Monday, 3 October 2016

Fires, Fiddles And Rome.

Baltic Dry Index. 875 -13    Brent Crude 49.96

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

All the best stories in the world are but one story in reality - the story of escape. It is the only thing which interests us all and at all times, how to escape.

Walter Bagehot.

We open what I suspect will become Deutsche Bank’s make or break key week, with oil rallying on OPEC’s aspirational plan to support oil prices, while pumping out near record amounts of crude oil. How many times have we heard this sort of nonsense before. Yet in today’s market casinos fuelled by central banksters pumping in record amounts of new electronic cash at the push of a button, leveraged derivatives gambling is the only game left in town.

We open with Brent Crude testing 50 dollars to the upside again. Supposedly OPEC is to let us all know how this new levitation regime works at the end of November. To me this looks like nothing more than a bull raid to squeeze out the shorts.

Oil Bulls Rewarded as Crude Surges After OPEC Output Agreement

October 3, 2016 — 12:00 AM BST
Oil investors’ bullish bets on last week’s OPEC meeting paid off.

While most analysts weren’t expecting a deal, money managers increased wagers on rising prices by the most since January ahead of the Organization of Petroleum Exporting Countries’ talks in Algiers. Oil capped the biggest monthly gain since April after the group announced Sept. 28 an agreement to limit production for the first time in eight years.

"There’s been a lot of skepticism," said Eric Nuttall, who manages a $130 million (C$171 million) energy fund at Sprott Asset Management LP in Toronto. "OPEC has changed since the last cycle. They’ve just gone through the worst selloff of oil in history. I’m more bullish than I was, and I was bullish before."

Investors increased their long position in West Texas Intermediate crude by 24,131 futures and options, or 8.1 percent, during the week ended Sept. 27, according to the Commodity Futures Trading Commission. Bets on falling prices dropped, after increasing at the fastest pace in more than a year during the previous week.

WTI futures rose 2.8 percent to $44.67 a barrel in the report week before settling at $48.24 Sept. 30. Crude climbed 7.9 percent last month, the first September increase since 2010.

OPEC surprised most analysts by agreeing on the framework for a deal to limit crude output as a supply surplus persists amid the two-year oil slump. Ministers said the group will keep production in a range of 32.5 to 33 million barrels a day. Earlier this month, Saudi Arabia signaled a decision was unlikely at the meeting, which would instead be a chance to consult.
"They did show they are going to defend prices," said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $133 billion of assets. "They don’t want to see market volatility below $40 and are willing to defend it."

OPEC pumped a record 33.69 million barrels a day in August, according to a Bloomberg survey, with Saudi Arabia boosting output to an all-time high.

But it’s challenging for the group to follow through on the cuts -- and, historically, there’s been a "credibility problem," he said. While the deal could add as much as $10 a barrel to oil prices, Goldman Sachs Group Inc. said it’s unclear how the plan will be implemented.

Russian Finance Minister Anton Siluanov questioned the plan and said Sept. 30 the country will not revise its budget outlook, which is based on the assumption that oil will average $40 a barrel the next three years.

Citigroup analysts pointed to OPEC’s plan to set up a committee to negotiate how to divide up cuts among members, noting that “this is still kicking the can down the road.” Iran, Nigeria and Libya have said they’re exempt from a deal.

As “the next Lehman” gets closer by the day, and with it the likelihood of the collapse of the Great Nixonian Error of fiat money, communist money, demand for fully paid up, numbered physical gold held outside of the banking system is soaring. No one wants their gold confiscated by larcenous feckless governments, or “Corzined,” hypothecated away MF Global style when trouble hits.

"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."

 President F.D. Roosevelt, 1933

Secret Alpine Gold Vaults Are the New Swiss Bank Accounts

“There has been a real interest in alternatives to bank deposits.”

September 30, 2016 — 8:00 AM BST
Deep in the Swiss Alps, next to an old airstrip suitable for landing Gulfstream and Falcon jets, is a vast bunker that holds what may be one of the world’s largest stashes of gold. The entrance, protected by a guard in a bulletproof vest, is a small metal door set into a granite mountain face at the end of a narrow country lane. Behind two farther doors sits a 3.5-ton metal portal that opens only after a code is entered and an iris scan and a facial-recognition screen are performed. A maze of tunnels once used by Swiss armed forces lies within.

The owner of this gold vault wants to remain anonymous for fear of compromising security, and he worries that even disclosing the name of his company might lead thieves his way. He’s quick to dismiss questions about how carefully he vets clients but says many who come to him looking for a safe haven for their assets don’t pass his sniff test. “For every client we take, we turn one or two away,” he says. “We don’t want problems.”

Demand for gold storage has risen since the 2008 financial crisis. Many of the wealthy see owning gold as a hedge against the insecurity of banks and a reasonable investment at a time when markets are volatile and bank accounts and low-risk bonds pay almost no yield. It may also be a way to avoid the increasing scrutiny of tax authorities. In high-profile cases, U.S., French, and German prosecutors have gone after citizens of those countries with undeclared Swiss bank accounts.

Swiss storage operations such as these don’t have the same obligation that Swiss banks do to report suspicious transactions to federal regulators. Americans aren’t required under the U.S. Foreign Account Tax Compliance Act to declare gold stored outside financial institutions.

Of the roughly 1,000 former military bunkers still in existence across Switzerland, a few hundred have been sold in recent years, and about 10 are now storage sites holding gold as well as computer data, according to the Swiss defense department.

Few match the opulence of the airstrip setup, whose owner claims to run the largest store of gold for private clients—and the seventh-largest gold vault in the world. Near the runway sits the VIP lounge and a pair of luxurious apartments for clients. The walls of the apartments are lined with aged wood from Polish barns. South African quartzite was chosen for the floors to match the faded gray timber, and the amenities—bathroom mirror, TV screens—can retract into the ceiling, counter, or wall. The owner offers a place for clients to sleep and eat, because “many do not want to leave a paper trail of credit card receipts and passports” at hotels and restaurants.

Some miles away, Dolf Wipfli, the founder and chief executive officer of a different company, Swiss Data Safe, is one of the few operators willing to be interviewed about his business. The gold Swiss Data Safe stores for clients is kept in a mountainside bunker outside the hamlet of Amsteg. On a recent tour, Wipfli wouldn’t disclose the gold’s exact location, choosing instead to take visitors into a room containing computer servers for the other half of his business, providing data backup storage. Wipfli declines to say how much he charges to store gold. The company’s website has versions in Chinese and Russian.

We close for today awaiting bankster action from Italy. As usual with financial news from Italy, fires, fiddling, and Nero’s Rome springs to mind.

Senior Italian bankers to meet Monday over sale of four banks: sources

Sun Oct 2, 2016 | 5:06pm EDT
Italy's economy minister has called a meeting with some of the country's top bankers on Monday to discuss stalled efforts to sell four small banks that were rescued from bankruptcy last year, sources said.

Bank of Italy Governor Ignazio Visco was expected to join the gathering, which comes just days after sources said the European Union had agreed to extend a Sept. 30 deadline for the sale of the troubled lenders.

Il Messaggero newspaper reported at the weekend that the European Central Bank had rejected a plan put forward by UBI Banca to buy three of the four banks -- Banca Marche, Banca Etruria and CariChieti.

It said the ECB was demanding that UBI should raise 600 million euros in fresh capital if it wanted to pursue the deal. UBI was only prepared to raise a maximum 400 million euros, the paper added in its unsourced article.

The ECB declined to comment on the story.

"The meeting is planned for (Monday) afternoon. There is only one item on the agenda; how to find a solution for the (four) banks," said a source, who declined to be named.

"Frankfurt (the ECB) is putting up ever more hurdles. We have to find a solution now because we can't carry on with this uncertainty," the source said.

Another source said the meeting would be held in the morning.

Two other sources looked to play down the encounter, saying it was a routine gathering of senior bankers, like others already held in Rome earlier this year, with no major announcements expected.

“It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those [Credit Default Swap] transactions.”

Joseph J. Cassano,  former head of A.I.G. Financial Products, London, August 2007. AIG was bailed out with 85 billion September 2008, after Cassano’s riskless CDS blew up.
At the Comex silver depositories Friday final figures were: Registered 30.36 Moz, Eligible 142.96 Moz, Total 173.32 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Along the lines that it never rains but it pours, the sky fell in on Germany’s dodgy Deutsche Bank on Saturday and Sunday.  If found guilty in Milan, I wonder if this triggers the RICO Acts in the USA? From Bloomberg’s reporting it sounds like old Three Card Monte di Siena has cut a deal, which can’t be good for DB. I suspect that this will be the key week of the year for DB. By the end of the week Deutsche Bank will either be well on its way to restoring confidence in its brand and survival, or will be caught up in “a next Lehman” whirlpool.
“I think we agree, the past is over.”

DB CEO John Cryan, with apologies to President George W. Bush.

Deutsche Bank Charged Over Paschi Accounts as Legal Hits Mount

October 1, 2016 — 8:34 PM BST
Deutsche Bank AG was dealt a fresh blow on Saturday when an Italian court charged the company, an employee and five former executives for colluding with Banca Monte dei Paschi di Siena SpA to falsify the Italian lender’s accounts in 2008.
Michele Faissola, who oversaw global rates at the time, and Ivor Dunbar, former co-head of global capital markets, were among those indicted in a Milan court. Both were top deputies to former Deutsche Bank co-chief executive officer Anshu Jain, and both have left the company.
Deutsche Bank has been trying to reassure investors and clients that it can withstand the financial strain of mounting legal bills. A U.S. Department of Justice request last month that the lender pay $14 billion to settle a case tied to mortgage-backed securities rattled confidence and drove its shares to record lows. CEO John Cryan had to defend the bank’s resilience after some hedge funds cut back their cash balances.
“This is another ugly picture, and it’s painful even if it’s an old transaction,” Christopher Wheeler, a financial analyst with Atlantic Equities LLP in London, said of the Italian case.
Faissola declined to comment. Dunbar didn’t immediately return a message to his mobile phone.
The charges follow a three-year probe that, according to prosecutors, showed Monte Paschi used the transactions to hide losses, leading to a misrepresentation of its accounts between 2008 and 2012. The deals came to light in January 2013, when Bloomberg News reported that Monte Paschi used derivatives struck with Deutsche Bank to mask losses from an earlier derivative contract dubbed Santorini.
Monte Paschi, the world’s oldest bank, restated its accounts and had to tap shareholders twice to replenish capital amid a surge in bad loans and losses on derivatives. It’s now attempting to convince investors to buy billions of euros of soured debt before another stock sale.
Deutsche Bank’s shares have slumped 49 percent in Frankfurt this year, and swung wildly last week. Monte Paschi has dropped 84 percent this year on concern it will struggle to restore profitability and strengthen its finances.

The Deutsche Bank managers were indicted along with former executives at Nomura Holdings Inc., who struck a similar deal with the Italian bank, and at Monte Paschi.

The international firms are also named as defendants in the indictment, as Italian law makes companies liable for certain crimes committed by their representatives. A trial is scheduled for Dec. 15.

---- Monte Paschi asked for a plea-bargain agreement in July. The lender said at that time that the request was agreed to with prosecutors in the Milan investigation, and if accepted by the judge the bank will need to forfeit 10 million euros ($11.2 million) and pay a fine of 600,000 euros. A decision is expected on Oct. 14.

---- Deutsche Bank faces inquiries into additional legal issues, including precious metals trading and billions of dollars in transfers out of Russia.
"When it rains, it pours,” said Marco Elser, a partner at Lonsin Capital Ltd., a London-based asset-management firm. “They have their hand caught in every single cookie jar. I think the market is seeing a wounded lion and will soon prey on it."

Merkel’s Deputy Criticizes Deutsche Bank for ‘Speculation’ Model

October 2, 2016 — 9:36 PM BST
German Vice Chancellor Sigmar Gabriel criticized Deutsche Bank for building its business on “speculation” and said he’s concerned about job losses at the nation’s biggest lender.

Gabriel, head of the junior party in German Chancellor Angela Merkel’s governing coalition, suggested it’s ironic that Chief Executive Officer John Cryan, in a letter to staff, blamed market forces and “heavy speculation” for buffeting Deutsche Bank’s shares.

“I don’t know whether to laugh or be angry that the bank that declared speculation to be its business model now declares itself a victim of speculators,” Gabriel, who leads Germany’s Social Democratic Party, told reporters on his plane during a trip to Iran. “I’m worried about the people employed by Deutsche Bank.”

Almost half of the bank’s 101,000 employees are based in Germany. Deutsche Bank, Europe’s biggest investment bank, dropped to record lows last week after after U.S. authorities sought a fine of as much as $14 billion for mortgage-backed securities deals. The stock rebounded on Friday after Agence France-Presse reported that the lender was nearing a settlement of $5.4 billion with the Justice Department.

German hard line on Italy may rebound with Deutsche in crisis

Fri Sep 30, 2016 | 12:25pm EDT
Germany's insistence that Italy accept tough conditions in tackling its problem lenders may rebound now that Berlin faces a banking crisis of its own.

After months of argument over how to deal with bad debts in the Italian financial system, Deutsche Bank (DBKGn.DE) instead took center stage on Friday, with its share price near record lows and its chief executive trying to reassure staff and markets that Germany's biggest bank remains robust.

For many in Italy, including Prime Minister Matteo Renzi, this diverted attention from the country's own difficulties in recapitalising the likes of Banca Monte dei Paschi di Siena. (BMPS.MI)

Renzi went easy on expressing any Schadenfreude on Friday, but knocked the ball back into the German court. "We have always said that the European Union has to do everything in its power to fix the problems of the banking sector and the main worry focuses on the German lenders," he told national broadcaster RAI.

He is not alone. The International Monetary Fund has named Deutsche as a bigger potential risk to the wider financial system than any other global bank.

With Monte dei Paschi struggling to persuade investors to back its third recapitalization in as many years, Economy minister Pier Carlo Padoan acknowledged Italy had to get its own house in order, but not in isolation.

"Just like the problem of bad bank loans must be solved within a reasonable time frame, so it should be for Deutsche Bank's problems," he told La Stampa newspaper.

Rome and Berlin have been at odds for months over demands that Italian savers should shoulder the burden of a rescue of Monte dei Paschi, Italy's third biggest and oldest bank.

Rome had tried to shield institutional investors and ordinary Italians who put their savings into the bank's bonds, while Berlin had wanted them to suffer losses as a condition for allowing state support.

There can be few fields of human endeavour in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.

John Kenneth Galbraith.

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?

'Incomprehensible' birth of supercrystal explained

Date: September 28, 2016

Source: Utrecht University

Summary: Two years ago, a research team published an article explaining how they had created a material with unique and extremely interesting electronic characteristics. In this 'supercrystal', the electrons move almost with the speed of photons, and the electric current can be switched on and off. This makes it ideal for ultra-fast electronics. But at the time, the researchers were at a loss to explain how this 'supercrystal' obtained its unique structure. Now they have unraveled the mystery, and it appears to involve a completely different mechanism for crystal formation.
This is an important insight for research into new materials with unique electronic characteristics. The results of their research were published online in Nature Materials.
The 'supercrystal' develops when tiny nanocrystals form a perfectly ordered surface one layer thick. In this super-matrix, the structure of the atoms -- A, B, A, B -- precisely follows that of the nanocrystals itself. "But how such a neatly ordered super-matrix could be born from all of those nanocrystals was incomprehensible to us," says Prof. Daniël Vanmaekelbergh from Utrecht University. "Now that we have insight into how the matrix is formed, we can conduct much more focused research into how we can make the structures that we would like to have."
To make the superstructure, the nanocrystals are dissolved in an oleaginous fluid that floats on a layer of coolant. As the oil evaporates, the nanocrystals appear to form a neat hexagonal structure on the surface of the water. But according to Vanmaekelbergh, something mysterious occurs: the nanocrystals rotate simultaneously and systematically into a pseudo-hexagonal structure. "It's as if they're synchronised swimmers," he explains.
Lego blocks
Only then do they make contact, and the nanocrystals 'click' together like Lego blocks to form a surface of a single, perfect layer. Until now, this mechanism has only been observed in metals, which are a completely different material.
X-ray radiation
It was not easy for the researchers to determine this surprising mechanism, as nanocrystals are too small to observe with an optical microscope. So the PhD candidates Jaco Geuchies and Carlo van Overbeek developed an experiment that followed the formation of the superstructure using X-ray radiation. With each change in the structure, the X-ray radiation was refracted in a different way. The researchers could then derive the movement of the nanocrystals from the changes in refraction.
The nanocrystals are semiconductors that are ideally suited for switching electric currents on and off. Forming specific perfect superstructures from these kinds of nanocrystals can dramatically increase the speed of the electronic current through the material.
Important step
Graphene offers perhaps the most spectacular current speed of any material, but graphene is not suitable for use in electronic switches. So the researchers went looking for a material with a structure similar to that of graphene, but with atoms or nanocrystals that have better characteristics for electronic switches. "That is why it is such an important step that we now understand how these interesting structures are formed," according to Vanmaekelbergh.

The monthly Coppock Indicators finished September

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

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