what was part of communist East Germany and its price controls until 1990 have become a major focus for traders and market analysts trying to divine the overall inflation rate for the country and then the euro region. Saxony is the first in Germany to publish monthly consumer price data at a time when inflation dominates European Central Bank policy making.

“The sooner you get any kind of inkling of data, the better,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London. “Saxony comes out first, it’s in Germany, which is obviously the largest economy in the euro zone, and that will look to be a guide to the potential for further stimulus down the line.”

The reaction to Saxony’s data published on Wednesday confirmed the sensitivity of financial markets to the findings of the state’s statisticians. The euro jumped 0.2 percent against the dollar and Germany’s benchmark 10-year bonds pared their gain immediately after the report showed the inflation rate rebounded in March.
Indeed, in the past year, the euro moved about 0.08 percent on average against the dollar in the five minutes after Saxony released its inflation report each month.

While hardly a seismic shift in sentiment, and coming at the same time the stock market opens in Frankfurt, the reaction was typically more than for consumer-price data for the euro region. The was also more movement than for the latest update on Germany’s business climate by the Ifo Institute, data that used to be more closely watched.

“At the moment the most dominant driver of exchange rates is central-bank policy and there it’s only important to look at numbers that have a potential impact on the sense of central banks,” said Ulrich Leuchtmann, Frankfurt-based head of currency strategy at Commerzbank AG, Germany’s second-largest bank. He said while Ifo used to move the exchange rate significantly with every surprise, “it’s not the case anymore.”

Saxony’s importance is down to timing rather than anything else. It’s the first glimpse of inflation data rather than an economic bellwether for Germany.
More

"The paper standard is self-destructive."

Hans F. Sennholz
At the Comex silver depositories Wednesday final figures were: Registered 32.32 Moz, Eligible 123.27 Moz, Total 155.59 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, steel. Yet another central bankster fuelled malinvestment bubble gone horribly wrong. China’s malinvestment bubble in steel has resulted in an annual capacity of 779 million tonnes to 822 million tonnes, depending on source of the figures, no one has an exact figure, not even the Chinese themselves. Some 200 million plus tonnes over the rest of the world combined! China’s domestic demand for steel is an estimated 300 million tonnes, but declining as they try to switch their economy towards a more developed consumption economy, so China will be dumping cut price steel for decades, even as it desperately tries to shut down parts of its steel industry in a massive industry consolidation. The collapse of the Great Nixonian Error of fiat money, and the near on 50 year malinvestment bubble it spawned, only began correcting in 2007. We have barely started the process of correction.
"The history of paper money is an account of abuse, mismanagement, and financial disaster."
Richard M. Ebeling

Tata's U.K. Steel Challenge Is Selling a Business That Few Want

March 31, 2016 — 12:00 AM BST
Buyers for Britain’s biggest steel operations may be tough to come by.

Faced with a market flooded with cheap Chinese exports, Tata Steel Ltd. is planning to sell its U.K. business after several quarters of losses and 2 billion pounds ($2.8 billion) of writedowns left the division with an asset value of almost zero. Steel prices have plunged to the lowest in a decade and in the U.K. higher wages and rising energy costs make the business harder to sustain.

“It will be very difficult to find a buyer for steel assets in the current market environment,” Seth Rosenfeld, a London-based European steel analyst at Jefferies International Ltd., said in a phone interview. “Trying to ensure the long-term competitiveness of this plant will remain a real challenge for any upcoming owner.”
More

Steelmakers' Megalomania Leads to Misery

Of the many lessons from Tata Steel's decision to sell its loss-making British operations, surely the biggest is this: If a steelmaker tells you he's embarking on a multi-billion dollar, cross-border, debt-funded expansion, run for the hills.
No doubt there will be much anguish in the coming days about the pernicious impact of China's cheap steel exports, which increased to more than 112 million tonnes last year (equivalent to about two-thirds of total EU production).
But in truth, Tata's U.K. business has been struggling ever since a bidding war tempted the Mumbai-based company to pay an eye-watering 6.2 billion pounds ($8.9 billion) for Corus Group in 2007 -- a one-third premium on its initial bid funded largely with debt.
At the time chairman Ratan Tata called the takeover a "defining moment" for the company. Indeed it was, only in all the wrong ways.
Granted, the financial crisis and Europe's protracted recession weren't foreseeable and that hit the company hard. Europe accounts for more than half of Tata's revenue but demand there hasn't recovered to pre-crisis levels. Yet, in spite of cost cuts and thousands of job losses, Tata hasn't been able to turn things around.
In today's money, Gadfly estimates the company's European operations have lost almost $5 billion since 2010. Asset impairments in the UK totaled more than two billion pounds ($2.9 billion) in that period, according to Tata. As a result, Tata Steel's net debt stood at some $11.3 billion at the end of December, or more than 10 times estimated 2016 Ebtida, according to Bloomberg data.
Pride Before a Fall
Given that burden, Tata's decision to sell-up shouldn't come as a surprise. Arguably it should have recognized its mistake in buying Corus sooner. Doubtless, a big reason why Tata first did the deal was that Indian rival Lakshmi Mittal had completed a $38 billion takeover of Arcelor the previous year.
That hasn't turned out terribly well either. ArcelorMittal has also been forced to shutter European plants and it wrote down the value of its European steel business by $4.3 billion in 2012. Its huge debt forced it to announce a $3-billion rights issue in February.
Steel industry megalomania isn't a peculiarly Indian phenomenon, however, nor is organic growth necessarily better. ThyssenKrupp plowed billions of euros into a new Brazilian steel plant but lost more than 8 billion euros between 2011 and 2013 as construction problems and currency swings destroyed the original business case. The German steelmaker's balance sheet still bears the scars.
More

UK steel crisis: 'Government in disarray' says Corbyn amid threat of 40,000 job losses

30 March 2016 • 2:50pm
----Simon Boyd, director at REIDsteel and Business for Britain South West chairman, said: "While we remain in the EU our elected Government is helpless to assist the British steel industry. EU restrictions on our trade policy have cost the British steel industry thousands of jobs, leaving entire communities devastated.
"If we vote leave we can take back control of our trade policy and provide the help our steel industry needs."
More.
Brexit Quote of the week.

Damn your principles! Stick to your party.

D. Cameron, with apologies to 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?

Today, the havoc subsidies wreak in energy policy. If an idea or innovation makes sense, there’s an entrepreneur out there that will take it up. Subsidies bring on the wrong technology, or bring in the right technology, but too fast for optimal efficiency. Not to worry though, on the Great Nixonian Error of fiat money, its only pretend money and there’s plenty more where that comes from.

Taxpayers Are Footing Bill for Solar Project That Doesn’t Work

David Kreutzer / @dwkreutzer / March 29, 2016
As every 10-year-old who ever got a sweater for a birthday present has been told, “it’s the thought that counts.” That seems to be the guiding principle at the Department of Energy and the California Public Utilities Commission when it comes to solar power.

The latest example is the $2.2 billion Ivanpah solar thermal plant in California. (Note: Solar thermal plants do not use solar panels to directly convert sunshine to electricity; they use sunshine to boil water that then drives conventional turbines.)

Here’s the story so far. Ivanpah…
  • is owned by Google, NRG Energy, and Brightsource, who have a market cap in excess of $500 billion.
  • received $1.6 billion in loan guarantees from the Department of Energy.
  • is paid four to five times as much per megawatt-hour as natural gas-powered plants.
  • is paid two to three times as much per megawatt-hour as other solar power producers.
  • has burned thousands of birds to death.
  • has delayed loan repayments.
  • is seeking over $500 million in grants to help pay off the guaranteed loans.
  • burns natural gas for 4.5 hours each morning to get its mojo going.
Brightsource, which is privately held, is owned by a virtual who’s who of those who don’t need subsidies from taxpayers and ratepayers.

In spite of all this, Ivanpah has fallen woefully short of its production targets. The managers’ explanation for why production came up 32 percent below expected output is the weather. In addition to raising questions about planning for uncertainty, it is not all that clear how a nine-percent drop in sunshine causes a 32-percent drop in production.

More bizarrely, the natural gas used to get the plant all warmed up and ready each day would be enough to generate over one quarter of the power actually produced from the solar energy. Sorry, let’s not be haters.

The problem for Ivanpah’s customers (California power utilities) is that they planned on all those solar watt-hours to meet California’s renewable power mandates, which require that renewables produce a large and rising fraction of California’s electricity. That is why they pay so much more for Ivanpah’s output than for conventionally powered electricity.

Breaching their contracts with these California utilities threatened to shut down Ivanpah. More likely than permanently shutting Ivanpah down would have been a change of ownership at a price that came closer to reflecting reality.

But this would have been bothersome for Ivanpah’s investors and the Department of Energy’s ridiculous Section 1703 Loan Program, so the California Public Utilities Commission saved the day (for the fat-cat owners, of course, not for actual the electricity consumers) by granting the company an extension to meet the production targets.
More

The monthly Coppock Indicators finished February

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

No comments:

Post a Comment