Friday, 6 May 2016

Dysfunctional Money.

Baltic Dry Index. 642 -10       Brent Crude 44.57

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

Brexit odds checker.

Brexit Quote of the Day.
Dodgy Dave Cameron: I would not want to put him in charge of snake control in Ireland.

With apologies to Eugene McCarthy.

The main economic news later today, is the latest employment numbers from America, where although they are about as reliable as China’s scripted figures, they give us a rosy picture of where the US authorities believe the economy is headed. Whilst mainstream media will report them as fact, realists will quickly deconstruct fact from fiction. The weekend’s coverage will be interesting.
In the meantime, we content ourselves today with the news out of an increasingly dysfunctional Asia. There the Great Nixonian Error of fiat money, communist money, has gone out of control in spades. Stay long fully paid up physical gold and silver. With no appetite anywhere on the planet to reform the Great Nixonian Error of fiat money, we are doomed to ride an increasingly unfit for purpose monetary system, to its final collapse and destruction. My guess is that it happens within the next five years. A decade at most. Global demographics are not on our side. China’s great malinvestment bubble is in the process of bursting. Japan’s economic insanity is already failing. The EUSSR is already dying. Italy’s plan for a 5 billion euro bad bank to prop up 350 billion bad debt problem has already failed. (Could it do otherwise?) The Great Nixonian Error can already see the end of the road.
The whole history of civilization is strewn with creeds and institutions which were invaluable at first, and deadly afterwards.

Walter Bagehot.

Asian stocks head toward ninth straight week of losses

Published: May 5, 2016 11:28 p.m. ET
Shares in Asia edged lower on Friday, amid caution before a key U.S. jobs report and shaky oil prices.

Japan’s Nikkei Stock Average NIK, -0.68%   fell 0.9% after it reopened from a three-day public holiday. Australia’s S&P/ASX 200 XJO, -0.11%   was down 0.6% and Korea’s Kospi was closed in observance of a holiday.

In China, the Shanghai Composite Index SHCOMP, -1.85%   slipped 0.1%, while Hong Kong’s Hang Seng Index HSI, -1.30%   lost 1%.

Trading was largely muted as investors waited for U.S. jobs data due late Friday in Asia. The report offers a glimpse of the health of the U.S. economy and is a key factor in swaying expectations for future interest-rate increases by the Federal Reserve. Economists estimate roughly 205,000 jobs were added in April.

Stocks in Asia look set to end in the red this week. That would mark the ninth straight week of losses for the MSCI AC Asia Pacific Index, a broad gauge for the region. The slide comes after a multiweek rally earlier in the year that, at different times, had pushed Australia and Hong Kong close to breaking even for 2016.

In Japan, stocks pulled back on weakness in mining, banking and insurance shares. The losses came even after the Japanese yen weakened from an 18-month high against the U.S. dollar. A weaker local currency benefits exporters, as they can sell their goods at more competitive prices overseas.

China's Great Commodity Bubble Loses Air Before It Can Burst

May 5, 2016 — 3:22 AM BST Updated on May 5, 2016 — 9:44 AM BST
The fever that’s gripped Chinese commodity markets is easing.

Speculators who traded 1.7 trillion yuan ($261 billion) futures in a single day last month have retreated as fast as they advanced. Trading volumes across the nation’s three biggest exchanges are more than half of what they were at their peak on April 22 and back to levels similar to a year ago, according to data compiled by Bloomberg. The amount of money changing hands on a daily basis has shrunk to $114 billion.
The slowdown marks a return toward normality after a frenzy that drew comparisons with the credit-driven stock market rally last year that preceded a $5 trillion rout. Investor appetite has waned after the exchanges raised transaction fees and margins amid orders from regulators to limit speculation.
“It’s pretty crazy to see such a quick move in trading volumes, compared with historical levels,” Zhang Yu, an analyst with Yongan Futures Co., said by phone from Hangzhou in Zhejiang Province. “Some investors are exiting after the exchanges’ measures.”
About 34 million contracts of everything from eggs to steel changed hands on the Dalian Commodity Exchange, Zhengzhou Commodity Exchange and Shanghai Futures Exchange on Wednesday, down from a peak of 80.6 million contracts seven sessions earlier. About 33 million contracts were traded at the end of April a year before. Chinese exchanges include both sides of a transaction in market data.
Some commodities have seen reduced turnover and short-term trading, showing that monitoring and regulatory moves to cool the market have worked and prevented risks, an official at the Dalian Commodity Exchange said, asking not to be identified because of internal policy.
China’s investors have honed in on raw materials amid signs of a pickup in demand after policy makers talked up growth, added stimulus and the property market rebounded. Government reforms aimed at shutting industrial overcapacity also bolstered concern that supplies of raw materials such as coking coal were falling short, according to Fu Peng, a portfolio manager at Lianzhan Global Macro Fund Management Co.

“With more speculators being let in on this secret, more money poured in the game,” Fu said. “Prices went higher and higher with explosive growth in trading volumes.”

Prices of some of the commodities soared as investors piled in since the beginning of March. Steel reinforcement bar in Shanghai jumped 38 percent through April 21, when it peaked at the highest level since September 2014 amid the heaviest trading ever, rising 20 percent in four days. Hard coking coal futures rose the most on record on April 25 to the highest in 22 months while cotton had it’s biggest single-day advance in five years.

While prices have come off their peaks amid the slowdown in trading, they haven’t collapsed. Steel futures have slid 15 percent since April 21 but are are still almost 20 percent higher compared with the beginning of March at 2,331 yuan a metric ton on Thursday. Coking coal is up 18 percent.

China Seen Churning Out Most Steel Ever After Price Surge: Chart

May 6, 2016 — 3:11 AM BST
China, maker of half the world’s steel, probably boosted production to a record in April as mills fired up furnaces and domestic prices surged to 19-month highs, according to Sanford C. Bernstein & Co. Average daily output may have eclipsed the previous high of about 2.31 million metric tons in June 2014, said Paul Gait, a senior analyst in London. Producers ramped up supply as demand rebounded and prices jumped as much as 69 percent from their November low, generating the best margins since 2009.

Digging for growth in China? Not quite yet, say excavator makers

Thu May 5, 2016 7:49pm EDT
The makers of China's excavators and bulldozers should be rejoicing: after two years of consecutive monthly declines, overall sales were up in the first three months of the year, while property sales and construction activity revived.

Not so, say dealers, consultants to the industry and construction equipment manufacturers themselves: a stronger start to 2016 is less the start of a tepid recovery than a temporary blip. It is only masking continued pain for a sector that flourished during the construction frenzy that propelled China past the global financial crisis.

New emissions rules drove sales, but factories that once churned out excavators and loaders are still working only at a fraction of capacity - as little as 20 to 25 percent, they said.

Choking off new sales, machines bought at the peak are still barely used, while fleets of equipment seized from bankrupt contractors are clogging the second-hand market.

Rosier economic indicators earlier this year - including a pickup in construction - prompted more than a few economists to revise higher their predictions for China's 2016 growth. April data, though, is less robust, raising concerns that any resurgence may be fizzling out.

A Reuters reporter's visit to dealerships on Beijing's outskirts found a half-empty dealer compound and deserted forecourts, where new excavators and forklift trucks still in their packaging were lined up alongside battered used models. There was no sign of buyers.

Speaking at a dealership in Beijing's northeastern suburbs that sells Guangxi LiuGong Machinery Co's equipment, manager Dang Yongli said that at the peak, he could barely keep up with demand for new machines.

"Many customers just couldn't wait. They would go to LiuGong directly, and line up outside the workshop," he said. Now, two out of every three machines he sells are used.

The slack in the system means even the world's largest heavy equipment maker, Caterpillar Inc, cautiously optimistic and more positive than some, urged caution last month.

Back outside Beijing, Han, a salesman for domestic brand Lonking Holdings said January to April saw growth in large part because of new emissions rules that had customers pulling forward purchases to get cheaper deals. He said the demand won't hold.

"We've been losing money, and we still are," shrugged Han, who would only give his surname
one of the main problems - dampening government efforts to revive growth - is overcapacity.

Chinese and foreign companies, caught out on the way up after 2008, poured money into factories and output. When the slowdown hit, many were suddenly producing so much they were forced to seek export markets instead of selling in China. In 2015, according to Off-Highway Research, a consultancy which analyses international construction equipment markets, output touched its lowest level since 2003.

"The impact of government investment seems to be not as strong as previously, which could be because there are too many machines out there already," said Liu Chunyu, vice president of the domestic sales division of Shantui Construction Machinery, China's biggest bulldozer maker.

"We know the breakneck growth we saw back in 2010 will never come back again."

Japan's Komatsu said last week that Chinese government efforts were failing to revive sluggish demand, forecasting a sharp drop in full-year growth for the group as a whole. Chinese demand alone could fall by as much as 25 percent, it said.

China says South China Sea criticism will rebound like a coiled spring

Fri May 6, 2016 1:35am EDT
International criticism of China over the disputed South China Sea will rebound like a coiled spring, a senior diplomat said on Friday, accusing the Philippines of ignoring treaties dating back to 1898 as it pushes its maritime claims.

China claims almost all of the energy-rich waters of the South China Sea, through which more than $5 trillion of maritime trade passes each year. The Philippines, Brunei, Vietnam, Malaysia and Taiwan have overlapping claims.

China's increasingly assertive moves in the waters, including building artificial islands and airports, have rattled nerves around the world, with the Group of Seven (G7) advanced economies warning last month they opposed provocation there.

G7 leaders meet for a summit in Japan later this month.

Ouyang Yujing, Director-General of Chinese Foreign Ministry's Department of Boundary and Ocean Affairs, said he had noticed recent criticism of China coming from outside the region.

"Of course we're willing to take on board constructive comments and criticism by the relevant countries," Ouyang told a news briefing.

"But if they are aimed at putting pressure on China or blackening its name, then you can view it like a spring, which has an applied force and a counterforce. The more the pressure, the greater the reaction," he said.

China has been stepping up its rhetoric ahead of a ruling expected in a few weeks by the Permanent Court of Arbitration in The Hague on a case the Philippines has brought against China's claims in the South China Sea.
U.S. officials have expressed concern the ruling could prompt China to declare an air defense identification zone, as it did over the East China Sea in 2013. China has neither confirmed nor denied it could do that.

The ruling is widely expected to favor the Philippines and risks significantly raising regional tensions because China rejects the court's authority to hear the case, even though it is a signatory of the U.N. Convention on the Law of the Sea under which it is being heard

Ouyang said China had studied the Philippines' case and decided that it was ultimately about sovereignty and maritime delineation, and China was within its rights not to participate.

Three previous international treaties - in 1898, 1900 and 1930 - have already fixed the Philippines' boundaries, Ouyang said. According to those treaties, features such as the Spratlys and Scarborough Shoal are clearly Chinese, he said.

“But it [the boom] could not last forever even if inflation and credit expansion were to go on endlessly. It would then encounter the barriers which prevent the boundless expansion of circulation credit. It would lead to the crack-up boom and the breakdown of the whole monetary system.”

Ludwig von Mises.
At the Comex silver depositories Thursday final figures were: Registered 29.18 Moz, Eligible 123.39 Moz, Total 152.57 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, commodities. Citi’s bullish, Goldie isn’t. “Echoing the positive outlook was industry veteran Tom Albanese, chief executive officer of mine owner Vedanta Ltd. and a former head of Rio Tinto Group, who said last week that recovering Chinese demand means the worst is over.” Is the worst over? Is Chinese demand recovering? Time will tell. But I suspect not.

On Bull-Market Brink, Citi Sees Commodity Gains as Goldman Jeers

Commodity bulls, it might finally be time to exhale.
There’s a growing chorus of voices and a surge of investor money signaling the worst of the commodity slump is over. Leading the pack is Citigroup Inc., the bank that was ahead of the game back in 2012 when analysts declared the end of the super cycle of rising demand and prices. Now, the bank expects a weaker dollar and China’s stabilizing economy mean most markets have reached their bottoms.
Raw materials are on the brink of a bull market, after five straight years of price declines fueled by slowing Chinese demand and global surpluses for most metals, grains and energy products. Not everyone expects the dark clouds to lift. Goldman Sachs Group Inc. sees no “sustainable shift in fundamentals” and says higher U.S. interest rates will keep the outlook bearish. But hedge funds remain optimistic. Their combined bets on a rally are the highest since 2014.
“It is more likely than not that we’ve seen a bottom in the commodity market as a whole,” said Fiona Boal, director of commodity research at Fulcrum Asset Management in London, which oversees about $4 billion. “And maybe more importantly, we’ve seen the start of some of the big supply responses that were needed following periods of low prices,” which is forcing cuts at mines, farms and oil fields, she said.
The Bloomberg Commodity Index, a measure of returns for 22 items, has risen as much as 17 percent from a record closing low on Jan. 20. A gain of 20 percent would meet the common definition of a bull market. Soybeans, gold, silver, crude oil and coffee have crossed that threshold in recent months. The index surged 8.5 percent in April, the biggest monthly advance since 2010.
Investors have poured $18.3 billion into global exchange-traded funds backed by raw materials this year, data compiled by Bloomberg show. Assets invested in commodity hedge funds, ETFs and passive indexes have reached $315 billion, the highest since May 2015, Citigroup said in an April report.
The end of the rout would be welcome news to producers including Exxon Mobil Corp., Freeport-McMoRan Inc. and Glencore Plc. As supply cuts start to take hold, the global gluts that plagued commodities from crude oil to zinc are starting to subside. Markets may rebalance by the end of the year, BP Plc Chief Executive Officer Bob Dudley said last week. Echoing the positive outlook was industry veteran Tom Albanese, chief executive officer of mine owner Vedanta Ltd. and a former head of Rio Tinto Group, who said last week that recovering Chinese demand means the worst is over.

Brexit Quote of the week.

Dodgy Dave Cameron: leader of the nattering nabobs of Brexit negativism.

With apologies to Spiro Agnew

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?

New Record Set for World's Cheapest Solar, Now Undercutting Coal

May 3, 2016 — 5:20 PM BST
Solar power set another record-low price as renewable energy developers working in the United Arab Emirates shrugged off financial turmoil in the industry to promise projects costs that undercut even coal-fired generators.
Developers bid as little as 2.99 cents a kilowatt-hour to develop 800 megawatts of solar-power projects for the Dubai Electricity & Water Authority, the utility for the Persian Gulf emirate, announced on Sunday. That’s 15 percent lower than the previous record set in Mexico last month, according to Bloomberg New Energy Finance.
The lowest priced solar power has plunged almost 50 percent in the past year. Saudi Arabia’s Acwa Power International set a record in January 2015 by offering to build a portion of the same Dubai solar park for power priced at 5.85 cents per kilowatt-hour. Records were subsequently set in Peru and Mexico before Dubai reclaimed its mantel as purveyor of the world’s cheapest solar power.

“This bid tells us that some bidders are willing to risk a lot for the prestige of being the cheapest solar developer,” said Jenny Chase, head of solar analysis at BNEF. “Nobody knows how it’s meant to work.”

Plunging costs along with the bankruptcy for the biggest developer, SunEdison Inc., has spurred questions about whether the cheapest projects will ever be profitable. The collapse of the world’s largest renewable energy company made some banks wary of financing projects. The winners of recent auctions in Mexico, Peru and Chile were diversified power companies like Enel SpA, which perhaps prioritized market share over profit maximization.

Dubai’s utility didn’t identify the developers behind the record-low bid it received. MEED reported that it’s a group including Masdar Abu Dhabi Future Energy Co., Spain’s Fotowatio Renewable Ventures BV and Saudi Arabia’s Abdul Latif Jameel. Among those companies, only Masdar could be reached for comment, and it didn’t confirm that it was the low bidder.

“A consortium led by Masdar, Abu Dhabi’s renewable energy company, was one of a number of bidders to have submitted a proposal for the third phase of the Mohammed bin Rashid Al Maktoum Solar Park,” a spokesperson for the consortium said in an e-mailed statement. “This is an active bid, with the technical and commercial proposals being evaluated by Dubai Electricity and Water Authority.”
The shift to tenders from feed-in tariffs for clean energy globally has helped governments rein in support for renewables while prodding companies to deliver lower costs. That’s shifted pressure away from government budgets and toward developers, which must strike a balance between a winning new contracts and maintaining profits.
Enel Green Power’s Chief Executive Officer Francesco Venturini, whose company bid 3.5 cents a kilowatt hour in Mexico last month, said in an interview that his projects will still make decent money even with record-low prices for electricity.

Another weekend, and spring is finally here. On Sunday the temperature is forecast to reach 75-77 degrees Fahrenheit. Another final chance to see our bluebell covered woods before the bluebells turn to seed. Have a great weekend everyone.

All the best stories in the world are but one story in reality - the story of escape. It is the only thing which interests us all and at all times, how to escape.

Walter Bagehot.

The monthly Coppock Indicators finished April

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

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