Tuesday, 4 October 2016

"Can't anybody here play this game?"

Baltic Dry Index. 864 -11    Brent Crude 50.76

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

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way--in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.

Charles Dickens. A Tale of Two Cities.
We open with life in a confusing America and ever more scary Europe. Is the US economy recovering or heading back into a slowdown? Does America need another interest rate hike rate or is it already too late in the day for that? Is the Atlanta Fed right or is the Cleveland Fed right? What does the Washington talking chair have to say? Given the state of Germany, Deutsche Bank, and Italy, is it all moot anyway? Isn’t a European banking fiasco about to detonate the next Lehman?
Below America and Europe on the brink. But on the brink of what?
"Been in this game one-hundred years, but I see new ways to lose 'em I never knew existed before."
Casey Stengel.

Two Fed GDP trackers show economic growth wilting

Published: Oct 3, 2016 2:25 p.m. ET

GDP, once seen growing 3%-plus, now likely to just break 2%

The U.S. economy got off to a roaring start in the third quarter, statistically speaking, but the glow has clearly faded.

The Atlanta Federal Reserve’s GDPNow chopped its forecast for U.S. growth to 2.2% on Monday, well below its 3.5% estimate a month ago.

A similar undertaking by the New York Fed suggests gross domestic product will expand at a 2.2% clip in the three months running from July to September. The Atlanta and New York Fed forecasts are based on statistical models tied to high-frequency economic reports.

What’s the source of the reduced performance? Retail sales, consumer spending, manufacturing and construction were all weaker than expected toward the end of the quarter.

Also read: U.S. construction spending weakens in August

Now, 2.2% growth isn’t terrible. Indeed, it’s slightly faster than the economy has grown since a recovery got underway in mid-2009 after the end of the Great Recession. It’s also a marked improvement upon the 1.4% and 0.8% growth rates in the first two quarters of 2016.

Still, such a modest growth rate assures the U.S. economy will fail to reach the 3% mark for an unprecedented 11th straight year. The last time the economy grew faster than 3% was 2005.

Before the current recovery, the economy had grown an average of 3.3% per year.

Fed’s Mester Says Case for November Hike Will Likely Be Strong

October 3, 2016 — 8:48 PM BS
Federal Reserve Bank of Cleveland President Loretta Mester said the economy is ripe for an interest-rate increase and repeated that the Fed’s November meeting should be viewed as “live” for a policy decision, despite its proximity to the U.S. presidential election.

“I would expect that the case would remain compelling” for a rate hike when the Federal Open Market Committee gathers in Washington Nov. 1-2, the week before Americans head to the polls, she told Kathleen Hays in an interview on Bloomberg Television Monday. Mester added that politics wouldn’t affect the decision.

Mester was one of three voters on the FOMC to dissent in favor of hiking when policy makers decided on Sept. 21 to leave interest rates unchanged. Following the meeting, Fed Chair Janet Yellen said she didn’t see any evidence that low unemployment was triggering a rise in inflation that required an increase.
Mester said she expects growth to pick up in the second half of 2016 and inflation to move back toward the Fed’s 2 percent target over the next couple of years. The argument for hiking, she added, was a “preemptive” one, and the economy was not yet overheating.

“I don’t think we’re behind the curve,” she said. But, “we’ve learned over history that the Fed should be looking ahead and not just waiting.”

Yellen Can’t Hide the Struggle Inside the Fed

“We do not discuss politics at our meetings.”

September 30, 2016 — 11:00 AM BST
At the presidential debate on Sept. 26, Republican candidate Donald Trump accused Federal Reserve Chair Janet Yellen of inflating “a big, fat, ugly bubble” by keeping interest rates too low. Yellen couldn’t just shrug off the accusation, because only five days earlier three members of her own rate-setting group, the Federal Open Market Committee, had expressed the same idea in more delicate language. Loretta Mester, Esther George, and Eric Rosengren dissented from the FOMC decision to stand pat on rates, the committee announced, because they “preferred” to raise the federal funds rate a quarter percentage point at the meeting.

It isn’t easy running a central bank, especially during an election campaign, and even more so during this campaign, when there’s a deep division within the economics profession over whether U.S. interest rates are too low. As the uneven record of central banking goes to show, setting interest rates is a bewildering business. But exposing that bewilderment to the public makes the Fed seem ineffective, which renders it more vulnerable to attack from the likes of Trump, who said in the debate that the Fed “is being more political than Secretary Clinton” and is keeping rates low to help President Obama until he hits the golf courses in January.
The difficulty for Yellen is that although the Fed’s motivations aren’t political, its actions are inherently political in the sense that they affect the economy and thus create winners and losers.

Deutsche Bank and 3 other ways Europe is giving investors heartburn

Published: Oct 3, 2016 4:56 p.m. ET

Europe yet to put debt crisis fully behind it

Oh, Europe, will you ever get it together?

Deutsche Bank sent shock waves through global markets last week, underlining the continent’s failure to draw a line under the region’s banking woes.

That is not the only challenge. After a quiescent interlude, worries about Britain’s impending exit from the European Union are creating fallout fears of their own. Italy is headed toward a constitutional referendum that could further fray political and economic ties in the eurozone.

“Many of the underlying problems that hurt Europe back in 2009-2012 (uncompetitiveness in the periphery, questionable sovereign debt sustainability, poor growth potential) have not been addressed fundamentally, but rather have been hidden by aggressive [European Central Bank] action,” wrote analysts at Montreal-based Pavilion, in a Monday research note.

Throw in growing suspicions that the European Central Bank—and other global monetary policy makers—are running out of tools to use to boost the economy and stubbornly low inflation, and it is no surprise investors are feeling at least a bit uneasy.

Here’s a rundown of the biggest concerns plaguing Europe right now:
We close for the day with the oil patch. OPEC just threw American frackers and Iran a lifebelt.

Shale Oil Firms Hedge 2017 Prices in ‘Droves’ on OPEC Rally

October 3, 2016 — 2:51 PM BST Updated on October 4, 2016 — 12:00 AM BST
Independent oil companies are using the post-OPEC rally to hedge their price risk for next year, banks and consultants said, a trend that’s likely to be viewed with concern from Saudi Arabia to Venezuela.

The clamor to hedge -- locking in future cash flows and sales prices -- could translate into higher U.S. oil production next year, offsetting an output cut that the Organization of Petroleum Exporting Countries outlined in Algiers last week. Shale firms in particular would enjoy extra income to pay for additional drilling.

“We are seeing significant producer flows which early estimates suggest could be the highest we have seen all year,” Adam Longson, commodity strategist at Morgan Stanley in New York said in a note to clients.

Crude futures in New York surged more than $4 a barrel since OPEC surprised traders by agreeing to trim output at a gathering in Algiers on Sept. 28. West Texas Intermediate traded at $48.77 a barrel, down 4 cents, at 6:58 a.m. Singapore time on Tuesday after closing at the highest in three months.

Harry Tchilinguirian, head of commodity research at BNP Paribas SA in London, said on Friday that OPEC had thrown a “lifeline” to U.S. shale firms, prompting them to hedge “in droves.” The bank has “seen many queries coming through” from producers, he said.

The WTI 2017 calendar strip -- an average of future prices next year that’s often used as a reference for hedging activity -- rose above $50 a barrel to its highest since August on Monday. “When calendar 2017 pricing rises into the low-to-mid $50s, as it is doing now, producer hedging rises materially,” Longson said.

Iran, OPEC’s Big Winner, Signs Landmark Oil Investment Contract

October 3, 2016 — 10:00 PM BST
Iran, fresh from an OPEC meeting where it won significant concessions from regional rival Saudi Arabia, will start the process of rejuvenating its sanctions-ravaged energy industry on Tuesday when the state oil company signs a new-model oil investment contract.

National Iranian Oil Co. will complete a $2.5 billion deal with a group of local companies, according to an oil ministry official. The new type of contract, designed to better reward investment in oil and natural gas production, is seen by Oil Minister Bijan Namdar Zanganeh as crucial in increasing the country’s long-term export potential.

Although it may take years for the deal to bear fruit, the signing will cap a good few days for Zanganeh, who returned from last week’s OPEC meeting in Algiers having secured Iran’s right to pump more oil even as Saudi Arabia and its Gulf Arab allies agreed to curb output. President Hassan Rouhani’s government has argued that it should be allowed to return production to levels achieved before international sanctions curbed shipments.

 “Iranians feel that they’ve missed out on a big, big party because of sanctions,” Francisco Blanch, head of commodities research at Bank of America Merrill Lynch, said in an interview. “Sanctions basically took a lot of production out at a time when oil prices were very, very high. Iran doesn’t really have to cut production, and it’s going to get a higher price.”

The prospect of higher oil -- benchmark prices in London traded at a three-month high above $50 a barrel on Monday -- coupled with increased investment in the energy industry will also be a boost to Rouhani, who faces a reelection battle next year when he must convince voters that rapprochement with the West is paying off economically.

Together with rising oil exports, the oilfield development contract to be signed Tuesday will be evidence of progress after the Iranian government won backing for the new investor contract. The local companies, which haven’t been identified publicly, will develop the South Yaran field in southwest Iran, near the Iraqi border.

The International Monetary Fund said Monday that economic conditions in Iran are improving substantially and forecast growth of at least 4.5 percent in 2016-17.

"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
At the Comex silver depositories Monday final figures were: Registered 29.29 Moz, Eligible 144.06 Moz, Total 173.35 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Below, an interesting question from Harvard.

Is Company Failure Inevitable?

26 Sep 2016
New Book: Companies don’t generally fail because of competition; it’s out-of-touch leadership that kills them. Lead and Disrupt coauthor Michael L. Tushman discusses how companies must continue to invest in their core products while innovating in new areas.

The vast majority of businesses in the United States kick the bucket before they reach middle age. Less than 0.1 percent of firms founded in the US make it to the age of 40. And among firms founded in 1976, only 10 percent were still going strong a decade later.

Large, long-successful companies are clearly not immune to perishing, either. Polaroid, founded in 1937, dominated the market for instant photographs and was also one of the first companies to invest in digital imaging, yet the business closed in 2008. In 1955, RCA was almost twice as big as IBM and was viewed as having better technology, yet by 1986, it was pronounced dead.

And the list of bankrupt or deceased giants goes on: RadioShack, General Foods, Blockbuster, Borders, Circuit City.

Why did these once world-beaters succumb? A new book, Lead and Disrupt: How to Solve the Innovator’s Dilemma, says that while each of these firms has a unique sinking-ship tale to tell, they all flopped for essentially the same reason: They suffered from a failure by leadership to grapple with changing technologies and business markets.

“The leaders of these companies were rigid in one way or another—unable or unwilling to sense new opportunities and to reconfigure the firm’s assets in ways that permitted the company to continue to survive and prosper,” write authors Michael L. Tushman, the Paul R. Lawrence MBA Class of 1942 Professor of Business Administration at Harvard Business School, and Charles A. O’Reilly III, the Frank E. Buck Professor of Management at Stanford University’s Graduate School of Business.

The authors, who have spent more than a decade helping companies innovate, say business leaders can dodge failure by adopting an “ambidextrous” approach—continuing to invest in their existing products or services while at the same time striving to adapt and grow by innovating in new areas.

Some firms have pulled off this tricky balance. IBM was founded in 1913 as a maker of mechanical tabulating machines and today is a $100 billion company that earns 85 percent of its revenue from software and services that didn’t exist 50 years ago. Amazon, which started out selling books online, is now the largest web retailer and a major player in cloud-based utility computing.

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?

Scientists pair up two stars from the world of chemistry

Date: September 28, 2016

Source: Technical University Munich

Summary: Many scientists consider graphene to be a wonder material. Now, a team of researchers has succeeded in linking graphene with another important chemical group, the porphyrins. Porphyrins are well-known because of their striking functional properties which for example play a central role in chlorophyll during photosynthesis. These new hybrid structures could also be used in the field of molecular electronics, catalysis or even as sensors.
Many scientists consider graphene to be a wonder material. Now, a team of researchers at the Technical University of Munich (TUM) has succeeded in linking graphene with another important chemical group, the porphyrins. Porphyrins are well-known because of their striking functional properties which for example play a central role in chlorophyll during photosynthesis. These new hybrid structures could also be used in the field of molecular electronics, catalysis or even as sensors.
Hardly any material is currently receiving as much attention in research as graphene. It is flexible, extremely thin and transparent, while at the same time it has very high tensile strength and conducts electricity, ideal prerequisites for a wide variety of application areas. However, using graphene to capture solar energy or as a gas sensor requires other specific properties as well. These properties can be achieved by fusing functional molecules with the carbon layer.
In previous research, scientists were primarily concerned with wet-chemical methods for attaching the molecules to the surface of the material. Together with his colleagues, Molecular Engineering at Functional Interfaces Professor Wilhelm Auwärter decided to take a different approach: They were able to link porphyrin molecules to graphene in a controlled manner in an ultra-high vacuum using the catalytic properties of a silver surface on which the graphene layer rested. When heated, the porphyrin molecules lose hydrogen atoms at their periphery and can thus form new bonds with the graphene edges.
Clean and controllable
"This method creates a clean and controllable environment," explains Professor Auwärter. "We can see exactly how the molecules bond and what types of bonds occur."
----In the future this new method may make it possible to bond other molecules to graphene as well. The researchers also want to take even better control of the reaction, achieving targeted modifications by attaching molecules to carbon nanostructures such as graphene ribbons. These nanostructures are of central importance in electronic applications.

The monthly Coppock Indicators finished September

DJIA: 18308  +28 Up NASDAQ:  5312 +21 Up. SP500: 2168 +32 Up.

No comments:

Post a Comment