Monday, 19 September 2016

The Ghost of Europe.

Baltic Dry Index. 800 +36    Brent Crude 46.53

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

The EUSSR was dead: to begin with. There is no doubt whatever about that. The register of its burial was signed by the clergyman, the clerk, the undertaker, and the chief mourner. John Bull signed it: and John Bull’s name was good upon 'Change, for anything he chose to put his hand to. The EUSSR was as dead as a door-nail.

With apologies to Charles Dickens and A Christmas Carol.

The wealth and jobs destroying EUSSR is dead, and no one knows what to do about it. Migrant Mad Merkel in Germany continues to be repudiated at the polls, leaving Europe’s paymaster largely rudderless as Italy drifts towards a banking catastrophe. Deutsche Bank, Germany’s largest bank is under existential attack by the Americans. Germany, France, Italy, and Spain, must come up with a plan on who will make up for the UK’s soon to be missing net contribution to the dead EUSSR. GB is the largest net contributor to EU funds behind Germany. Of course after Brexit,  the EUSSR could cut back on spending to match its reduced means, but that would mean reforming the Common Agricultural Policy  by which France lives high on the hog. That’s about as likely as Turkey joining the European Union before Christmas.

Below, Europe adrift after the Bratislava boat trip to nowhere. Christmas came early for John Bull.

Merkel’s Defeat in Berlin Election Shows Old Parties Diminished

September 18, 2016 — 5:16 PM BST Updated on September 19, 2016 — 5:00 AM BST
Chancellor Angela Merkel’s party and its coalition partner lost support in regional elections in Berlin as the anti-immigration Alternative for Germany siphoned off voters, extending its challenge to the country’s political establishment.

The Social Democrats, the junior coalition partner in the national government, won the election for the capital’s city council and Merkel’s Christian Democratic Union finished second. Yet their combined voter share declined by about a quarter, leaving the “grand coalition” of the two biggest parties without a majority to run Germany’s biggest city. Alternative for Germany, or AfD, was projected to win about 14 percent, putting it just behind the resurgent anti-capitalist Left party and the Greens.

With state elections done for the year, Merkel’s next task is to halt coalition strife over her rejection of a cap on migration, a demand pushed by the AfD but also by Merkel’s Bavarian party allies. Pressure to settle the dispute is likely to grow ahead of a CDU convention in December that’s meant to set the party’s course for national elections in a year’s time. Merkel will address the Berlin result at a news conference at 1:30 p.m. local time Monday.

---- Electoral successes by the AfD in a string of state votes are roiling politics in Europe’s biggest economy after last year’s record influx of asylum seekers, which has dragged down poll ratings for Merkel and her party. After finishing third behind the AfD in a state vote two weeks ago, Merkel’s party was headed for its worst showing in Berlin since the end of World War II and an exit from the city government.

Italy's Renzi steps up attack on EU, Merkel

Sun Sep 18, 2016 | 9:10am EDT
Italian Prime Minister Matteo Renzi stepped up his attacks against other European Union leaders on Sunday after an EU summit in Bratislava which he said amounted to no more than "a nice cruise on the Danube."
Renzi said at the end of Friday's summit he was dissatisfied with its closing statement, after he was excluded from a joint news conference by German Chancellor Angela Merkel and French President Francois Hollande..

In particular, he criticized the lack of commitments on the economy and immigration in the summit's conclusions, which he himself signed.

In a fiery interview in daily Corriere della Sera on Sunday Renzi - who has staked his career on a referendum this year on his plan for constitutional reform - intensified his criticisms, though he remained vague on what commitments he would have liked the summit to have produced.

"If we want to pass the afternoon writing documents without any soul or any horizon they can do it on their own," Renzi said of his fellow leaders.

"I don't know what Merkel is referring to when she talks about the 'spirit of Bratislava'," he said. "If things go on like this, instead of the spirit of Bratislava we'll be talking about the ghost of Europe."

Brexit? What Brexit? EU on cruise control

Sun Sep 18, 2016 | 9:38pm EDT
The "Brexit cruise" didn't get very far. EU leaders drifted down the Danube for an hour, said little about Britain over a leisurely shipboard lunch, then circled back to Bratislava to resume Friday's summit.

Beneath the surface, though, things have been stirring on Brexit. Summit chairman Donald Tusk later stirred them up more by saying Britain's poker-faced prime minister, Theresa May, had let him glimpse her cards, indicating divorce talks prompted by June's referendum may start in four to five months.

Britain's plan to leave the European Union was at the heart of the meeting of the 27 other member states in Slovakia, where May was the notable absentee. But it seemed an empty heart.

Book-ended by talks ashore on repairing the loss of trust in the EU exposed by the British vote, the cruise conversation was minimal, according to Tusk. This left leaders back where they started - waiting for Mrs May and, when the summit ended, bickering with each other over migrants and economics.

Tusk and others repeated their mantra of "no negotiation without notification" - that the EU will not so much as talk to the British until May triggers a two-year countdown to Brexit by formally saying Britain will leave under Article 50 of the EU treaty.

The legal mechanics, written to discourage anyone quitting, mean that triggering it flips negotiating power from London to Brussels by binding Britain to a deadline to strike a deal or lose favored access to its main export market.

That poses dilemmas for both sides of how much to talk and when. Diplomats speak of a "chicken and egg situation".

France's Le Pen says she is 'candidate of the people,' eager for presidential vote

Sat Sep 17, 2016 | 9:00am EDT
Far-right National Front party leader Marine Le Pen on Saturday said she was eager for France's presidential election campaign to start, portraying herself as the "candidate of the people" and mocking her opponents' primaries as cockfights.

Opinion polls consistently show the anti-immigration, anti-EU Le Pen making it to the second round of the 2017 election. Her ratings have been boosted by worries over Europe's refugee crisis and concerns over Islamist attacks,

But the same polls also show Le Pen losing the second-round runoff -- to be held in early May -- prompting her to make further efforts to polish her image and that of her camp, including with a campaign poster sporting the slogan "France Brought to Peace", and not bearing the party's name or logo.

"I'm very relaxed, impatient to start this presidential campaign," Le Pen told reporters. "I am eager for the match to start, to debate issues that are essential to the survival of our country as it is now.

She was speaking at her party's annual rally, this year in the Mediterranean town of Frejus, where the mayor, David Rachline, is a rising party star and Le Pen's campaign manager.

Le Pen, who was alone amid France's major party leaders to back Britain's exit from the European Union and is also alone in supporting U.S. Republican candidate Donald Trump, hopes to benefit from rising anti-establishment sentiment amid voters on both sides of the Atlantic.

U.S. Is Investigating Bosch in Widening VW Diesel-Cheat Scandal

September 16, 2016 — 6:00 PM BST
U.S. prosecutors are investigating whether Germany’s Robert Bosch GmbH, which provided software to Volkswagen AG, conspired with the automaker to engineer diesel cars that would cheat U.S. emissions testing, according to two people familiar with the matter.

Among the questions the Justice Department is asking in the criminal probe, one of them said, is whether automakers in addition to VW used Bosch software to skirt environmental standards. Bosch, which is also under U.S. civil probe and German inquiry, is cooperating in investigations and can’t comment on them, said spokesman Rene Ziegler.

The line of inquiry broadens what is already the costliest scandal in U.S. automaking history. Wolfsburg-based VW faces an industry-record $16.5 billion, and counting, in criminal and civil litigation fines after admitting last year that its diesel cars were outfitted with a “defeat device” that lowered emissions to legal levels only when it detected the vehicle was being tested.

More than a half dozen big manufacturers sell diesel-powered vehicles in the U.S. The people familiar with the matter declined to say whether specific makers are under scrutiny.

A second supplier may also be part of the widening probe: When prosecutors in Detroit outlined their case last week against a VW engineer who pleaded guilty to conspiracy in the matter, they said he had help from a Berlin-based company that is 50 percent owned by Volkswagen, described as "Company A" in a court filing. That company, according to a another person familiar with the matter, is IAV GmbH, which supplies VW and other automakers.

IAV employees were part of a group working with Bosch and VW to develop emissions functions, according to U.S. court filings in a separate case.

In Asian news, it’s all about the meeting of the Fed and the BOJ. Neither central bank is expected to surprise the markets, but all eyes will be on what weasel words the Fed opts for when yet again backing away from even a tiny quarter percent interest rate rise. But should the Fedsters surprise all with an unexpected rate hike after last week all but saying they wouldn’t, expect the temper tantrum of temper tantrums on Wall Street, and panic in the Hillary Clinton campaign.

Asia stocks rise before central bank meetings, oil bounces

Sun Sep 18, 2016 | 10:54pm EDT
Asian shares advanced on Monday ahead of central bank meetings in the United States and Japan this week, while oil prices bounced on talk of an OPEC deal on output and reports of fighting around Libyan oil ports.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.8 percent, though that remained well short of recent one-year peaks.

Shanghai .SSEC put on 0.6 percent, while South Korea .KS11 added 0.6 percent. Liquidity was lacking with Tokyo closed for a holiday.

EMini futures for the S&P 500 ESc1 were trading around 0.3 percent firmer. On Friday, the S&P 500 .SPX had eased 0.38 percent and the Dow .DJI 0.49 percent.

Financials led the losses on news authorities had proposed to fine Deutsche Bank (DB.N) $14 billion sent its shares down 9.35 percent. Goldman Sachs (GS.N) and JPMorgan (JPM.N) both fell over 1 percent.

Bombings in New York City and New Jersey and a stabbing at a Minnesota shopping mall added to a general air of risk aversion.

Oil climbs as Venezuela sees output deal, Libya suffers clashes

Sun Sep 18, 2016 | 11:46pm EDT
Oil prices rose almost 2 percent on Monday, after Venezuela said OPEC and non-OPEC producers were close to reaching an output stabilizing deal and as clashes in Libya raised concerns that efforts to restart crude exports could be disrupted.

Venezuelan President Nicolas Maduro has said that a deal could be announced this month to stabilize oil markets, which have come under pressure due to a persistent glut and a price collapse over the past two years.

Brent crude futures LCOc1 were at $46.59 per barrel at 0301 GMT (11:01 p.m. EDT), up 82 cents, or 1.8 percent, from their previous settlement. U.S. crude CLc1 was up 88 cents, or about 2 percent, at $43.91 a barrel.

The rise in oil prices is a reaction to Venezuelan comments about producers reaching a possible output agreement, said Ric Spooner, CMC Markets' chief market analyst. Loading disruptions in Libya were also underpinning the market, Spooner added.

"(Libya) unable to get their first ship loaded is a reminder that it may be difficult for Libya to increase production."

Clashes in Libya have halted the loading of the first oil cargo from the port of Ras Lanuf in close to two years, while also raising fears of a new conflict over Libya's oil resources.

Brent and WTI prices had been dragged to multi-week lows on Friday amid worries returning supplies from Libya would add to the global supply glut.

Eight years on from the collapse of Lehman Brothers on Wall Street, and nothing in banking is fixed on either side of the Atlantic. Worse the next Lehman is out there and getting closer by the day.

Opinion: Eight years after Lehman’s fall, Wall Street is still reeling

Published: Sept 15, 2016 1:17 p.m. ET

Investment banks deserve to suffer because they still haven’t cleaned up their act

Eight years ago Sept. 15, Lehman Brothers filed for Chapter 11 protection in what remains the biggest bankruptcy in U.S. history.

The failure of the fourth-largest U.S. investment bank launched the worst financial crisis and recession since the Great Depression, costing the U.S. economy more than $22 trillion, according to the Government Accountability Office.

Nobody’s celebrating this grim anniversary, least of all on Wall Street, whose highly leveraged speculation in credit derivatives nearly brought down the global financial system.

Those big banks and some of their top executives are still around, thanks to U.S. taxpayers and the Justice Department, which gave leading bankers “get out of jail free” cards. But overpaid CEOs aside, they’re not living anywhere near as high on the hog.

The big banks are chafing under much stricter regulation. Citigroup Inc. C, +0.71%  and J.P. Morgan Chase & Co. JPM, +0.36%  have sold off hundreds of billions of dollars of assets to lower risk. The big banks have struggled to make money because of rigorous stress tests, stringent capital requirements and other restrictions, both international and domestic.

The hostile new regulatory regime has coincided with massive shifts in global markets and radical moves by the world’s central banks to depress interest rates far below where they had ever been. Several rounds of “quantitative easing” by the Federal Reserve, European Central Bank and Bank of Japan and negative interest rates on government bonds of major countries have drastically cut banks’ earnings from fixed income, once a huge cash cow.

Meanwhile, technology has revolutionized trading, and automation continues to replace humans as the big firms struggle to cut expenses. The emergence of robo-advisers, along with a big move by investors from active to passive investing, challenge the banks’ asset-management business, a rare bright spot in recent years.
Oh, well don't get technical at a time like this.

The Fed’s talking chair, with apologies to Cary Grant.  His Girl Friday 1940.
At the Comex silver depositories Friday final figures were: Registered 31.15 Moz, Eligible 138.14 Moz, Total 169.29 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, Mark Carney, the ex-Goldmanite, discredited, and for the time being, Governor of the Bank of England. With a spectacular lack of judgement and impartiality in the Brexit campaign, like his, it’s time to return him to Goldman Sachs, where he should easily fit right back in, says Harry Phibbs. Mr. Carney swallowed hook line and sinker, Dodgy Dave and the Chancellor’s Project Fear campaign, and placed the BOE firmly in the Remainiac team. New Prime Minister May and John Bull need a new Brexit Governor for the BOE. One whose first loyalty isn’t to the Chancellor of the day, nor team Goldman Sachs. In  the real world outside of Goldman Sachs, no one carries on paying for a duff financial advisor with a losing track record.
“Call it the Goldman Sachs test. If this is something Goldman would do to its clients, don't do it."
Felix Salmon.

Bank of England Chief Mark Carney Should Be Fired

By Harry Phibbs | 4:38 am, September 16, 2016
Mark Carney, as Governor of the Bank of England, allowed himself to become a pin-up for the Remain campaign during the EU referendum. In one sense this was no surprise – Carney spent 13 years working with Goldman Sachs, which gave financial backing to the “Stronger In” campaign. He is the embodiment of the sort of corporatist establishment figure we could expect to be devoted to the European Union. The world of crony capitalism is his world.
Yet it was still pretty shocking that the Bank of England’s reputation for professionalism and impartiality was so casually squandered. There are two problems. First of all, the Bank of England shouldn’t get involved in telling us how to vote. Secondly, the prediction that voting for Brexit would mean voting for an immediate recession has been proved false.
What makes it all the worse is the lack of any hint of contrition from Carney for his misjudgment. He told the Treasury Select Committee last week that he is “absolutely serene”. But his behaviour means that subsequent decisions by the Bank have been distorted.
Rather than accepting the reality of the economic data, there has been a face-saving exercise. Although there is no recession, decisions on interest rates pretend that there is. So we had the unnecessary cut to an artificially low level last month and the refusal to put rates back up this month despite the abundant evidence of the Bank’s Monetary Policy Committee action being unnecessary.
---- This was a big call. George Osborne, the Chancellor of the Exchequer, was emphatic about the “immediate” recession that “would” be caused by a Brexit vote; he produced a Treasury dodgy dossier; and insisted an “emergency budget” would be imperative. But at least Osborne has gone.
Carney might have put in a few caveats in the small print but he was on the same campaign. He gave full encouragement to the message that the Bank of England believed that a vote for Brexit was a vote for recession. Carney said a recession was “likely” and then allowed Osborne to spin this as Brexit meaning that Britain”would be poorer” and that such a vote would be rapidly followed by a “DIY recession”.
---- Two former Chancellors of the Exchequer – Lord Lawson and Lord Lamont – challenged Carney’s behaviour: “There has been startling dishonesty in the economic debate, with a woeful failure on the part of the Bank of England, the Treasury, and other official sources to present a fair and balanced analysis,” they said. “They have been peddling phoney forecasts and scare stories to back up the attempts of David Cameron and George Osborne to frighten the electorate into voting Remain.”
The former Governor of the Bank of England, Lord King, said the “scaremongering tactics” meant it was “the most dispiriting campaign in my lifetime”. After the referendum result King added: “We are now in a better position to rebalance the UK economy.”
---- Yet even if Carney had not been humiliated by his predictions being so discredited he still showed poor judgment interfering in political decision making. If for a referendum why not a General Election? If he can give (false) warnings against Brexit why not (valid) warnings about the harm that would be caused to the economy by a Corbyn Government? If he pompously claims a “responsibility” to provide one than why not the other? I would hope that the British people would have the good sense not to put Jeremy Corbyn into Downing Street – but we certainly don’t need Carney telling us what to do.
Just after the EU referendum result the Bank of England’s annual report was published. It said that: “The Governor’s salary was set at £480,000 p.a. with membership of the Career Average section of the Bank Pension Fund or 30% of salary in lieu.” He would “receive no bonuses or other performance-related pay” (which is just as well) but that he had been paid “relocation support” for coming over for Canada.
If only we could offer him “relocation support” to go back. The British economy could flourish with a new Bank of England Governor who actually believed in making a success of Brexit. We can manage very well without this discredited figure. We don’t need someone who smugly and falsely talks down the economy and charges as half a million a year for the privilege. Let him go back to Goldman Sachs where his contempt for free market competition and self governing democracies means he would fit in so well.

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?

Nuclear Energy May Rise Again

September 15, 2016
A different kind of nuclear reactor may be in the offing now that Terrestrial Energy has cleared a hurdle to get financing. The US Department of Energy has just asked it to submit the second part of an application to get a loan guarantee.

In 2014, the Energy Department said it could potentially make $12.5 billion available to build advanced reactors. As for Terrestrial, it is asking for as much as $1.2 billion to build a 195 megawatt molten salt reactors. They can burn “thorium” that may not only be safer but also create less radioactive waste than uranium.

The technology “represents true innovation in safety, cost and functionality. It offers safe and reliable power solutions for electricity production, and energy for industrial process heat generation,” the company said in a statement. “Together, these extend the applicability of nuclear energy far beyond its current footprint.”  

Terrestrial is working with the Idaho National Laboratory to find a suitable site for the project — one that would be federally owned.

Thorium is abundant in nature, with about four times the amount in the earth’s crust than uranium. When used as a nuclear fuel, the whole cycle produces less radioactive waste than does uranium. But the thorium fuel cycle still makes radioactive material that must be warehoused and some say it does produce an isotope of uranium that could be used in nuclear weapons, although plutonium that is the preferred method is not a byproduct.

Why has this country chosen uranium over thorium? The decision was made in the 1950s during the emergence of nuclear power generation. That was during the Cold War and the U.S. government had decided that the national treasury would be invested in uranium fuels, as they can be more easily enriched to make nuclear bombs.

Today, the U.S. might have chosen a different path. But it would be too costly to retrofit the existing nuclear energy infrastructure to comport with the thorium fuel cycle. The supply chain is now fully stocked and includes everything from uranium suppliers to reactor designers.

In the United States, a handful of nuclear plants have closed shop because they could not compete with combined cycle natural gas plants. And two have closed because of technical issues. While this country is working to get four new nuclear units up-and-running in Georgia and South Carolina, it is also partnering with China and Canada’s Terrestrial Energy to operate the highly advanced next-generation nuclear plants.

As for China, its next-generation 100 megawatt smaller plant could be operational within a decade.

The monthly Coppock Indicators finished August.

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

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