Baltic Dry Index. 332 +03 Brent Crude 36.64
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:
The kind of politician who would cut down a redwood tree and then mount the
stump to make a speech for conservation.”
With
apologies to Adlai Stevenson
With
much of mainstream media focused on America and the Super Tuesday primaries this
morning, and with our global stock markets back on risk on hopium again, today
we take another look at the deepening commodities depression. Either stocks or
commodities are wrong about the global economy. My guess is that it is the
stock markets that are wrong. But first the good news case in stocks.
Asian stocks soar to two-month highs on solid data; oil up
Stock markets across the region were in the black, led
by Japan and Hong Kong, with announcements from China this week of a cut in
bank reserve requirements and structural reforms helping underpin sentiment.The Nikkei .N225 was up 4 percent and Hong Kong's Hang Seng Index .HSI by 2.6 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 2 percent to its highest levels since Jan. 7, and building on gains in the previous session.
"While we remain cautious on the outlook, we don't think the global economy is going to tip into a recession," said Geoff Lewis, Hong Kong-based senior strategist at Manulife Asset Management. "Much of the bad news is already priced into markets offering investors areas of opportunity."
The Institute for Supply Management's (ISM) index of U.S. factory activity, a closely-watched measure of the American manufacturing sector, rose more than expected last month. It also edged up for two months in a row, appearing to have snapped its almost continuous decline since late 2014.
U.S construction spending rose to the highest level since October 2007 while solid GDP data
from Australia and Canada helped.
More
Meanwhile
in commodities news, there’s still no light at the end of the tunnel. But maybe
it’s not a tunnel at all, maybe it’s a mine.
Glencore Posts Biggest Profit Drop Since IPO on Metals Slump
March 1,
2016 — 7:02 AM GMT Updated on March 1, 2016 — 8:02 AM GMT
By a lot of measures, 2015 was the worst year for Glencore Plc since the
mining and trading giant became a public company.
Net income excluding some items plunged 69 percent to $1.34 billion
during the year as prices for metals and oil collapsed, the Baar,
Switzerland-based company said in a statement Tuesday. While that beat the
$1.17-billion estimate from analysts, the firm suffered an adjusted loss in its
mining division and plans to sell as much as $5 billion in assets.
Glencore executives struck an upbeat note on a call with reporters after
the results, with Chief Executive Officer Ivan Glasenberg saying commodity
prices have bottomed and sales into China are “pretty good.” While the
company’s priority remains reducing its $25.9 billion debt load, a return to
dividends is possible next year, Chief Financial Officer Steve Kalmin said.
The stock slipped 1.7 percent to 131.05 pence as of 8 a.m. in London.
Profits from the world’s biggest mining companies are evaporating as
prices for copper, nickel, zinc and iron ore plunge because of gluts and
slowing demand from China, the biggest customer. To weather the commodities
collapse, Glencore is trying to save money and plans to reduce debt to as low
as $17 billion by scrapping its dividend, cutting costs and selling assets and
new shares.
----Adjusted
earnings before interest and tax from the trading division was $2.46 billion,
compared with the company’s forecast of $2.5 billion and $2.79 billion in the
previous year. Earnings from the mining unit swung to a loss of $292 million
from a profit $3.9 billion in 2014
----BHP Billiton Ltd., Rio Tinto Group and Vale SA have all reported
plunging profits and cut dividends this year, at the same time painting a
gloomy picture for a near-term recovery in metals, with most still in
oversupply. A measure of six metals traded in London tumbled 24 percent last
year, the most since the global financial crisis of 2008. Oil plummeted 30
percent after dropping 46 percent a year before.The commodities slump means Glencore now generates most of its cash from trading as its mines and smelters around the globe struggle for profitability.
More
Moody's: Asian steel producers will report lower earnings and high leverage in 2016
Hong Kong, February 29, 2016 -- Moody's Investors Service says that
steel producers in Asia will see their overall earnings in 2016 fall to levels
even lower than the weak results reported in 2015 because production volumes
and spreads will contract further, against the backdrop of oversupply and the
resulting low prices.
"Debt leverage for rated Asian steel producers in 2016 will remain
high in 2016, after increasing significantly in 2015," says Jiming Zou, a
Moody's Vice President and Senior Analyst. "Nevertheless, the levels in
2016 will likely fall year-over-year due to corporate austerity measures."
Zou points out that such expectations for the steel sector led to
Moody's taking negative rating actions on most steel companies in recent weeks.
"As demand for steel in China declines further — against the
backdrop of slower Chinese economic growth — the country's steel producers will
continue to export their giant stockpiles of steel, pressuring prices in
Asia," adds Zou. "Anti-dumping measures and safeguard duties will
slow Chinese export growth, but overall volumes will remain high."
Zou explains that China accounts for half of all steel production
globally, and three-quarters of such production in Asia. It is also a giant
steel consumer. Consequently, Chinese steel supply and demand dynamics show
significant effects beyond the country's borders.
Moody's analysis is contained in its just-released report titled
"Steel Producers — Asia: Supply Glut and Low Prices Will Reduce Earnings
and Keep Leverage High in 2016," and is authored by Zou.
Moody's report says that in 2015, China's apparent steel consumption
declined 5% year on year, while net exports grew 25.5%. Moody's expects that
steel demand in China will fall another 5% in 2016 and exports will rise by a
single-digit percentage.
Moody's says that large steel producers can improve their business scale
and market share by acquiring small or inefficient steel producers that become
unviable due to the challenging market conditions.
However, in terms of the Chinese market in particular, despite the
government's efforts to consolidate the domestic steel industry, there is
significant uncertainty over the pace of the capacity reduction and rebalancing
of supply and demand in the country.
On specific steel markets, Moody's report says that Chinese producers
will underperform those in other parts of Asia, because of the massive supply
situation in China.
As for Korean and Japanese steel companies, they are better positioned
to weather adverse market conditions because of their focus on premium
products, although earnings will stay below their historical levels.
For major Indian steel mills, the ramp-up of new steel-production
capacity, resumption of captive iron ore production and the government's
introduction of minimum import prices will help the sector mitigate earnings
pressure during 2016.
More
Oil prices fall on huge build in U.S. crude stocks
Oil prices fell on Wednesday in the wake of industry data that showed a
huge build in U.S. crude stockpiles that were already at a record high.
Early losses were trimmed, however, as the market discounted the data
in line with recent sentiment that has seen crude prices push higher in the
last fortnight since hitting 12-year lows under $30 a barrel between late
January and mid-February.
in line with recent sentiment that has seen crude prices push higher in the
last fortnight since hitting 12-year lows under $30 a barrel between late
January and mid-February.
London Brent crude for May delivery was down 12 cents at $36.69 a barrel
by 0436 GMT, after settling up 24 cents on Tuesday. The contract touched an
intraday peak of $37.25 on Tuesday, the highest since Jan. 5 and up 37.5
percent from a 12-year low hit in late January.
NYMEX crude for April delivery was down 40 cents at $34 a barrel, after
settling up 65 cents on Tuesday on the back of a firmer close on Wall Street.
U.S. crude hit a one-month high on Tuesday.
U.S. crude inventories rose by 9.9 million barrels last week, data from
the American Petroleum Institute showed after Tuesday's settlement. That was
well above a 3.6-million barrel increase expected by analysts in a Reuters
poll.
The surprise jump initially pushed U.S. crude down as much as 60 cents
on worries that official data from Energy Information Administration (EIA) due
later in the day would show a large build similar to the industry numbers.
"Inventories are already at a historical high and with it
continuing to inch upwards, the market has been taking a nonchalant behavior
towards increasing inventories," Daniel Ang at Phillip Futures said in a
note.
Global oil prices appear to have bottomed out and are expected to rise
through this year as investment cuts help to reduce a supply glut, a senior
analyst at the International Energy Agency said on Tuesday.
More
The Rise and Fall of Commodities Hedge Fund King Willem Kooyker
March 1,
2016 — 5:01 AM GMT Updated on March 1, 2016 — 11:02 AM GMT
Thirty miles west of Wall Street, in an anonymous office park set among
rolling hills and shady streets, lurks a giant of the commodities world.
Behind the bland facade in Berkeley Heights, New Jersey, lies the
headquarters of Willem Kooyker, one of the most powerful and enigmatic traders
in the game.
For half a century, Kooyker has quietly ridden the ups and downs of oil,
copper, cocoa and more, first in his native Holland and later at Commodities
Corp., the legendary trading-company-cum-think-tank that served as a training
ground for market wizards Paul Tudor Jones, Louis Bacon and Bruce Kovner.
Only now, at 73, Kooyker is struggling to contain the damage from a
commodities collapse that even he never saw coming.
Before the worst hit -- $20-a-barrel oil no longer sounds so crazy --
Kooyker’s hedge-fund firm was already hemorrhaging billions in assets, people
close to his operation say. With returns at Blenheim Capital Management LLC’s
flagship fund down for four out of the past five years, some investors are
heading for the exits.
The numbers tell the story. At its height in 2011, Blenheim was the world’s
largest commodities-focused hedge fund, with $9.1 billion in assets, people
familiar with the firm say. Today, its assets have fallen nearly 85 percent to
$1.5 billion.What went wrong? The short answer is that Kooyker didn’t think things would get this bad. He and his colleagues underestimated the economic troubles in China and never thought commodities prices would fall so far, so fast, the people said, speaking on the condition they not be named to avoid jeopardizing business relationships.
It’s a remarkable turnabout for Kooyker, whose tenure atop Commodities Corp. in the 1980s set the stage for two wildly lucrative decades at Blenheim. In 1999, for instance, as oil sank below $10 a barrel, Kooyker bet that commodities would bounce back -- and his hedge fund soared nearly 109 percent. Billions of investor dollars poured in.
Few outsiders had any idea what Kooyker was up to. Most still don’t. He’s long operated under the radar, arguing that any publicity, good or bad, only hurts investment returns.
“They are the most secretive I have ever met," Christoph Eibl, chief executive officer of the $800 million commodity investor Tiberius Asset Management AG, said of Blenheim.
Kooyker and others at Blenheim declined to comment on the fund’s recent performance, assets under management or trading strategy.
The question now is how Kooyker can recover from a rout that has shaken investors, corporations and entire economies. Already, Blenheim investors like the $21 billion New Zealand public pension fund have pulled money out, according to annual reports from the Kiwi fund and interviews with people familiar with the matter.
More
Copper Sags as China Stimulus Move Fails to Stem Demand Concern
February 29,
2016 — 11:42 AM GMT Updated on February 29, 2016 — 7:24 PM GMT
Copper had a fourth decline in five sessions on speculation that China’s
efforts to stimulate its economy will fail to rekindle demand growth in the
world’s biggest metals consumer.
China’s central bank cut the reserve ratio amid plunging stock prices
and a weakening currency. Global equities headed for a fourth monthly decline
amid mounting concerns about slowing world growth. Copper has lost more than 20
percent in the past year.
“People have been burned buying based on the fact that China has been
easing” monetary policy, James Cordier, the founder of Optionsellers.com in
Tampa, Florida, said in a telephone interview. “That kind of monetary policy
hasn’t done anything for their industrial growth.”
----The required
reserve ratio for the banks will drop by 0.5 percentage point effective March
1, the People’s Bank of China said on its website Monday. The move marks a
return to more traditional easing after the
central bank indicated in recent weeks it would spur growth by guiding
interbank markets lower and injecting liquidity through open-market operations.
More
We close for the day with China. Even
in China, two million layoffs a year for three years, is a big economic drag.
Exclusive: China to lay off five to six million workers, earmarks at least $23 billion
Tue Mar 1, 2016 | 6:14 AM EST
BEIJING (Reuters) - China aims to lay off 5-6 million state workers over
the next two to three years as part of efforts to curb industrial overcapacity
and pollution, two reliable sources said, Beijing's boldest retrenchment
program in almost two decades.
China's leadership, obsessed with maintaining stability and making sure
redundancies do not lead to unrest, will spend nearly 150 billion yuan ($23
billion) to cover layoffs in just the coal and steel sectors in the next 2-3
years.
The overall figure is likely to rise as closures spread to other
industries and even more funding will be required to handle the debt left
behind by "zombie" state firms.
The term refers to companies that have shut down some of their
operations but keep staff on their rolls since local governments are worried about
the social and economic impact of bankruptcies and unemployment.
Shutting down "zombie firms" has been identified as one of the
government's priorities this year, with China's Premier Li Keqiang promising in
December that they would soon "go under the knife"..
The government plans to lay off five million workers in industries
suffering from a supply glut, one source with ties to the leadership said.
A second source with leadership ties put the number of layoffs at six
million. Both sources requested anonymity because they were not authorized to
speak to media about the politically sensitive subject for fear of sparking
social unrest.
The ministry of industry did not immediately respond when asked for
comment on the reports.
The hugely inefficient state sector employed around 37 million people in
2013 and accounts for about 40 percent of the country's industrial output and
nearly half of its bank lending.
More
Juncker: The Ten Commandments. Cameron was a
great believer in some of them.
With apologies to Joe
Orton and Loot.
At
the Comex silver depositories Tuesday final figures were: Registered 24.79 Moz, Eligible 127.99 Moz, Total 152.78 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, why the bubbly, hopium stock markets might
be making a major error yet again.
The G-20s Big Fat Zero——Now Comes The Bubble’s Demise!
by David Stockman • February 29, 2016
The tens of millions of taxpayer money wasted at the G-20’s Shanghai
soirée had a silver lining. The assembled masters of world
finance came up with a big fat zero on the coordinated global
stimulus front.
So doing, they essentially admitted that their money
printing central banks are out of dry powder (“…but monetary policy alone
cannot lead to balanced growth”) and that they are divided and
confused on the fiscal front.
----
To be sure, the G-20 statement attempted
some whistling past the graveyard, suggesting that
financial markets have over-reacted and there is no need for an
April 2009 style global stimulus. Or as clueless Jack Lew
insisted,” don’t expect a crisis response in a non-crisis environment.”
The final communique echoed this head-in-the-sand posture:
“the magnitude of recent
market volatility has not reflected the underlying fundamentals of the global
economy”, the communique said.
Let’s see. The global trade data for 2016 reported to date is an
absolute disaster. China’s exports were down 11% worldwide and by far
greater amounts to key boom-time partners like Brazil, where shipments
sank by 60% in January over prior year. Likewise, Japan’s exports were off by
13% at the start of the year, and in February South Korea was down by more than
20% on a Y/Y basis.
What the assembled financial apparatchiks didn’t say is that even as the
global economy slides southward, they are confronted with barriers to new
policy rescues on nearly every front, meaning that the scam which has kept the
casinos afloat and the bullish speculators in clover since March 2009 is in its
final days.
Just consider what is coming down the pike during the balance of 2016.
First and foremost, the Red Suzerains of Beijing have reached a state of
blatant desperation and impotence as the worlds’ most fantastic credit bubble
shatters. No sooner than the last G-20 honcho left town than they let the yuan
resume its downward crawl. At the same time, they lowered the so called RRR
(required reserve ratio) to 17.0%—–so as to purportedly release another $300
billion in loanable funds within the banking system.
Right. That’s exactly the thing to encourage further capital flight and
weakening of the yuan, even as the move to encourage still more bank
lending is essentially designed to bring coals to Newcastle.
For crying out loud. They have spent months talking about the need to
rein-in credit growth and reported only a few days ago that January experienced
a record eruption of new credit extensions. Bank lending to business was up 73%
over prior year and total new social financing amounted to $500 billion in
a single month.As we pointed out a few days ago, that amounts to a $6 trillion annualized run rate of new debt on a wobbling $11 trillion economy that already had $30 trillion of unsupportable debt when the books closed on 2015.
In short, China is heading straight for a crash landing. And the evidence was unfolding right under the noses of the G-20 pettifoggers who pointedly agreed not to stumble into a race to the currency bottom and to take Beijing’s word at face value:
Jeroen Dijsselbloem, chairman of euro zone finance ministers, said G20 members had agreed to inform each other in advance about policy decisions that could lead to devaluations of their currencies.
G20 host China used the meeting to try to allay concerns about the world’s second-biggest economy, and Beijing’s ability to manage it, that have grown since a market rout and a surprise devaluation last August.
“Monetary policy will probably have to be kept appropriately loose, even though people have realized that its role cannot replace fiscal policy,” said China’s Finance Minister Lou Jiwei.
Chinese policymakers reiterated pledges not to devalue the yuan CNY=CFXS again, and Premier Li Keqiang told the G20 opening session on Friday there was no basis for continued depreciation of the yuan.
C’mon. And the fact that this risible pledge lasted less than 24 hours is only the half of it.
More
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.
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?
Physicist discovers new 2-D material that could upstage graphene
Date:
February 29, 2016
Source:
University of Kentucky
Summary:
Physicists have discovered a new material that could advance digital technology
and open a new frontier in 2-D materials beyond graphene. Truly flat and
extremely stable, the material is made up of light, inexpensive and earth
abundant elements.
A new one atom-thick flat material that could upstage the wonder
material graphene and advance digital technology has been discovered by a
physicist at the University of Kentucky working in collaboration with
scientists from Daimler in Germany and the Institute for Electronic Structure
and Laser (IESL) in Greece.
Reported in Physical Review B, Rapid Communication, the new
material is made up of silicon, boron and nitrogen -- all light, inexpensive
and earth abundant elements -- and is extremely stable, a property many other
graphene alternatives lack.
"We used simulations to see if the bonds would break or
disintegrate -- it didn't happen," said Madhu Menon, a physicist in the UK
Center for Computational Sciences. "We heated the material up to 1,000
degree Celsius and it still didn't break."
Using state-of-the-art theoretical computations, Menon and his
collaborators Ernst Richter from Daimler and a former UK Department of Physics
and Astronomy post-doctoral research associate, and Antonis Andriotis from
IESL, have demonstrated that by combining the three elements, it is possible to
obtain a one atom-thick, truly 2D material with properties that can be fine-tuned
to suit various applications beyond what is possible with graphene.
While graphene is touted as being the world's strongest material with
many unique properties, it has one downside: it isn't a semiconductor and
therefore disappoints in the digital technology industry. Subsequent search for
new 2D semiconducting materials led researchers to a new class of three-layer
materials called transition-metal dichalcogenides (TMDCs). TMDCs are mostly
semiconductors and can be made into digital processors with greater efficiency
than anything possible with silicon. However, these are much bulkier than
graphene and made of materials that are not necessarily earth abundant and
inexpensive.
Searching for a better option that is light, earth abundant, inexpensive
and a semiconductor, the team led by Menon studied different combinations of
elements from the first and second row of the Periodic Table.
Although there are many ways to combine silicon, boron and nitrogen to
form planar structures, only one specific arrangement of these elements
resulted in a stable structure. The atoms in the new structure are arranged in
a hexagonal pattern as in graphene, but that is where the similarity ends.
The three elements forming the new material all have different sizes;
the bonds connecting the atoms are also different. As a result, the sides of
the hexagons formed by these atoms are unequal, unlike in graphene. The new
material is metallic, but can be made semiconducting easily by attaching other
elements on top of the silicon atoms.
The presence of silicon also offers the exciting possibility of seamless
integration with the current silicon-based technology, allowing the industry to
slowly move away from silicon instead of eliminating it completely, all at
once.
More
The monthly Coppock Indicators finished February
DJIA: 16517 -23 Down. NASDAQ: 4558 +45 Down. SP500: 1932 -17 Down.
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