Wednesday, 14 September 2016

Fear Returns.

Baltic Dry Index. 796 -08    Brent Crude 47.26

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

He was a boy when the great earthquake struck San Francisco at 5:12a.m. on Wednesday, April 18, 1906, one of the worst natural disasters in U.S.history. The man and his family survived the earthquake and subsequentfire, managing to get out of the destroyed city by boat. His father paid theboatman, who would not accept money, in gold, secreted away for emergencies. Gold, the sweat of the god as the Incas called it, is hard money. It is the only money when chaos ensues.

Satyajit Das. Extreme Money. Masters of the Universe and the Cult of Risk

After a summer of complacency in the face of a summer of falling earnings and a noticeably slowing global economy, fear has returned to global stock markets. All news is no longer good news, and there’s a rising fear that the central banksters have actually lost control of the monetary system. Whatever they do or say, nothing works out in the real world like they said it would. Our Great Nixonian Error of fiat money, communist money, is long in the tooth, increasingly dysfunctional, and now rigged from hour to hour by competing central banksters with rival interests and rival fiat currencies. 

Though they ooze oily smarmy statements at every summit, the reality is that each is engaged in a currency war. Just look at the Bank of England’s actions after the Brexit vote. Watch what they do not what they say. Some, the Europeans, actually want the euro to supplant the almighty dollar. It’s more likely to collapse and disappear than to replace the almighty dollar.  Stay long a fully paid up physical gold reserve.

Wall Street’s ‘fear gauge’ shows it’s about to get ugly in the stock market

Published: Sept 13, 2016 6:23 p.m. ET

VIX jumps 18% on Tuesday as the Dow tumbles 260 points

So much for the those calm markets. Wall Street’s “fear gauge” is rearing higher as U.S. equities logged a second sharp selloff in the past three sessions, as hand-wringing over the Federal Reserve’s monetary policy contributes to a renaissance of volatility.

The CBOE Volatility Index VIX, +17.74% often used as a measure of fear in the market, rose 18% on Tuesday at 17.85, implying that investors are dialing up bets that stocks could suffer further near-term swings lower.

The VIX has hovered around 12 since mid-July. That level usually signals quiescence, while a reading of 20 or above indicates that investors are bracing for moves sharply south

The rise in the VIX comes as the Dow Jones Industrial Average DJIA, -1.41% and the S&P 500 index SPX, -1.48% and the Nasdaq Composite Index COMP, -1.09% relinquished all of the sharp gains racked up 24 hours ago. Monday’s rally followed another tumble on Friday that saw the VIX jump 40%—the largest daily move since the U.K.’s vote to secede from the European Union on June 23.

Three straight days of moves of at least 1% for stocks, marks the first time since 1963 that the S&P 500 followed an extended period of calm—43 days—with a trio of such choppy trading days, according to Dow Jones data. That was the two-day period before and immediately following the assassination of President John F. Kennedy in November 1963, Dow Jones data show.

“The pickup in volatility is notable, and typically characterizes pullbacks,” said Katie Stockton, chief market technician at BTIG.

In the bond market, anxiety has returned too. Has the great multi-decade bond bubble started to burst? Once again the big question is, have the central banksters lost control?

Libor’s Reaching Point of Pain for Companies With Big Debt Loads

September 13, 2016 — 10:00 AM BST
Short-term borrowing rates are rising to the point where some heavily indebted U.S. companies can no longer ignore them.

A benchmark for near-term borrowing, the three-month U.S. dollar London interbank offered rate, has risen above 0.75 percentage point. That’s a key threshold for junk-rated companies with about $230 billion of loans outstanding according to data compiled by Bloomberg -- with Libor above that level, the borrowers will have to pay more interest over time. The increase so far could amount to about an extra $250 million of total interest expense annually for the companies.

Companies that took out floating-rate loans knew they would have to pay more to borrow once rates started rising, but they haven’t experienced real increases for years. Even when the Federal Reserve started hiking rates in December, many companies did not have to pay higher rates on their loans until Libor breached key levels, because of the way their floating rates are calculated. Rising interest payments would only add to pain for U.S. borrowers that are already suffering from falling profits and higher default rates. And Libor could rise further-- JPMorgan Chase & Co. strategists recently forecast it could reach 0.95 percentage point by the end of this month.

There will be some companies “for which it might become an issue," said Neha Khoda, a high-yield credit strategist at Bank of America Corp. With Libor having risen above key levels like 0.75 percentage point, many issuers have to think about how they will pay the extra interest, she said. Three-month Libor now stands at 0.86 percentage point, and has been rising as new money market fund rules curb investor demand for companies’ short-term debt.

----Libor is rising in anticipation of new rules for money market funds that go into effect in October. Under the regulations, investors in funds that buy short-term corporate obligations can suffer losses when the value of the assets falls. Funds that only invest in short-term government debt are not subject to the new rules, which has made government-only money market funds much more popular in recent months.

As investors have had less demand for funds that invest in short-term corporate debt obligations, issuers have had to boost yields, lifting benchmark rates.
Up next, the oil patch. Do I bet on red or black?

IEA Changes View on Oil Glut, Sees Oversupply Persisting in 2017

September 13, 2016 — 9:00 AM BST
The surplus in global oil markets will last for longer than previously thought, persisting into late 2017, as demand growth slumps and supply proves resilient, the International Energy Agency said.
World oil stockpiles will continue to accumulate through 2017, a fourth consecutive year of oversupply, according to the IEA. Consumption growth sagged to a two-year low in the third quarter as demand faltered in China and India, while record output from OPEC’s Gulf members is compounding the glut, said the agency, which just last month saw the market returning to equilibrium this year.
“Supply will continue to outpace demand at least through the first half of next year,” the Paris-based adviser said in its monthly report. “As for the market’s return to balance -- it looks like we may have to wait a while longer.”
Almost two years after the Organization of Petroleum Exporting Countries set a strategy to eliminate the global oil glut by pressuring rivals with lower prices, markets continue to struggle with excess supply and crude remains capped near $50 a barrel. The organization plans to hold informal talks with competitor Russia in Algiers later this month, fanning speculation the producers may agree on an output cap to shore up prices.
The IEA trimmed projections for global oil demand next year by 200,000 barrels a day to 97.3 million a day. It reduced growth estimates for this year by 100,000 barrels a day to 1.3 million a day, citing a “dramatic deceleration in China and India” this quarter coupled with “vanishing growth” in developed economies.
“Recent pillars of demand growth -- China and India -- are wobbling,” said the IEA, which counsels 29 nations on energy policy. “The stimulus from cheaper fuel is fading. Refiners are clearly losing their appetite for more crude oil.”
Supplies outside OPEC will rebound next year after this year’s sharp decline, rising by 380,000 barrels a day, according to the report. The estimate is “marginally” higher than last month, driven by the stronger-than-expected performance of Norway and Russia. U.S. shale-oil production will begin to recover in the second half of 2017, it said.
Production from OPEC’s 14 members rose slightly last month as Gulf countries Saudi Arabia, Kuwait and the United Arab Emirates pumped at or near record levels and as Iraq pushed output higher, the IEA said. Saudi Arabia has overtaken the U.S. as the world’s largest oil producer -- when non-crude forms like natural-gas liquids are included -- a ranking America held since April 2014. Saudi crude output was 10.6 million barrels a day in August.

We close with a subject we’ve covered before, but now it’s starting to make mainstream media. Will there be enough oil available for the world by mid next decade? It’s a question of more than just academic interest.  Of course better solar power and greatly improved battery and other forms of power storage will go some way to help, but battery storage improvement tends to be incremental. One way or another our western lifestyle world is still going to be highly oil reliant.

Oil investment crashes to 60-year low, incubating next energy shock 

14 September 2016 • 12:01am
Oil discoveries have slumped to the lowest level since 1952 and the global economy is becoming dangerously reliant on crude supply from political hotspots, the world’s energy watchdog has warned.
Annual investment in oil and gas projects has fallen from $780bn to $450bn over the last two years in an unprecedented collapse, and there is no sign yet of a recovery next year.

The International Energy Agency said wells are depleting at an average rate of 9pc annually. Drillers are not finding enough oil to replace these barrels, preparing the ground for an oil price spike in the future and raising serious questions about energy security.

“There is evidence that cuts in exploration activities have already resulted in a dramatic decline in new oil discoveries, dropping to levels not seen in the last 60 years,” said the IEA’s World Energy Investment 2016 report.

The drop is so drastic that the effects are likely to overwhelm slow gains from fuel efficiency and the switch to electric cars, at least for the rest of this decade.

Much of the steepest fall in spending is in stable political areas. Britain’s North Sea investment has shrivelled to £1bn from an average of £8bn over the last five years.  Spending in Canadian fields has plummeted by 62pc.

This decline tightens the future stranglehold of the OPEC cartel and Russia on global oil supplies, although the consequences will not be obvious until it is too late. The big national oil companies in the Gulf have costs of $10 a barrel or less, and most have kept up investment. 

Saudi Arabia seems determined to keep raising output and push for market share, even though low prices caused by its own policy are playing havoc with its public finances. The budget deficit is 16pc of GDP. 

It is drawing down foreign exchange reserves and tapping the global bond markets to makes end meet, a high-risk strategy but one that can probably work for another two years. 

----The IEA said global spare capacity is wafer-thin at just 1.7m barrels a day (b/d), stripping out idle capacity in the war-torn trio of Libya, Iraq, and Nigeria. This implies that the market will swing from glut to scarcity with lightning speed once the energy cycle turns. 

For now the world is still swimming in oil, and iron law of the oil cycle is that the longer this goes on, the greater the rise in crude prices later. Brent contracts have slipped 6pc to $47 a barrel over the last three trading sessions, giving up the short-lived gains from vague talk of an output freeze by OPEC and Russia later this month.

The IEA said the oil market is behaving strangely. “With the price of oil at current levels, one would expect supply to contract and demand to grow strongly. However, the opposite now seems to be happening,” it said.

But as we covered last week, all the oil and gas news hasn’t been bad.

Apache Has High Hopes for New Oil-Field Discovery in Texas

Energy firm says overlooked ‘Alpine High’ area potentially holds billions of barrels of oil

Updated Sept. 7, 2016 10:43 a.m. ET
Apache Corp.  said it has discovered the equivalent of at least two billion barrels of oil in a new West Texas field that has the promise to become one of the biggest energy finds of the past decade.

The discovery, which Apache is calling “Alpine High,” is in an area near the Davis Mountains that had been overlooked by geologists and engineers, who believed it would be a poor fit for hydraulic fracturing. It could be worth $8 billion by conservative estimates, or even 10 times more, according to the company. Shares rose by as much as 13% after U.S. markets opened Wednesday.

Apache started acquiring mineral rights in the area two years ago and subsequently discovered its potential. The company then quietly went about locking up more land in the field, believed to be up to 450,000 acres overall. Its position now exceeds 300,000 acres, or roughly two-thirds of the field, and is about 20 times the size of Manhattan.

The company has begun drilling in the area and says the early wells, which produce more natural gas than oil, are capable of providing at least a 30% profit margin at today’s prices, including all costs associated with drilling.

Some are so prolific that they can break even at a price of 10 cents per million British thermal units, according to the company. Natural gas futures closed Tuesday at $2.72.

At each step of the transition from commodity to paper to credit, money became more unreal, and detached from the real goods and services that money can be exchanged for. Money transformed itself from a mechanism for trade into an object in its own right. Modern technology—digital money—further stripped money of corporeality.

Satyajit Das. Extreme Money. Masters of the Universe and the Cult of Risk

At the Comex silver depositories Tuesday final figures were: Registered 30.02 Moz, Eligible 136.03 Moz, Total 166.05 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Below, shipping has its “Lehman moment.” At this time it’s impossible to predict how this will impact the global economy, except to note that it will act as a drag. The longer the uncertainty goes on, it’s likely the greater the impact will become. Supposedly some 540,000 twenty foot equivalent unit containers are involved. Some stranded at sea on ships that cannot dock or in port that cannot sail. Some stranded in docks that cannot be loaded or handled for onward delivery. Some empty that cannot be handled and sent back east to Asia. All taking up what until August 31 was productive shipping space. For retailers, next month is their key shipping month. Work-arounds are likely to be costly and slow. 
“Round and round she goes, and where she stops nobody knows,” but this buck is going to stop somewhere and the cost is likely to fall on retailers profit margins. At least, as it seems to me in Merrie Olde London.

Hanjin Fall Is Lehman Moment for Shipping, Seaspan CEO Says

September 13, 2016 — 4:22 AM BST Updated on September 13, 2016 — 8:22 AM BST
The fall of South Korea’s biggest container line Hanjin Shipping Co. is similar to the 2008 collapse of Lehman Brothers Holdings Inc. and has materially impacted the shipping industry, Seaspan Corp. Chief Executive Officer Gerry Wang said.

Seaspan, the Hong Kong-based container-ship leasing company that has three vessels chartered to the distressed line, is evaluating all options and examining systemic risks resulting from Hanjin’s bankruptcy filing, Wang said in an interview with Bloomberg Television. In June, Wang had rejected Hanjin’s requests for charter-rate cuts before the shipping line filed for court receivership last month.

“The fallout of Hanjin Shipping is like Lehman Brothers to the financial markets,” Wang said. “It’s a huge, huge nuclear bomb. It shakes up the supply chain, the cornerstone of globalization.”

With about 93 ships, including 79 container vessels, stranded at 51 ports in 26 countries, the gridlock at Hanjin has disrupted global supply chains during “peak season” when stores in the U.S. stock up before the year’s busiest holiday shopping season. The owner and Hanjin’s parent are in the process of injecting funds to help the beleaguered company offload cargo stuck aboard many ships and break the impasse.

The impact on Seaspan has been small, Wang said, adding he is seeing a “silver lining” as freight rates improve in the short term. The vessels he has leased to other shippers are more than 90 percent full ahead of the holiday season, he said. Seaspan has an operating fleet of about 90 vessels.
“There’s a tremendous flight to safety,” he said. “Freight rates have shot up like crazy over the short term, the long term I don’t know. But one thing’s for sure: This fallout will help demand and supply.”
Hanjin Chairman Cho Yang Ho completed infusing 40 billion won ($36 million) to help the tottering unit, three days after group affiliate Korean Air Lines Co., the biggest shareholder, approved pumping 60 billion won. A former chairwoman of Hanjin Shipping pledged 10 billion won on Monday from her personal wealth as relief to the company. The South Korean government estimates Hanjin Shipping needs at least 600 billion won to cover unpaid costs like fuel and cargo handling.
----Hurt in an industry marked by overcapacity and slowdown in global trade, Hanjin Shipping filed for bankruptcy protection on Aug. 31, and a court in Seoul is hearing the case and will weigh options for a reorganization or liquidation.
“At the end of the day, the industry has been money losing,” Wang said. “For like any industry, for long term, it’s just not sustainable.”

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?

Nanogrids and Microgrids are Keys to Decentralizing the Energy Infrastructure

September 13, 2016 By Carl Weinschenk
The Illinois Institute of Technology’s (IIT) Keating Sports Center is the site of an innovative nanogrid, according to Aquion Energy.

The nanogrid, which was designed by Azimuth Energy, runs both alternating current and direct current and uses solar energy to feed Aquion Aspen batteries. The power control electronics are from Schneider Electric, the press release says.

The DC element of the nanogrid runs the facility’s LED lighting. Other loads and battery charging are handled by the AC element. “This type of system demonstrates that distributed energy can be used to feed DC and AC loads, and that a system of this kind makes sense technically and financially and provides energy efficiency gains,” wrote Terry Holtz, Aquion’s Senior Application Engineer in response to emailed questions from Energy Manager Today. “This type of system also provides resiliency in the case of grid outages. We see this system applying to any commercial customer looking to maximize energy efficiency and bring resiliency to their building loads.”

Nanogrids essentially is the microgrid concept — creating islands of power generation that rely on renewables and can either work in concert with or independently of the utility — taken to its logical conclusion. Indeed, a big piece of the value proposition may be that nanogrids are so small that they ease the transition to decentralized power. Asha Labs puts it this way:

The off-grid central Texas farm with its solar panels and its diesel generator on the back of the pickup truck is already operating as a nanogrid.  Why is it less disruptive to the utility? Because nanogrids, at current scale, do not take too much off the plate of the utility enabling them make the adjustment in a more transitional way. Why is it good for consumers? The ability to manage your own generation, demand and usage using renewable energy is where we are all going so why not get there earlier than others[?]

The small microgrid category – nanogrids and microgrids – is growing. Navigant Research found that the sector will be worth $17.5 billion annually by 2024. That represents the lion’s share of the $25 billion value of the remote power systems by that year, according to Navigant.

The monthly Coppock Indicators finished August.

DJIA: 18401  +18 Up NASDAQ:  5213 +16 Up. SP500: 2171 +18 Up.

No comments:

Post a Comment