Monday, 25 April 2016

Spectacular Error.

Baltic Dry Index. 688 +18      Brent Crude 44.60

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

Brexit odds checker.

Brexit Quote of the Day.
“When it becomes serious, you have to lie.”

Dodgy Dave Cameron, with apologies to Jean-Claude Juncker. Failed former Luxembourg P.M., serial liar, president of the European Commission.

We open today with it’s an ill wind and all that. The American War Party’s botched coup in Kiev, led to the EU imposing ill thought out sanctions on Russia. Sanctions that hurt the EUSSR serfs far more than they hurt Russia, after Russia responded with tit for tat sanctions on the EU. Now Russia is investing in food production to make sure that the EU will never regain much of those Russian food markets. 

If all else fails, immortality can always be assured by spectacular error.

John Kenneth Galbraith.

Billionaire Farmers Reaping Fortunes From Russian Food Sanctions

April 24, 2016 — 10:01 PM BST
Russia’s geopolitical conflicts, anemic oil prices and weakened ruble are working out rather well for the country’s biggest publicly traded farming company.

Ros Agro Plc has ambitious plans to build pig farms and greenhouses in central and eastern Russia, as well as for acquisitions, by selling U.K.-listed shares.

Its aim for the first Russian offering of new stock in London since October illustrates a wider renaissance for the nation’s farms as billionaires from Vladimir Evtushenkov to Gennady Timchenko, friend of President Vladimir Putin, invest in tomatoes and apple trees. It also marks the curious consequences of Russia’s worst falling out with the U.S. since the Cold War.

Ros Agro, owned by Vadim Moshkovich, another billionaire, will raise $250 million to fund investments and help fill a void left by falling food imports after tit-for-tat trade sanctions between Russia and western nations, and a weak ruble that raises prices of shipments from overseas.

“The company is going to invest aggressively and grow,” said Svyatoslav Arsenov, who helps oversee about $300 million including a Ros Agro stake at UralSib Asset Management in Moscow. “The devaluation of the ruble has made the sector very attractive from the perspective of money generation.”

Russia, the world’s ninth-biggest food importer in 2013, had cut its overseas purchases almost 40 percent to $26.5 billion by 2015, according to government data. Putin has urged a drive to increase food security, saying last year that Russia’s huge tracts of farmland “make us the richest country” in agriculture.

While Russia is self-sufficient for some meat, it doesn’t produce enough dairy, fruits or vegetables, Prime Minister Dmitry Medvedev said in February, promising state support. Agricultural output rose 3 percent last year even as the economy shrank 3.7 percent.

Rosagro and its shareholders have been beneficiaries.

The company’s global depositary receipts have more than doubled since Russia banned some food imports in August 2014, reaching $16.15 apiece by Friday in London. Moshkovich, owner of three-quarters of the current stock, plans to invest $100 million in the issue of new securities.

We “favor Rosagro as a way to invest in the import-substitution theme,” Bank of America Merrill Lynch analysts including economist Vladimir Osakovskiy said in a note Friday.

Ros Agro’s offering would be the first in London by a Russian company since Lenta Ltd., a retailer backed by U.S. buyout firm TPG Capital, raised money in October. Other businesses such as Eurasia Drilling Co., Russia’s largest oil driller, and potash producer Uralkali PJSC, have been withdrawing their listings as investors’ taste for energy and emerging markets soured.

Elsewhere, central bank interest rate repression is now generating a biblical sized misallocation into a dangerous bond bubble. An accident waiting to happen with far greater risks than the malinvestment bubble that blew up 2007-2009. Not for nothing are central banks led by China and other members of the Shanghai Cooperation Organisation buying and hoarding physical gold against the day the west’s central banksters yet again lose control.

In central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly and results far much less.

John Kenneth Galbraith

It's Dangerous Out There in the Bond Market

April 25, 2016 — 12:01 AM BST Updated on April 25, 2016 — 3:47 AM BST
Bond investors are taking bigger risks than ever before.

Yields on $7.8 trillion of government bonds have been driven below zero by worries over global growth, meaning money managers looking for income are pouring into debt with maturities of as long as 100 years. 
Central banks’ policy is exacerbating matters, as the unprecedented debt purchases to spur their economies have soaked up supply and left would-be buyers with few options.

While demand has shown few signs of abating, investors are setting themselves up for damaging losses if yields rise even a little from their rock-bottom levels. Based on a metric called duration, a half-percentage point increase would result in a loss of about $1.6 trillion in the global bond market, according to calculations based on data compiled by Bank of America Corp. This year alone, the danger of owning debt has surged by the most since 2010, raising concerns from heavyweights such as Bill Gross.

“It takes a fairly small move out in rates on the long-end to wipe out your annual return,” said Thomas Wacker, the head of credit of the Chief Investment Office at UBS Wealth Management, which oversees $2 trillion in assets. Longer-maturity debt is “not something we are particularly keen on,” he said.

Investors continuing to buy bonds even when they pay next to nothing suggests deep concern over the state of the global economy. This month, the International Monetary Fund warned the threat of worldwide stagnation was rising because economic expansion has been so tepid for so long. It also chopped its 2016 growth forecast to 3.2 percent from 3.4 percent in January.

That gloom, combined with more aggressive stimulus measures by the Bank of Japan and the European Central Bank, pushed average yields on $48 trillion of debt securities in the BofA Merrill Lynch Global Broad Market Index to a record-low 1.29 percent this month. They ended at 1.37 percent on Friday.

It won’t take much of a backup to inflict outsize losses.

The effective duration of the global bond market, which is measured in years and determines how much prices are likely to change when interest rates move, surged to an all-time high of 6.84 years in April. That translates into a 6.84 percent decline in price for every percentage-point increase in yields.

Economists suggest the bond market is underestimating the potential for yields to rise, especially as the Federal Reserve considers raising rates. The median estimate in a Bloomberg survey calls for the Fed to boost rates twice in 2016, while traders see the chances of any increase this year at about 60 percent.

“People are complacent,” Fabrizio Fiorini, chief investment officer at Aletti Gestielle SGR SpA, which oversees more than $17 billion, said from Milan. “Time is against the long end of the bond market. Even if an increase in bond yields may not be so strong, the positions are so huge that the damage can be massive.”

 “America has always been best when she is lying down with her back on the mat and the crowd has given the final count.”
Senator Ted Cruz, Presidential candidate. ???
At the Comex silver depositories Friday final figures were: Registered 31.95 Moz, Eligible 119.18 Moz, Total 151.13 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today we return to the Fedster’s “recovery.”

The Debt Doghouse Is Filling-Up Fast—-Junk Downgrades Soaring

by Financial Times • April 22, 2016
The debt doghouse is filling up fast. More companies were downgraded to junk status by Moody’s in the first three months of the year than in the whole of 2015.

In total, 51 companies were pushed into junk territory, up from eight in the fourth quarter and 45 in 2015.
The sharp increase in number of so-called “fallen angels” — as those companies stripped of their investment grade status are known — comes as focus intensifies on whether the current credit cycle, which began after the 2008-2009 financial crisis, is turning.

Pressure on borrowers’ balance sheets has been particularly acute among those exposed to the falling price of commodities.

Moody’s also blamed the travails of the commodities market on the significant swelling in the number of “potential angels”, or those companies at risk of being cut to junk.

The increase in the number pushed the amount of debt in “potential angel” camp to $265bn by the end of March.

That is up from just $234bn at the end of the year and $105bn at the end of the first quarter in 2015.
Of the 51 companies that lost their investment grade at Moody’s in the first quarter, those from the oil and mining industries accounted for 22 of them.

With 16, the US oil and gas industry accounted for the vast majority of the casualties in the commodities industry.

A renaissance in US oil production, driven by technological advances that allow crude to be extracted by the shale rock found in several states including Louisiana, Texas and North Dakota, encouraged oil and gas explorers to borrow aggressively.

While defaults among commodities companies have helped push the overall rate up for the most speculative of borrowers, the rate outside the energy and mining sectors has remained low.

However, the turbulence in the commodities market was not the only stain on borrowers’ ratings during the quarter.

Moody’s decision to cut Brazil’s sovereign rating to junk in February also pushed 28 of the countries into junk territory.

Latin America’s largest economy is in the midst of a political crisis as president Dilma Rousseff fends of an impeachment threat, while the country is in the grips of its worst recession since the 1930s.

“The pressure on commodity-linked industries and sovereign ratings were the key drivers of increased activity,” Moody’s added in its report.

The spate of Brazilian companies pushed into junk last quarter has left the US as the most likely source of companies exposed to future downgrades into junk.

North America is now home to 34 per cent of the so-called “fallen angels”, followed by Europe with 31 per cent, Asia with 25 per cent and 10 per cent from Latin America.

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

John Kenneth Galbraith.

Brexit Quote of the week.

Freedom is the right to tell people what they do not want to hear.

George Orwell.

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?

Coal-based electronics: A potential usurper to silicon's throne?

Colin Jeffrey April 20, 2016
Graphene may be the poster child of thin film electronics, and silicon the current king of materials for semiconductors, but if scientists from MIT get their way, graphene's humble cousin, coal, could soon be giving them both a run for their money. For the first time, electronic devices have been created from thin films of coal and the research points to a range of uses that this cheap and abundant material could have in electronic devices, solar panels, and batteries.

Coal comes in four different types, all characterized by their composition, age, and the degree of compression applied to them over the millennia. Specifically, they range from lignite, a soft brown combustible sedimentary rock formed from naturally compressed peat, through to sub-bituminous, bituminous and lastly to anthracite, a compacted variety with a high carbon content and fewer impurities than the other types. In developing their application, the MIT researchers analyzed the chemical, electrical, and optical properties of thin films of all four different types of coal, and decided on anthracite as the most suitable for the devices constructed in their experiments.

To prepare the coal for the research, the scientists developed a process to crush the anthracite to a powder, suspend it in solution, and deposit it in thin uniform films on a substrate, similar to the way it is done in fabricating other electronic devices from graphene or silicon. However, unlike silicon that must be refined to a purity of over 99 percent, coal can simply be used in its crushed form without further refining.
Despite coal being one of the most abundant substances used by humans, the vast bulk of it has simply been used as a fuel for burning, with almost all of its electrical and optical properties rarely studied for use in electronic devices.
"The material has never been approached this way before, to find out what the properties are, what unique features there might be." said MIT doctoral student Brent Keller.
As an initial proof of concept for what the team sees as a wide range of possible uses, the researchers built an electrical heating device that could see duty in anything from being part of a part of a biomedical implant, to helping defrost car windows or aircraft wings. Along with the properties of this device, the researchers also found that by altering the temperature used to process the coal, a large range of the optical and electrical properties of the material could be exactly tailored to meet specified values.
But even this new found capability for coal is just the beginning of its potential, according to the researchers. Given that the four main varieties of coal selected have many other subsets all with differing compositions, the team believes that there could as yet be strikingly useful differences that could be exploited in other kinds of electronic devices.
----According to Professor Grossman, the major advantage of the new material is its low cost to produce from an incredibly cheap base material, allied with an uncomplicated solution procedure that allows exceptionally low fabrication costs. Compared to silicon or graphene for use in electronic semiconductors, coal thin film is far and away the simplest to produce because it doesn't require such high levels of purification.

The monthly Coppock Indicators finished March

DJIA: 17685.09 -18 Down. NASDAQ:  4869.85 +33 Down. SP500: 2059.74 -22 Down. 

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