Monday, 26 September 2016

Sliding From Bad To Worse.

Baltic Dry Index. 941 +04    Brent Crude 46.29

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

“Why, sometimes I've believed as many as six impossible things before breakfast.”

Migrant Mad Merkel, with apologies to Lewis Carroll, Alice in Wonderland

According to reports in Focus Magazine, Deutsche Bank, Germany’s largest, doesn’t have a friend in Mrs Merkel. By implication that means no state aid either for old Three Card Monte di Sienna in Italy, at least not until after a depositor and bondholder bail-in. Europe’s banking crisis looks set to get serious again just as the traditional stock market crash season arrives. In Italy, Grillo’s back.

Merkel Rules out Assistance for Deutsche Bank, Focus Reports

September 24, 2016 — 5:45 PM BST
Chancellor Angela Merkel has ruled out any state assistance for Deutsche Bank AG in the year heading into the national election in September 2017, Focus magazine reported, citing unidentified government officials.

The German leader also declined to step into the Frankfurt-based bank’s legal imbroglio with the U.S. Justice Department, which may seek as much as $14 billion in sanctions against Deutsche Bank’s mortgage-backed securities business, the magazine said. A German government spokesman declined to comment on the report Saturday. A Deutsche Bank spokeswoman also wouldn’t comment.

The finances of Germany’s biggest lender, which has lost almost half of its market value this year, are raising concern among German politicians. At a closed session of Social Democratic finance lawmakers this week, Deutsche Bank’s woes came up alongside a debate over Basel financial rules, according to two people familiar with the matter.

Germany’s government expects a “fair outcome” in the U.S. probe, the Finance Ministry said on Sept. 16.
Deutsche Bank has said it’s unwilling to pay the maximum amount sought by U.S. authorities as investors fret about the bank’s capital. Chief Executive Officer John Cryan, 55, has struggled to boost profitability by selling riskier assets and eliminating jobs as unresolved legal probes and claims add to concerns that the lender will be forced to raise capital.

Grillo says he is back in charge of Italy's 5-Star Movement

Sun Sep 25, 2016 | 9:58am EDT
Beppe Grillo, the irreverent comic who co-founded Italy's anti-establishment 5-Star Movement, declared he was taking back leadership of the bloc this weekend ahead of a year-end referendum that could sink the government.

Saying he was "tired", Grillo stepped aside two years ago, letting a five-member directorate take care of the movement's day-to-day decision making, backed by 5-Star strategist and co-founder Gianroberto Casaleggio.

But much has changed since then. Casaleggio died in April, and missteps by Virginia Raggi, the 5-Star mayor of Rome elected earlier this year, have exposed rifts and confusion among the movement's top lawmakers.
"I'm back," Grillo announced to the 5-Star faithful, tens of thousands of whom filled a large square in the Sicilian capital of Palermo late on Saturday for the movement's annual meeting, which continues on Sunday.

"I will be the political boss and I will take decisions because someone has to," he said during a speech broadcast on TV. Earlier, before taking the stage, Grillo said he would take charge at least until the elections.
Wearing blue jeans and a cotton shirt with the sleeves rolled up, Grillo appeared to relish returning to his role as chief rabble rouser, shouting that the movement had entered its "second phase".

The 5-Star Movement stormed onto the national political scene in 2013 when it won more than 25 percent of the national vote, coming in a close second to the ruling Democratic Party (PD).

With PD Prime Minister Renzi facing a crucial referendum vote on his trademark constitutional reform by the end of the year, the timing of Grillo's announcement appears meant reinvigorate the movement to defeat the referendum and make ready for a vote that could come as early as 2017.

But as bad as continental Europe is, the big worry is China. After the world’s largest ever malinvestment bubble, now comes the correction.

China slowdown is global economy's biggest threat, Rogoff says

5 hours ago
The former chief economist of the International Monetary Fund has told the BBC a slowdown in China is the greatest threat to the global economy.

Ken Rogoff said a calamitous "hard landing" for one of the main engines of global growth could not be ruled out.

"China is going through a big political revolution," he said.

"And I think the economy is slowing down much more than the official figures show,"

Mr Rogoff added: "If you want to look at a part of the world that has a debt problem look at China. They've seen credit fuelled growth and these things don't go on forever."

Last week, the Bank of International Settlements, the global think tank for central banks, said that China's debt to GDP ratio stood at 30.1%, increasing fears that China's economic boom was based on an unstable credit bubble.

The figure was described as "very high by international standards" by the Financial Policy Committee of the Bank of England, which will now test British banks' exposure to a Chinese slowdown.

----"Everyone says China's different, the state owns everything they can control it," Mr Rogoff, now Professor of Economics at Harvard, said.

"Only to a point. It's definitely a worry, a hard landing in China.

----"We're having a pretty sharp landing already and I worry about China becoming more of a problem.
"We've taken it for granted that whatever Europe's doing, Japan's doing - at least China's moving along and there isn't really a substitute for China.

China's Runaway Housing Market Poses Latest Challenge for Yuan

September 26, 2016 — 12:34 AM BST
Here's the latest uncertainty facing China's currency: sky high house prices.

A runaway boom in the largest cities will push investors to look for cheaper alternatives overseas, draining money out of China and putting downward pressure on the yuan in the process, according to analysis by Harrison Hu, Chief Greater China Economist at Royal Bank of Scotland Group Plc. in Singapore.

An "enlarged differential between domestic and foreign asset prices will lead to capital outflows and depreciation, until parity is restored,” Hu wrote in a note. He said that the 30 percent year-on-year price gain in Tier 1 and leading Tier 2 cities implies a 25 percent rise in dollar terms, which far outpaces the 5 percent gain in major U.S. cities. That ratio is here in red: 
"It's commonly believed that China’s policymakers will sacrifice the yuan exchange rate to avoid a sharp correction in domestic property prices, as the latter will more significantly derail China’s economy and the financial system," Hu wrote.

That's because the importance of the property market in the world’s second largest economy far outweighs many sectors, including the stock market. Hu compares property as a percentage of economic output to the far lighter footprint of stocks:

A real estate crash in China could have far reaching consequences and it would be a long time before investors regained their confidence, according to Hu.

That will put policy makers in a very difficult position. While the government has some cards in its hand, such as an ability to control land supply and enforce curbs on new home-buying, history shows that some tightening measures risk backfiring and only stoking speculative behavior such as “panic buying” like that seen in Shanghai earlier this year.

Besides, the regulator’s handling of last year's stock market turmoil did little to inspire confidence in the government’s ability to oversee the bubbly housing market.

“No bubble has a happy ending,” Hu wrote.

We end for today with good news for Russia and good news for global food security. Bad news for the EU’s idiotic sanctions war with Russia.

Russia's Grain May Soon Bring in More Gold Than Oil
13:53 23.09.2016(updated 14:24 23.09.2016)

Amid a record-setting harvest, Russia's agricultural sector is giving the Russian economy a powerful and much-needed boost; according to some observers, the sector even has the potential to gradually wean the country off its dependence on the export of hydrocarbons.

Earlier this month, the UN's Food and Agriculture Organization projected a record grain harvest for Russia, with the US Department of Agriculture following suit, saying that Russian grain exports now exceed those of the US. This year, the country is expected to produce about 64 million metric tons of wheat, with the total grain harvest expected to reach between 113 and 116 million tons. This would mean exceeding contemporary Russia's previous record – set in 2008 when farmers produced 108.2 million tons of grain. About 40 million tons from this year's harvest is expected to be exported, up from the 32 million tons exported last year.

Amid the bumper crop bonanza, which is becoming a regular occurrence as the Russian agro-industrial complex takes advantage of sanctions on European food products, some officials are beginning to suggest that agriculture may soon turn into a major tool helping to ease the country's dependence on oil and gas exports as a percentage of its exports earnings.


"For more than two thousand years gold's natural qualities made it man's universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper."

Hans F. Sennholz
At the Comex silver depositories Friday final figures were: Registered 30.97 Moz, Eligible 139.36 Moz, Total 170.33 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, more bad news from Asia. The great malinvestment bubble is still deflating. In Asia, the Great Vampire Squids are all suddenly cutting back. I blame it on Brexit.

Goldman Sachs Said to Plan 25% Cut to Asia Investment Bank Jobs

September 24, 2016 — 10:07 AM BST
Goldman Sachs Group Inc. plans to cut about a quarter of its investment-banking jobs in Asia, excluding Japan, because of a slump in deal-making in the region, according to a person with knowledge of the matter.

The New York-based bank plans to make the cutback of about 75 jobs in the region later this year, the person said, asking not to be identified because the matter is confidential. The job reduction comes as the bank faces its worst Asia ranking in equity issuance since 2008, according to data compiled by Bloomberg data. A Goldman Sachs spokesman said he was unable to comment.

Asia ex-Japan equity offerings have declined 29 percent this year, and Goldman’s ranking plummeted to 11th from second in 2015, its worst showing in about eight years, the data show. The company also has come under scrutiny by authorities for its role in underwriting $6 billion of bond sales for 1MDB, the Malaysian government fund at the center of several international investigations into suspected corruption and money laundering.

Chinese securities firms are mounting a challenge to western banks like Goldman Sachs and Morgan Stanley in Asia, with mainland companies occupying seven of the top 10 positions in advising on Hong Kong initial public offerings this year, data compiled by Bloomberg show. Postal Savings Bank of China Co. raised $7.4 billion in a Hong Kong initial public offering this week, the world’s biggest first-time share sale this year.

Global investment banks have reduced headcount to trim costs after reporting declines in profit this year. UBS AG trimmed senior management ranks in the region, removing an Asia investment banking co-head position in July. The bank’s pretax profit at its investment bank slumped 48 percent in the second quarter, which the bank partly blamed on a slowdown in its Asia-Pacific equities business. Nomura Holdings Inc. and Macquarie Group Ltd. also cut jobs this year.

Tudor Said to Close Singapore Trading Desk Amid Global Cuts

September 25, 2016 — 10:00 PM BST Updated on September 26, 2016 — 12:52 AM BST
Tudor Investment Corp., the $11 billion hedge fund founded by billionaire Paul Tudor Jones, has closed its Singapore trading desk as part of a global shakeup, according to people familiar with the matter.

The firm still has staff in Singapore focusing on quantitative research, and continues to add such developers, said one of the people, who requested anonymity because the move hasn’t been publicly disclosed. Tudor had employed about 10 people in Singapore before it closed the trading desk, said the person, who declined to say how many people remain in the office.

Tudor dismissed 15 percent of its workforce last month while accelerating its focus on quantitative research, as hedge funds have struggled to navigate markets since the global financial crisis. Quant funds, some of which have outperformed human traders after correctly anticipating market shocks such as Brexit, are gaining in popularity even as traditional hedge funds have suffered the biggest investor redemptions this year since 2009.
---- Among the industry’s oldest hedge fund managers, Greenwich, Connecticut-based Tudor cut jobs after clients pulled more than $2 billion this year amid lackluster returns. The cuts were focused on money managers that had posted losses or failed to post profit, people familiar with the matter said last month. Tudor’s main fund lost 3.2 percent this year through Sept. 9, according to an investor document.

“We’re very important,” Blankfein is quoted as saying in The Times of London. “We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It’s a virtuous cycle.”
He goes on to admit to being the focus of public outrage--"I know I could slit my wrists and people would cheer"--but then blows the attempt to reconciliation by saying he is "doing God's work."

If the financial system goes down, our business is going down and, trust me, yours and everyone else's is going down, too.
Lloyd Blankfein’s CEO Goldman Sachs, Mr. Goldman Sacks 2008 threat/promise.

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?

Adani's largest solar power project in TN is good, but rooftop solar is the way ahead

On Wednesday, 21 September, 2016, the Adani group launched the largest single location solar power project in the world. The group which has interests in ports, edible oil and energy entered the solar sector around two years ago. It began with what was then India’s largest solar power plant (located in Gujarat). It now boasts of having the largest single location solar power plant in the world.
The new project's operations is located in Kamuthi in Ramanathapuram district, Tamil Nadu. It is being undertaken by Adani Green Energy (Tamil Nadu), the renewable energy wing of the Adani Group. The new plant has a capacity of 648 megawatts (MW) and involves an investment of around Rs 4,550 crore.
“A plant of this magnitude reinstates the country’s ambitions of becoming one of the leading green energy producers in the world,” said Gautam Adani, Chairman, Adani Group.

Around 8,500 personnel worked to achieve an average of around 11 MW of installation a day, to set up the plant in a record time of 8 months. The solar power plant is part of the state government’s plans to generate 3 GW of solar power inline.

The India scene
The Adani group, according to a Mercom report, accounts for an 11 percent market share, with a cumulative solar power generation capacity of around 2 GW (see chart).

----With India deciding to source 40 percent of the 100 GW of power through rooftop solar, this is another segment that is bound to be extremely interesting in the coming years. This is because rooftop solar involves almost no land acquisition cost, and little transmission cost (because the distance between the solar panels to the consumers is the shortest). Tata Power currently has the largest solar installed capacity in India with approximately 9 percent. It is followed by ACME with 7 percent and SunEdison with approximately 5.5 percent. The Adani group accounts for 5 percent.

Even globally, solar power has taken centre stage. This is underscored by by Michael Liebreichm, Chairman of the Advisory Board, Bloomberg New Energy Finance (BNEF), in his ‘state of the clean energy industry’ keynote address at BNEF’s Future of Energy Global Summit in New York, earlier this year.

The monthly Coppock Indicators finished August.

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

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