Thursday, 28 April 2016

The “Golden Era” Ends.

Baltic Dry Index. 715 +11      Brent Crude 47.00

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

Brexit odds checker.

Brexit Quote of the Day.
Dodgy Dave Cameron: A modest little person, with much to be modest about.

With apologies to  Winston Churchill.

Up first, some very bad news for pension funds and insurers and annuities. The golden era of investment returns has ended, says McKinsey & Co. Meanwhile Japan just stunned the market. Did Japan just run out of ammo, ideas and road? Bloomberg attempts positive spin.

Be Afraid, Be Very Afraid If You're Investing for the Long Run

April 27, 2016 — 11:30 PM BST
Turning 30 just got a lot scarier.

A coming collapse in investment returns means that people that age today will have to work seven years longer or save almost twice as much to end up with the same nest egg as those of roughly a generation ago.
So says the research arm of McKinsey & Co. in a new report that argues that investors of all ages need to resign themselves to diminished gains.

The consulting company maintains that the last 30 years have been a “golden era” of exceptional inflation-adjusted returns thanks to a confluence of factors that won’t be repeated. They include falling inflation and interest rates, swelling corporate profits and an expanding price-earnings ratio in the stock market.

The next two decades won’t be nearly as lucrative, even on the optimistic assumption that the world economy snaps out of its recent funk and resumes growing at a faster clip, according to the McKinsey Global Institute report titled “Diminishing Returns: Why Investors May Need to Lower Their Expectations.”
“We’ve had a wonderful 30-year period in terms of returns, way more than the 100-year average,” said Richard Dobbs, a McKinsey director in London. “That era is coming to an end.”

Bond investors have already reaped much of the benefits from declines in inflation and interest rates from the sky-high levels that prevailed in the 1970s.

U.S. and European corporations, meanwhile, will find it harder to boost profits in the face of stepped-up competition from emerging-market rivals and from smaller businesses able to tap into the global market through the Internet, Dobbs said.

It’s not only 30-year-olds and other individual investors who’ll be hurt if McKinsey is right about the outlook. Pension funds and university endowments also have reason to worry, Dobbs said.

The roughly $1 trillion funding gap confronting U.S. state and local retirement plans could triple if McKinsey’s more pessimistic projections pan out, he said. U.S. college endowments could be out as much as $19 billion per year, he added.

McKinsey sets out two paths for the economy and financial markets over the next 20 years in its report. In the slow-growth scenario, U.S. gross domestic product expands by an average 1.9 percent per year, while growth in other major economies is 2.1 percent. Returns in that case are well below the average of the 1985 to 2014 period.

In the recovery scenario, U.S. growth matches the 2.9 percent average of the last 30 years while non-U.S. GDP rises 3.4 percent. Returns still fall short of the golden era when inflation and interest rates were falling and profit margins were expanding.

Bank of Japan Stuns Market by Holding Off on More Stimulus

April 28, 2016 — 4:09 AM BST Updated on April 28, 2016 — 5:10 AM BST
The Bank of Japan held off on expanding monetary stimulus, as Governor Haruhiko Kuroda and his colleagues opted to take more time to assess the impact of negative interest rates.

The move comes as a surprise to the slight majority of economists surveyed by Bloomberg who had projected some action from the central bank in response to a strengthening in the yen that has cast a shadow over prospects for higher wages and investment. The currency rallied against the dollar immediately after the decision while stocks in Tokyo tumbled.

Policy makers are betting that their success in bringing down borrowing costs since unveiling the negative-rate strategy in January will generate an acceleration in lending. They left unchanged three key easing tools -- the 80 trillion yen ($732 billion) target for expanding the monetary base, mostly through government-bond purchases, the 0.1 percent negative rate on a portion of the cash banks park at the BOJ, and a program to buy riskier assets including stocks. Separately, they postponed their time frame for reaching a 2 percent inflation target, to sometime in fiscal 2017, for the fourth delay in about a year.

“Kuroda wanted to make it clear the BOJ won’t make monetary policy driven by market demands. It’s too early to make another move after implementing the negative rate a couple of months ago,” said Kyohei Morita, chief Japan economist at Barclays Plc. “The important message is that the BOJ will be data-dependent and I expect they will bolster stimulus in July as they review the outlook of inflation.”

Morita added that while the central bank appears to be concerned about a strong yen, recent signs of stabilization in the foreign exchange and stock markets provided them with some relief.

Up next today, what went wrong at overpriced Apple. Smart phones are becoming commoditised in China it seems. Lacking a new killer product, the smart phone market in China is local manufacturers competing for the non-premium consumer on price. Apple’s business model now looks so last decade.

This is why Apple iPhone sales are tanking in China

Published: Apr 27, 2016 5:13 p.m. ET

Apple’s growth dips 26% in China, while Huawei and lesser known brands like OPPO and vivo grow

It was early morning eight months ago when Tim Cook shot an email to TV personality Jim Cramer telling him the company was doing fine in China. The global markets roiled amid broader macroeconomic concerns, yet Apple’s shares quickly recovered on Cook’s optimism.

Two quarters later, things are far from rosy.

Sales in the Greater China region plunged 26% in its fiscal second quarter, marking the biggest percentage decline of any of Apple’s geographic regions. Total sales fell for the first time since 2003, while the iPhone suffered its first-ever quarterly decline.

“Whereas China accounted for half or more of the company’s revenue growth for several quarters, it’s now accounting for half its year-on-year shrinkage,” said Jan Dawson, founder of tech consulting company Jackdaw Research.

Apple AAPL, -6.26%   blamed the slowdown on macroeconomic issues and tough year-over-year comparisons, with the iPhone 6S flailing next to the huge success of the iPhone 6 and iPhone 6 Plus. Cook also blamed Hong Kong, which accounted for the vast majority of declines in Greater China, because its dollar is pegged to the U.S. dollar, which has strengthened significantly over the past two years, thus making it more expensive for international shopping and tourism in the country.

But there are reasons to believe the quarter’s troubles aren’t just cyclical and isolated. People in China are buying more phones from local manufacturers, such as Huawei Technology Co. 002502, +1.12% and Xiaomi. And the Chinese government recently banned certain media services from Apple, as it clamps down on distributed content, a move that could weigh heavily on Apple’s next big revenue driver: services. When excluding Hong Kong, mainland China sales still fell a whopping 11% during the quarter.

“Only super rich, really high-paid professionals buy iPhones in China -- you’re not talking about lots and lots of people,” said John Zhang, faculty director of the Penn Wharton China Center, and a professor of marketing. “That means at some point, you’re not going to be able to grow unless you put out new innovative products to keep your people engaged, which is not the case with Apple.”

----Competition in China is increasing across the board, with lesser-known Chinese manufacturers OPPO and Vivo making IDC’s list of the world’s top five smartphone manufacturers for the first time in the first quarter, ousting Lenovo and Xiaomi, which slipped to the sixth and seventh spots.

Those companies offering mid-tier phones in China priced below $250 are growing in line with the improving wages of the middle class. However the majority of those wages are still far below the premium market that Apple’s phones target in China.

We end for the day with massive changes coming to the global oil markets. Move over the seven sisters make room for the ugly sisters.

Putin's Decade-Old Dream Realized as Russia to Price Its Own Oil

April 28, 2016 — 1:00 AM BST
Russian President Vladimir Putin is on the verge of realizing a decade-old dream: Russian oil priced in Russia.

The nation’s largest commodity exchange, whose chairman is Putin ally Igor Sechin, is courting international oil traders to join its emerging futures market. The goal is to increase revenue from Urals crude by disconnecting the price-setting mechanism from the world’s most-used Brent oil benchmark. Another aim is to move away from quoting petroleum in U.S. dollars.

If Russia is going to attract international participation in Russian-based pricing, the Kremlin will need to persuade traders it’s not simply trying to push prices up, some energy analysts said. The government is dependent on oil revenue to fund its budgets.

“The goal is to create a system where Russian oil is priced and traded in a fair and straightforward way,” said Alexei Rybnikov, president of the St. Petersburg International Mercantile Exchange, or Spimex, in a phone interview.

Russia, which exports about half its crude, has long complained about the size of the discounts for lower quality Urals oil compared to North Sea Brent prices, which are assessed by the Platts agency. With world oil prices down by half in the past two years and Russia facing the prospect of its worst budget deficit as a percentage of its economic output since 2010, it needs every dollar of petroleum revenue it can get. Having its own futures market would improve Russian oil price discovery as well as help domestic companies generate extra revenue from trading, said Rybnikov.

Bloomberg LP, the parent of Bloomberg News, competes with Platts and other companies in providing energy-market news and information.

---- Moscow is not alone in its push to change global oil pricing. China, which vies with the U.S. as the world’s biggest crude importer, has spent two decades trying to introduce its own oil futures contact, now expected this year. Iran and Venezuela, members of the Organization of Petroleum Exporting Countries, have called for trading oil in other currencies than U.S. dollars.

The Kremlin plan echoes the New York Mercantile Exchange’s efforts to offer Russian export oil futures in late 2006. Nymex, now part of CME Group Inc., discontinued the contract six years later because it wasn’t popular among traders, JBC Energy GmbH said.

The mercantile community will have been unusually fortunate if during the period of rising prices it has not made great mistakes. Such a period naturally excites the sanguine and the ardent; they fancy that the prosperity they see will last always, that it is only the beginning of a greater prosperity. They altogether over-estimate the demand for the article they deal in, or the work they do. They all in their degree—and the ablest and the cleverest the most—work much more than they should, and trade far above their means. Every great crisis reveals the excessive speculations of many houses which no one before suspected, and which commonly indeed had not begun or had not carried very far those speculations, till they were tempted by the daily rise of price and the surrounding fever.

Walter Bagehot. Lombard Street. 1873.

At the Comex silver depositories Wednesday final figures were: Registered 31.96 Moz, Eligible 119.50 Moz, Total 151.46 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
No crooks for a change today. Today, UK haute cuisine at its best. The Guardian ponders on the great Brexit question of the day. Can any others beat Heinz baked beans? You might be surprised by their answer. Baked Beans, the perfect complement in GB to everything except porridge.  

Baked beans taste test: can anything beat Heinz?

Beanz means Heinz – right? We pit the nation’s favourite against the supermarket own-brands, to see if cheaper tins contain better beans
Wednesday 27 April 2016
Pushed for an answer in a pub quiz, most of us would probably guess that Heinz beans first arrived in the UK in 1943, along with a boatload of GIs and DC Comics. Or was it in the late 50s, post-rationing? In fact, Heinz beans made their UK debut in 1886. Little wonder that, 130 years later, its baked beans remain the nation’s favourite.

The recipe has evolved over time (pork was dropped during WWII), but Heinz still sells 1.5m tins of beans a day in the UK, and dominates 65-70% of the British market.

The Heinz bean is the great immovable object in canned foods. In its ubiquity, it defines how we expect baked beans to taste, but without excelling in its field. Sweet and tomatoey, gently earthy, calculatedly bland, Heinz beans are an immediately familiar and comforting convenience food but, if you scrutinise their flavour, a steadfast 6/10 experience. We eat Heinz beans out of habit and sentimentality, rather than because they taste incredible. Surely, therefore, one of its supermarket own-brand rivals must surpass Heinz on flavour? Or at least do a good job of mimicking its beans for less than 75p a can? How hard can it be to stew some haricot, tomatoes, herbs and spices? Beanz means Heinz, they say – but is that true?

Tesco, baked beans, 32p

There is a real 1980s school dinners feel to Tesco’s beans. The sweet, bland sauce is fractionally thinner than you would normally expect and, frankly, barely distinguishable as tomato-based. It does not adhere meaningfully to the beans, either. They look pale and exposed, like bald English bathers in a Costa Brava hotel pool. The dominant flavour is of marginally overcooked, mushy haricot, which, while not actively unpleasant, definitely makes this taste like the cheap option it is. Heinz is a purring Jag next to this third-hand Honda Jazz.

Aldi, Corale baked beans, 27p

Like most food, good baked beans are about balance – a balance almost entirely absent in Aldi’s version. The tomato flavour you expect to find front and centre is meek to non-existent. Instead, rustic pulses rule the roost. The sauce is sweet and vague. Various spice extracts provide faint sharp, spiky murmurings at its edges. But both trail in the wake of those bullish beans. Certain adults may find this a refreshingly robust mouthful, but their kids (even before discovering a few hard, undercooked beans) will, almost certainly, be clamouring for Heinz.

Waitrose, Duchy Organic baked beans, 62p

In the pan, the beans appear to be swimming in a ludicrous amount of dark, rusty-brown liquid. It is an unpromising start … and something of an optical illusion, given there is a creditable 49% haricot in each can. That sauce, moreover, delivers an unusually juicy, bright and well-rounded tomato flavour, thanks to some very discreet chilli and garlic seasoning. In contrast to the more rugged examples in this test, the organic beans are also remarkably smooth and creamy. All in all, a marked improvement on Heinz, while costing 13p less. Impressive.

Co-op, Loved By Us baked beans, 52p

You know when you’re in a meeting and everyone starts talking at once? And you don’t know what’s going on? That is Co-op’s baked beans. The sauce is a bewildering muddle of peculiar flavours: something almost sweetly corny; a certain mustiness; gentle spiciness; tomatoes thrown off-kilter by interloping astringent notes. The beans themselves taste tired. They fulfil their iron-rich obligation, but with little of the vibrancy displayed in the Duchy Organic or Morrisons samples. A minority of those beans are a bit hard and chewy, too. Not great. 3/10

Still there are worse things than baked beans lurking in cans.

Surstömming (rotten fish)

Surstömming is a unique dish from northern Sweden and roughly translates to ‘sour herring’. Baltic fish is caught in May and June and fermented for one to two months before being tinned. Once tinned it continues to ferment for a further 6 months, after which it begins to release a range of offensive gasses. Interestingly in 2006, several major airlines including Air France, KLM, and British Airways, banned Surstömming from their aeroplanes.
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?

Nanotube semiconductors well-suited for PV systems

Date: April 26, 2016

Source: DOE/National Renewable Energy Laboratory

Summary: Researchers have discovered single-walled carbon nanotube semiconductors could be favorable for photovoltaic systems because they can potentially convert sunlight to electricity or fuels without losing much energy.
Researchers at the Energy Department's National Renewable Energy Laboratory (NREL) discovered single-walled carbon nanotube semiconductors could be favorable for photovoltaic systems because they can potentially convert sunlight to electricity or fuels without losing much energy.
The research builds on the Nobel Prize-winning work of Rudolph Marcus, who developed a fundamental tenet of physical chemistry that explains the rate at which an electron can move from one chemical to another. The Marcus formulation, however, has rarely been used to study photoinduced electron transfer for emerging organic semiconductors such as single-walled carbon nanotubes (SWCNT) that can be used in organic PV devices.
In organic PV devices, after a photon is absorbed, charges (electrons and holes) generally need to be separated across an interface so that they can live long enough to be collected as electrical current. The electron transfer event that produces these separated charges comes with a potential energy loss as the molecules involved have to structurally reorganize their bonds. This loss is called reorganization energy, but NREL researchers found little energy was lost when pairing SWCNT semiconductors with fullerene molecules.
"What we find in our study is this particular system -- nanotubes with fullerenes -- have an exceptionally low reorganization energy and the nanotubes themselves probably have very, very low reorganization energy," said Jeffrey Blackburn, a senior scientist at NREL and co-author of the paper "Tuning the driving force for exciton dissociation in single-walled carbon nanotube heterojunctions."
The paper appears in the new issue of the journal Nature Chemistry. Its other co-authors are Rachelle Ihly, Kevin Mistry, Andrew Ferguson, Obadiah Reid, and Garry Rumbles from NREL, and Olga Boltalina, Tyler Clikeman, Bryon Larson, and Steven Strauss from Colorado State University.
Organic PV devices involve an interface between a donor and an acceptor. In this case, the SWCNT served as the donor, as it donated an electron to the acceptor (here, the fullerene). The NREL researchers strategically partnered with colleagues at Colorado State University to take advantage of expertise at each institution in producing donors and acceptors with well-defined and highly tunable energy levels: semiconducting SWCNT donors at NREL and fullerene acceptors at CSU. This partnership enabled NREL's scientists to determine that the electron transfer event didn't come with a large energy loss associated with reorganization, meaning solar energy can be harvested more efficiently. For this reason, SWCNT semiconductors could be favorable for PV applications.

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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