Monday, 22 August 2016

Stuck In A Jackson Hole.

Baltic Dry Index. 682  -03    Brent Crude 50.04

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

In central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly and results far much less.

John Kenneth Galbraith

We open this morning with good news from Germany. Temporarily, the world’s largest supplier of dirty killer diesel engines has halted some production due to a supplier dispute. Germans and others can breathe easier this morning, albeit only figuratively.

VW Halts German Production Over Unprecedented Fight With Supplier

August 19, 2016 — 8:48 AM BST Updated on August 19, 2016 — 5:22 PM BST
Volkswagen AG factories in Germany are grinding to a halt after a supplier took the unprecedented step of cutting off the automaker as the two battle in court and engage in a public war of words about who’s to blame for the impasse.

VW stopped Passat production on Thursday and will halt assembly of its best-selling Golf on Monday if the conflict isn’t resolved, said people familiar with the matter, who asked not to be identified. VW has officially said the factories producing those models face slowdowns, as do plants that build chassis, the basic underpinnings of vehicles. The supplier has essentially called the automaker a bully, prompting VW’s top labor boss to respond that he’s “furious” and the leader of its home state to say “coercive measures” by a court may be needed to end the conflict.

The production holdup threatens to reduce Volkswagen’s earnings by as much as 40 million euros ($45 million) a week -- according to Christian Ludwig, an analyst at Bankhaus Lampe -- at a time when the carmaker is trying to boost sagging profit at its namesake brand by lowering annual spending by 1 billion euros. The conflict centers on a contract that VW signed with the supplier, then later canceled. The parts maker, which builds seat and transmission parts, says it wants the auto manufacturer to pay for the plant alterations it made to provide the services.

----Volkswagen shares fell 1.5 percent to a two-week low of 119.90 euros at the close in Frankfurt. The stock has declined 10 percent this year, valuing Europe’s biggest carmaker at 62.4 billion euros.

Prevent Group’s Car Trim seat-component division and ES Automobilguss transmission-parts unit suspended deliveries after Volkswagen rejected discussions to reimburse the supplier when the new contract was dropped, the parts manufacturer said in a statement. The canceled order involved a 500 million-euro deal with Car Trim that was scheduled to start next year, said a person briefed on the supplier’s business, who asked not to be named discussing the legal case.

If you think government statistics are dodgy and rigged now, just look what’s in the planning stage. Soon we will all be like China which is just like Uncle Scam. What are they trying to hide? After 8 years of emergency measures of QE forever, ZIRP and now NIRP, the Fed find’s itself still stuck in a Jackson Hole.

The Hunt Is On for a New Way to Measure the World's Economic Output

August 21, 2016 — 5:00 PM BST
Gross domestic product is so twentieth century.

The measure has risen from humble beginnings during the Great Depression to be an essential gauge for governments and central banks the world over. Long-term investors allocate capital based on its findings; traders buy and sell stocks, bonds, currencies and commodities in the blink of an eye after readings flash on their screens. One such closely-watched report comes this Friday, when the U.S. releases its revised estimate of second-quarter GDP.

Problem is -- whether compiled by production, income or expenditure approaches -- GDP is increasingly struggling to keep up with the pace of economic change.

In an age where $10 can buy one compact disc or a month of unlimited music streaming, it’s getting tougher to put a price on economic output. And as an aggregate measure that ignores distribution effects, GDP has masked rising inequalities that helped fuel anti-establishment politicians like Donald Trump or the backlash that contributed to Brexit.

So as governments in the rich world and emerging markets alike struggle to reproduce the growth rates and productivity leaps of previous decades, a more urgent search is under way to make the economic yardstick fit for purpose.

Meanwhile as the not so good, the bad, and the downright ugly head off to the Fed’s annual insider junket in Jackson Hole Wyoming, one of the Fed’s empty suit tipsters is back on track peddling a coming interest rate hike. But what will the Fed’s muddled  talking chair say on Friday?  Then again, would the Fed’s “Fisch” really go off reservation just five days before the talking chairs much touted major policy speech?  Is Ebenezer Squid about to get a stiletto in the ribs on Friday?

Economics is extremely useful as a form of employment for economists.

John Kenneth Galbraith

Fischer Signals 2016 Rate Hike With Economy Nearing Fed Goals

August 21, 2016 — 6:19 PM BST
Federal Reserve Vice Chairman Stanley Fischer signaled that a 2016 rate hike is still under consideration, saying the U.S. economy is already close to meeting the central bank’s goals and that growth will gain steam.
“We are close to our targets,” Fischer said in a speech at the Aspen Institute in Aspen, Colorado on Sunday. “Looking ahead, I expect GDP growth to pick up in coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes,” he added, without giving explicit views on his rate outlook.

Fischer’s remarks come less than a week before Fed Chair Janet Yellen speaks Aug. 26 at an annual symposium hosted by the Kansas City Fed in Jackson Hole, Wyoming. Investors are looking for clues from central bankers on the timing of potential interest-rate increases amid modest economic growth, strong job gains, and only moderate increases in inflation.

“It would be quite an event if Fischer went out so close to Yellen’s speech this week and said something” the Fed Chair disagrees with, said Roberto Perli, a partner at Cornerstone Macro LLC and former Fed board economist. “While I don’t expect Yellen to provide much rate guidance in Jackson Hole, I think she will echo Fischer’s upbeat assessment of the U.S. economy.”

Asian shares slip, dollar stands tall on Fed hike bets

Mon Aug 22, 2016 12:25am EDT
Asian shares slipped on Monday and the dollar pulled away from last week's lows on expectations that a signal might emerge from a Federal Reserve gathering this week in Jackson Hole, Wyoming that the U.S. central bank is gearing up to hike interest rates.

Global central bankers will join the annual mountain retreat that opens on Thursday, with Fed Chair Janet Yellen due to speak the following day.

On Sunday, Fed Vice Chairman Stanley Fischer gave a generally upbeat assessment of the U.S. economy's current strength in prepared remarks, saying the job market was close to full strength and still improving.

"We are close to our targets," Fischer said, though he did not directly address the timing of when the U.S. central bank should next raise interest rates.

Last week, New York Fed President William Dudley said a rate hike would be possible in September. Fischer's remarks fuelled that sense of anticipation, though interest rate futures contracts indicate that market is pricing in about 50/50 odds of an increase in December.

"Fischer's comments have raised some expectations in the market, particularly after Dudley's recent comments," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.7 percent, after losing 0.3 percent last week. Wall Street logged modest losses on Friday, ending nearly flat for the week.

Japan's Nikkei .N225 rose 0.3 percent, taking solace from a weaker currency ahead of the Jackson Hole meeting. It had skidded 2.2 percent last week, as the dollar dipped below 100 yen.

"Moves in the Japanese market will likely be dominated by the dollar-yen performances after the meeting," said Masashi Oda, general manager of the strategic investment department at Sumitomo Mitsui Trust Asset Management. "The market could move either way, but most people want some kind of signal at this point."

The dollar was up 0.6 percent against its Japanese counterpart at 100.84 yen JPY=, while the euro was down 0.4 percent at $1.1276, pulling away from last week's eight-week high of $1.1366.

The dollar index, which tracks the greenback against a basket of six major rivals, added 0.4 percent to 94.923 .DXY, pulling away from last week's low of 94.077, which was its lowest since June 24.

Politics is the art of choosing between the disastrous and the unpalatable.

John Kenneth Galbraith

At the Comex silver depositories Friday final figures were: Registered 27.04 Moz, Eligible 130.43 Moz, Total 157.46 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, all you need to know about Italy’s Infamous Bank “Three Card Monte.” The world’s oldest bank might not make it out of 2016.

Monte Paschi’s 544-Year Journey From Farm Lending to Scandals

August 1, 2016 — 9:13 AM BST
Banca Monte dei Paschi di Siena SpA, the world’s oldest bank, is also Europe’s riskiest. In the region’s stress tests published last week, Monte Paschi’s capital was wiped out under the exam’s toughest scenario, the worst performance among the 51 banks examined.

To bolster its buffers, Monte Paschi said late Friday that it will tap investors for the third time in two years by selling up to 5 billion euros ($5.6 billion) of stock and dispose of most of its bad loans.

Here are some of the highlights of the bank’s history -- from pawnshops to going public and derivatives bets gone wrong.


The Tuscan city-state of Siena establishes Monte Pio after the Black Death killed half its population. Modeled on pawnshops that Franciscan monks set up to help the poor, the bank goes on to make loans to local farmers.


After Siena becomes part of the Grand Duchy of Tuscany, the bank changes its name to Monte dei Paschi, which literally means lending entity of pasture lands, to reflect its focus on agriculture.


Under Fascist leader Benito Mussolini, Monte Paschi becomes a corporation controlled by local politicians and some of its profit is used to support civic activities such as the Palio horse race in Siena.


The bank becomes a joint-stock company and is split into two entities: Banca Monte dei Paschi di Siena SpA, a bank, and Fondazione Monte dei Paschi di Siena, a non-profit foundation. The latter takes management control of the lender and uses dividends to support public interest projects in areas including science, art, education and health.


Monte Paschi’s shares list on the Italian stock exchange for 3.85 euros each, after demand for the stock exceeds the offer tenfold.

Nov. 2007

Monte Paschi becomes Italy’s No. 3 lender after buying Italian rival Banca Antonveneta from Banco Santander in an all-cash deal worth at that time 9 billion euros. Monte Paschi doesn’t closely examine the books of Antonveneta, which had been acquired by Santander just weeks earlier from ABN Amro.


Monte Paschi Chairman Giuseppe Mussari, a lawyer and political appointee with no banking experience, uses derivatives to counter losses of more than $925 million stemming from the Antonveneta deal and other transactions. Monte Paschi pays Merrill Lynch, JPMorgan Chase & Co, and Deutsche Bank more than $200 million in fees for the derivatives contracts and other work.


Monte Paschi obtains 1.9 billion euros in government aid to boost its capital.

Jan. 2012

Mussari resigns as chairman.

Nov. 2012

Monte Paschi’s foundation can no longer afford to pay for the medieval costumes the riders use in the Palio horse race.

Jan. 2013

A Bloomberg News report that Monte Paschi used a 2 billion-euro loan from Deutsche Bank to obscure losses -- along with the bank’s statement that a similar deal signed with Nomura Holdings Inc. was under review -- provokes national outrage and criminal investigations.

Feb. 2013

Monte Paschi receives a 4.07 billion euro bailout from the government, which includes the rollover of previous aid.

Nov. 2013

The European Union approves a reorganization plan for Monte Paschi involving the bailout, the sale of 3 billion euros in equity, and the termination of 8,000 employees.

April 2014

Monte Paschi increases the share sale announced in November by 2 billion euros to 5 billion euros

Oct. - Nov. 2014

Monte Paschi fails European Central Bank stress test, emerging with biggest shortfall among lenders under review; The bank approves a plan to raise 2.5 billion euros from investors to fill the gap.
Former Chairman Mussari and two other former bank executives are sentenced to three-and-a-half years in prison for obstructing regulators. They appeal their terms.

Dec. 31, 2015

Monte Paschi records $52 billion in bad loans, with provisions covering less than half of the positions.

Feb. 2015

The bank increases the amount of capital it will raise to 3 billion euros.

Jan. - Feb. 2016

Monte Paschi shares plunge 61 percent amid broad sell-off in European banking stocks. The bank is asked to submit data on non-performing loans as the ECB increases scrutiny of the region’s credit quality.


Italy begins talks with the European Commission on a plan to recapitalize Monte Paschi that may include waiving a ban on using public funds.

July 4

Monte Paschi discloses the ECB demands to cut 10 billion euros in net non-performing loans, 40 percent of its total, over next three years.

July 29

ECB releases stress tests for lenders; Monte Paschi’s capital wiped out under the exam’s toughest scenario.

The nation’s treasury said Friday public funds won’t be needed. Monte Paschi’s share sale target is more than five times its current market value. The offering depends on its ability to find buyers for its soured debt. The bank plans to sell a 27.7 billion-euro bad-loan portfolio for 9.2 billion euros, or 33 percent of its gross value.

In any great organization it is far, far safer to be wrong with the majority than to be right alone.

John Kenneth Galbraith

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?

Elon Musk leads Tesla effort to build house roofs entirely out of solar panels

In latest clean energy plan, Tesla purchases SolarCity to make solar ‘shingles’: ‘It’s not a thing on the roof. It is the roof,’ CEO says
Friday 19 August 2016

A new venture spearheaded by Elon Musk will create house roofs made entirely of solar panels, in a sweeping expansion of Tesla’s clean energy ambitions.

Tesla has finalized a $2.6bn deal to buy solar power company SolarCity to produce solar “shingles” – photovoltaic material that would be fashioned into the shape of a house roof.

“I think this is really a fundamental part of achieving differentiated product strategy, where you have a beautiful roof,” Musk said. “It’s not a thing on the roof. It is the roof.”

Musk is chief executive of Tesla and is also the chairman and largest shareholder of SolarCity, whose chief executive is Musk’s cousin, Lyndon Rive. The two entrepreneurs devised the idea for SolarCity during a trip the Burning Man desert festival in 2004.

Musk describes the deal, subject to shareholder approval, as a “no-brainer” that would combine the solar panel roofs with Tesla’s PowerWall home batteries, to store electricity for later use in the evening.

A Tesla and SolarCity statement said they are creating the “world’s only vertically integrated sustainable energy company” and will work on releasing two new solar roof products by the end of the year. SolarCity has, however, reduced its forecast, citing costs, for megawatt installations for this year.

The idea of solar shingles isn’t entirely new – Dow Chemical produced them before deciding to scrap the idea in June. But Musk, an entrepreneur who has advocated for a global carbon tax in a bid to lower greenhouse gas emissions, hopes the SolarCity venture will allow Tesla to offer a one-stop-shop in clean energy, alongside its batteries and electric cars.

According to Rive, there are 5m new roofs installed every year in the US. The vast majority of American houses have asphalt roofs, which soak up a lot of heat and can be hard to replace.

“If your roof is about to need to be replaced, you don’t want to invest in solar panels to install on it since you are about to take it down – but if the solar panels are the roof and you need to redo it anyway, there’s no reason not to go with a power-generating roof,” said Rive.

The cost of households becoming solar has fallen by 70% over the past decade in the US, with more than 1m American homes now fitted with solar panels – up from just 30,000 homes in 2006. In July, the Obama administration announced an initiative to deliver one gigawatt of solar to low-income households by 2020.

The monthly Coppock Indicators finished July

DJIA: 18432  +03 Up NASDAQ:  5162 +10 Up. SP500: 2173 +01 Up.

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