Wednesday, 10 August 2016

Prepping for War in the South China Sea?

Baltic Dry Index. 631 –05     Brent Crude 44.90

LIR Gold Target in 2019: $30,000.  Revised due to QE programs.
When the operations of capitalism come to resemble those of the casino, ill fortune will be the lot of many.
John Maynard Keynes.
We open today with Bloomberg reporting on the EUSSR folly of imposing sanctions on Russia following America’s botched coup in Kiev. Moscow imposed retaliatory sanctions and set about the process of producing domestic substitution. In football terms: Moscow 10 Brussels 0, and this isn’t Moscow tooting its own horn, it’s America’s soft propaganda news arm, Bloomberg reporting on Merkel and Juncker’s folly.
But first the exclusive from Reuters on developments in the South China Sea. Hanoi is preparing for war. Can a misstep be far away?

Exclusive: Vietnam moves new rocket launchers into disputed S.China Sea - sources

Wed Aug 10, 2016 1:00am EDT
Vietnam has discreetly fortified several of its islands in the disputed South China Sea with new mobile rocket launchers capable of striking China's runways and military installations across the vital trade route, according to Western officials.

Diplomats and military officers told Reuters that intelligence shows Hanoi has shipped the launchers from the Vietnamese mainland into position on five bases in the Spratly islands in recent months, a move likely to raise tensions with Beijing.

The launchers have been hidden from aerial surveillance and they have yet to be armed, but could be made operational with rocket artillery rounds within two or three days, according to the three sources.

Vietnam's Foreign Ministry said the information was "inaccurate", without elaborating.

Deputy Defence Minister, Senior Lieutenant-General Nguyen Chi Vinh, told Reuters in Singapore in June that Hanoi had no such launchers or weapons ready in the Spratlys but reserved the right to take any such measures.

"It is within our legitimate right to self-defense to move any of our weapons to any area at any time within our sovereign territory," he said.

The move is designed to counter China's build-up on its seven reclaimed islands in the Spratlys archipelago. Vietnam's military strategists fear the building runways, radars and other military installations on those holdings have left Vietnam's southern and island defenses increasingly vulnerable.

Military analysts say it is the most significant defensive move Vietnam has made on its holdings in the South China Sea in decades.

Hanoi wanted to have the launchers in place as it expected tensions to rise in the wake of the landmark international court ruling against China in an arbitration case brought by the Philippines, foreign envoys said.
The ruling last month, stridently rejected by Beijing, found no legal basis to China's sweeping historic claims to much of the South China Sea.

Vietnam, China and Taiwan claim all of the Spratlys while the Philippines, Malaysia and Brunei claim some of the area.

"China has indisputable sovereignty over the Spratly islands and nearby waters," China’s Foreign Ministry said in a faxed statement on Wednesday. "China resolutely opposes the relevant country illegally occupying parts of China’s Spratly islands and reefs and on these illegally occupied Spratly islands and reefs belonging to China carrying out illegal construction and military deployments.”

The United States is also monitoring developments closely.

---- Foreign officials and military analysts believe the launchers form part of Vietnam's state-of-art EXTRA rocket artillery system recently acquired from Israel.

EXTRA rounds are highly accurate up to a range of 150 km (93 miles), with different 150 kg (330 lb) warheads that can carry high explosives or bomblets to attack multiple targets simultaneously. Operated with targeting drones, they could strike both ships and land targets.

That puts China's 3,000-metre runways and installations on Subi, Fiery Cross and Mischief Reef within range of many of Vietnam's tightly clustered holdings on 21 islands and reefs.

While Vietnam has larger and longer range Russian coastal defense missiles, the EXTRA is considered highly mobile and effective against amphibious landings. It uses compact radars, so does not require a large operational footprint - also suitable for deployment on islets and reefs.

"When Vietnam acquired the EXTRA system, it was always thought that it would be deployed on the is the perfect weapon for that," said Siemon Wezeman, a senior arms researcher at the Stockholm International Peace Research Institute (SIPRI).

---- China took its first Spratlys possessions after a sea battle against Vietnam's then weak navy in 1988. After the battle, Vietnam said 64 soldiers with little protection were killed as they tried to protect a flag on South Johnson reef - an incident still acutely felt in Hanoi.

In recent years, Vietnam has significantly improved its naval capabilities as part of a broader military modernization, including buying six advanced Kilo submarines from Russia.

Now back to the EUSSR’s sanctions folly. When both sides eventually get around to ending the stupidity of the sanctions, most of the former EU exports to Russia will have been displaced permanently by locally sourced production. Washington, Brussels and Berlin forgot, if they ever knew, that necessity is the mother of invention. Three of Russia’s four great 2000+ mile rivers flow north into the much of the year frozen sea of the Arctic. Western Europe can thank God that he didn’t make them flow east to west.

Blessed Are Russia's Cheesemakers

For they have beaten an import ban and restrained inflation

August 10, 2016 — 5:01 AM BST
Russian President Vladimir Putin’s ban on many food imports in retaliation for Western sanctions has taught his country to feed itself, and that's helped keep inflation down. 
Cut off from delicacies ranging from French brie and camembert to Nowegian salmon since August 2014, local companies have stepped in with their own production. Russians have eaten it up, with consumption of foreign produce now nearly at historical lows, according to ACRA, a rating company.

In value terms, imports now account for as little as 22 percent of food sales, down from 34 percent at the start of 2014, ACRA said in a report. Even when inflation peaked near 17 percent in March 2015, the effect of the ban contributed only 1.6 percentage point to that reading, it estimates.
The share of imported cheese on the domestic market was at 23 percent in the first quarter of 2016, down from 49 percent two years earlier, while pork dropped to 8.5 percent from 18 percent, according to ACRA. With inflation slipping in July to the slowest in more than two years, the embargo’s effect on prices was zero, it said.

After Putin collided with the West over Ukraine in 2014, Russia went on a self-sufficiency crash-course.
What that’s meant is a pivot toward policies aimed at making goods or services domestically that were previously produced abroad. While benefiting agriculture in particular - whose share in economic output last year rose to 4.4 percent, the highest since 2003 - it’s also a positive for the central bank. Annual inflation has slowed this year, though it's still at 7.2 percent.
We end for the day back in the oil patch. The short covering rally over, oil is about to resume its bear market, says Stephen Schork, editor of the The Schork Report providing fundamental and technical analysis of the energy markets. There is simply far too much oil and gasoline around swamping boyant demand.

Opinion: This oil bear says prices are headed back below $30

Published: Aug 9, 2016 3:06 p.m. ET

Demand has been strong this summer, but the supply glut remains immense

Oil bulls were relieved when Brent crude LCOV6, +0.00%   rallied in recent days after having fallen nearly 20% from its recent peak above $52.

But those who expect oil CLU6, -0.09% to retake those highs may be sadly disappointed, and indeed oil prices fell modestly on Tuesday. One prominent industry observer, who has been consistently bearish on oil for the last two years, says crude prices have only one way to go — down, way down.

Stephen Schork, editor of The Schork Report, based in Radnor, Pa., attributes the recent rally, in which crude prices doubled from their mid-$20s lows in January and February, to a massive short squeeze.

The current bounce, he told me in an interview Monday, is just another instance of bearish traders covering short positions. But it won’t last, he insisted, because the supply glut remains immense, even in the face of strong demand.

As of July 29, U.S. crude oil inventories stood at 522.5 million barrels, which the U.S. Energy Information Administration called “historically high levels for this time of year.”

In a recent report, Schork went even further. “Prior to this year, record gasoline stocks appearing in the summer was unheard of,” he wrote. “The fact that Nymex stocks recently hit an all-time high — at the peak of the summer driving season, when demand has never been greater — is amazingly bearish.”

In our interview, Schork said, “It’s hard to be bullish on August 8th. We’re in the midst of the strongest demand season ever. Gasoline demand has never been stronger, upward of 7.9 million barrels a day. Gasoline prices are very cheap and hence the demand is very strong.”

According to AAA, as of Monday, the average price for regular unleaded gas was $2.123 a gallon, nearly 50 cents a gallon lower than a year ago.

That’s prompted Americans to take to the roads en masse. Through July, U.S. National Parks, which are celebrating their centennial, were on track to smash 2015’s records, with some five million more visitors so far in 2016 than last year.

And yet that strong demand hasn’t made a dent in the oversupply of oil and gasoline.

“We know there is a massive glut of oil out there,” Schork told me. “We have oil sitting in tanks here in the United States,..oil sitting in tankers off the coast of Iran, Singapore, Texas.”

----Problem is, Schork explained, “for every one barrel that the U.S. producer took off the market over the past year, OPEC replaced that oil with two barrels.”

“As long as the Saudis and the Iranians continue to pump oil, continue to fight for market share, as long as they continue to put oil on the market, the market remains glutted.”

And since that dispute is rooted as much in geopolitical and religious rivalries as in the economics of oil production, don’t expect any quick fixes at upcoming meetings of the Organization of Petroleum Exporting Countries.

The World’s Energy Engine Is Slowing

August 9, 2016 — 9:59 AM BST Updated on August 9, 2016 — 5:01 PM BST
China’s imports of crude oil, coal and natural gas slowed in July, offering no solace for producers hoping demand from the world’s largest energy consumer may help mop up global gluts of the fuels.

The nation imported about 7.35 million barrels a day last month, the slowest pace since January, according to data Monday from the General Administration of Customs. Inbound shipments of coal slipped 2.5 percent from June, while natural gas slumped more than 13 percent.

The July data reflects sluggish economic growth in the world’s second-largest economy and contrasts with the country’s rising energy imports in the first six months, which added some support to global prices. During that period, crude purchases jumped 14 percent and coal rose 8.2 percent as domestic users turned to cheaper overseas supplies as domestic production shrank. Natural gas shipments increased 23 percent during the first half of the year.

“China’s strong appetite for crude oil and coal certainly boosted global prices in the first half of the year,” Guo Chaohui, an analyst at Beijing-based China International Capital Corp., said by phone. “However, we think China’s support for oil prices is weakening because of high domestic stockpiles and sluggish demand for oil products.”
"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."

Antony C. Sutton

At the Comex silver depositories Tuesday final figures were: Registered 27.55 Moz, Eligible 125.35 Moz, Total 152.90 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Below caveat emptor. Cui bono?
“Call it the Goldman Sachs test. If this is something Goldman would do to its clients, don't do it."
Felix Salmon.

World Gold Council, LME and key market participants to launch LMEprecious

Published 9 August, 2016
The World Gold Council and the London Metal Exchange (LME), together with Goldman Sachs, ICBC Standard Bank, Morgan Stanley, Natixis, OSTC and Societe Generale, today announce their intention to introduce a suite of exchange-traded and centrally-cleared precious metals products.
The initiative has been driven by the need for greater market transparency, to support and aid ongoing regulatory change,  provide additional robustness to the precious metals market, broaden market access, make trading more capital efficient and trade lifecycle management easier. LMEprecious will be developed to accommodate the interests of the full range of market stakeholders and to reinforce the strengths of the London market.
Today’s announcement follows an extended process of engagement with major market participants and users, and the LMEprecious service has been designed based on extensive consultation with core market players. Advanced discussions are taking place with a number of other leading institutions that have indicated their strong support for this initiative.
 Aram Shishmanian, the Chief Executive of the World Gold Council, said: “This is another important step in the modernisation of the gold market. It will strengthen London’s position in the global gold market, enabling it to meet the needs of all participants, attract new players and satisfy the highest standards of regulatory compliance.
We are proud to have been the catalyst for this process, defining the new trading capabilities and driving market engagement. We are confident that the new offering will be successfully implemented and supported by the market.”
LMEprecious will comprise spot, daily and monthly futures, options and calendar spread contracts for gold and silver. Future developments will include platinum and palladium contracts.  All trading will be centrally cleared on LME Clear, the LME’s cutting-edge, real-time clearing house, and leverage the London market’s existing delivery infrastructure. The new product suite will complement the bilateral over-the-counter (OTC) market, offering market participants similar levels of execution flexibility, including the ability to bring bilaterally negotiated (phone-based) trades into clearing. Market participants will also benefit from tight on-exchange price discovery and a product model designed to maximise capital efficiencies.
Garry Jones, the Chief Executive of the LME, said: “We are delighted to be working with the World Gold Council and a group of leading banks, to now take this project forward towards an enhanced market structure. LMEprecious opens up trading opportunities for existing LME members and their clients, as well as for new participants wishing to take advantage of optimised precious metals trading.”
The banks participating in this initiative will act as liquidity providers for the precious contracts to ensure efficient price discovery and establish market depth. Additional market participants are openly invited to participate in supporting and sharing in the success of the new contracts. LMEprecious will launch in the first half of 2017, following a comprehensive process of integration and testing with participants and subject to regulatory approvals.

The man who is a pessimist before forty-eight knows too much, if he is an optimist after it, he knows too little.

Mark Twain.

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?

Tata Steel looking at sponsoring research by IIT Madras scientists into graphene

By Bharani Vaitheesvaran, ET Bureau | Aug 09, 2016, 02.46 AM IST
CHENNAI: India's largest private sector steel company Tata SteelBSE -1.20 % is looking at sponsoring research by IIT Madras scientists into graphene, a new-generation carbon material hotly pursued by corporations in search of the next building block for electronic gadgets and transform processes in the manufacturing sector.
Just one-atom thick, many times stronger and lighter than steel, graphene is being tested in applications from replacing silicon in smartphones to the components of aircraft bodies in making flying more fuel-efficient.

Its use has already been experimented in making automotive lubricants and how memory devices like hard drives in computers can be made more powerful by exploiting their unique electrical properties.
For IIT-Madras, the Tata Steel partnership could open up further investments in next frontier technology areas. "The deal is most likely to be signed next week at the IIT-Madras Research Park," Krishnan Balasubramanian, Dean of Industrial Consultancy and Sponsored Research at the technology institute, told ET.

Earlier, ET had reported that IIT Madras was planning a Centre of Excellence for Graphene. Now, the institute believes the centre, to be set up at the research park, will be f ..
"While Tata Steel has agreed to be the anchor investor for the centre, the research will be for many other Tata Group companies too," he said. Queries raised with Tata Steel went unanswered.

The likely applications for Tata Group companies involve enhancements in coating, manufacturing processes, sensors and wearable devices. Graphene, or other nano-materials, can also find their way in new photo voltaic surfaces to be used in solar panels.

Read more at:

The monthly Coppock Indicators finished July

DJIA: 18,432  +03 Up NASDAQ:  5,162 +10 Up. SP500: 2,173 +01 Up


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