Baltic Dry Index. 652
-30 Brent Crude 45.33
Brexit odds checker.
http://www.oddschecker.com/politics/british-politics/eu-referendum/referendum-on-eu-membership-result
Brexit Quote of the Day.
Cameron,
suppose you were an idiot; and suppose you were a member of the Commons; but I
repeat myself.
With
apologies to Mark Twain.
Up
first, what would President Trump bring? Debt, and a lot of it, says the Chief
Investment Officer of DoubleLine Capital. Yet another reason to stay long fully
paid up, physical gold and silver.
"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."
William F. Rickenbacker
Jeff Gundlach Says Prepare for Debt-Fueled Trump Presidency
May 4, 2016 — 9:08 PM BST
Jeffrey Gundlach, chief investment officer of DoubleLine Capital, told
attendees at the Sohn Investment Conference to prepare for a Donald Trump
presidency.
“What’s going to happen is you’re going to get a Reagan response with
Donald Trump," Gundlach told the New York crowd. “He promises a wall, he
promises to bring jobs back, and he promises a lot of infrastructure spending.
Let’s face it: Trump is extremely comfortable with debt."
Trump became the presumptive Republican nominee on Tuesday when Senator Ted Cruz dropped out of the race. The money manager predicted that if Trump wins the White House, the ratio of public debt to gross domestic product will rise.
Gundlach’s $59 billion DoubleLine Total Return Bond Fund has returned about 2 percent in 2016, compared with a 3.5 percent gain by the Barclays U.S. Aggregate Bond Index, the main benchmark for the broader bond market. The fund beat 98 percent of peers over the past five years, according to data compiled by Bloomberg.
Gundlach also recommended shorting utilities stocks and buying mortgage real-estate investment trusts, both through exchange-traded funds. With one turn of leverage, the trade should rise by 35 percent, he said.
Last month Gundlach told investors that it would be a good time to buy mortgage-backed securities and sell corporate bonds because the latter could be affected by elevated risk of defaults in high-yield debt. Junk has rallied with Treasury bonds because Federal Reserve Chair Janet Yellen seems to have scaled back expectations for multiple interest rate hikes this year.
Trumped! Why It Happened And What Comes Next, Part 1
by David Stockman •
First there were seventeen. At length, there was one.
Donald Trump’s wildly improbable capture of the GOP nomination,
therefore, is the most significant upheaval in American politics
since Ronald Reagan. And the proximate cause is essentially the same. Like back
then, an era of drastic bipartisan mis-governance
has finally generated an electoral impulse to sweep out the stables.
Accordingly, the Donald’s patented phrase that “we aren’t winning
anymore” is striking a deep nerve on main street. But that is not
on account of giant trade deficits or a faltering foreign
policy and failed military adventures per se.
Indeed, it has very little to do with any patriotic impulse with
respect to America’s collective polity, and everything to do with voter
perceptions that they personally are not winning economically anymore,
either.
What is winning is Washington, Wall Street and the bicoastal elites. The
latter prosper off finance, the LA branch of entertainment (movies and TV), the
SF/technology branch of entertainment (social media) and the great
rackets of the Imperial City—including the
military/industrial/surveillance complex, the health and education
cartels, the plaintiffs bar, the tax loophole farmers and the endless lesser
K-Street racketeers.
Consequently, most of America’s vast flyover zone has been
left behind. Thus, the bottom 90% of families have no more real net
worth than they had 30 years ago. By contrast, the real net worth of
the top 9% stands at 150% its 1985 level, and the
very top 1% is at 300% of its level three decades ago.
Moreover, the wealth round trip of the bottom
90% depicted in the chart below was hardly real in the first place.
Main Street net worth temporarily soared owing to Greenspan’s 15-year
housing bubble which culminated in the great financial crisis. What is
left is mainly the mortgage debt.
More
In Asian news, more sign of a growing slowdown. Q1 16 might have been 2016’s high spot.
Hong Kong PMI hits 8-month low
Published: May 4, 2016 10:55 p.m. ET
HONG KONG--The Nikkei Hong Kong Purchasing Managers Index fell to an
eight-month low of 45.3 in April from 45.5 in March, suggesting a further
deterioration in Hong Kong's private sector amid China's economic slowdown,
Markit Group Ltd. said Thursday.
The April PMI was dragged down partly by fewer new orders and new
business from China, Markit said. A PMI reading above 50 indicates an expansion
in manufacturing activity, while a reading below that points to a contraction.
The Hong Kong PMI has been in contraction for 14 months, while the
latest rate of deterioration marked the fastest since August 2015, Markit
added.
Markit economist Annabel Fiddes said the latest Hong Kong PMI was partly
driven by a faster decline in total new business. "As a result, companies
made further cuts to production schedules and employment, and companies lowered
their charges at a marked pace in order to attract new business," she
said.
"The weak start to the second quarter indicates that the sector
continues to struggle in the face of poor economic conditions and reduced
client demand, particularly across mainland China," she added.
More
China services index reflects slowing growth
Published: May 4, 2016 10:44 p.m. ET
BEIJING--China's service activity grew at a slower pace in April, a
private gauge showed Thursday, adding to the uncertainty over the direction of
the world's second-largest economy.
The Caixin China services purchasing managers' index dropped to 51.8 in
April from 52.2 in March, Caixin Media Co. and research firm Markit said,
indicating a slowdown in the nation's service sector.
A reading above 50 indicates a month-to-month expansion while a result
below that points to a contraction.
"Expansion in the services sector helped offset some of the impact
caused by flagging manufacturing. Overall, however, the economy still faces
relatively strong downward pressure. The government needs to keep implementing
moderate stimulus to prevent a hard landing of the economy," said He Fan,
chief economist at Caixin Insight Group.
Though the service PMI was lower than a month earlier, the employment
and new order subindexes picked up in April.
China's service sector has been one of the few bright spots in the
economy, helping to offset a sharp slowdown in traditional industries battling
idle capacity and weakening demand. In 2015, services accounted for 50.4% of
China's gross domestic economy, up from 48.1% in 2014.
China's official nonmanufacturing PMI, a competing gauge, fell to 53.5
in April from 53.8 in March, according to data released on Sunday.
More
In energy news, low prices have a silver lining for some, but not all.
The Unloved Business That's Saved Big Oil From Low Energy Prices
May 5, 2016 — 12:01 AM BST
Big Oil is suddenly Big Chemical.
For years, the business of turning gas and oil into the chemicals used
to make everything from plastic bags to paint has been a mostly unloved corner
of the world’s largest oil companies. Now, it’s shining, cushioning companies
from Exxon Mobil Corp. to Royal Dutch Shell Plc from the worst energy price
slump in a decade.
“Chemicals are coming back onto the radar screen,” Simon Henry, chief
financial officer at Shell, Europe’s largest oil company, said on Wednesday.
In good times, when high oil and gas prices deliver billions of dollars
in profits, the chemical business is largely a footnote in the profit and loss
account. Today, with most major oil companies losing money in their production
and exploration units, petrochemicals have become one of the biggest -- if not
the biggest -- sources of income.
The petrochemical business is getting a lift from the very same factor
weighing down the production and exploration units: low oil and gas prices.
Effectively, cheap energy translates into cheap raw materials and higher
margins.
“Petrochemical has been doing very well, actually,” Total SA CFO Patrick
de la Chevardiere said last week.
Take
Exxon Mobil. In the first quarter, the chemicals business accounted for nearly
75 percent of the $1.8 billion the company reported in profit. Between January
and March, it made $1.36 billion producing chemicals such as ethylene and
propylene. During the same period, it lost $76 million pumping oil and gas.
More
Oil Price Risks Force Maersk to Plan Deeper Cost Cuts, CEO Says
May 4, 2016
— 12:15 PM BST
A.P. Moeller-Maersk A/S is adapting its cost base to prepare for the
risk of lower crude prices as the world keeps producing more petroleum than it
can consume, according to the chief executive officer of the Danish
shipping and oil conglomerate.
Oil has risen about 60 percent from a 2016 low. But the risk that prices
will again fall is forcing Maersk’s oil unit to explore bigger cost cuts than
previously planned, said group CEO Nils Smedegaard Andersen.
“The price will obviously be driven by the balance between supply and
demand and there will be oversupply for many months still,” he said by phone
from Copenhagen. “It definitely can’t be ruled out that the oil price will fall
again.”
Brent crude has rebounded as lower U.S. output removes some excess supply
from the market. One barrel traded at about $45 on Wednesday, compared with a
low of $28 in the middle of January.“I have previously said the oil price was too low, but it’s very plausible that the balance between supply and demand will continue to be unfavorable,” Andersen said.
Maersk Oil, which has its main operations in the North Sea and Qatar, raised its full-year forecast and now sees the unit breaking even, compared with a forecast for a 2016 loss in February. The unit can now break even with oil at $40 to $45. It previously said oil needed to trade at about $45 to $55 in order to avoid a loss.
The division cut costs by 21 percent in the first quarter, a higher rate than the 20 percent it targets for end-2016 when comparing with 2014 levels. That means cuts will probably end up deeper than initially planned, the CEO said. Those measures helped Maersk deliver a bigger profit than analysts expected, driving its shares up as much as 6.7 percent on Wednesday.
“We’re happy we’ve reached the goal we set,” Andersen said. “We will definitely work on cutting costs even further.”
Maersk Oil reported a net operating loss after tax of $29 million in the first quarter, compared with a profit by the same measure of $208 million a year earlier. The loss was smaller than the $58 million predicted in a survey by Ritzau.
“We don’t outright expect that the oil price will fall, but we want to make sure we have a solid oil business even at an oil price in the $40 to $50 range,” Andersen said.
More
We close for the day with an update on the wild fire in Alberta’s tar sands. Oil production is now starting to be affected, although that is of little consequence to the unfolding personal drama affecting almost 90,000 people fleeing the fire. In a way, a 21st century version of the 1906 San Francisco great fire, though hopefully with much less destruction.
Raging Canadian wildfire disrupts oil-sands operations
Published: May 4, 2016 4:48 p.m. ET
Blaze shuts one mining operation as other camps take in evacuees
CALGARY, Alberta — Raging forest fires in Canada’s oil-rich province of Alberta forced the evacuation of nearly 90,000 people, devastating the remote town at the hub of the country’s oil-sands industry and threatening to further burden a sector already plagued by low energy prices.Some 88,000 people evacuated from Fort McMurray, 270 miles north of Alberta’s capital Edmonton, to shelters hundreds of miles north and south of the town, said Darby Allen, the town’s regional fire chief, at a news briefing Wednesday.
“We had a devastating day yesterday and we’re preparing for a bad day
today,’ he said, choking back tears. He said there were no known casualties or
injuries.
The uncontrolled blaze shut down one major oil-sands mining operation on
Wednesday and forced another to curtail production. Other operators have
evacuated nonessential personnel to make room for thousands of evacuees who
fled the disaster and sought refuge in camps designed to house temporary
workers.
The oil-sands facilities aren’t directly threatened by the uncontrolled
forest fires, but mandatory evacuations of workers have brought some operations
to a halt.
Royal
Dutch Shell PLC’s RDS.A, -2.47%
Canadian unit halted its oil-sands mining operations, which produce
about 250,000 barrels a day, to speed evacuations of people who fled to the
site, which is about 60 miles north of the fires. A spokesman didn’t provide an
estimate for how long the shutdown is expected to last.
Canada’s
total oil sands production is around 2 million barrels a day, much of which is
exported to the U.S.
At the
Comex silver depositories Wednesday final figures were: Registered 28.58 Moz, Eligible 123.47 Moz, Total 152.05 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
No
crooks today. Today, Asia’s developing rice problem.
As Asia's rice crop shrivels, food security fears resurface
Nearly a decade after a spike in global food prices sent shockwaves
around the world, Asia's top rice producers are suffering from a blistering
drought that threatens to cut output and boost prices of a staple for half the
world's population.World rice production is expected to decline for the first
time this year since 2010, as failing rains linked to an El Nino weather
pattern cut crop yields in Asia's rice bowl.
A heat wave is sweeping top rice exporter India, while the No.2 supplier
Thailand is facing a second year of drought. Swathes of farmland in Vietnam,
the third-biggest supplier, are also parched as irrigation fed by the Mekong
river runs dry.
The three account for more than 60 percent of the global rice trade of
about 43 million tonnes.
"As of now we haven't seen a large price reaction to hot and dry
weather because we have had such significant surplus stocks in India and
Thailand. But that can't last forever," said James Fell, an economist at
the International Grains Council (IGC).
Rice inventories in the three top exporters are set to fall by about a
third at the end of 2016 to 19 million tonnes, the biggest year-on-year drop
since 2003, according to Reuters calculations based on U.S. Department of
Agriculture data.
Any big supply disruption can be extremely sensitive. In 2008, lower
Asian rice output due to an El Nino prompted India to ban exports, sending
global prices sky-rocketing and causing food riots in Haiti and panic measures
in big importers such as the Philippines.
Manila at the time scrambled to crack down on hoarding, ordered troops
to supervise subsidized rice sales and asked fast food chains to serve
half-portions, as well as urging Vietnam and others to sell the country more
rice.
The world has suffered a series of food crises over the past decade
involving a range of grains due to adverse weather.
In the case of rice, benchmark Thai prices hit a record around $1,000 a
tonne in 2008. Price spikes like this typically also boost demand for other
grains such as wheat, widely used for noodles in Asia, and soybeans and corn
used for food or feed.
While currently far below 2008 highs, rice earlier this month hit
$389.50, the strongest since July and up 13 percent from an eight-year low of
$344 in September.
Bruce Tolentino of the Philippines-based International Rice Research
Institute is concerned about Asia's vulnerability.
"In general prices are still stable right now. They're inching up
though, and what will drive things over the edge will be a major calamity in
one of the major producing countries."
Although India's rice output in 2015 was largely stable, extremely hot
temperatures are threatening a second crop in eastern regions.
Traders see further price gains by June as India's next big crop is not
due until September and Thailand's main crop by year end.
The IGC sees a 2016 world harvest of 473 million tonnes, down from 479
million tonnes in 2015 and the first decline in six years.
More
Indian State Bans Daytime Cooking Amid Deadly Heatwave, Severe Drought
May 2 2016 12:00 AM EDT
The Indian state of Bihar this week took the unprecedented step of
forbidding any cooking between 9 a.m. and 6 p.m., after fires swept through
shantytowns and thatched-roof houses in villages and killed dozens.
While India remains in the midst of a heatwave that has killed more than
300 people, another 80 people have died in accidental fires made worse by the
extreme drought that is also gripping the country.
---- Much of India is reeling under a scorching heat
wave and severe drought conditions that have decimated crops, killed livestock
and left at least 330 million Indians without enough water for their daily
needs.
Rivers, lakes and dams have dried up in parts of the western states of
Maharashtra and Gujarat, and overall officials say that groundwater reservoirs
are at just 22 percent capacity.
In some areas, the situation is so bad the government has sent tankers
of water for emergency relief. Monsoon rains are still weeks away, expected to
start only in June.
At
least 300 people have died of heat-related illness this month, including 110 in
the state of Orissa, 137 in Telangana and another 45 in Andhra Pradesh where
temperatures since the start of April have been hovering around 44 degrees
Celsius (111 Fahrenheit).
That's
about 4-5 degrees Celsius (8-10 degrees Fahrenheit) hotter than normal for
April, according to state meteorological official Y.K. Reddy. He predicted the
situation would only get worse in May, traditionally the hottest month in
India.
More
Extreme Heat Sears Southeast Asia With All-Time Records; Worst Heat Wave in Thailand in 65 Years
Apr 28 2016 04:00 PM EDT
Southeast Asia has been roasting in an extended heat wave through much
of April with temperatures reaching unprecedented levels, allowing at least
three countries to set new all-time national heat records and several others to
come very close.
In Thailand, the heat wave is considered the worst since reliable
records have been kept in that country.
"As of now we can say we've broken the record for the highest
temperatures over the longest duration in 65 years — and the season isn't over
yet," Surapong Sarapa, head of the Thai Meteorological Department's
weather forecast division, told the Associated Press. Thailand began keeping national
weather records after 1950.On April 28, Mae Hong Son recorded the hottest temperature on record in Thailand topping out at 112.3 degrees Fahrenheit (44.6 degrees Celcius), according to Christopher Burt, a weather historian with wunderground.com. The previous record was held by Uttaradit which reached 112.1 degrees Fahrenheit (44.5 degrees Celcius) on April 27, 1960.
Burt added that at least 50 towns and cities in Thailand had recorded all-time record highs for their respective locations as of April 19.
---- Several countries surrounding Thailand have also dealt with the searing temperatures.
Cambodia and Laos set new all-time record highs for any day of the year
during April, Burt reported. In addition, Malaysia, Singapore, and Vietnam have
all come very close to setting new national heat records.
The new all-time record high for Cambodia was set on April 15 when the mercury
soared to 108.7 degrees Fahrenheit (42.6 degrees Celcius) in Preah Vihea,
beating the previous record set just two days early in Bantey Ampil.
More
"Gold bears the confidence of the world's millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history. There is no reason to believe it will lose the confidence of people in the future."
Oakley R. Bramble
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?
Harvard Scientist, Longtime Solar Skeptic, Now Sees the Light
May 4, 2016
— 5:01 AM BST
David Keith, a Harvard University scientist, has long doubted solar energy’s
potential to compete on cost with conventional power sources. Now he sees the
light.“I was wrong,” largely because the fundamentals of solar power have changed, Keith, a professor of applied physics and public policy, wrote in a recent essay. “One can now build systems in the world’s sunny locations and get very cheap power.”
His reversal reflects the steep declines in producing electricity from sunlight. Even without government subsidies, power from large solar farms in some regions is now significantly below $40 a megawatt-hour and is on pace to drop below $20 by 2020, Keith wrote. That would be the cheapest power on the planet.
It’s a significant shift from his earlier stance, that high costs would relegate solar power to being “green bling for the wealthy.”
Lower prices, however, don’t solve the issue that solar panels stop
generating power when the sun goes down. And the technology may not make sense
in regions like New England, northern Europe and coastal China. Yet in places
where sunshine is plentiful, solar has the potential to reshape power markets,
Keith said.
“Obviously the market was created by subsidies,” Keith said in an
interview Tuesday. “But the subsidy-created market really did drive this supply
chain innovation.”
http://www.bloomberg.com/news/articles/2016-05-04/harvard-scientist-a-former-solar-skeptic-now-sees-the-light"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
F. A. von Hayek
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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