Tuesday, 10 May 2016

The Monetary Humpty Dumpty.

Baltic Dry Index. 616 -15      Brent Crude 43.78

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

Brexit odds checker.

Brexit Quote of the Day.
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 to assure the survival and the success of the EUSSR.

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

Today, more on our increasingly unstable and dysfunctional Great Nixonian Error of fiat money, communist money. The benefits of fiat money were all front loaded and long ago dissipated by bent politicians promoting wars, bribes to voters and funders, and central banksters all too willing to run the printing presses red hot. Over 40+ years on the GNE, collectively they have driven the most massive malinvestment bubble planet earth has ever seen. Worse they have globalised it. There is not now a market driven place on the planet. All is now central banks supressing and rigging markets, and by ZIRP and NIRP, generating a massive global bubble of unrepayable debt. Our central banksters are now out of ammo, road and talent, and it only gets more dysfunctional with each of their attempts at putting Humpty Dumpty back together again.

Below, the latest developments in the cancer of fiat money.

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

“Adam Smith” aka George Goodman.

The Cold, Hard Facts Raining on China's Commodity Parade

May 9, 2016 — 9:29 AM BST Updated on May 9, 2016 — 11:58 AM BST
There’s nothing like facts to get in the way of a good yarn.

Prices of everything from steel rebar to cotton are extending losses in China as a slew of bearish data hastens the reversal of a rally last month triggered by speculation that economic stimulus and industrial reforms would drive up demand and curb supplies.

Steel futures in Shanghai fell the most since trading began in 2009 after inventories rose while iron ore in Dalian sank as much as 7.1 percent, extending its retreat from a 13-month high, after data showed Chinese port stockpiles expanded to the highest level in more than a year. Cotton on the Zhengzhou Commodity Exchange, which had surged to an 11-month high, slid 1.5 percent after China unloaded supply from its reserves. Copper lost 2.1 percent after the nation’s imports shrank from a record.

“Investors are looking at fundamentals more closely now,” Zhang Yu, a senior analyst with Yongan Futures Co., said by phone from Hangzhou. “While inventories were built up with the price surges, recent data couldn’t convince people that China’s real economy is bottoming and going to bring demand back.”

The rally last month was accompanied by a surge in trading volumes, with as much as 1.7 trillion yuan ($261 billion) in commodity futures changing hands in a single day. That drew comparisons with 2015’s credit-driven stock market rally that preceded a $5 trillion rout, and prompted exchanges to raised transaction fees and margins amid orders from regulators to limit speculation.

As the exchanges stepped in, trading volumes shrank. About 20 million contracts of everything from eggs to steel changed hands on the Dalian Commodity Exchange, Zhengzhou Commodity Exchange and Shanghai Futures Exchange on Friday, down from a peak of 80.6 million contracts on April 22.

“Bullish enthusiasm in Chinese commodities futures has been rapidly declining, especially after the exchanges pushed out massive measures to curb speculative trading,” Yu said.

Iron ore futures in Dalian sank to 388 yuan a metric ton on Monday, while rebar, used to strengthen concrete, slumped by the Shanghai Futures Exchange limit to 2,175 yuan a ton. Coking coal, used in steel making, dropped as much as 6.3 percent to 650.50 yuan a ton and copper slid to 35,840 yuan a ton.
Cotton, of which enough was traded in a single day last month to make a pair of jeans for all of humanity, lost as much as 3.9 percent to 11,865 yuan a ton.

Iron ore inventories held at ports across China increased 1.4 percent last week to the highest since March 2015, according to data from Shanghai Steelhome Information Technology Co., while rebar stockpiles rose for the first time in nine weeks. Imports of unwrought copper and products slumped to 450,000 tons last month from 570,000 tons in March, Chinese customs data showed on Sunday, as swelling stockpiles discouraged shipments.

Ore with 62 percent content delivered to Qingdao tumbled 5.7 percent to $54.99 a dry metric ton, according to Metal Bulletin Ltd.

The Red Flood Of Dumped Factory Surpluses Is Adding To Global Glut

by Wall Street Journal • 
China is doubling down on efforts to keep unprofitable factories afloat despite for years pledging to curb excess capacity, adding to a glut of basic materials flooding the global economy.

The country’s overproduction of steel, aluminum, diesel and other industrial goods has driven down prices and crippled competitors, leading to thousands of lost jobs in the U.S. and elsewhere.

China’s continuing aid for unneeded factories is triggering a sharp rise in trade disputes and protectionist sentiment, especially in the U.S., where trade has emerged as one of the pivotal issues in the U.S. presidential election.

According to a Wall Street Journal analysis of Chinese public companies, Chinese government support includes billions of dollars in cash assistance, subsidized electricity and other benefits to companies. Recipients include steelmakers, coal miners, solar-panel manufacturers, and other producers of other goods including copper and chemicals.

One beneficiary, Aluminum Corp. of China, or Chalco, said in October one of its units would shut down a roughly 500,000-ton-per-year smelter in the far-western Gansu region as it struggled to make profits. Executives prepped for thousands of layoffs.

Then Gansu officials slashed the plant’s electricity bill by 30%, employees say, and the factory was saved. Although a portion of capacity was taken offline, most is operational.

“We’re in full production now with 380,000 tons of capacity,” said Fei Zhongchang, a company sales manager. Chalco’s press office and local government officials didn’t respond to requests for further comment.

In Europe, workers have joined protests against Chinese steel imports. Australia has investigated dumping of products including solar panels and steel and India has raised import taxes on steel after a surge of cheap Chinese goods.

The U.S. launched seven new investigations into alleged dumping or government subsidies involving Chinese goods in the first three months of this year, more than the same period of any other year dating back to at least 2003, government data show.

Earlier this year, the U.S. Commerce Department slapped preliminary import duties of 266% on imported Chinese cold-rolled steel. The decision came after U.S. Steel Corp. lost $1.5 billion last year, closed its last blast furnace in the South and laid off thousands of workers, blaming China.

Goldman: The Search for Yield Is Just Getting Started

A severe case of whiplash for credit investors.

May 9, 2016 — 12:28 PM BST
"Just when I thought I was out, they pull me back in," Michael Corleone famously quipped in The Godfather: Part III.

The same might be said by credit fund managers who, having largely sat out on the recent rally in junk-rated debt, now find themselves forced to re-enter the fray after underperforming the wider market.

A new note from Goldman Sachs Group Inc. underscores the extent to which life has grown vastly more complicated for bond managers, with a staggering 90 percent of actively-managed high-yield debt funds now failing to meet or surpass their benchmarks this year.

At issue is the rapid reversal in credit markets which saw junk bonds nosedive at the tail-end of last year only to stage an almighty turnaround in March and April. High-yield debt has now posted a year-to-date return of 6.4 percent after getting off to the worst start on record through mid-February, when the asset class was down as much as 5 percent, according to Goldman's data.

"Key to the underperformance was the defensive positioning of high-yield funds heading into the year, maintaining high cash balances and low conviction as oil, recession, and redemption fears pulsated through the credit markets. However, the defensive strategy left funds underinvested when the high-yield and oil market sharply turned a corner in tandem in mid-February," Goldman's Bridget Bartlett wrote in a report titled "Search for yield just getting started."

A lack of new bond sales from riskier companies is exacerbating the difficult trading environment, making it more troublesome for bond investors to keep pace with the runaway reversal in debt markets, she added.

"As funds play catch-up to their benchmarks, bond managers are more incentivized to step down the quality spectrum to find alpha [outperformance]," Bartlett wrote. "We believe this will intensify the 'search for yield' that has already been set in motion by easy global monetary policy."

I’m with Stan Druckenmiller — gold has every reason to rise

Published: May 9, 2016 3:02 p.m. ET

Negative interest rates, the Fed’s quantitative easing and a race to devalue global currencies are bullish for gold

I've met hedge fund manager Stan Druckenmiller a couple times, the first time about 15 years ago when he spoke at a Robin Hood charity event.

He's made billions of dollars investing money for George Soros and his own clients in the hedge fund he ran for 20 years. I ran across his name over the weekend, as some of you might have, in must-read articles after his appearance at the annual Sohn Conference in New York.

Druckenmiller was wildly bullish on gold and bearish on the stock market. He also was concerned about corporate debt and the Fed's endless easy-money policies.

My own analysis and writings reflect much of what Druckenmiller is talking about with gold, stocks, the U.S. Federal Reserve, corporate debt/financial engineering. The question is one of timing, though. Many of the reasons behind his, and my, analysis have been true for the past five years. So another five years of Fed-enabled corporate debt/financial engineering games isn't out of the question, is it?

I am writing up a new report about the short- and long-term outlook for gold, which is obviously related to all of the same topics that Druckenmiller is highlighting. Long-story short: While I question the timing of a stock market crash, all signs do point toward a higher price for gold, both in the near term and my lifetime, during which I expect a five- to 10-fold increase in price. Negative interest rates, more of the Fed’s quantitative easing (QE) and a race to devalue every major currency in the world are quite bullish for gold. The timing of all those things are affecting the gold market right now.

----Gold is a different story. Whether it's Trump, Clinton or anybody else in the White House, these trillions of dollars of economic movement and debt and financial engineering from governments and corporations and wars and starvation and natural disasters and the risk of our Internet/electrical/defense networks failing and so on ... the fundamentals can't be undone now.

I'll finish by reminding you that we learned in 2008's financial crisis that paper promises from banks aren't worth the paper they're written on when the crap hits the fan. So if you're using GLD or SLV or other paper promise precious metal ETFs as a hedge against economic/financial crises, then it sort of defeats the purpose of using precious metals as a hedge against black swans or other crises.

Trump’s Right——Paying Back The National Debt With “Discounts” Is Already Official Policy

by David Stockman • 
Donald Trump says a lot of whacko things, and his recent wild pitches about defaulting on the national debt and replacing Yellen because she is not a Republican sound as if they were coming right out of his wild man wheelhouse. Certainly these statements have gotten mainstream financial journalists and editorial writers in high dudgeon.

Said the NYT editorial page about Trump’s observation that if things got bad enough he’d seek to negotiate “discounts” on Uncle Sam’s towering debt,

Such remarks by a major presidential candidate have no modern precedent. The United States government is able to borrow money at very low interest rates because Treasury securities are regarded as a safe investment, and any cracks in investor confidence have a long history of costing American taxpayers a lot of money.

Well, now. These “very low rates” could not have anything to do with the fact that the Fed has vacuumed-up $3.5 trillion of Treasury debt and its close substitute in GSE securities since September 2008. Apparently, the law of supply and demand has been suspended until further notice—-except for the fact that when Bernanke even hinted that the Fed might sell-down some of its grossly bloated balance sheet in April 2013 treasury yields erupted higher in the infamous taper tantrum.

The fact is, ultra low rates on Uncle Sam’s mountainous debt have everything to do with central bank manipulation of interest rates; and “confidence” in Washington’s fiscal rectitude is but an empty platitude.

There has been a central bank Big Fat Thumb on the scales for nearly two decades, and it now includes the $1.7 trillion of treasury debt owned by the People’s Bank of China (including its off-shore accounts), the $1.2 trillion owned by the BOJ and the nearly $7 trillion owned by central banks and their affiliates as a whole.

That’s right. The world’s central banks own more than 50% of the publicly traded US debt of $13.5 trillion, and not one single penny of it was purchased with real savings or anything which remotely resembles honest money. It was all scooped-up when central banks hit the “buy” key on their digital printing presses.

In short, the “very low yield” on US Treasury debt is the product of a giant monetary fraud, not a testament to the strength and safety of Washington’s credit. And it most certainly has nothing whatsoever to do with investor “confidence” in Washington’s integrity.

Just the opposite. The Wall Street traders are all-in on the scam. The marginal bond price is “discovered”, in fact, when fast money traders buy the stuff on 95% repo leverage while front-running the central banks.

So Donald Trump’s wild pitch in this instance can’t hold a candle to the truly scandalous arrangement under which Uncle Sam’s debt is actually priced. Even the treasury debt in commercial bank vaults is mainly there because regulatory authorities permit the fiction that it is risk free and therefore require zero capital backing.

“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 Monday final figures were: Registered 29.23 Moz, Eligible 123.23 Moz, Total 152.46 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
So you really think nuclear power or fiat money is safe. Below, what happens when mere mortals start messing around with complicated things. More importantly, just wait until the central banksters really lose control of the Great Nixonian Error of fiat money. With physical fully paid up gold and silver, getting in early beats getting in late, if they let you in at all.

Exclusive: Technicians from SWIFT left Bangladesh Bank exposed to hackers - police

Mon May 9, 2016 5:32am EDT
Bangladesh's central bank became more vulnerable to hackers when technicians from SWIFT, the global financial network, connected a new bank transaction system to SWIFT messaging three months before a $81 million cyber heist, Bangladeshi police and a bank official alleged.
The technicians introduced the vulnerabilities when they connected SWIFT to Bangladesh's first real-time gross settlement (RTGS) system, said Mohammad Shah Alam, the head of the criminal investigation department of the Bangladesh police who is leading the probe into one of the biggest cyber-heists in the world.
"We found a lot of loopholes," Alam said in an interview in Dhaka. "The changes caused much more risk for Bangladesh Bank."
He and a senior central bank official said the SWIFT employees made missteps in connecting the RTGS to the central bank's messaging platform.
The technicians did not appear to have followed their own procedures to ensure the system was secure, according to the Bangladesh Bank official, who said he was not authorized to publicly comment because of the ongoing investigation.
Because of this, SWIFT messaging at the central bank was widely accessible, including remote access with only a simple password, police said. It had no firewalls and only a rudimentary switch.
"It was the responsibility of SWIFT to check for weaknesses once they had set up the system. But it does not appear to have been done," said the bank official.
SWIFT's chief spokeswoman Natasha de Teran said she had no comment on the allegations by authorities in Bangladesh. She also declined comment on any aspect of the Bangladesh project, including whether the firm had deployed any employees or outside contractors to Bangladesh Bank.
Reuters was not able to independently verify the allegations by Bangladeshi officials about the SWIFT technicians. If they are validated, however, that could undermine confidence in the cooperative that is the backbone of global financial transactions.
The officials in Dhaka discussed their findings with Reuters ahead of a meeting this week in Basel, Switzerland where Bangladesh Bank officials have said their governor and a lawyer appointed by the bank will discuss recovery of about $81 million stolen by the hackers with the head of the Federal Reserve Bank of New York and a senior executive from SWIFT.
Bangladesh Bank officials have said they believed SWIFT, and the New York Fed, bear some responsibility for the February cyber heist. SWIFT has declined comment on that claim.

Brexit The Animated Movie.

Brexit Quote of the week.

"When it becomes serious, you have to lie"

Jean-Claude Juncker. Failed Luxembourg Prime Minister and ex-president of the Euro Group of Finance Ministers. Confessed liar. EC President.

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?

Lilium electric jet: VTOL air travel for the masses?

Colin Jeffrey May 8, 2016
Can't face the drive to the airport? Why not bypass the whole circus and jump in your two-seat, vertical take-off and landing (VTOL) all-electric engine jet aircraft? That's the vision for the Lilium Jet, an aircraft currently being developed in Germany under the auspices of the European Space Agency's business incubation center that boasts fly-by-wire joystick controls, retractable landing gear, gull-wing doors, and a claimed top speed of 400 km/h (250 mph). The creators claim that this personal e-jet could be made available to the public as early as 2018.

Combining the vertical take-off capabilities of helicopters and the cruising abilities of fixed-wing aircraft, the Lilium Jet aims to be significantly quieter than other VTOL vehicles such as helicopters, thanks to its 320 kW (435 hp) rechargeable-battery-powered ducted fan engines (arranged in a not-too-dissimilar form to that adorning Darpa's X-plane prototype).

Designed for recreational flying use during daylight hours, the Lilium Jet should be classed as a Light Sport Aircraft in Europe, with a pilot's license requiring just a minimum of 20 hours training.

"Our goal is to develop an aircraft for use in everyday life," says Daniel Wiegand, CEO and one of the company's four founders. "We are going for a plane that can take off and land vertically and does not need the complex and expensive infrastructure of an airport."

Whilst flying an aircraft with so little training may seem fraught, with redundant systems for batteries, engines, and electronics (much like other proposed VTOL electric craft, such as the Joby S2), the new craft is designed to be a good deal safer than a helicopter, and with intelligent computer-control for automatic take-off and landing, any chance for pilot error should be significantly reduced.
Initially the Lilium would be only allowed to fly from designated airfields. However the ultimate goal is for it to be able take off vertically from just about any open flat space larger than just 15x15 m (49x49 ft), such as a large garden.
Once airborne the Lilium Jet will swivel its engines into a rear-facing position to propel it along like a fixed-wing aircraft to cruise at speeds of around 300 km/h (180 mph), and to travel up to a claimed distance of 500 km (300 miles) on a single charge. Top speed is aimed at around 400 km/h (250 mph), but this will have an effect on the maximum distance traveled.
The Lilium company was founded in 2015 by a group of engineers and doctoral students from the Technical University of Munich in Germany, and is developing the aircraft using the funds supplied by a venture capital investor. To date, the company says it has flown and proven the initial concept with a number of 25 kg (55 lb) scale prototypes.

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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