Tuesday, 7 June 2016

Brexit Fever Sweeps Europe.

Baltic Dry Index. 607 -03       Brent Crude 50.44

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

Brexit odds checker.

Brexit Quote of the Day.
Dodgy Dave Cameron: He knows nothing and thinks he knows everything. That points clearly to a political career.

With apologies to George Bernard Shaw

We seem to have entered an era of great change. The era of the petro-dollar is about to end. From America to Japan, the old order in place since the Great Nixonian Error of fiat money, August 15th, 1971, is being undone. But not one man in a million can diagnose the monetary illness at the core of our massive casino driven,  malinvestment world. With Brexit leading in UK polls, “Brexit fever” is now sweeping the wealth and jobs destroying EUSSR. And thanks to “Brexit fever” in America, the continuance of the petro-dollar is now in question. Stay long fully paid up physical gold and silver. We seem to have entered a new 1848. A new “spring of nations.” But will this time round be different? An old dinosaur I may well be, but even I wasn’t around for the “spring of nations.”

The European Revolutions of 1848, known in some countries as the Spring of Nations, Spring time of the Peoples or the Year of Revolution, were a series of political upheavals throughout Europe in 1848. It remains the most widespread revolutionary wave in European history, but within a year, reactionary forces had regained control, and the revolutions collapsed.

Raggi’s Populist Surge Leads Rome Mayoral Race Ahead of Run-Off

June 5, 2016 — 11:35 PM BST Updated on June 6, 2016 — 8:14 AM BST
The anti-establishment Five Star Movement’s Virginia Raggi leads the first round of local elections in Rome and may become the city’s first female mayor in a run-off later this month, the latest sign of a populist surge across Europe, preliminary results show.

Raggi got 35.4 percent of the vote against 24.8 percent for her closest rival, Roberto Giachetti of Prime Minister Matteo Renzi’s Democratic Party, according to preliminary counting of votes in more than 90 percent of polling stations. If the final results confirm that no candidate got more than half of the vote, Raggi, 37, and Giachetti, 55, will face-off in a second round on June 19.

Thirteen million voters were called to the polls on Sunday in cities across the country. A victory in Rome would hand the Five Star’s euro-skeptics their biggest win yet dealing a blow to Renzi’s efforts to convince Italians he can make good on his pledge to end years of stagnation. The Five Star also unexpectedly got more than 30 percent in Turin, making its candidate Chiara Appendino the second most voted after PD incumbent mayor Piero Fassino who had almost 42 percent, with votes in almost all polling stations counted.

PD candidate Giuseppe Sala holds a narrow lead in Milan, ahead of Stefano Parisi who is backed by former premier Silvio Berlusconi’s Forza Italia party and the Northern League, with votes counted in more than 90 percent of polling stations. Renzi’s candidate in Naples was third, failing to qualify for the second round of voting, preliminary results show.
Local government has become fertile ground for Europe’s anti-establishment forces. In Germany, the anti-euro Alternative for Germany has won seats in eight of the country’s 16 state assemblies three years after it was set up. In France, the National Front has won control of several towns while Podemos runs Spain’s two biggest cities.
Those movements are all attracting voters “who want to take back control of their lives,” Raggi said in an interview last week.

Spain’s Insurgents Gear Up for New Attempt to Oust Rajoy

June 6, 2016 — 4:01 AM BST Updated on June 6, 2016 — 10:48 AM BST
Spain’s insurgents are gearing up for another crack at the establishment.
Six months ago the anti-austerity group Podemos and the pro-market reformers of Ciudadanos won so many seats in their first general election that no one could form a government. When Spaniards go back to the polls on June 26, the newcomers will be looking to get into power.
Podemos has a new ally, Ciudadanos has a new strategy. And with the parliament delicately poised in a perfect deadlock after December’s vote, a handful of extra seats for either group could make a major difference to the outcome.
“The election will show just how entrenched is this new four-party system in which no one can govern on their own,” said Francisco Camas, a Madrid-based analysts at pollster Metroscopia. “Relatively small changes in certain districts could lead to decisive shifts when it comes to forming a government.”
While Brits, French and Austrians have turned to Euroskeptic parties to express their frustrations, Spaniards shut out of the labor market by the economic crisis or angered by an epidemic of corruption have been divided between the Marxist university professors running Podemos and the business-school analysis of Ciudadanos. After public outrage at a party bribery ring cost caretaker Prime Minister Mariano Rajoy a third of his seats in December, the parliament suffered its first stalemate in the country’s democratic history.

For more on the historical shifts taking place in Spain, click here.

The result this time will determine whether the euro area’s fourth-biggest economy continues to play along with European budget rules or adopts the more confrontational approach favored by Podemos. The anti-austerity group wants to negotiate debt relief from creditors after government liabilities spiraled to more than 100 percent of output.

Investors are already getting twitchy and the extra yield they demand to hold Spanish 10-year bonds instead of German bunds has increased by 29 basis points to 139 since the last vote. Spanish stocks have underperformed equities in Europe and the U.S.

German Factory Orders Declined in April on Weak Export Demand

June 6, 2016 — 7:00 AM BST
German factory orders declined in April as demand for investment goods from outside the 19-nation currency region slumped.
Orders, adjusted for seasonal swings and inflation, fell 2 percent from the prior month, when they rose a revised 2.6 percent, data from the Economy Ministry in Berlin showed on Monday. The reading, which is typically volatile, compares with economists’ forecast for a drop of 0.5 percent. Orders slid 0.5 percent from a year earlier.
The Bundesbank last week cut its forecast for German growth in 2016 and 2017, while affirming a robust underlying economic trend as a strengthening labor market and rising household incomes underpin domestic spending. Business sentiment was the strongest in five months in May as data confirmed the economy expanded 0.7 percent in the first quarter.
A drop in orders “is more of a counter-movement to rather strong figures from March, which were pumped up by an unusual high number of big-ticket items,” Ralph Solveen, an economist at Commerzbank AG in Frankfurt, said before the report. “If you look for a slightly longer period, the underlying trend in orders is more or less unchanged.”
Export orders fell 4.3 percent, led by a 13.3 percent slump in investment-goods demand from the outside the euro area that followed an 11 percent surge the previous month, the ministry report showed. Euro-zone orders gained 2.5 percent and domestic orders rose 1.3 percent, marking the third consecutive monthly increase.

In Swizzerland, wisely there’s going to be no free lunch after all. The land of John Calvin has voted to retain the work ethic.

Swiss voters reject proposal to give basic income to every adult and child

Exit polls suggest 78% voted against scheme to give £1,765 a month to each adult, which supporters say would help fight poverty and inequality

Swiss voters have overwhelmingly rejected a proposal to give the entire population of the country enough money to live on, according to exit polls.

A projection provided to the public broadcaster RTS said 78% had voted against all Swiss citizens, along with foreigners who have been residents in Switzerland for at least five years, being given a universal basic income, or UBI.

Supporters said providing such an income would help fight poverty and inequality in a world where good jobs with steady salaries are becoming harder to find.

The result comes as no surprise, however opinion polls ahead of the vote had indicated more than 70% of Swiss voters opposed the measure. The Swiss government and nearly all the country’s political parties had urged voters to reject the initiative.

Critics have called the initiative “a Marxist dream”, warning of sky-high costs and people quitting their jobs in droves, to the detriment of the economy. “If you pay people to do nothing, they will do nothing,” said Charles Wyplosz, economics professor at the Geneva Graduate Institute.

We close for the day in the oil patch. here, another earthquake is just getting underway, it seems to me.

Exclusive: As Iran's oil exports surge, international tankers help ship its fuel

Mon Jun 6, 2016 3:38am EDT
More than 25 European and Asian-owned supertankers are shipping Iranian oil, data seen by Reuters shows, allowing Tehran to ramp up exports much faster than analysts had expected following the lifting of sanctions in January.
Iran was struggling as recently as April to find partners to ship its oil, but after an agreement on a temporary insurance fix more than a third of Iran's crude shipments are now being handled by foreign vessels.
"Charterers are buying cargo from Iran and the rest of the world is OK with that," said Odysseus Valatsas, chartering manager at Dynacom Tankers Management. Greek owner Dynacom has fixed three of its supertankers to carry Iranian crude.
Some international shipowners remain reluctant to handle Iranian oil, however, due mainly to some U.S. restrictions on Tehran that remain and prohibit any trade in dollars or the involvement of U.S. firms, including banks and reinsurers.
Iran is seeking to make up for lost trade following the lifting of sanctions imposed in 2011 and 2012 over its nuclear program.
Port loading data seen by Reuters, as well as live shipping data, shows at least 26 foreign tankers with capacity to carry more than 25 million barrels of light and heavy crude oil, as well as fuel oil, have either loaded crude or fuel oil in the last two weeks or are about load at Iran's Kharg Island and Bandar Mahshahr terminals.
The resumption of international shipping of Iranian oil has been made possible by an increase in interim, limited, insurance cover by "P&I clubs" - maritime mutual associations that provide "protection and indemnity" insurance to shippers.
The International Group of P&I Clubs, which represents the world's top 13 ship insurers, increased the amount covered by so-called "fall-back" shipping insurance from 70 million to 100 million euros ($113.36 million) in April.
"In the first days after lifting sanctions only Iranian ships were loaded in the country, mainly due to several problems in finding insurance/reinsurance," said Luigi Bruzzone of ship broker Banchero Costa.
"The strong interest of the market in these trades pushed all the stakeholders to solve all the problems ... and almost all P&I Clubs have granted their insurance."

Gold set to rise if Saudis ditch petrodollar

Posted on
Have we reached the end of the petrodollar? The answer is “not quite”, but the end could be very close — and that has big implications for the price of gold.

For the most part, gold is priced internationally in dollars. Since 1974, just after the Nixon administration broke the dollar-gold link, oil has also been priced in dollars, and the end of this arrangement would suggest a very much weaker and less safe U.S. dollar. Countries would scramble to acquire, euros, yen, yuan, pounds, possibly even gold, if that is part of how the Saudis might want payment for their oil. All oil producing countries adopted the petrodollar system after Saudi Arabia did. This meant that a U.S. dollar received in exchange for oil automatically became a petrodollar as the proceeds had to be deposited into a Western bank.

So how have we come to be contemplating the end of the petrodollar? Last month the U.S. Senate voted to approve the Justice Against Sponsors of Terrorism Act by unanimous consent. More than enough for the Senate to override the threatened veto of the act by President Obama. The House is expected to approve the act later in the year.

This legislation allows survivors and victims families of the 9/11/2001 atrocities to sue Saudi Arabia for damages in U.S. courts, based on the alleged part the Saudis played in financing the 9/11 terrorists. The Saudis warned very publicly in back in April that, if such a bill went into U.S. law, that they would have to sell off some $750 billion of U.S. Treasury holdings in advance, to prevent those from being frozen by U.S. courts. But it quickly gets much more serious than that.

The stage is set for a monumental clash of wills later in the year. The act pits a lame duck U.S. president fighting for the Saudis against a bipartisan Congress fighting for Americans, and does so in a highly charged U.S. presidential election year.

While the Saudis would be very reluctant to sell out of U.S. Treasuries and/or stop pricing crude oil in dollars, which then get recycled back into U.S. Treasuries to help finance the U.S. government, this legislation leaves them with little choice. Continuing to price Saudi oil sales in dollars but not able to recycle them into U.S. assets makes no sense at all. But ending the petrodollar, is a financial earthquake far bigger than the Lehman Bros. crash of 2008.

Most other countries, led by China and Japan, hold many billions of U.S. treasuries too. While they just might be persuaded not to aggravate things by following the Saudis and selling out of the greenback, they would be very reluctant to add more purchases in the event of the end of the petrodollar merry-go-round. And it is by no means certain that some countries might not, out of necessity, have to front-run any Saudi selling. We know that some countries are already quietly adjusting their U.S. treasury mix, due to local needs. But that gentle canter can all too easily turn into a stampede if they think the Saudis will be forced into selling.

So what might all this mean for gold? Higher prices probably, and sharply higher prices at that.

This new distrust between the Saudis and America, places a big negative uncertainty over the future of the petrodollar, and that in itself makes for a far more volatile and weaker U.S. dollar, one that at some point ahead will lose its main underpinning ( in place since 1974 and introduction of the petrodollar). That all this is about to come to a head in a matter of weeks or months. In a G-20 world completely unprepared for such dramatic change, this event will have a major bullish monetary implication for gold, both short term and long term.
"The international monetary order is more precarious by far today than it was in 1929. Then, gold was international money, incorruptible, unmanageable, and unchangeable. Today, the U.S. dollar serves as the international medium of exchange, managed by Washington politicians and Federal Reserve officials, manipulated from day to day, and serving political goals and ambitions. This difference alone sounds the alarm to all perceptive observers."

Hans F. Sennholz

At the Comex silver depositories Monday final figures were: Registered 23.12 Moz, Eligible 130.05 Moz, Total 153.17 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, those inscrutable Chinese. “God’s workers” on Wall Street just made them a little more scrutable, and didn’t like what they saw. Those Beijing apparatchiks have far more debt angels dancing on the head of their Chinese pin, than is good for them or us.

China's Debt Load Is (Much) Higher Than Previously Thought, Goldman Says

New credit creation points to an "uncomfortable" trend.

June 6, 2016 — 10:28 AM BST
Count total social financing (TSF) as another Chinese statistic of increasingly dubious value, according to analysts at Goldman Sachs Group Inc.

With many investors grappling to understand the degree to which China's economic growth has been fueled by debt, efforts to get a grip on measures of new credit creation have gained fresh urgency. To date many have relied on the TSF invented by the Chinese authorities in 2011 as a way of capturing a larger slice of the country's shadow banking activity, but Goldman analysts led by MK Tang cast fresh doubt on the measure's ability to gauge credit creation in a note published on Wednesday.

They identify a discrepancy between China's official TSF and Goldman's new proprietary estimates of credit, describing the growing difference as "an uncomfortable trend that has gotten more discomforting."

Of particular issue is the rise in opaque loans given noises surrounding China's circular financing schemes, which involve banks lending to non-bank financial institutions (NBFIs) as opposed to directly to companies. 
While this "round-tripping," as Goldman dubs it, does help boost bank profits, it also means more investments on bank balance sheets and more money meandering through the financial system as opposed to moving into the real economy through an increase in M2 money supply.

Faced with an increasingly tangled system of financing and a money supply measure that doesn't fully encapsulate new credit creation, the Goldman analysts opt to take a slightly different approach to gauge the strength of China's recent credit boom. They look at the (adjusted) flow of money emanating from households and companies and going into various financial investments.

On that basis, China's credit creation came in at 24.6 trillion yuan ($3.7 trillion) last year — far outstripping the 16 trillion yuan increase in money supply and the 19 trillion yuan of TSF.
"Such a scale of deterioration [in China's leverage] certainly increases our concerns about China’s underlying credit problems and sustainability risk," the Goldman analysts conclude. "The possibility that there is such a large amount of shadow lending going on in the system that is not captured in official statistics also points to [a] regulatory gap, and underscores the lack of visibility on where potential financial stress points may lie and how a possible contagion may play out."
Lenin is said to have declared that the best way to destroy the Capitalistic System was to debauch the currency. . . Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million can diagnose.
John Maynard Keynes.
Brexit The Animated Movie.

Brexit Quote of the week.

'You just never know. That unpredictability is the great thing about life. You change. The world changes. You live in a country where we are still blessed with enormous opportunity. Leave yourself open to the world of possibility. You have the ambition, you have the smarts and you have the toughness. So, turn the page on your biography - you have just started a new chapter in your lives.'

Lloyd Blankfein CEO of Goldman unintentionally backs Brexit in a US speech to graduates.

Solar  & Related Update.

With events happening fast in the development of solar power and graphene, I’ve added this 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?

Kia Soul EVs Used In UC Davis Vehicle-To-Grid Trial

June 6th, 2016 by James Ayre
A newly expanded partnership with the Advanced Power and Energy Program at the University of California, Irvine, was recently announced by Kia Motors America and Hyundai America Technical Center through a press release.
The partnership will see the organizations work together to develop and trial vehicle-to-grid (V2G) advanced smart charging software algorithms, according to the press release. Kia Motors America will be providing 6 Soul EVs to the partnership, for use in the development and trialling.
“Grid-connected electric vehicles offer tremendous potential in terms of energy storage and dispersion during high-demand periods, and Kia is excited to collaborate with APEP in the study and development of advanced smart grid technologies,” commented Orth Hedrick, vice president of product planning at Kia Motors America. “Kia’s green car roadmap calls for a dramatic expansion of electrified vehicles over the next five years, and we are proud of the role the Soul EV will play in helping UCI’s students and faculty develop new and better advanced smart charging technologies.”

“Vehicle-to-grid defines a system which enables battery electric vehicles (BEV) and plug-in hybrids (PHEV) to communicate with the power grid for bi-directional power flow while being grid-connected. This enables the vehicles to serve as energy storage to help manage energy demand,” the press release explains, in case you hadn’t read about V2G technology before.

“Demonstration and evaluation of Soul EVs will increase understanding of how BEVs are managed on the electric grid, while identifying challenges and solutions for V2G deployment. Additionally, this test program will help predict BEV and PHEV charging behavior and further understanding of their impact on the grid.”

Scott Samuelsen, Director of Advanced Power and Energy Program (APEP), added: “The rapidly evolving coupling of vehicles and the electric grid requires planning based on informed decisions supported by the market-based, systems analyses provided by the Kia/APEP program.”

The monthly Coppock Indicators finished May

DJIA: 17787  -20 Up NASDAQ:  4946 +04 Down. SP500: 2097 -18 Up.

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