Thursday, 22 September 2016

The Fed Folds.

Baltic Dry Index. 903 +38    Brent Crude 47.30

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

“No one believes more firmly than Ebenezer Squid that all Fedsters are equal. He would be only too happy to let you make your decisions for yourselves. But sometimes you might make the wrong decisions, Fedsters, and then where should we be?”

With apologies to George Orwell, Animal Farm

She came, she saw, Wall Street’s Great Vampire Squids conquered. All too predictably, the Fed folded yesterday, leaving their key interest rate unchanged, rather than face a temper tantrum from Wall Street. Wall Street has the Fed over a barrel, and everyone all around the world knows it. For now its bond and stock market bubbles back on again. But the Fed and its fold up talking chair have lost all credibility, even main stream media has noticed. They might as well invite Ebenezer Squid and team Wall Street on to the Board.

Asian stocks shoot higher after Fed decision

Published: Sept 21, 2016 11:07 p.m. ET
Asian stocks shot higher across the board Thursday, buoyed by the U.S. Federal Reserve’s decision to stick to the status quo, as well as rising commodity prices.

The Hang Seng Index in Hong Kong HSI, +1.14%   and Korea’s Kospi SEU, +1.10%   were both up 1%, while the S&P/ASX 200 XJO, +0.85%   rose 0.8% and the Shanghai Composite Index was up 0.7% SHCOMP, +0.75%  . Japan was closed for a public holiday.

Overnight, the Federal Reserve opted to hold its key short-term interest rate steady. Asia-based traders welcomed the news as a rate rise would have pulled money out of emerging markets.

Fed officials also cut their 2016 growth forecast for the U.S. economy to 1.8%, from a 2.0% projection in June, and lowered their long-term view on the growth rate to 1.8% from 2%.

Some in the market were caught off-guard by the strength of the relief rally.

“It took me a bit by surprise,” said Daniel So, a strategist China Merchants Bank International Ltd. “Of course it is good news for the financial markets in the short term, but the market has expected this and the interest rate risk hasn’t gone away.”

The Fed’s move followed the Bank of Japan’s announcement Wednesday that it left unchanged its negative interest rate on certain commercial-bank deposits and said it would introduce a 10-year interest-rate target.
Despite the dissent of three more hawkish Federal Open Market Committee members, the consensus around a rate increase before the end of the year appears solid. According to Chicago Mercantile Exchange’s FedWatch tool, there is a 59.3% chance of a change in interest rates at the December meeting, a touch higher than the previous day’s probability.

‘Whites-of-eyes’ comment contradicts what Yellen said about the Fed being able to wait

Published: Sept 21, 2016 4:24 p.m. ET

News conference with top central banker has confused message

Even after an hour of questioning , Federal Reserve Chairwoman Janet Yellen has some explaining to do.
On the one hand, she said Wednesday that Fed officials had judged that the case for higher interest rates had “strengthened” but that most members of the policy committee decided not to raise rates today because the economy has more room to run to bring more discouraged workers back into the labor market.

“We don’t see the economy is overheating now,” Yellen said, justifying the decision not to raise rates at today’s meeting.

That sure sounds like the Fed will keep rates low until it sees evidence of overheating.

But, but, but....

On the other hand, Yellen said later on in her press conference that the Fed doesn’t believe in a “whites-of-their-eyes sort of approach” to policy making. In other words, the Fed can’t wait until overheating is apparent; it must raise rates pre-emptively to keep inflation under control.

“Monetary policy works with long and variable lags.” That’s the first thing everyone is taught about monetary policy, and Yellen said she still agrees with that statement. If you wait until the economy overheats, then inflation could get a foothold and it could be harder to rein in.

So the Fed needs to be ahead of the curve, always keeping in mind that a policy change taken today may not have its full impact until late 2017 or early 2018.

So, which is it? A Fed that can wait so the economy can run for a while, or a Fed that can’t wait until it sees “the whites” of inflation’s eyes?

Despite Wall Street’s all too apparent victory, it’s very late in the game in the casinos, and the smart money is getting out. The bubbles probably continue on out to the US presidential election on November 8, but getting out early always beats getting carried out last.

Tiger Cub Citrone Sees Market in Biggest Correction Since 2008

September 21, 2016 — 3:31 PM BST
Robert Citrone, the Tiger cub who now runs one of the best-known macro hedge funds, is warning investors that the market moment they’ve been anticipating is at hand.

“We believe we are in the midst of the market correction we have been expecting," Citrone, founder of Discovery Capital Management, told investors in an e-mail obtained by Bloomberg. “It will likely persist over the next 3-4 months and be the largest correction since the 2008 crisis,” he said. The firm managed about $12.4 billion at the start of 2016.

Money managers including Paul Singer have signaled that the markets may be on the precipice as central banks reexamine monetary policy. In remarks last week at the CNBC Institutional Investor Delivering Alpha Conference, Singer said years of easing had created "a very dangerous time in the global economy and global financial markets." Carl Icahn, who warned of risks at the same event, described predicting the moment of a correction as "sort of a guessing game."

Market volatility returned on about Sept. 9, when concern that central bankers may be losing their appetite for further stimulus efforts spurred the biggest slump since the U.K. secession vote in June, ending the summer’s calm. The CBOE Volatility Index has increased about 19 percent this month through Sept. 20.

In Asian news, capital flight from China picks up. Can the end be far away?

Suitcases of Cash: China Travel Data Hint at Capital Outflow

September 21, 2016 — 10:00 PM BST Updated on September 22, 2016 — 3:38 AM BST
The explosive growth of spending overseas by Chinese tourists dwarfs the increase in the number of Chinese traveling abroad. The most likely reason? Disguised capital outflows.

So says former U.S. Treasury official Brad Setser, who drilled into the spending data provided by some of the most popular destinations for Chinese travelers. The nation’s tourism deficit -- a measure of foreign visitor expenditure in China minus what its citizens spend overseas -- soared to $206 billion in the 12 months through June 30, up from $77 billion in 2013, the last year of the yuan’s one-way appreciation trajectory.

While outbound tourism has grown decently -- to about 120 million visitors last year from 98 million in 2013 -- that acceleration pales in comparison with the spending figures.

Chinese tourists seem to be packing more than just sunscreen and cameras on vacation. The data discrepancy suggests they’re also shifting cash by buying homes while studying abroad, signing up for life insurance products in Hong Kong, or opening deposit accounts to squirrel money offshore, Setser said.
That’s bad news for the global economy.

"Right now, the world as a whole needs Chinese demand for its goods and services far more than it needs Chinese demand for bank deposits and bonds," said Setser, now a senior fellow at the Council on Foreign Relations in New York. "It helps us understand how the slowdown in China over the past few years is impacting world growth."

Data Discrepancies

The U.S. and Japan are among nations that break out spending by visitors from China. The U.S. data, which include spending on education by students from China, shows a steady increase, but on a trajectory nowhere near as steep as Chinese data show. Japanese and European Union numbers reveal similar discrepancies, says Setser.

We close with long overdue better news in the Hanjin Shipping insolvency. Hanjin’s largest shareholder, Korean Air Lines is to provide an emergency relief loan against Hanjin’s receivables.  Together with some earlier cash injections, this ought to be enough to get most ships at sea unloaded, though it’s unlikely to help containers stuck in ports waiting to be loaded.

Hanjin Shipping shares skyrocket after $54 million relief loan

Published: Sept 21, 2016 11:22 p.m. ET

Korean Air Lines infuses funds to get supply chain moving

SEOUL — South Korea’s Hanjin Shipping Co. got temporary relief after its largest shareholder’s board agreed to provide 60 billion won ($54 million) to get its stalled supply chain moving again.

Korean Air Lines Co. 003490, +5.90%  , which owns a third of Hanjin 117930, +29.61%  , approved the lending plan at a board meeting late Wednesday, saying it would secure the funds using Hanjin’s accounts receivable as collateral.

“We’ll try to offer the emergency funds as soon as possible. We hope the money will help Hanjin’s cargo operations around the world,” a Korean Air spokesman said Thursday.

Shares of Hanjin soared as much as 28% following Korean Air’s decision. The stock had fallen more than 20% to record low levels on Wednesday as the possibility of liquidation of the company loomed large.

But relief loans while better than nothing, don’t seem likely to save Hanjin.

Doubts raised on Hanjin rehab plan as ships clog Busan port

Wed Sep 21, 2016 | 9:13am EDT
The South Korean court handling Hanjin Shipping's (117930.KS) receivership cast doubt on the container carrier's ability to survive a restructuring, news reports said, as 13 Hanjin ships crowded waters outside the country's biggest port.

A rehabilitation plan for the world's seventh-largest container carrier is "realistically impossible" if top priority debt such as backlogged charter fees exceed 1 trillion won ($896 million), the Seoul Central District Court said, South Korea's Yonhap newswire reported on Wednesday.

Hanjin, which filed for court receivership late last month, must submit a rehabilitation plan in December that creditors owed billions of dollars will be called to agree to.

Hanjin has begun returning chartered vessels to their owners and is trying to secure funds to help unload ships. An estimated $14 billion in cargo was initially trapped on its ships around the world, creating havoc ahead of the crucial holiday shopping season.

Some 13 Hanjin container ships were waiting in international waters outside Busan port, according to latest Hanjin data on Wednesday, as South Korea's largest port struggled to accommodate vessels denied entry elsewhere and forced to sail home to South Korea.

"It's a highly abnormal situation. Time is money for a shipper, so the more ships wait, the more losses," a Busan Port Authority spokeswoman said.

"Some ships are waiting because they cannot leave for their destination," she said.

At the Hanjin Newport section of Busan port, 78.6 percent of container capacity was filled as of Wednesday morning, higher than the 60 percent preferred for efficient operation, the port spokeswoman said. Of about 33,000 containers at Hanjin Newport, about 40 percent held cargo.

Busan is one of a handful of major global ports where Hanjin ships can freely unload cargo without threat from creditors. South Korea's maritime ministry said earlier this month Busan and Incheon port authorities will guarantee payments for most services offered to Hanjin Shipping vessels.

---- With debt of about 6 trillion won ($5.4 billion) at the end of June and the South Korean government's unwillingness to mount a rescue, expectations are low that Hanjin Shipping will survive.
Top priority debt means claims for public interests, which are paid first to creditors and include cargo owners' damages and unpaid charter fees, Yonhap reported citing the Seoul Central District Court.
Backlogged charter fees that occurred after Hanjin Shipping's court receivership have topped 40 billion won, while cargo owners' claims for damages are expected to begin in earnest after 3-4 weeks have passed from original delivery schedules, the report said.

“If we went back on the gold standard and we adhered to the actual structure of the gold standard as it existed prior to 1913, we’d be fine. Remember that the period 1870 to 1913 was one of the most aggressive periods economically that we’ve had in the United States, and that was a golden period of the gold standard. I’m known as a gold bug and everyone laughs at me, but why do central banks own gold now?” 

Alan Greenspan. June 28, 2016.
At the Comex silver depositories Wednesday final figures were: Registered 31.05 Moz, Eligible 139.64 Moz, Total 170.69 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, banking American style.  Why do these “banks” still have banking licences? Are the CEOs and CFOs running these “banks” really fit and proper people to be running banks?

The Debate Is Over: Banking Has Become a Criminal Enterprise in the U.S.

By Pam Martens and Russ Martens: September 19, 2016

Tomorrow the U.S. Senate Banking Committee will hold a hearing to take testimony from Wells Fargo CEO John Stumpf and Federal regulators to understand how this mega bank was able to get away with opening more than two million fake customer accounts over a span of years. The accounts and/or credit cards were never authorized by the customer and were opened solely by employees to meet sales quotas, get bonuses or to avoid getting fired for failing to meet sales targets.

The only reason the Republican-controlled Senate is holding this hearing is because the Wells Fargo fake-account story got a lot of coverage in the media when the Consumer Financial Protection Bureau (CFPB) announced a $185 million settlement over the charges on September 8. The reason the story got a lot of media coverage is because it’s a simple story to tell: widely respected bank opens two million accounts for its customers without their knowledge or permission, sometimes illegally funneling money to the new account from the old account to generate fees.
In July of last year, when Citibank, the deposit-taking retail bank settled charges with the CFPB for $700 million for deceptively selling add-on products to credit card customers, the Senate Banking Committee yawned and did nothing.  The story didn’t get major press attention because it was a complicated story to tell. Among a long list of fraudulent practices, the CFPB found that Citibank led 2.2 million customers to believe they were paying to have their credit card monitored for fraud and identity theft, “when, in fact, these services were either not being performed at all, or were only partially performed,” according to the CFPB.
The CFPB charges against Citibank came exactly two months after Citbank’s parent, Citicorp, pleaded guilty to a felony with the Justice Department in connection with the rigging of foreign currency. On the same day, another U.S. mega bank, JPMorgan Chase, also pleaded guilty to a felony related to the same crime. Both banks are more than a century old and both banks, on May 20 of last year, pleaded guilty to a felony for the first time in their history.
The public first got its peek into the corrupt culture at Citigroup, the bank holding company of Citibank, on December 4, 2011 when Richard Bowen, a former Citigroup Vice President and whistleblower, appeared on 60 Minutes. Bowen explained how he had found that Citigroup was buying fraudulent mortgages and selling them to investors as sound investments. When his superiors ignored his warnings, in November 2007 he wrote to top management, including the CFO, chief risk officer and Robert Rubin, the Chairman of Citigroup’s executive committee who, as a former Treasury Secretary under Bill Clinton, had pushed to deregulate Wall Street banks – allowing them to hold FDIC insured products and cross-sell their carnival barker wares to the public.
Bowen explained on 60 Minutes what happens when an honest employee speaks out in one of the Wall Street banking behemoths: “I was relieved of most of my responsibility and I no longer was physically with the organization.” He was told not to show up at the bank.
----When the big Wall Street banks collapsed under the weight of their own corruption in 2008, rather than being prosecuted by the Justice Department, the banks were bailed out through a secret, unprecedented $13 trillion revolving loan program operated by the Federal Reserve. Citigroup received the largest amount of these loans: over $2.5 trillion between 2007 and 2010. These loans were made frequently at less than one percent interest while the insolvent Citigroup charged some of its customers double-digit interest rates on credit cards.

Which brings us to today’s crisis of confidence in the U.S. banking system. The underfunded Consumer Financial Protection Bureau, which Republicans in Congress are attempting to neuter further, has received thousands of new complaints against the banking giants of Wall Street, which are publicly available for viewing here. (Just put the name of the bank you want to inspect in the search box.) Searching under the name Citibank brings up 29,000 rows of complaints. A search under Chase, the retail banking unit of JPMorgan Chase, brings up 37,000 rows of complaints.

----Chronology of Financial Abuses at Citigroup: (Only a Partial Listing):
September 19, 2002: FTC Announcement —  “In the largest consumer protection settlement in FTC history, Citigroup Inc. will pay $215 million to resolve Federal Trade Commission charges that Associates First Capital Corporation and Associates Corporation of North America (The Associates) engaged in systematic and widespread deceptive and abusive lending practices.”
October 31, 2003: U.S. District Court Judge William Pauley signs a settlement order agreed to by multiple regulators for Citigroup to pay $400 million over issuance of fraudulent stock research.
May 28, 2004: The Federal Reserve announces a $70-million penalty against Citigroup Inc. and CitiFinancial Credit Co. over their handling of high-interest-rate “subprime” mortgages and personal loans.
May 31, 2005: SEC announces a $208 million settlement with Citigroup over improper  transactions by its proprietary mutual funds.
June 28, 2005: Citigroup agrees to pay the UK regulator, the FSA, $25 million over its “Dr. Evil” trade that manipulated the European bond market.
March 26, 2008: Citigroup settles a suit with Enron creditors for $1.66 billion over claims it aided and abetted Enron in hiding its debt.
August 26, 2008: California Attorney General Edmund Brown Jr. announces a settlement with Citigroup to return all monies improperly taken from customers through an illegal account sweeping program. According to the Attorney General: “Nationally, the company took more than $14 million from its customers, including $1.6 million from California residents, through the use of a computer program that wrongfully swept positive account balances from credit-card customer accounts into Citibank’s general fund…The company knowingly stole from its customers, mostly poor people and the recently deceased, when it designed and implemented the sweeps,” Attorney General Brown said. “When a whistleblower uncovered the scam and brought it to his superiors, they buried the information and continued the illegal practice.”
December 11, 2008: SEC forces Citigroup and UBS to buy back $30 billion in auction rate securities that were improperly sold to investors through misleading information.
Much more

"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

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?

Diamond proves useful material for growing graphene

Date: September 19, 2016

Source:  Argonne National Laboratory

Summary: A new method has been developed to grow graphene that contains relatively few impurities, and costs less to make, in a shorter time and at lower temperatures compared to the processes widely used to make graphene today.
Graphene is the stuff of the future. For years, researchers and technologists have been predicting the utility of the one-atom-thick sheets of pure carbon in everything from advanced touch screens and semiconductors to long-lasting batteries and next-generation solar cells.
But graphene's unique intrinsic properties -- supreme electrical and thermal conductivities and remarkable electron mobility, to name just a few -- can only be fully realized if it is grown free from defects that disrupt the honeycomb pattern of the bound carbon atoms.
A team led by Materials Scientist Anirudha Sumant with the U.S. Department of Energy's (DOE) Argonne National Laboratory's Center for Nanoscale Materials (CNM) and Materials Science Division, along with collaborators at the University of California-Riverside, has developed a method to grow graphene that contains relatively few impurities and costs less to make, in a shorter time and at lower temperatures compared to the processes widely used to make graphene today.
Theoretical work led by Argonne nanoscientist Subramanian Sankaranarayanan at the CNM helped researchers understand the molecular-level processes underlying the graphene growth.
"I'd been dealing with all these different techniques of growing graphene, and you never see such a uniform, smooth surface."
The new technology taps ultrananocrystalline diamond (UNCD), a synthetic type of diamond that Argonne researchers have pioneered through years of research. UNCD serves as a physical substrate, or surface on which the graphene grows, and the source for the carbon atoms that make up a rapidly produced graphene sheet.
"When I first looked at the [scanning electron micrograph] and saw this nice uniform, very complete layer, it was amazing," said Diana Berman, the first author of the study and former postdoctoral research associate who worked with Sumant and is now an Assistant Professor at the University of North Texas. "I'd been dealing with all these different techniques of growing graphene, and you never see such a uniform, smooth surface."
Current graphene fabrication protocols introduce impurities during the etching process itself, which involves adding acid and extra polymers, and when they are transferred to a different substrate for use in electronics.
----The team found that the single-layer, single-domain graphene can be grown over micron-size holes laterally, making them completely free-standing (that is, detached from the underlying substrate). This makes it possible to exploit the intrinsic properties of graphene by fabricating devices directly over free-standing graphene.
The new process is also much more cost-effective than conventional methods based on using silicon carbide as a substrate. Sumant says that the 3- to 4-inch silicon carbide wafers used in these types of growth methods cost about $1,200, while UNCD films on silicon wafers cost less than $500 to make.
The diamond method also takes less than a minute to grow a sheet of graphene, where the conventional method takes on the order of hours.

The monthly Coppock Indicators finished August.

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

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