Wednesday, 20 April 2016

The Turning Tide?

Baltic Dry Index. 671 +12      Brent Crude 43.09

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

Brexit odds checker.

Brexit Quote of the Day.
Dodgy Dave: One could drive a schooner through any part of his Remain argument and never scrape against an accurate fact.

With apologies to David Houston on William Jennings Bryan.

Today, the less reported news of things starting to impact the global economy, and not in a positive way.   I think I might be detecting the turning tide. Precious metals over stocks?
"When paper money systems begin to crack at the seams, the run to gold could be explosive."

Harry Browne

Kuroda warns Japan’s supply chains shaken by quakes

Published: Apr 19, 2016 11:11 p.m. ET
TOKYO — Bank of Japan Governor Haruhiko Kuroda said Wednesday that nationwide supply chains have begun to feel the impact of strong earthquakes that shook southern Japan recently, underlining his caution over economic prospects.

Speaking in parliament, Kuroda also kept the door open to additional stimulus, saying there is “plenty of room” for the central bank to increase its asset purchases or adopt deeper negative interest rates.

Kuroda’s remarks follow signs of economic stress, including Toyota’s decision to shut 26 car assembly lines nationwide due to production halts by a supplier following the earthquakes.

“Parts production has been temporarily halted at factories of transportation machineries and IT-related goods, and those developments have affected supply chains,” Kuroda said during a parliamentary session.

“This isn’t only about Kumamoto” prefecture, the epicenter of some of the latest deadly earthquakes, Kuroda said. “They have begun to affect production at factories in other parts of Japan.”

China is one step closer to global gold-price domination

Published: Apr 19, 2016 5:29 p.m. ET

Analyst: Shanghai Gold Fix marks ‘start of a new global gold market’

China, the world’s largest gold producer, made a big move to advance its efforts to become a global price leader for the yellow metal.

On Tuesday, the Shanghai Gold Exchange, dubbed the largest physical gold exchange in the world, launched the Shanghai Gold Fix—a twice-daily price fixing for the metal per gram, denominated in Chinese yuan CNYUSD, -0.0897%

The move is “hugely important,” said Julian Phillips, founder and contributor to It’s a step toward “China controlling the gold price.”

The Shanghai Gold Exchange listed 18 institutions, including the Bank of China and China Construction Bank, as market makers for the fix.

Phillips pointed out that there are “other structural changes that China has made that place them in a position to take control inevitably” over the gold price.

In June of last year, the Bank of China became the first Chinese bank to join the group of lenders that set the London Bullion Market Association’s gold price benchmark. The LBMA Gold Price replaced the historical London Gold Fix in March of last year.

-----The Shanghai Gold Fix launch is “the start of a new global gold market,” Phillips said.

After all, China, isn't just the world’s largest producer of the metal, but also one of the biggest buyers of gold, often running neck and neck with India as the globe’s top consumer.

Silver Futures Enter Bull Market as Prices Jump to 10-Month High

April 19, 2016 — 2:08 AM BST Updated on April 19, 2016 — 7:18 PM BST
Silver entered a bull market after climbing to a 10-month high amid positive signs for Chinese industrial demand and decreasing bets the Federal Reserve will raise U.S. interest rates.

China’s economy stabilized in the first quarter as gross domestic product rose 6.7 percent from a year earlier, boosting speculation that demand won’t slow for industrial metals. Investors are betting there’s a 55 percent chance Fed officials will increase rates by the end of 2016, down from 93 percent at the beginning of the year. Lower rates are a boon to precious metals, which don’t offer yields or dividends.

Silver, which has more industrial uses than gold, has risen 23 percent this year, outpacing gains in the yellow metal. Investors have been pouring cash into silver, known as the devil’s metal because of its often wild price swings.

China's Stocks Tumble Most in Seven Weeks to Break Trading Calm

April 20, 2016 — 3:16 AM BST Updated on April 20, 2016 — 6:21 AM BST
China’s stocks sank the most in almost two months, pushing a gauge of volatility up from its lowest level this year.

The Shanghai Composite Index dropped as much as 4.5 percent, the biggest loss since Feb. 29. Consumer and technology companies led declines, while 73 stocks fell for each that rose. In Hong Kong, the Hang Seng China Enterprises Index slid from a three-month high as China Telecom Corp. and China Shenhua Energy Co. sank more than 4 percent.

The losses come amid signs of waning interest in mainland equities after March’s 12 percent rebound and speculation better economic data will prevent the government from adding stimulus. A gauge of 50-day price swings fell to its lowest level this year on Tuesday, while the Shanghai gauge is down 2.9 percent this month. Wei Wei, an analyst at Huaxi Securities Co. in Shanghai, says today’s slump is raising concern that the panic seen at the start of the year, when the equity gauge sank 23 percent in the space of a month, could return.

----The Shanghai Composite declined 3.9 percent to 2,924.35, falling below the key 3,000 level for the first time since April 8, and taking its loss this year to 17 percent. Trading volumes on the gauge were 21 percent higher than the 30-day average for this time of day. The Hang Seng China Enterprises slid 2.3 percent, while the Hang Seng Index dropped 1.5 percent as China Unicom (Hong Kong) Ltd. led declines.

Oil Rises After Four-Day Slide as Kuwait Strike Curbs Production

April 19, 2016 — 12:32 AM BST Updated on April 19, 2016 — 12:26 PM BST
Oil climbed after a four-day loss as a strike in Kuwait cut output from OPEC’s fourth-biggest member, countering the bearish impact of failed production-freeze talks in Doha.

Futures rose as much as 2 percent in New York. The labor stoppage in Kuwait that initially slashed daily output by as much as 1.7 million barrels entered a third day. Prices slipped 1.4 percent Monday after the world’s biggest producers failed to reach an agreement to limit supplies amid a global glut.

Kuwait Oil Workers Ending Strike After Three-Day Disruption

April 19, 2016 — 6:01 AM BST Updated on April 20, 2016 — 1:25 AM BST
Kuwait oil workers said they’ll end a strike that disrupted output in OPEC’s fourth-largest producer for three days, after the government said it wouldn’t negotiate while the walkout lasted.

Workers will resume their jobs at 7 a.m. local time on Wednesday out of respect for the country’s emir after successfully showing the importance of their role in the economy, KUNA, the country’s official news agency said, citing a statement from a labor union. The report came soon after Anas Al Saleh, the acting oil minister, said on Alrai television the government wouldn’t hold talks with workers as long as a strike continued.

“The goal in going on strike was to send a clear message,” the Union of Petroleum and Petrochemical Workers said in the letter. “The workers reiterated in their action their role” in the economy, the union said in the statement in Arabic.

The workers went on strike to protest cuts in pay and benefits as Middle Eastern crude exporters reduce subsidies and government handouts. A global glut of crude has pushed prices 30 percent lower in the past year. Worldwide supply surpassed demand by 1.5 million barrels a day in the first quarter, according to the International Energy Agency.

Dubai Said to Close Sheikh's Buyout Firm That Held $13 Billion

April 18, 2016 — 12:42 PM BST
Dubai International Capital LLC, the ruler’s buyout firm that held stakes in companies from Merlin Entertainments Plc to U.S. hedge fund Och-Ziff Capital Management Group LLC and tried to buy Liverpool Football Club, is closing down after restructuring $2.5 billion of debt, according to people with knowledge of the matter.

Dubai International, set up in 2004 as an international investment arm of Dubai Holding LLC, is dismissing staff and closing its offices in the city’s financial district, the people said, asking not to be identified as the matter is private. The company plans to sell its stake in U.K.-based engineering firm Doncasters Group Ltd. in the next few months to repay almost $1 billion to creditors before halting operations, the people said.

At the height of the emirate’s boom years, Dubai International amassed overseas assets worth about $13 billion, including the Tussauds Group, owner of London’s Madame Tussauds waxworks museum, as well as stakes in Sony Corp. and Daimler AG. The company was later forced to sell most of these assets and reschedule $2.5 billion of debt when the global financial crisis froze credit markets and asset prices slumped.

Dubai International is fully owned by Dubai Holding, an investment company backed by ruler Sheikh Mohamed bin Rashid Al Maktoum. Dubai Holding has assets valued at about 130 billion dirhams ($35.39 billion) excluding land banks, vice chairman and managing director Ahmad Bin Byat said in November.

We close for the day with trouble in high tech. Is it all about to go wrong in the sector? Has the tide turned on technology stocks?

Intel to cut 12,000 jobs

Published: Apr 19, 2016 5:21 p.m. ET
Intel Corp. said it plans to reduce its global workforce by up to 12,000 jobs, or 11%, as the semiconductor giant seeks to transition away from being a company focused on computer chips.

"These actions drive long-term change to further establish Intel as the leader for the smart, connected world," Chief Executive Brian Krzanich said in an email to employees. The chip maker had a global workforce of 107,300 employees at the end of 2015, according to a regulatory filing.

Intel announced the job cuts and the pending transition of its chief financial officer along with its first-quarter results, which included a lackluster 7.2% increase in first-quarter revenue.

Shares of the Santa Clara, Calif., company recently fell 2.7% to $30.75 in after-hours trading as Intel also lowered its revenue growth forecast for 2016.

For decades, Intel has been the primary provider of chips for personal computers. As PC sales have slowed, the chip maker has focused more on providing the computing power for server systems that act as the backbone for the growth in cloud-computing.

Intel said Tuesday that the job cuts are part of the company's restructuring away from a computer-based company to one that powers the cloud and billions of connected computing devices.

IBM’s stock tumble shaves 60 points off the Dow

Published: Apr 19, 2016 4:19 p.m. ET

The stock’s price and percentage decline is biggest in six months

Shares of International Business Machines Corp. suffered the biggest one-day percentage selloff in six months Tuesday, as the technology giant’s first quarterly revenue beat in nearly two years wasn’t enough to distract investors from a surprise drop in gross margin.

The stock closed down $8.53, or 5.6%, marking the seventh-straight quarter that it dropped the day after results were reported. The price and percentage declines are the biggest since it tumbled $8.58, or 5.8%, on Oct. 20, 2015, the day after IBM reported third-quarter results.

Tuesday’s price slide reduced the Dow Jones Industrial Average, which is a price-weighted index, by about 58 points. That means if IBM’s stock was unchanged, the Dow, which closed up 49 points, would be up about 107 points.

Although IBM has had a history of disappointing investors with its quarterly reports, expectations may have been riding abnormally high. Before the results were released, the stock had soared 29% since closing at a 6 1/2-year low of $117.85 on Feb. 11 through Monday’s eight-month closing high of $152.53.

Shares initially traded higher in after-hours trade Monday, after results were reported, as both earnings and revenue beat expectations. They soon turned lower, however, as adjusted gross margin dropped 1.8 percentage points to 47.5%. That rate, which was also well below the full-year 2015 rate of 50.8%, came as a surprise to investors because IBM IBM, -5.59%  had said in January it expects “modest expansion” in gross margin in 2016.

A Wall Street Witches Brew——Hockey Sticks And Financial Engineering Games

by David Stockman • 

---- Indeed, the poster boy for financial engineering reported last night, and not only were IBM’s results another fiasco; they are actually just a leading indicator of where stock-option crazed C-suites are taking corporate America under the auspices of the Fed’s destructive regime of Bubble Finance.

Not surprisingly, IBM’s sales were down for the 16th straight quarter—-this time by 4.5%. Meanwhile, its pre-tax profits plunged by 67% from $3 billion in Q1 2015 to just $1 billion in the current quarter.

Perhaps fittingly, IBM’s bottom line results were saved from a total wipeout only by a final gasp of financial engineering. It posted a negative tax provision of $983 million or negative 95%. Save for that fig leaf, IBM posted the lowest quarterly pre-tax profit in two decades!

Needless to say, more than a decade of extreme financial engineering does not have much to write home about. IBM has flooded the casino with share repurchases and dividends in order to levitate its stock price and keep its executives flush with stock option gains. But even that short-sighted liquidation of its own seed corn is no longer working. After last night’s disaster, its stock is down by 6% from its recent dead cat bounce, and now dwells 33% below its early 2013 high of $215 per share.

That its hapless CEO and Board have not been sent packing long ago is undoubtedly due to the never ending gifts it showers on the casino and the brokers and fast money operators who ply their trade there. To wit, during the last decade, IBM has repurchased $100 billion worth of shares and paid $33 billion of dividends.

That happens to equal 100% of its cumulative net income——-so it is perhaps not surprising that its sales and profits continue to erode. At the same time, IBM made almost $30 billion of acquisitions and increased its outstanding debt from $10 billion to $31 billion.

In short, IBM has been a financial engineering dream. It is hard to imagine what Wall Street generated maneuver or gimmick it has overlooked.

But, alas, financial engineering does create value, and if practiced long enough, it destroys it. 

“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”

“Adam Smith” aka George Goodman.

At the Comex silver depositories Tuesday final figures were: Registered 32.46 Moz, Eligible 120.64 Moz, Total 153.10 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
In Brexit news, some things Dodgy Dave would rather that the voters didn’t know.

7 risks in voting Remain

By Daniel Hannan @DanHannanMEP 18 April 2016
How dismal the Remain-mongers sound, how timorous. ‘Yeah, we know that the EU is a bit rubbish, but it’s safer to stick with what you’ve got.’
It’s not just that they say nothing positive about Britain. They don’t even say anything positive about the EU. All their talk of ‘staying in a reformed Europe’ dried up when the renegotiation failed, leaving them to fall back on the Sunk Costs Fallacy. Whether or not we’d join from first principles, we’re told, we’re committed now.
As well as being wrong in general terms – there’s a reason we call it a fallacy – their argument is wrong in that it confuses familiarity with certainty. There will be no status quo option on the ballot paper on 23 June. Voting to stay in is not the same as voting to stay put.
Two things are transforming the EU: the euro crisis and the migration crisis. The question for Britain is whether to make these problems our problems. Having kept the pound and stayed out of the Schengen Zone, we have other options, global options. And if we fail to exercise those options? We hear a lot about the risks of leaving, but what are the risks of remaining? Here are some of the more obvious ones.
1. Deeper integration
In June, the EU published its response to the euro crisis, a document known as the Five Presidents’ Report. It set out plans for ‘fiscal and political union’, ‘further pooling of decision-making on national budgets’, and harmonisation of ‘insolvency law’, ‘company law’, ‘property rights’ and ‘social security systems.’ It made clear that these things were to be pursued as ‘single market measures’, applying to all 28 states not just those in the euro. This isn’t some think-tank paper, or some manifesto by crackpot MEPs. It represents official Brussels policy. We can’t say we haven’t been warned.
2. More bailouts
It seems clear that yet another Greek bailout will be needed. The real danger, though, is that the euro crisis will spread to Italy or France, making Greece look like a sideshow. As the Governor of the Bank of England admits: ‘There are risks of remaining in the European Union… in particular, in relation to the development of the euro area.’ At the last election, David Cameron boasted that he had a written guarantee that Britain wouldn’t be dragged into any more bailouts. In July, that deal was torn up and Britain – despite all the promises – was dragged into the third Greek rescue package. How many more times will it happen if we signal that we won’t leave?
3. A European Army
Last year, the President of the European Commission, Jean-Claude Juncker, said he wanted an EU army. The European Commission says EU defence integration is not ‘just a political option but a strategic and economic necessity’. Germany’s Defence Minister, Ursula von der Leyen, says: ‘Our future as Europeans will at some point be with a European army’. Again, what are the odds of Britain being able to resist this process if it votes for continued EU membership on the present terms?

Brexit Quote of the week.

"On the whole Dodgy Dave wants to be good, but not too good, and not quite all the time.”

With apologies to 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?

Is the Luster of Tesla’s Powerwall Already Fading?

by Jason Deign April 18, 2016
Tesla made a lot of noise with the launch of the Powerwall last year. But the home battery system may be noisy in a more literal way.

Some are reporting higher-than-expected operating volumes. One German customer measured a noise level of more than 80 decibels coming from a Powerwall installed in his home in February. That is roughly equivalent to the noise made by garbage disposal.

“He was told that this noise is just for the first 24 to 48 hours, but it did not vanish,” said a representative of a rival storage company that ended up swapping out the customer’s battery system.

GTM was unable to speak directly to the customer, who did not wish to be named. But he did respond to questions delivered via email. “It was a continuous noise that was [audible] in the whole house," he said.

When Tesla sent an engineer to install a software update, “I was told that the power consumption of the ventilation or cooling system was reduced to 15 percent of its original value,” said the customer. “After this update, the noise was not there anymore.”

Cutting the Powerwall’s cooling capacity may have solved the noise issue, but would have also presumably affected performance.

It is not clear whether this was an isolated case. One of the other early Powerwalls installed in Germany, for example, was sited in a garage rather than indoors because of a “light noise” from the cooling system, according to reports.

“I’ve heard they’re loud enough to want to relegate to a garage or outside. Not for communal areas, certainly. I haven’t been able to substantiate this, though," said Logan Goldie-Scot, head of energy storage analysis at Bloomberg New Energy Finance.

Nick Pfitzner, Australia’s first Powerwall customer, told GTM his battery system was “not really” loud when installed outdoors. “My neighbor has a water feature, and you can’t hear it over that,” he said.

Chris Williams, managing director at Natural Solar, which installed Pfitzner’s battery system, claimed the Powerwall “is almost silent."

"In the event the battery temperature needs to be cooled, the fan will turn on. This operates at less than 50 decibels," said Williams. Nevertheless, customers commonly ask for the Powerwall to be installed in their garage or outside, he said.

Overheating may not be a major issue in Germany. But placing Powerwalls outdoors in Australia may pose problems in for customers in that country. “The concern is that it’s hot here,” said Pfitzner.

In this respect, Tesla’s liquid cooling system might prove an advantage over competing products.

Noise and location are not the only issues with the product since it began shipping at the end of last year.
Competitors are also claiming that installation times are long.

“Installers who already installed the Powerwall did not believe the installation time of five hours because it is very complex,” said Mathias Bloch, a spokesperson for Sonnen, a rival of Tesla's.

"The installation time is a critical point, because it drives the installation costs and can make the overall system more expensive," said Bloch.

This could impact cost. Tesla’s biggest selling point has been its price. But many observers have noted that the installed cost of a Powerwall adds up to much more than the $3,000 retail price advertised by the manufacturer.

In Germany, for example, Sonnen estimates that the true cost of a Powerwall could be in the region of €8,500 to €9,000 (US$9,600 to $10,150), including the battery system itself plus a StorEdge inverter interface, gateway, reseller margin, installation fee and sales tax.

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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