Monday, 5 September 2016

Regulated Globalization.

Baltic Dry Index. 720  +08     Brent Crude 46.73

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

The law of unintended consequences refers to how economic decisions may have effects that are unexpected. Usually this refers to an economic law which distorts consumer or producer behaviour in a way that is not expected.
For example, a law may be implemented with the best intentions to help a group, but, if there are unintended consequences they could end up being worse off.
---- It makes sense to bail out bankrupt banks and avoid financial meltdown.  But, if governments offer this guarantee then banks have a greater incentive to take risks knowing they will get bailed out.

Below, all that is wrong with the EUSSR. It’s all the voters fault, they’re simply not listening to their betters! With European politicians like Mrs Merkel, the EU itself is headed towards breakup, not just the crash of the wealth and jobs destroying, one size fits all, fiat euro. Stay long fully paid up physical gold and silver. Continental Europe’s problems are all coming to a head.

“All too often today, the EU elites seem to be detached from reality.”

Donald Tusk.  EU Council President.

Merkel Seen Defying Populists to Stay Her Course Into 2017 Vote

September 4, 2016 — 11:00 PM BST Updated on September 5, 2016 — 5:41 AM BST
Angela Merkel’s humiliation in her political home state provides further evidence to her opponents that Germany’s first female chancellor has had her day. It may instead make her more likely to run for a fourth term.

The Alternative for Germany, or AfD, capitalized on public discontent with Merkel’s refugee policy Sunday to overtake her Christian Democrats for the first time in a state election, raising questions over her political standing ahead of the next federal ballot in the fall of 2017.

While the result is an undeniable defeat, especially after she campaigned hard at rallies across the Mecklenburg-Western Pomerania region, Merkel used a series of interviews with German media before the vote to signal that she’s holding fast to her open-border policy. The election outcome, though a major embarrassment, is still unlikely to make Merkel budge, according to Holger Schmieding, chief economist at Berenberg Bank.

“There is no rival, there is no alternative,” Schmieding said by phone. As a result, “there isn’t all that much they can do. She’ll have to sit it out.”

A year after her fateful decision to allow refugees passage into Germany from Hungary and one year out from federal elections, Merkel’s popularity has plummeted and her Bavarian CSU allies have been lukewarm on supporting her to run again next year. Yet her Social Democratic coalition partner is plumbing historic lows and the AfD polls higher in state elections than nationally, where all surveys show Merkel’s Christian Democratic Union-led bloc ahead.

Going into the election year, “nobody stands a better chance than Merkel,” Carsten Nickel, an analyst for Teneo Intelligence in Brussels, said by phone. She “is the guarantee for the CDU to come in as strongest party and to make use of the coalition options that she has.” With her focus on the political center, “what she will do is keep calm and carry on.”

----She’s already under pressure from her own bloc to change course. Wolfgang Bosbach, a CDU lawmaker and former chair of the interior affairs committee, told Monday’s Die Welt newspaper that the state election result will go down as a historic defeat and the government’s refugee policy was to blame. He still warned against a debate over Merkel’s candidacy in 2017 as a result.

Italian Bank Rescue That Mustn’t Fail Hangs Over Lake Como Party

September 4, 2016 — 11:00 PM BST
Italy’s business elite concluded an annual summer lakeside retreat dogged by the enduring shadow cast by Europe’s unhealthiest big bank.

The need to revive Banca Monte dei Paschi di Siena SpA, the world’s oldest lender, didn’t feature on the official agenda of the Ambrosetti Forum at Lake Como this weekend, but both Prime Minister Matteo Renzi and his finance minister, Pier Carlo Padoan, were forced to confront the threat that it poses. While the meetings focused on Europe’s migrant crisis and Italy’s economic malaise, financiers in the pillared corridors of the Villa d’Este hotel spoke about little else.

“The success of Monte Paschi’s rescue plan is crucial to assess the near future of the banking system in the country as a whole,” Giovanni Bossi, chief executive officer of Italy’s financial-services firm Banca Ifis SpA said on the sidelines of the forum. “Italy cannot allow a failure of its restructuring that would heavily hurt investors’ perception of Italian banks, increasing the risk of self-fulfilling expectations.”

The institution founded in Siena in the 15th century remains in intensive care after two bailouts since 2009 and 8 billion euros ($8.9 billion) of fresh capital raised from investors in the last two years. Paschi, shown in European stress tests to be the region’s most vulnerable lender to a severe economic shock, is now the focus of a new plan to restore profitability.

At the center of that is Monte Paschi’s need for yet more cash. On July 29 -- the same day of the stress test results -- Chief Executive Officer Fabrizio Viola announced a plan to tap investors again by selling up to 5 billion euros of stock after first moving 28 billion euros of bad loans off the bank’s books for securitization and a subsequent sale. According to Corrado Passera, Italy’s former economic development minister and a former CEO of Intesa Sanpaolo SpA, the stakes couldn’t be higher.

“Monte Paschi represents the weakness of Italy’s banking system,” he said in an interview on Saturday. “If the restructuring plan doesn’t work, it risks a domino effect on the country’s banking system as a whole.”
Meanwhile it’s day two of the Mad Hatter’s China Tea Party in Hangzhou, China. According to French “Love Rat” President Holland, France is in favour of “ a regulated globalization." In this version of the Mad Hatter’s Tea Party, far from reforming France and the rump-EU, the rest of the world is supposed to become more like over regulated France.

Economic Czars Warn G-20 of Risk From Populist Backlash on Trade

September 4, 2016 — 4:34 AM BST Updated on September 4, 2016 — 11:00 PM BST
Global economic leaders stepped up warnings that the populist mood sweeping many developed nations is a threat to trade and growth, calling from the sidelines of the Group of 20 summit for governments and businesses to fight to keep goods flowing across borders.

International Monetary Fund Managing Director Christine Lagarde urged corporate chiefs to lobby governments to keep trade flows up as she cautioned about the outlook for growth into 2017. Her comments on Saturday in Hangzhou, China, were echoed by World Trade Organization Director-General Roberto Azevedo, while Canadian Trade Minister Chrystia Freeland said it’s right to worry about protectionist sentiment.

"Trade is way too low and has been way too low for a long time," Lagarde told business leaders, citing an anti-trade movement in politics, policy and public opinion. "If there is no international trade, if there is no cross-border investment, if services, capital, people and goods do not cross borders, then it’s less activity for you, it’s less jobs in whichever country you are headquartered."

Lagarde’s warning comes amid a dimming global growth outlook and faltering momentum for the U.S.-led Trans-Pacific Partnership trade pact in the final months of President Barack Obama’s term. Presidential candidates Donald Trump and Hillary Clinton have both spoken against the deal, which excludes China, while progress on a U.S.-European Union trade and investment deal known as TTIP has also stalled.

-----G-2O leaders are under pressure to jump start growth that slowed to 2.7 percent last year among their economies, which represent about four-fifths of global gross domestic product. Growth is projected to slow to 2.4 percent this year before picking up to 3 percent next year and 3.1 percent in 2018, according to economists surveyed by Bloomberg.

‘Regulated Globalization’

France’s trade minister Matthias Fekl said late last month that the U.S. hasn’t offered anything substantial in negotiations with the EU on the free-trade deal and that talks should come to an end. His comments followed those of German Economy Minister Sigmar Gabriel, who said TTIP discussions “have de-facto broken down, even if no one wants to say so.

French President Francois Hollande offered some conditional support for trade talks Sunday. "France is for free trade and is open for trade," he told reporters in Hangzhou. "But we won’t accept that trade is at the expense of fundamental principles such as respect for the environment or social protections. We have to decide what sort of growth we want, and France is for a regulated globalization."

China, U.S. commit to refrain from competitive currency devaluations

 Sun Sep 4, 2016 5:54am EDT
China and the United States on Sunday committed anew to refrain from competitive currency devaluations, and China said it would continue an orderly transition to a market-oriented exchange rate for the yuan CNY=CFXS.

A joint "fact sheet", issued a day after U.S. President Barack Obama and his Chinese counterpart Xi Jinping held talks, also said the two countries had committed "not to unnecessarily limit or prevent commercial sales opportunities for foreign suppliers of ICT (information and communications technology) products or services".

While China and the United States cooperate closely on a range of global issues, including North Korea's disputed nuclear program and climate change, the two countries have deep disagreements in other areas, like cyberhacking and human rights.

Both countries said they would "refrain from competitive devaluations and not target exchange rates for competitive purposes", the fact sheet said.

Meanwhile, China would "continue an orderly transition to a market-determined exchange rate, enhancing two-way flexibility. China stresses that there is no basis for a sustained depreciation of the RMB (yuan). Both sides recognize the importance of clear policy communication."
While we close for G-20 day two awaiting their pearls of wisdom in the final press release,  and the final results of the Hong Kong elections which are likely to embarrass President Xi, below yet another warning from the commodity sector of probable trouble ahead from under investment following the current near depression in commodity prices.
Another unintended consequences of central banks manipulating the price of money, setting off serial malinvestment booms and busts, as we operate near the end of the Great Nixonian Error of fiat money, communist money. Of course there’s an element below of talking up one’s book, but that aside, there is significant under investment taking place now in the mining and crude oil sectors. If the world economy drops into serious recession or worse, that underinvestment might be liveable with, but only probably at the price of great social disorder, Venezuelan style.

Platinum supply cliff in sight – Implats

1st September 2016
Johannesburg ( – Underinvestment in platinum mining is poised to result in serious constraints in platinum supply from South Africa in the future.

The early 2020s are foreseen as the years when the current scant investment in growth projects will be severely felt and prices will surprise on the upside after what has been nearly six years of low prices.

“There is just an absolute lack of investment in the platinum industry. We’re not too far from 2020, 2021 and 2022 when supply from this country is going to drop off a cliff,” outgoing Impala Platinum (Implats) CEO Terence Goodlace said during his swansong presentation of results, which saw the company’s platinum production rise 12% but its earnings per share plummet by 67% to 12c a share on low metal prices.

“Ultimately, we’re going to be in a situation where we believe that the ongoing supply deficits that we see now are just going to get worse,” Goodlace said, adding that were it not for the depreciation of the rand/dollar exchange rate, the South African platinum mining industry would be in even more trouble given the $570/oz year-on-year fall in the dollar price of platinum.

That big reduction has hit Implats’ Zimplats and Mimosa platinum mines, in Zimbabwe, which have both had to perform exceptionally diligently to increase production by more than a million tonnes while simultaneously cutting R300-million out of capital expenditure (capex) and costs.
The whole history of civilization is strewn with creeds and institutions which were invaluable at first, and deadly afterwards.

Walter Bagehot.

At the Comex silver depositories Friday final figures were: Registered 26.07 Moz, Eligible 136.12 Moz, Total 162.19 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, caveat emptor when investing in the new technologies of tomorrow.  All that glitters is not gold.

Lithium fantasies vs. bitter realities

Friday, Sept. 2, 2016
Joe Lowry, often revered as “Mr. Lithium” among investors, recently opined in a tweet, “Convinced #lithium supply wont exceed demand in this decade.” In a sane world, such opinions voiced by a 20-year veteran of the lithium industry should have a chilling effect on the rampant investment that has caused the establishment of over 100 new lithium companies worldwide since the beginning of 2016.
But the trading activity in many of these companies shows that the enthusiasm for lithium stocks is not only unaffected by such sentiment: it seems to have a stimulating effect on punters who feel they might be missing the boat.
Rational investors who are typically better informed than mania-induced deal chasers have already profited from the lithium craze, and in the cases of the most sophisticated, have already moved on to other opportunities.
That’s not to say that the boat has left the harbor and is now sailing away from the Great Crap Table that is the speculative junior mining business. There is, and will be, hundreds of opportunities for the risk-tolerant who dream of catching a ten-bagger.
I categorize the startup lithium space into three flavours: 1) Advanced; 2) Speculative; and 3) Dreamers.
In the case of the first category, companies are typified by having an early mover advantage (they were lithium companies before 2016), have a seasoned and well regarded management team who have a history of selling mining assets and/or putting them into production, and which are typically trading above $1 a share, having put exploration dollars into the ground, and demonstrated continued potential economic viability of their projects.
This is the realm of the serious lithium investor, who must presume that there is a potential, as per Joe Lowry’s statement at the outset of this article, that lithium prices might not go any higher, and in fact, could return to a baseline around US$6,000 to $7,000 per tonne for grades suitable for battery ingredients.
The second category is where the high-risk, high-impact opportunities still exist. In most cases, these companies became lithium companies in 2016, have projects that are either geologically untested, and/or are “closeology” plays designed to capitalize on the geological advancement of neighbours.
These companies are typically trading well under a dollar, and have management teams that are more experienced with reactivating shell companies and are what I refer to as the “volume business” opportunists who chase the commodity flavour-of-the-day throughout their careers, picking off “scores” or “passes” along the way.
Not that you can’t make money on this second group. But you have to be agile and quick, and it also helps to have an inside line on what the gameplan of the promotional group behind it is. This is not investing; this is gambling. The only money I direct at such plays is money I can afford to kiss goodbye to without shedding a tear. Not that there is such a thing as a dollar that can afford to be wasted, but there are those among us who are attracted to the potential of an exponential win, even though the odds are not at all in our favour.
The third type of company is the skull and crossbones variety, the pie-in-the-sky, wing-and-a-prayer type of play that is the dregs of the market, that only snags uninformed investment from those who would be better off buying lottery tickets, for those odds are better for making money.
Mark Twain actually gave out some good advice in regard to such companies. He said, “If you want to double your money, take it out of your pocket, fold it in half, and put it back”.
In the case of some lithium juniors, that should be regarded as premium advice.
To find out which lithium juniors fall into which category, subscribe to the Midas Letter Premium Edition. The September edition will be published on Sunday, September 11, 2016.
James West is an investor and the author of the Midas Letter, an investing research report focused on Canadian markets. The views expressed here are his own and are presented for general informational purposes only — they should not be construed as advice to invest in any securities mentioned.
James West and/or associated funds do not own shares in any securities mentioned in this article. For the full Midas Letter disclosure policy, click here. Postmedia and Midas Letter have a revenue sharing arrangement.
"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."

F. A. von Hayek

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?

Low-cost and defect-free graphene

Date: September 2, 2016

Source: University of Erlangen-Nuremberg

Summary: Graphene is one of the most promising new materials. However, researchers across the globe are still looking for a way to produce defect-free graphene at low costs. Chemists have now succeeded in producing defect-free graphene directly from graphite for the first time.
They recently published their findings in the journal Nature Communications.
Graphene is two dimensional and consists of a single layer of carbon atoms. It is particularly good at conducting electricity and heat, transparent and flexible yet strong. Graphene's unique properties make it suitable for use in a wide range of pioneering technologies, such as in transparent electrodes for flexible displays.
However, the semi-conductor industry will only be able to use graphene successfully once properties such as the size, area and number of defects -- which influence its conductivity -- can be improved during synthesis. A team of FAU researchers led by Dr. Andreas Hirsch from the Chair of Organic Chemistry II has recently made a crucial break-through in this area. With the help of the additive benzonitrile, they have found a way of producing defect-free graphene directly from a solution. Their method enables the graphene -- which is of a higher quality than ever achieved before -- to be cut without causing defects and also allows specific electronic properties to be set through the number of charge carriers. Furthermore, their technique is both low-cost and efficient.
A common way of synthesising graphene is through chemical exfoliation of graphite. In this process, metal ions are embedded in graphite, which is made of carbon, resulting in what is known as an intercalation compound. The individual layers of carbon -- the graphene -- are separated using solvents. The stabilised graphene then has to be separated from the solvent and reoxidised. However, defects in the individual layers of carbon, such as hydration and oxidation of carbon atoms in the lattice, can occur during this process. FAU researchers have now found a solution to this problem. By adding the solvent benzonitrile, the graphene can be removed without any additional functional groups forming -- and it remains defect-free.
'This discovery is a break-through for experts in the international field of reductive graphene synthesis,' Professor Hirsch explains. 'Based on this discovery we can expect to see major advancements in terms of the applications of this type of graphene which is produced using wet chemical exfoliation. An example could be cutting defect-free graphene for semi-conductor or sensor technology.'
Additional benefits
The method devised by FAU researchers has another advantage: the reduced benzonitrile molecule formed during the reaction turns red as long as it does not come into contact with oxygen or water. This change in colour allows the number of charge carriers in the system to be determined easily through absorption measurements. This could previously only be done by measuring voltage and means that graphene and battery researchers now have a new way of measuring the charge state. 

The monthly Coppock Indicators finished August.

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

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