Tuesday, 12 April 2016

Those Missing Yankee “Panamanians.”

Baltic Dry Index. 555 +16        Brent Crude 42.68

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.
In a time of universal deceit, telling the truth is a revolutionary act.

George Orwell.

If you are sitting comfortably, I’ll begin. Once upon a time in a land faraway, called Swinderland, populated by clock makers, chocolate makers and evil banksters, there was a French tax scandal, spun after the war as an evil Nazis scandal ….. More later.
But first this. “So you really want to buy a UK Steel works and compete with China. Why, are you mad?”

China steel capacity at 1.13 bln T, more cuts required - official  

China steel capacity at 1.13 bln T, more cuts required – official China's total crude steel capacity currently stands at 1.13 billion tonnes, and the country needs to step up efforts to shut down poorly performing mills, a government official said on Saturday.

In February China announced plans to shut 100 million to 150 million tonnes of crude steel capacity in the next five years, as it tackles a price-sapping glut that has caused turmoil in the industry.

But more would need to close to achieve significant improvements, Luo Tiejun, the vice head of the raw materials department at the Ministry of Industry and Information Technology (MIIT), told a conference.

Luo said domestic steel consumption was forecast to stay between 630 million and 700 million tonnes in the coming five years, and if exports remained at 100 million tonnes, production levels would stay at around 800 million tonnes. Restoring the sector to health would require taking out still more capacity, however.

"If production stays at 800 million tonnes, then we need to cut 200 million tonnes for the situation to become acceptable," he said. Luo, who was discussing China's five-year plan until
2020 for the stricken sector, said as well as the 1.13billion tonnes "some dead capacity" still remains.

Capacity was previously estimated to stand at 1.2 billion tonnes, about 400 million tonnes over actual production in 2015. Besides ordering closures, the February plan also
banned new steel projects, but the China Iron and Steel Association (CISA) had warned of a further rise in capacity this year.

China's steel firms have blunted some of the impact of overcapacity by selling their surpluses abroad, taking exports to a record 112 million tonnes in 2015.

But the flood of cheap Chinese steel on foreign markets has sparked protests and anti-dumping complaints, and Luo warned that China could not expect to scale up exports further to remedy overcapacity.

China will focus on boosting industry efficiency in the next five years, aiming to raise utilisation rates closer to 80 percent, from a CISA-estimated average of 67 percent last year.
From Thompson Reuters, Inside Metals, April 11, 2016.

Risk of a recession may be higher than you think

Published: Apr 11, 2016 5:17 p.m. ET

Q1 profits expected to decline by 9%, according to FactSet

Bear markets — a drop of 20% or more from peak to trough — almost always require an economic recession, which are always preceded by a profit recession.

The question on every investor’s mind is whether the current earnings recession will cause the whole economy to contract. The consensus, which includes the Federal Reserve, is that the weakness in economic growth is temporary and we are not headed into a recession.

But foreseeing a recession with a reasonable accuracy has eluded economists so far, even though in hindsight there have been numerous telltales.

Problems with seasonality and multiple revisions to numbers mean that by the time a recession is confirmed, we are already smack in the middle of it.

Meanwhile, the S&P 500 SPX, -0.27% having rallied 13% from its February lows, has been grinding sideways, even in the face of the steepest downward revision to earnings growth since 2009. According to FactSet, earnings per share are expected to fall by 9%, which will mark the third consecutive earnings-growth drop.

The implication of such a market move is that investors are betting that there will be a significant rebound in earnings growth in the second half of the year.

Société Générale’s chief global strategist Albert Edwards is unequivocal about a looming recession, though he has been calling for one for quite some time.

In March 2015, he pointed to a profit deterioration, saying that in the past that was typically followed by an economic recession. Since that call and over the past 13 months, the S&P 500 has seen two corrections of more than 10% and is down about 3%.

Last week, Edwards, in a note to investors, said that his recession indicators have stopped flashing amber and have turned red.

“My own observation has led me to the conclusion that when whole-economy profits begin to fall sharply, this is usually followed shortly after by the overall economy tipping over into recession, driven by the volatile business investment cycle,” he wrote.

Back in  Asia, it’s all going wrong for Abenomics and Japan.

BlackRock Joins $46 Billion Japan Pullout

April 10, 2016 — 4:00 PM BST Updated on April 11, 2016 — 7:22 AM BST
For global equity investors and Shinzo Abe, it’s splitsville.

Starting in the first days of 2016, foreign traders have been pulling out of Tokyo’s stock market for 13 straight weeks, the longest stretch since 1998. Overseas investors dumped $46 billion of shares as economic reports deteriorated, stimulus from the Bank of Japan backfired and the yen’s surge pressured exporters. The benchmark Topix index is down 17 percent in 2016, the world’s steepest declines behind Italy.
Losing the faith of foreigners would be a blow to the Japanese prime minister -- they’re the most active traders in a market Abe has held up as a litmus on his growth strategies. “Japan is back," and “Buy my Abenomics!” he proclaimed during a visit to the New York Stock Exchange in September 2013, when shares were marching to an eight-year high. Now about half of those gains are gone and BlackRock Inc., the world’s largest money manager, is among firms ending bullish calls on Japan equities.

“Japan has been disappointing,” said Nader Naeimi, Sydney-based head of dynamic markets at AMP Capital Investors Ltd., which oversees about $115 billion. He’s a long-time fan of Tokyo equities who says he’s now looking for opportunities to sell. “A lot of people are starting to doubt Abenomics.”

While markets elsewhere are climbing back from a global selloff, investors in Japan see fewer reasons for optimism. Growing concern that Abenomics -- the three-pronged strategy of fiscal and monetary stimulus and structural reform -- is falling flat has spurred speculation the nation will slip into deflation, setting back efforts to end three decades of malaise.

Masahiro Ichikawa, a senior strategist at Sumitomo Mitsui Asset Management Co., fears a downward spiral. Foreigners are needed to boost the stock market, and if equities don’t rise the public will lose confidence and curb spending, as he sees it. That could send Japan back into deflation. “If foreigners don’t come back, the future of Abenomics could be jeopardized,” he said.

Overseas investors, which account for about 70 percent of the value traded in Tokyo shares, bought a net 18.5 trillion yen between 2012 and 2015. Global fund managers, which were negative on Japanese shares for almost all of the five years before Abe came to power, have been overweight every month since, according to a Bank of America Corp. Merrill Lynch survey.

Now that bullishness is dissipating. Overweight positions on Japanese stocks fell for a third straight month in March, with investors’ outlook on the economy dimming and concern over earnings growing, the Merrill Lynch survey showed. They’ve sold a net 5 trillion yen since the second week of January, the longest stretch since 16 weeks of selling in 1998 and the most in records going back to 1993.
In the EUSSR, what else. The sooner Brexit rolls around the better, though for now Project Fear and Smear seems to be working.  Honestly though, why wouldn’t the country and descendants of the people who did the early work on nuclear weapons in WW2, and invented and built, and transported the Mulberry harbours that made D-Day landings a success, not succeed at anything, inside or outside the EUSSR, though Brexit takes back out borders and frees up billions for HMG to spend rather than Brussels.
Below, the bad and badder news from Italy. Emphasis added.

Italy Forms $5.7 Billion Fund to End Doubts About Banking System

April 11, 2016 — 9:56 PM BST Updated on April 11, 2016 — 11:53 PM BST
Italian officials and financial firms agreed to create a multibillion-euro fund to help weakened banks raise capital and unload bad loans, as the nation tries to assuage investor jitters and avert a crisis.
The new fund, named Atlante, will be supported by numerous institutions, its manager, Quaestio Capital Management SGR, said late Monday after more than a week of meetings among banks, insurers and state lender Cassa Depositi e Prestiti. The fund may be worth about 5 billion euros ($5.7 billion), said Banca Popolare dell’Emilia Romagna Scarl Chief Executive Officer Alessandro Vandelli, speaking on the sidelines of the meeting.

Italy is trying to help unprofitable lenders lure private investors and avoid creditor losses as the European Central Bank steps up pressure on the country to tackle an estimated 360 billion euros in bad debt.
With the economy struggling to recover from a recession, Prime Minister Matteo Renzi earlier this year struck an agreement with the European Commission that allows banks to bundle their soured loans into securities for sale, while purchasing a state guarantee for the least-risky portion.

Atlante will act as a buyer of last resort for banks that struggle to raise equity capital in the private markets or that can’t sell off the riskiest portions of their bad debts. The fund is being managed by a private manager, Quaestio, because Italy doesn’t want to fall afoul of European Union rules against providing state aid. Quaestio’s shareholders include Intesa Sanpaolo SpA’s top investor, Fondazione Cariplo.

News that negotiations to create a fund were taking place led to a surge in Italian bank shares earlier on Monday, with Banca Monte dei Paschi di Siena SpA jumping 9.8 percent in Milan, UniCredit SpA advancing 2.4 percent and Intesa Sanpaolo rising 1.7 percent. That pared losses that have put them among the worst performers on the Bloomberg Europe Banks and Financial Services Index this year.

Italy Production Declines, Adding To Doubts on Pace of Recovery

April 11, 2016 — 9:00 AM BST
Italian industrial production fell in February, reflecting concerns about the pace of recovery that prompted the government to cut this year’s growth outlook.

Output declined 0.6 percent from January, which registered a 1.7 percent revised jump, national statistics bureau Istat said in a report issued Monday in Rome. The median of 15 estimates in a Bloomberg survey called for a 0.9 percent drop in the February. On an annual, work-day-adjusted basis, production increased 1.2 percent, Istat said.

The output’s monthly decline in February was the biggest since June 2015 when production decreased 1 percent.

The government led by Prime Minister Matteo Renzi last week cut its forecast for economic growth this year and next amid a weaker dynamic of global demand and consumer prices. It said it targets a gross-domestic-product rise of 1.2 percent in 2016 and 1.4 percent in 2017, down from previous projections of 1.6 percent for both years.

Last year’s economic expansion likely continued in the first quarter of 2016 amid “a stability of consumer growth as well as the first signs of a recovery of investments,” Istat said in an April 5 report.

The country’s unemployment rose in February as a discount on social contributions for businesses hiring more workers on a long-term basis was being phased out, stripping job creation of a key boost. The jobless rate increased to 11.7 percent from a revised 11.6 percent in January. That compares with a high of 12.8 percent at the start of 2014, but it is still almost twice the rate it was in mid-2007.

Istat originally reported a 1.9 percent increase in January industrial production.
We end for the day with a global tax scandal with the curioser and curioser aspect of all those missing American “Panamanians.”  Who is directing the spin, and steering the narrative? Cui bono comes to mind, along with who’s watching the watchers? Barry Obama is strangely silent at this theft of data, to equal Chelsea Manning’s and old Snowy’s in Moscow.  It couldn’t be the NSA operating with plausible deniability could it? 

They wouldn’t do a thing like that would they? If they did, a whole lot of Americans will be waiting for that knock on the door in the night and some alphabet soup type "asking" for a "favour." Panama and the USA signed a tax data sharing agreement in 2010 going back to 2007. Given that this stolen data goes back to the 1970s, and America's relationship with Panama via the former Canal Zone,  there ought to be American "Panamanians" right up til Noriega was deposed. So where are the missing American papers?

Shocked by the Panama Papers? Blame Switzerland

April 10, 2016 10:00 AM EST
The revelations about offshore accounts contained in the so-called Panama Papers are sensational, but they are unlikely to put an end to these tax havens favored by the world's rich and powerful.

Rather, the disclosures are a reminder that these shelters have been around for close to a century, and have proved remarkably resilient even as they periodically aroused public outrage and calls for reform. In fact, an earlier scandal may have laid the foundation for the tax havens that are now under scrutiny.

Switzerland has become shorthand for hidden money, and with good reason: The country has long sought to attract foreign capital to its banking system by offering a mixture of secrecy, preferential tax treatment and creative corporate structures.

The process began before World War I, when the Swiss canton of Zug amended its laws to make it easy for foreigners to establish corporations and holding companies. Zug, which may be home to as many as 29,000 such companies today, helped begin this tradition of courting foreign capital. (The canton made headlines in 2001, when President Bill Clinton pardoned Marc Rich, a convicted U.S. tax evader who had sought refuge in Zug). The bankers and lawyers of Zurich -- and to a lesser extent, Basel -- played a part, too, helping manage these companies and the money they brought to the region.

In the 1920s, Switzerland became a favored destination for cash that needed to escape the prying eyes of government authorities. This stoked immense resentment against Swiss bankers, not least because they steadfastly refused to cooperate with any country hoping to track down tax evaders.

The Swiss government itself endorsed the stonewalling approach. The Federal Council minutes of 1924 note that the Committee of the Swiss Bankers’ Association had opted to reject "any measure combating this evasion.”

But up to this point, Swiss secrecy was a matter of custom, not law. That would soon change. In 1934, Switzerland made secrecy a state policy. In the usual telling of this story, this decision was a response to the Nazis coming to power in Germany in 1933, and Swiss secrecy was a humanitarian gesture aimed at protecting Jewish assets from the German government.

This narrative, however, is bosh. As the historian Sébastien Guex has shown, Swiss secrecy was largely driven by a reaction to a little-known scandal with similarities to today’s Panama Papers contretemps.

The story begins in 1932, when the French government struggled to balance the budget as the country was mired against the Great Depression. A left-leaning coalition government, aware that many of France’s wealthiest citizens had been avoiding taxes by moving money to Switzerland, undertook an investigation.

On Oct. 26, local authorities raided the Paris offices of the Commercial Bank of Basel, seizing notebooks that contained the names of 2,000 elite French citizens who had been using Swiss banks to shield their income from the tax man. Wealthy industrialists such as the Peugeot brothers, prominent politicians and many others found themselves in the public eye.  Secrets had been spilled, and many of those who hadn’t been identified pulled their money from Switzerland.

The French government sought to intimidate Switzerland into handing over more information; it even arrested officials connected to the bank. This wasn’t a minor affair: Guex estimates that the French government had lost upward of 2 billion francs in tax revenue thanks to these evasions. And so they continued to target the Swiss banks.

The Swiss fought back. A government official wrote that “it would in no way be in our interest to grant French agents judicial cooperation which might have very unfavorable repercussions on the substantial business accruing to our banks from foreign deposits.”

U.S., Panama Sign New Tax Information Exchange Agreement


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.
At the Comex silver depositories Monday final figures were: Registered 32.45 Moz, Eligible 122.81 Moz, Total 155.26 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
H.M.’s G. needs to stand up for legal tax avoidance, which is a vital necessary support for private wealth and property, and along with education and hard work, necessary for wealth building and societal improvement. At the same time crack down on abusive tax evasion, such as cost JC Juncker his job as PM of leading EUSSR tax evading enabler, Luxembourg.

Panama Furor Rumbles Into Second Week as Global Pressure Mounts

April 11, 2016 — 1:00 AM BST
The fallout from the Panama leaks showed no sign of abating as U.K. Prime Minister David Cameron was forced to provide more transparency over his wealth and European officials pledged measures to require companies to report their offshore bank accounts.

Cameron will face lawmakers on Monday as he seeks to draw a line under the crisis stemming from information about the use of offshore tax havens leaked from Panama-based law firm Mossack Fonseca. Iceland’s prime minister has resigned, Malta’s government faces a confidence vote and Argentine President Mauricio Macri promised to put his assets in a blind trust after he was linked to two companies listed in Panama.

The revelations are undermining public trust in governments around the world, even on unrelated issues including Britain’s European Union membership and a Dutch referendum on a proposed trade pact with Ukraine that was defeated last week. The leaks come as politicians around the world find themselves on the defensive against populist groups angry at rising inequality.

“The Panama papers are yet another symptom, rather than root cause, of a growing disconnect between elites and their voters,” said Wolfango Piccoli, co-president of Teneo Intelligence in London. “Even if the Panama story were not to drag on for too long, the fundamental crisis of diminishing trust in the political establishment is likely to continue.”

As politicians feel the heat, banks, law firms and other companies that have facilitated access to offshore accounts are coming under greater scrutiny that could change how they do business.

More than 20 nations have announced probes into information contained in the leaks, and the Organization for Economic Cooperation and Development will host a meeting on April 13 to discuss cross-border tax issues. Global finance ministers are expected to discuss the issue when they gather this week in Washington for the International Monetary Fund’s spring meeting.

The European Commission on Tuesday will consider how to require large companies to make public what they pay in tax in each of the 28 EU countries, and possibly outside the bloc as well.

Though the Commission has been working for years on how to stop multinationals playing European countries’ tax codes off each other to minimize payments, the Panama papers may push it to expand the scope of its work, EU Financial Services Commissioner Jonathan Hill said in a statement on Saturday.

“There is an important connection between our continuing work on tax transparency and tax havens that we are building into the proposal,” Hill said in the statement.

Following a week of scrutiny into his financial affairs, Cameron published details of the taxes he’s paid since 2009, after acknowledging that he sold about 30,000 pounds ($42,000) of shares in an offshore fund set up by his late father shortly before he became prime minister. He said he had paid all tax due on the sale.

Cameron will tell the House of Commons on Monday that companies will be prosecuted if they fail to stop their employees assisting tax evaders. He also set up a task-force of tax and law enforcement officials to pursue leads contained in the leaked documents.

The leak from Mossack Fonseca to an international consortium of investigative journalists consisted of more than 11.5 million documents detailing over 214,000 offshore companies, about half of which are domiciled in the Virgin Islands.

Jeremy Corbyn, leader of the U.K.’s opposition Labour Party, said on Sunday that Britain had a role to play in cracking down on tax havens because many are British dependent territories.

“What Panama has shown more than anything is there’s one rule for the rich and another for the rest,” Corbyn said in an interview with the BBC. “We need to be much more assertive on overseas arrangements in British dependent territories.”

Iceland’s government survived a no-confidence vote on Saturday following the resignation of former Prime Minister Sigmundur David Gunnlaugsson over his offshore bank accounts. Malta’s government faces a parliamentary vote on Friday after the country’s energy minister and Prime Minister Joseph Muscat’s chief of staff were found to have trust companies domiciled in Panama.

The revelations also disrupted French Prime Minister Manuel Valls’s working trip to Algeria over the weekend. Reporters from two French media, newspaper Le Monde and broadcaster Canal+, were denied visas to accompany Valls because they reported on Algerian cabinet members caught up in the Panama affair. Other French media decided not to cover the trip in protest.

Societe Generale SA also confirmed that French police visited its offices last week to collect documents related to its offshore accounts revealed in the Panama Papers. In Paris, youths spray-painted a Societe Generale branch with slogans related to the revelations during a protest on Friday against a labor reform bill.

In Switzerland, prosecutors said the Mossack Fonseca documents contain new information relevant to their investigation into corruption at soccer’s world governing body FIFA.
Ayrshire Pullman Motor Services v Inland Revenue [1929] 14 Tax Case 754, at 763,764.
"No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer's pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue"

Lord Clyde President of the Court of Session.

Brexit Quote of the week.

Cameron: He knows nothing and thinks he knows everything. That points clearly to a political career.

With apologies to George Bernard Shaw

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?

Lightweight metal foam turns armor-piercing bullets into dust

Nick Lavars April 10, 2016
Composite metal foams (CMFs) are little-known materials that are beginning to show some big promise.
Last year we saw researchers adapt these lightweight materils to stop various forms of radiation in their tracks, and now the same team has ramped things up to offer protection from something with a bit more force: an armour-piercing bullet, which was turned to dust on impact.

In its most simple form, foam metal is made by bubbling gas through molten metal to form a frothy mixture which then sets as a lightweight matrix. This leaves a material that offers a lighter alternative to conventional metals, while still maintaining a comparable strength.

Afsaneh Rabiei, a professor of mechanical and aerospace engineering at North Carolina State University, last year produced a foam metal shield that could block X-rays, various forms of gamma rays and neutron radiation, giving it potential as a lightweight alternative to the bulky radiation shielding currently available.
Building on this previous work, Rabiei then set about building high-strength armor. The shield was comprised of boron carbide ceramics as the strike face, with composite metal foam (CMF) as the bullet kinetic energy absorber layer and Kevlar panels as backplates. To test its durability, Rabiei and her team took aim with a 7.62 x 63 mm M2 armor-piercing projectile, which was fired in line with the standard testing procedures established by the National Institute of Justice (NIJ).
"We could stop the bullet at a total thickness of less than an inch, while the indentation on the back was less than 8 mm," Rabiei says. "To put that in context, the NIJ standard allows up to 44 mm (1.73 in) indentation in the back of an armor."
But Rabiei imagines her work will provide more than just ultralight, bullet-destroying body armor. Other potential applications include space exploration and transportation of nuclear waste due to its aforementioned abilities to block radiation.

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

John Kenneth Galbraith.

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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