Tuesday, 31 May 2016

Dress-Up Tuesday.

Baltic Dry Index. 606       Brent Crude 49.65

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

Brexit odds checker.

Brexit Quote of the Day.
Aw, you can come up with statistics to prove anything, Cameron. Forty percent of all British people know that.
With apologies to Homer Simpson.

For an extra treat today scroll down to the end to watch the modern Mozart 10 year old child prodigy from Vilnius, play Albinoni.

We open for dress-up Tuesday, the last trading day of the month for the Great Vampire Squids in the Fed’s gambling casinos, with yet more worrying news from the Orient. In suicide Empire of Japan, nothing ever works as intended. China and a Fed rate hike in June, have turned Asian stock markets skittish.

Japan's consumer spending drops again

Published: May 30, 2016 7:46 p.m. ET
TOKYO--Japanese consumer spending fell for a second straight month in April, offering Prime Minister Shinzo Abe yet another reason to delay a sales tax increase scheduled for next year.

Household spending decreased 0.4% from a year earlier in April, adjusted for price changes, after dropping 5.3% in the previous month, according to data released Tuesday by the Ministry of Internal Affairs and Communications.

Economists polled by The Wall Street Journal and the Nikkei expected a 1.3% fall.

Weakness in consumption, which accounts for 60% of Japan's economic output, added to signs that the economy isn't out of the woods yet despite a modest rebound in the January-March quarter. Exports fell 10% in April as U.S.-bound shipments decreased the most in five years. Consumer prices slipped 0.3% in that month. Corporate earnings have also shown signs of losing steam.

Fed, China fears force investors to check out of Asia

Mon May 30, 2016 7:03pm EDT
Having dumped Asian shares on resurgent worries about China's economy, the specter of more aggressive U.S. interest rate rises is now forcing global investors to sell the region's bonds and currencies.

A net $3.2 billion left Asian equity markets, excluding Japan, during the period May 1 to 24, the largest outflow since January, data from HSBC showed. Indonesia's and South Korea's bond markets, heavy recipients of foreign investment until March, are now seeing chunks of inflows reverse while Asia's currencies have also fallen quite sharply.

Some market participants see foreign investment outflows across Asian asset classes as an overreaction, given the strides policymakers have made in shoring up capital flight defenses since the "Fed taper tantrum" in 2013.

But for others, the unease around the Fed's policy deliberations twins increasing concerns around currency volatility with broader worries about the health of the China's real economy.

"If the Fed hikes rates in June, it might come at a time when the Chinese economy weakens, and that could also mean that the Chinese currency starts to weaken again," said Herald van der Linde, head of Asia-Pacific equity strategy at HSBC in Hong Kong.

"And that could lead to a scenario where everybody's up and down and markets fall five to 10 percent."

---- "The market is split between those who think it's time to buy emerging markets and those who think the China data is not sustainable and U.S. rates will go up and emerging markets are overvalued," said Sean Taylor, chief investment officer at Deutsche Asset Management. Deutsche had $846 billion of assets under management at the end of December.

Soft Chinese economic data in April has raised doubts about the effectiveness and sustainability of the fiscal stimulus being doled out in the world's second-largest economy.

Chinese stocks .SSEC, the region's worst performers, are down almost 20 percent this year.
We close with the wealth and jobs destroying entity also known as the European Union. Whether Britain stays or leaves the dying EUSSR, isn’t likely to make much difference, to the EUSSR’s outcome. Just to add the costs to the people of GB. The problems of Greece have now reached too big to fail or bail, Italy and France. What is the point in remaining in an insane asylum run by the inmates like this?

Draghi’s First Good News in a Year Has $267 Billion Cost

May 30, 2016 — 5:00 AM BST Updated on May 30, 2016 — 10:17 AM BST
Mario Draghi may have bought himself a brief respite from the threat of deflation. The cost? More than a quarter of a trillion dollars.

On Thursday, the European Central Bank president should be able to deliver his first snippet of good news for a year on his mandate. Most economists in Bloomberg’s monthly survey predict the central bank’s forecasts for inflation and growth will be left unchanged or increased. Yet respondents see the relief as short-lived, with two thirds predicting more easing will eventually be needed.

The poll results underscore how the Governing Council’s meeting in Vienna, one of the occasional sessions held outside the ECB’s Frankfurt headquarters, is likely to mark a pause for officials after a fresh round of stimulus in March that included a bump of 240 billion euros ($267 billion) to their bond-buying program.
While economists are skeptical the package will be enough to return inflation to the target of just under 2 percent, Vice President Vitor Constancio is more optimistic. He said last week that he believes consumer-price growth will be near that goal in two years time.

“The combined economics departments of the Eurosystem central banks must be sighing in relief over this round of forecasts,” said Anatoli Annenkov, an economist at Societe Generale in London. “They have a rare opportunity to forecast higher inflation.”

The gathering in Austria takes place against a backdrop of growing concern among investors that central banks have run out of ways to bolster feeble prices. Before the meeting, fresh data should give officials more insight into how well the existing stimulus is working.

Eurostat will probably say on Tuesday that the inflation rate rose to minus 0.1 percent in May from minus 0.2 percent the previous month, and unemployment was unchanged at 10.2 percent in April, according to separate Bloomberg surveys. Brent crude, up more than 75 percent since January, is being closely watched for its impact on consumer prices.

A gauge of euro-area economic confidence rose for a second month in May to a four-month high, data from the European Commission in Brussels showed on Monday.

That could all help lift the ECB’s previous projections, published in March, which foresaw inflation averaging 0.1 percent in 2016, 1.3 percent in 2017 and 1.6 percent in 2018.

Still, achieving the inflation goal any time soon remains a tall order. Core inflation, which the ECB says is a gauge for future price developments, slowed to 0.7 percent in April and is seen barely picking up to 0.8 percent in May. Euro-area negotiated wages rose a nominal 1.4 percent in the first quarter, the slowest pace since the inception of the single currency a decade and a half ago.

France and Italy could be the next European economies to crash

Denied the option of devaluation, both countries have relied on debt-funded public spending to maintain economic activity and living standards. The people and their representatives refuse to face reality
May 29, 2016

Certain diseases attack the peripheries before vectoring in on vital organs. Following a similar trajectory is the European debt crisis, moving ever closer to the core. Italy and France are now especially vulnerable.

Defenders argue that Italy and France are large modern nations, with enviable economic pedigree. They are, respectively, the 13th and 9th largest economies in the world; gross domestic product per capita in 2014 is estimated at $34,500 (£23,590) and $40,400 (£27,624).

They have large populations, an educated and productive workforce, well developed infrastructure and considerable economic and social capital. Both countries are major agricultural and industrial powers, strong in advanced technical products, luxury goods, food processing, pharmaceuticals and fashion. Both are major exporters and significant tourist destinations
France even has a favourable demographic outlook, with a birth rate just above replacement level mainly among its immigrant population. They are simply too large to fail.
But Italy and France share problems of slow growth, unemployment, poor public finances and structural problems. They have found it difficult to reform and face an increasingly tough political environment.
Italian total real economy debt (that is, government, household and business) is around 259 per cent of GDP, up 55 per cent since 2007. France’s equivalent debt is around 280 per cent of GDP, up 66 per cent since 2007. This ignores unfunded pension and healthcare obligations as well as contingent commitments to Eurozone bailouts. Debt will increase in critical levels quickly without corrective action.
France and Italy cannot avoid a financial crisis in an environment of low growth and low inflation. Real GDP growth would need to be around twice the current projected rates to stabilise and then reduce government debt-to-GDP ratios.
The required fiscal adjustment to start reducing government debt is around 2 per cent of GDP, which would reduce the growth needed to reduce leverage. 
A combination of weak economic activity and low inflation is causing Italy’s debt trajectory to spiral upwards, despite austerity and a primary surplus of 2 per cent of GDP. In France, there is no sign that the budget is likely to be in surplus in the near future. 
The real problem is the lack of competitiveness, and underlying many of these problems is the single currency. 
Before the 2015 fall in the euro, after the European Central Bank introduced negative interest rates and quantitative easing, Italy and France were faced with a 15-25 per cent overvalued currency. This was compounded by the high leverage to the exchange rate for export competitiveness. 
Italy has a gearing of over 60 per cent to the exchange rate, due to the nature of its exports, compared to around 40 per cent for Germany. Denied the option of devaluation to maintain international competitiveness, both countries have relied on debt-funded public spending to maintain economic activity and living standards.

France braces for further strikes in half-term travel chaos

David Chazan29 May 2016 • 5:11pm
Half-term holidaymakers in France may be stranded by further strikes that will disrupt flights and rail services as fuel shortages persist in the worst labour unrest for decades.

Days before the Euro 2016 football tournament kicks off, President François Hollande, already under pressure over terrorism fears, is frantically seeking a face-saving way to end the crisis over bitterly disputed labour reforms.

Mr Hollande, who is nicknamed ‘Flanby’ after a wobbly caramel dessert partly because of his reputation for caving in when challenged, is reportedly ready to offer the unions a compromise. If they drop their opposition to an employment bill to make hiring and firing easier, he will grant concessions in separate negotiations on working conditions and pay.

The more moderate CFDT union backs the labour reforms, which have already been watered down, to the disgust of many employers, but the hardline CGT refuses to compromise.
“The CGT knows it will not obtain the withdrawal of the law but it will be necessary for them to win concessions in other areas,” a source close to the president told the Journal du Dimanche newspaper. Negotiations are already in progress with the national rail company, SNCF, the state-owned Paris transport corporation, RATP, and Air France. 
Air controllers plan to strike from Friday to Sunday, which will affect airports across France and is likely to force French and international airlines to postpone and cancel flights.
Rail workers are also planning stoppages that will lead to severe cuts in national train services from Wednesday. In Paris, Métro and suburban train services will be reduced from Thursday, when CGT members are to begin a strike. Another leftist union, SUD, has called a strike from June 10, when the month-long football tournament starts. 
Many of the strikers voted for the Socialist president who came to power promising to curb the “excesses” of international finance. Now that he has adopted a more pragmatic, business-friendly stance in a bid to cut unemployment, at a record of more than 10 per cent, they accuse him of betrayal. 

Air France Pilot Strike Threatens to Disrupt Soccer Tournament

May 30, 2016 — 4:29 PM BST
Air France’s pilots are escalating a long-running contract dispute by threatening to disrupt travel with an extended strike just as France prepares to host the European soccer championship that starts in mid-June.

The French airline’s main pilot union, the SNPL, said 68 percent of those participating in a work-stoppage ballot voted Monday in favor of a walkout exceeding six days to protest the airline’s plans to cut pay. Of the carrier’s 3,600 pilots, 2,500 belong to the SNPL.

The SNPL didn’t specify any dates for a strike, and talks in the dispute continue. The UEFA European Championship is scheduled to take place in France from June 10 through July 10. The conflict is reminiscent of a dispute in 1998, when pilots at the airline halted work for eight days just ahead of the World Cup soccer tournament in France. The carrier declined to comment on Monday’s vote, beyond estimating that 1,360 pilots might take part in a walkout.

“When it becomes serious, you have to lie.”

Jean-Claude Juncker. Failed former Luxembourg P.M., serial liar, president of the European Commission.
At the Comex silver depositories Friday final figures were: Registered 30.12 Moz, Eligible 123.52 Moz, Total 153.64 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, what really happened when the Great Nixonian error of fiat money, communist money, went bust for the first time in 1974.  
“Every victory is only the price of admission to a more difficult problem”
Henry Kissinger.

The Untold Story Behind Saudi Arabia’s 41-Year U.S. Debt Secret

How a legendary bond trader from Salomon Brothers brokered a do-or-die deal that reshaped U.S.-Saudi relations for generations.

May 31, 2016

Failure was not an option.

It was July 1974. A steady predawn drizzle had given way to overcast skies when William Simon, newly appointed U.S. Treasury secretary, and his deputy, Gerry Parsky, stepped onto an 8 a.m. flight from Andrews Air Force Base. On board, the mood was tense. That year, the oil crisis had hit home. An embargo by OPEC’s Arab nations—payback for U.S. military aid to the Israelis during the Yom Kippur War—quadrupled oil prices. Inflation soared, the stock market crashed, and the U.S. economy was in a tailspin.

Officially, Simon’s two-week trip was billed as a tour of economic diplomacy across Europe and the Middle East, full of the customary meet-and-greets and evening banquets. But the real mission, kept in strict confidence within President Richard Nixon’s inner circle, would take place during a four-day layover in the coastal city of Jeddah, Saudi Arabia.

The goal: neutralize crude oil as an economic weapon and find a way to persuade a hostile kingdom to finance America’s widening deficit with its newfound petrodollar wealth. And according to Parsky, Nixon made clear there was simply no coming back empty-handed. Failure would not only jeopardize America’s financial health but could also give the Soviet Union an opening to make further inroads into the Arab world.

It “wasn’t a question of whether it could be done or it couldn’t be done,” said Parsky, 73, one of the few officials with Simon during the Saudi talks.

At first blush, Simon, who had just done a stint as Nixon’s energy czar, seemed ill-suited for such delicate diplomacy. Before being tapped by Nixon, the chain-smoking New Jersey native ran the vaunted Treasuries desk at Salomon Brothers. To career bureaucrats, the brash Wall Street bond trader—who once compared himself to Genghis Khan—had a temper and an outsize ego that was painfully out of step in Washington. Just a week before setting foot in Saudi Arabia, Simon publicly lambasted the Shah of Iran, a close regional ally at the time, calling him a “nut.”

But Simon, better than anyone else, understood the appeal of U.S. government debt and how to sell the Saudis on the idea that America was the safest place to park their petrodollars. With that knowledge, the administration hatched an unprecedented do-or-die plan that would come to influence just about every aspect of U.S.-Saudi relations over the next four decades (Simon died in 2000 at the age of 72).

The basic framework was strikingly simple. The U.S. would buy oil from Saudi Arabia and provide the kingdom military aid and equipment. In return, the Saudis would plow billions of their petrodollar revenue back into Treasuries and finance America’s spending.

It took several discreet follow-up meetings to iron out all the details, Parsky said. But at the end of months of negotiations, there remained one small, yet crucial, catch: King Faisal bin Abdulaziz Al Saud demanded the country’s Treasury purchases stay “strictly secret,” according to a diplomatic cable obtained by Bloomberg from the National Archives database.

With a handful of Treasury and Federal Reserve officials, the secret was kept for more than four decades—until now. In response to a Freedom-of-Information-Act request submitted by Bloomberg News, the Treasury broke out Saudi Arabia’s holdings for the first time this month after “concluding that it was consistent with transparency and the law to disclose the data,” according to spokeswoman Whitney Smith. The $117 billion trove makes the kingdom one of America’s largest foreign creditors.

Yet in many ways, the information has raised more questions than it has answered. A former Treasury official, who specialized in central bank reserves and asked not to be identified, says the official figure vastly understates Saudi Arabia’s investments in U.S. government debt, which may be double or more.

"The history of paper money is an account of abuse, mismanagement, and financial disaster."

Richard M. Ebeling

Brexit The Animated Movie.

Brexit Quote of the week.

Let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, tell any lie, to assure the survival and the success of the EUSSR.

Dodgy Dave Cameron, with apologies to J. F. Kennedy.

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?

And the future is, tethered drones. Coming soon to a police force near you, probably.

Tethered drone provides a hovering watchtower to troops on the ground

Nick Lavars May 24, 2016

From Gengis Khan and his Mongol commanders to jihadis hiding in the Afghan mountains, fighters have always gravitated towards elevated vantage points to better prepare for incoming enemies. Technology has changed the face of warfare but the benefits of holding the higher ground remain the same, even if it's a flying robot doing the legwork for you. Looking to further boost to its surveillance capabilities, the US military has begun testing a tethered drone system that hovers in the air and streams continuous aerial views to troops on the ground.
Dubbed Tether Eye, the wired aircraft was developed by AeroVironment as a way of offering the military a 24-hours-a-day surveillance tool. It can be launched from fixed locations or while on the move from a portable self-contained base station, which constantly shuttles power to the craft through a ruggedized tether.
Equipped with electro-optical and infrared cameras, it can fly to an altitude of 150 ft (45 m) and capture night and day 360-degree video, which is streamed back to the base station to give troops an all-seeing eye in the sky.
---- "Having the ability to deploy a 'virtual observation tower' at a moment's notice above buildings and vehicles represents a game-changing capability for intelligence, surveillance, reconnaissance and security operations that has the potential to save lives," says Amanda Toman, Program Manager at the US Combatting Terrorism Technical Support Office. "We look forward to continuing our evaluation of Tether Eye's capabilities with AeroVironment as a possible deployable capability across government facilities."
You can see the Tether Eye in action in the video below.

Fotokite keeps drone photography on a tight leash

Nick Lavars April 9, 2015

Learning the intricacies of drone photography can involve a steep learning curve, but flying a kite is a much simpler proposition. For Russian roboticist Sergei Lupashin, blending these old and new forms of flight could be a key to unlocking the potential of aerial photography. By putting his Fotokite quadcopters on a leash, he hopes to get airborne cameras into the hands of more journalists, enabling them to tell stories from exciting new angles.

The huge potential of drone photography, a field that amasses more breathtaking captures every day, is not lost on those in the news gathering business. For the last couple of years, media companies around the world have come to embrace the technology, with outlets from the BBC to CNN turning to drones to bring new perspectives to their journalism. In the case of the BBC, this has turned up captivating aerial footage of everything from Auschwitz, to New Year's Eve fireworks, to a ravaged Gaza strip following a 50 day conflict with Israel.

But in addition to considerable technical ability, getting these drones in the air requires a lot of time spent training up certified pilots. It is Lupashin's thinking that tethering the aircraft to someone with their feet firmly on the ground can make the technology a whole lot more accessible, while actually serving to improve certain capabilities at the same time.

He claims that somebody can be taught to fly a Fotokite within just five minutes.

Finally, something too good not to share. A child prodigy from Vilnius, Lithuania. Almost worth staying in the EUSSR, if he can be persuaded to play London occasionally. The performance starts about 1.20. Almost worth staying, but only almost.

The monthly Coppock Indicators finished April

DJIA: 17773.64-19 Down. NASDAQ:  4775.36 +11 Down. SP500: 2065.30 -21 Down. 

Monday, 30 May 2016

Out Of Ammo, Ideas, And Road.

Baltic Dry Index. 606 +05      Brent Crude 49.07

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

Brexit odds checker.

Brexit Quote of the Day.
“I wonder what Juncker is doing," thought Dodgy Dave. "I wish I were there to be doing it to the British people, too.”

Dodgy Dave Cameron, with apologies to A.A. Milne, and Winnie-the-Pooh

Eight years on from Lehman, our central banksters are still operating on the Voodoo economics of ZIRP, QE, and NIRP. Far from a generating a booming, healthy, sustainable global economy, all it has produced is a massive Chinese malinvestment bubble, failing suicide economics in Japan, an increasingly dysfunctional jobs and wealth destroying European Union, plus an American economy that works well for the Wall Street gamblers in the financialised casinos, but one that has by-passed everyone else in the real economy, and done it by loading up the future with unrepayable debt.
After yet another meaningless G-7 photo-op just passed, Bloomberg’s noted Mohamed El-Erian ever so politely suggests that the central banks have run out of ammo, ideas, and road. While so far only Greece and Cyprus, have smashed into the barriers, to borrow a technical term from yesterday’s Monaco Grand Prix, all of the others are dangerously close. While the world could safely ignore the crash of Greece and Cyprus, a smash up of Spain, France, Italy, Germany, Japan or China will be different. If America smashes into the barriers, it will end the Great Nixonian Error of fiat money, communist money, as we have known it. Since 2008, the Great Nixonian Error has been living on borrowed time, drinking in the last chance saloon, and playing Russian roulette all at the same time. What could possibly go wrong?

Central Banks Can't Go It Alone Anymore

May 27, 2016 2:00 AM EDT By Mohamed A. El-Erian
Whether through signals from the Group of Seven meeting this week or in the outcome of the latest round of European negotiations on Greece, officials of advanced countries increasingly are acknowledging that the problems facing their economies require a new response to take over from the overlong use of narrow short-term tools.

This recognition has been too long in the making and, judging from the regrettable lack of credible and detailed action plans, still needs time to be translated into progress on the ground.

Before the G-7 meeting in Japan, several member countries indicated they understood that their individual and collective policy stances needed to evolve. Germany warned against continued over-reliance on central banks, simultaneously stressing the need for structural reforms. Canada and Japan urged a more aggressive and imaginative use of fiscal policy. And the U.S. warned Japan to resist the temptation to intervene to depreciate the yen.

----These notable developments reflect an important evolution in mindsets, which are shifting more decisively toward looking at structural and secular conditions, and away from an excessive emphasis on cyclical considerations. This shift is driven by three developments: recurring disappointing economic growth despite extraordinary monetary policy stimulus and, in the case of Greece, eye-popping bailout packages; concern that the benefits of unconventional central bank involvement are being offset by a mounting risk of collateral damage and unintended consequences; and recognition that the political context is becoming more complicated as anti-establishment movements gain momentum amid growing popular mistrust of “elites” both in government and the private sector.

Such thinking should, one would hope, lead to the implementation of pro-growth structural reforms, tax reform in conjunction with lessened fiscal austerity; debt relief for segments with crushing debt overhangs; and effective global policy coordination.

Nonetheless, the translation of greater collective awareness into credible actions remains frustratingly patchy.

----Meanwhile, it is unlikely that the G-7 will implement a much different policy stance once officials return to their national capitals. As a result, the crucial handoff from reassuring words to effective measures on the ground will once again fail to materialize.

Yet greater awareness is a critical ingredient of durable mindset adaptations and related course corrections, so there is hope that the advanced economies are getting closer to putting in action a much-needed comprehensive policy response. So if not this time, maybe next time. Still, time is not on their side.

By this measure, U.S. stocks are more expensive than ever

Published: May 27, 2016 12:50 p.m. ET

Median price-to-sales ratio of S&P 500 at 2.2

By one measure, U.S. stocks are even more expensive than they were during the tech bubble of 2000.
While price-to-earnings ratios, which can be manipulated by financial engineering, aren't at alarming levels, price-to-sales ratios indicate stocks are well beyond being merely fully priced, as the chart from Ned Davis Research below shows.

The price-to-sales ratio divides a company’s stock price by revenues. The price-to-earnings ratio divides the price by earnings.

The median price-to-sales ratio on S&P 500 SPX, +0.43% —or the P/S of the 250th stock on the index—is at 2.2, according to Ned Davis Research, above the 2007 and 2000 levels, when stocks were arguably in bubble territory.

The median P/S at those levels suggest that, unlike the bubble of 2000, when tech stocks led the price appreciation, the vast majority of large-cap stocks are now too expensive.

One of the reasons for a rise in the P/S ratios is declining revenue over the past three quarters as prices climbed to near record levels.

“On revenue basis, U.S. stocks are as expensive as they have ever been. But it’s not the only metric. They are expensive if you look at cyclically-adjusted or Shiller price-to-earnings ratios,” said Meb Faber, co-founder and chief investment officer at Cambria Investment Management.

Shiller PE, which is price-to-earnings ratio based on average inflation-adjusted earnings from the previous 10 years, is at 26.2, its highest level since 2007. The Shiller PE reached that level in 2014 and has largely stayed there.

While valuation metrics are virtually useless when it comes to timing market tops and bottoms, they do tend to have pretty reliable predictive value when it comes to long-term returns.

China's Veiled Loans May Prove Lethal

Credit is a risky business, but loans that dare not speak their name? They are possibly even more dangerous, as China is about to find out.

As many as 15 publicly traded Chinese lenders, large and small, report roughly $500 billion of such debt between them, which they hold not as loans but as receivables from shadow banking products. While the traditional credit business of these banks is 16 times bigger, receivables have jumped sixfold in three years. Explosive growth of this type usually ends badly. It's hard to see why it'll be different for the People's Republic.

Before they can brace themselves -- or embrace the risk, if they think the rewards are worth it -- equity investors need to know where to look. Flitting from one explanatory note to another in dense annual reports isn't everybody's idea of a day well spent. But the effort may be worth it. For instance, page 184 of Agricultural Bank's 2015 annual report informs us that the bank has 557 billion yuan ($85 billion) worth of assets tied in "debt instruments classified as receivables." On page 245, we further learn that most of this is old hat, and the only fast-growing portion is an 18.7 billion yuan chunk helpfully titled as "Others."

A footnote adds that the category primarily consists of "unconsolidated structured entities managed by the group." Give up? Then you miss the big reveal that occurs 34 pages later:

The unconsolidated structured entities managed by the Group consist primarily of collective investment vehicles (“WMP Vehicles”) formed to issue and distribute wealth management products (“WMPs”), which are not subject to any guarantee by the Group of the principal invested or interest to be paid.

That's broadly how Chinese lenders disclose their cryptic linkages with shadow banks. The names keep changing, from "investment management products under trust scheme"  and "investment management products managed by securities companies" to "trust beneficiary rights" and "wealth management products."
The latter have swelled to the equivalent of 35 percent of GDP, and account for 3 trillion yuan of interbank holdings. The common thread to these products is that they're all exposed to corporate credit and designed to get around lenders' minimum capital requirements and maximum loan-to-deposit norms , with scant loss provisioning in case things go wrong.

There's plenty that could. The reported nonperforming loan ratio of 1.75 percent is a joke. CLSA says bad loans have already snowballed to 15 to 19 percent of the loan book; Autonomous Research partner Charlene Chu estimates the figure will reach 22 percent by the end of this year. A 20 percent loss on a $500 billion portfolio of loans masquerading as receivables would wipe out 58 percent of annual profit of the 15 banks under our scanner.

At the Comex silver depositories Friday final figures were: Registered 30.12 Moz, Eligible 123.52 Moz, Total 153.64 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Not the usual suspects today. Today, it’s those unloved, unlovable FX money changers. They’ve decided to clean up their act. No honest they have. They’ve said so, cross their heart and hope to die. Out is lying, starting false rumours, disclosing client orders, using back channels to rig markets near sensitive market times. In the new code of conduct, based loosely on the Prayer of St Francis, Luther’s Theses, and the Ten Commandments, Goldman’s “God’s work,” is to undergo  a reformation. Unlike all three, there’s no enforcement mechanism in the code, called hell and purgatory in the originals, and called fines and jail in the modern era.
So it’s all going to be a nicer, kinder, happier, FX bear pit in which to lose money now! I can’t wait! But how will they cope without months of ethics training? How will they deal with all that guilt, when they slip up? They’re only human, after all, deep down under that heartless rapacious, avaricious, larcenous, money-grubbing,  persona.

Don't lie, don't cheat, don't start rumors, says new FX code

Thu May 26, 2016 11:34am EDT
The first global code of conduct for currency trading has banned dealers from lying and starting false rumors as part of new guidelines aimed at rebuilding trust in a foreign exchange market plagued by scandals and accusations of manipulation.
The document, released on Thursday after evolving from a handful of regional codes used previously, focuses largely on the detail of how banks deal with clients' orders and what market participants can and cannot say to one another.
On those issues alone, it includes dozens of individual directives organized under 11 broader "principles" as well as an extended annex of specific examples of appropriate and inappropriate formulas for discussing market moves.
"The foreign exchange industry has suffered from a lack of trust," Reserve Bank of Australia Assistant Governor Guy Debelle, who chaired the panel of 21 central banks working on the document since last July, told reporters on a conference call. "The market needs to rebuild that trust."
The code is part of the industry's response to charges of market manipulation and misuse of confidential customer order informationhttp://images.intellitxt.com/ast/adTypes/icon1.png which saw seven of the world's top banks fined around $10 billion at the end of a huge global inquiry last year.
The second phase of the code will be completed in 12 months, Debelle said, and will cover further aspects of execution, trading and platforms, prime brokerage and governance, as well as risk management and compliance.
Thursday's FX guidelines, however, raised questions about enforcement and how the code will be policed.
"The code is not regulation. We are establishing principles," Debelle said in a question-and-answer session. "I think as adherence mechanisms are developed over the next year or so, we'll provide greater guidance."
The issue of high-speedhttp://images.intellitxt.com/ast/adTypes/icon1.png electronic trading, which has changed the face of the industry in the past decade, also is left for later.
Sharing of confidential client order information via FX traders' electronic chat rooms with names such as "The Cartel" and "The Bandits' Club", particularly around the benchmark currency rates known as the 4 o'clock London fix, was central to the scandal.
But traders said the resulting fear of talking freely about the market has increased the risk of trading and discouraged some of the speculation which made the market able to swallow large orders easily without volatile moves in prices.
The code specifies, for example, that information contained in banks' research can only be shared after it is published, and client order information can only be shared "sensitively" and if there is a "valid reason" for doing so.
Perhaps the most nebulous area of communication surrounds "market color", which traders have said in the past led to banks and clients revealing details of particular orders which were moving currencies at a given time.
According to the FX Code, the seeking and sharing of market color is appropriate as long as it is "properly aggregated or anonymized and restricted to seeking information on market liquidity and sharing market views and opinions without disclosing specific trading positions or intention to trade."

Brexit The Animated Movie.

Brexit Quote of the week.

Let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, tell any lie, to assure the survival and the success of the EUSSR.

Dodgy Dave Cameron, with apologies to J. F. Kennedy.

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?

Gibraltar's landmark wave power station opens for business

Chris Wood May 26, 2016
Gizmag was in Gibraltar today at the ribbon cutting event for Eco Wave Power's (EWP) innovative wave energy station, installed on the ammunition jetty in the tiny-yet-iconic British territory. The event itself was brief, but its significance could be huge, marking a big moment for both Gibraltar, and a company with promising green energy tech, and big plans.

We've been following the Israel-based company's progress for years. First tested back in 2012, in a tank at Ukraine's Institute for Hydromechanics in Kiev, the solution captures energy by harnessing the rise and fall of the waves. The motion is converted into fluid pressure, which then spins a generator to produce electricity.

It's been a long road since then, with the team ticking off numerous tests – including stress testing storm trials in the Black Sea, and the creation of a demo station in Jaffa Port, Israel – to evaluate and improve the technology. Today marks a major achievement for the company, inaugurating a landmark power station, installed on Gibraltar's World War II ammunition jetty. The system is Europe's first grid-connected wave energy plant.
To get to the jetty, we took a short drive down the east coast of the territory, before walking down a dimly-lit, lengthy passage that took us underneath the iconic, limestone mass of the Rock of Gibraltar. Stepping out into the golden sunshine some five minutes later, the first thing that struck us about the buoy system is that it fitted in surprisingly well with its picturesque surroundings.
That could well be one of the biggest advantages of EWP's solution here – the visual impact of the station is low, thanks in part to its use of the historic jetty, and the buoys themselves aren't unattractive. If future sites are similarly well placed, then protests from locals about the buoys "ruining the view" – a routine complaint about off shore wind farms – should be minimal.
The ribbon cutting event itself was brief, with Gibraltar's Prime Minister Fabian Picardo saying a few words about the significance of the occasion, before hitting the button that sent the buoys crashing down into the calm waters below.
Despite the slow bobbing motion of the floats during today's demo, EWP claims that the station efficiently gathers energy year round, from tranquil waters to less beach-friendly weather. It's only in the stormiest conditions that the system has to cease operations, being lifted back up from the waves to avoid damage.
Stepping back into the darkness of the tunnel, we took a look at the rest of the equipment that completes the green energy set up. Inside a shipping container to the side of the tunnel are the guts and brains of the station. A mass of hydraulic accumulators, pipes and generators – the entire system is controlled via a touch-screen interface.
According to EWP's on-site engineers, the station is designed to be largely automated, running with as little input as possible. Full manual control is available however, with the interface allowing engineers to complete required actions, such as raising the buoys out of the water. If you're not a big fan of touch controls, then you'll be happy to learn that there's also a big, reassuringly bright red "emergency stop" button on the opposite side of the enclosure.
Placing all equipment but the buoys themselves out and away from the water makes maintenance a breeze, and minimizes the chance of polluting the surrounding water should the equipment break down. For the buoys themselves, the company has employed anti-corrosion measures it claims will protect the metal for some 30 years before an overhaul is needed.
The power station is currently capable of producing 100 KW, but the team plans to increase the amount of energy being generated, up to a 5 MW target by 2020. At that point, the station will be producing an impressive 15 percent of the territory's energy needs.

The monthly Coppock Indicators finished April

DJIA: 17773.64-19 Down. NASDAQ:  4775.36 +11 Down. SP500: 2065.30 -21 Down.