Thursday, 27 October 2016

Is Tata About To Implode?

Baltic Dry Index. 802 -11   Brent Crude 50.08

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

Eurasian Snow cover. (How bad will winter be?)

“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 transactions.”

Joseph J. Cassano, a former A.I.G. executive, August 2007, on Credit Default Swaps that wiped out A.I.G in 2008.

We open with news from India. Is Tata about to implode? Is it ta-ta for Tata Sons? Fired CEO Mistry knows where all the skeletons are buried. And if it is about to implode, is it enough of an outside shock to trigger the next global recession?

Booted from Tata Sons, Cyrus Mistry doesn’t look like he’s going down without a fight

October 26, 2016
Cyrus Mistry has come out with all guns blazing against the Tata Group.

After maintaining a stoic silence since Oct. 24, when he was booted out as chairman by the board of directors at Tata Sons, Mistry has now made a scathing attack on the leadership of the 148-year-old group.

“I have to say that the board of directors has not covered itself with glory,” Mistry said in an email to the board of Tata Sons on Oct.25, according to the Economic Times newspaper. Tata Sons is the holding company of the Tata Group. “To ‘replace’ your chairman without so much as a word of explanation and without affording him an opportunity to defend himself…must be unique in the annals of corporate history.”

“The sudden action and lack of explanation has led to all manner of speculation and has done my and the group’s reputation immeasurable harm,” Mistry added. He said he was “shocked beyond words.” After all, Mistry is the first chairman of the group to be unceremoniously shown the door.

Moreover, the former chairman pointed out that some amendments made to the articles of association between the trusts, board, and the chairman had “diminished the role of the Tata Sons chairman” and led to “alternative power structures.” He also said that he was promised a free hand over the operations of the group, which wasn’t the case four years on.

An email to Tata Sons seeking comment on Mistry’s allegations has gone unanswered.

The 48-year-old Mistry, who was chosen by the board after an exhaustive hunt in 2011, has also questioned the corporate governance practices and the work ethic of the group. Before becoming chairman, Mistry had been a member of the board for five years.

“The letter is to emphasise the total lack of corporate governance and a failure of the directors to discharge their fiduciary duty to stakeholders of Tata Sons and the group companies,” Mistry said. The Tata Group has always claimed to take corporate ethics rather seriously, and has a widely held reputation for good governance.

Mistry’s decision to speak out comes a day after Ratan Tata, the former chairman who has now temporarily returned, said that he had retaken control in the “interest of the stability of and reassurance to the Tata Group.” The Tata group is yet to publicly disclose why they sacked Mistry, but media reports have pointed to performance issues, investor concerns and a growing rift between Tata and his successor.

Tata has moved quickly since retaking office. Yesterday (Oct. 25), the 78-year-old addressed the heads of various group companies and is currently studying their ongoing initiatives. Tata Sons also appointed Tata Consultancy Services CEO N Chandrasekaran and Jaguar Land Rover CEO Ralf Speth as additional directors to the board. The board has constituted a selection committee to find a permanent chairman for the group within four months.

In what could be the first move in a long-drawn tussle, the Tata Group has also filed a caveat against any legal action that Mistry might initiate against his removal. Mistry, on his part, has stayed put so far.

“Tatas have filed caveats seeking notice from Cyrus Mistry fearing legal action,” Mistry’s office said in a statement. “Cyrus has not filed any caveats. He has already made a statement that such concerns are misplaced at this stage.”

In China news today, something of a mixed bag. The latest China statistics hardly support the official GDP numbers, nor show any meaningful restructuring underway in steel. But China still likes gold.

Weak China economic data help push Asian markets down

Published: Oct 26, 2016 11:28 p.m. ET

Lower oil prices, disappointing earnings also weigh on markets

Asian markets were largely down in early trade Thursday with traders focused on oil, earnings and China economic data.

Japan’s Nikkei NIK, -0.48%   was down 0.3%, Australia’s S&P/ASX XJO, -0.87%   off 0.5% but Korea’s Kospi SEU, +0.38%   gained 0.3%.

Oil prices are currently inching lower in Asian trade following overnight declines. The market is increasingly sceptical that OPEC will pull off a production cut, as it had indicated.

Australia’s Woodside Petroleum WPL, -1.59%   was down 1.6% and Chinese oil major PetroChina 0857, -1.99%   slumped 2.1%. Cnooc 0883, -3.05%   was down 3.6% after the company reported production fell 7.7% year-over-year to 117.7 million barrels of oil equivalent in the third quarter.

The U.S. reported a 553,000-barrel drop in crude inventories. However, the decline was centered on the West Coast, which is isolated from the rest of the network, said ANZ Research, and which was therefore discounted.

“Inventories actually increased along East and Gulf Coasts,” said ANZ.

Chinese stocks retreated after data released early Thursday showed that growth in China’s industrial profits slowed in September.

China recorded 7.7% on-year growth in industrial profits in September, sharply down from the 19.5% growth the previous month, according to the National Bureau of Statistics.

China’s Industrial Profits Get Boost From Steel, Refining

October 27, 2016 — 2:34 AM BST Updated on October 27, 2016 — 3:41 AM BST
Profits of China’s industrial corporations are holding up this year thanks to a boost from steel and refining, even as last month’s earnings slowed from a three-year high.

Industrial profits in January-September rose 8.4 percent from a year earlier to 4.64 trillion yuan ($685 billion), the National Bureau of Statistics said Thursday. Earnings last month rose 7.7 percent in September from a year earlier to 577.1 billion yuan, less than the jump of 19.5 percent in August that was the biggest in three years.

"The figures aren’t bad in fact, especially in the state sector, which is doing very well," said Zhou Hao, an economist at Commerzbank AG in Singapore. "The biggest challenge facing companies is to strike a balance between cutting debt and making a profit. Controlling debt risk now becomes a priority for the government as corporate profits have been stabilized."

Steel production is leading the charge with a 272.4 percent jump in the fist nine months versus a year ago, followed closely by a 263.8 percent jump for oil refining earnings. Years of deflation for factories has abated, with producer prices up last month for the first time since 2012, as global commodity prices recover and stimulus supports domestic demand.

With the economy stable, policy makers are stepping up efforts to curb risks from rampant growth in shadow banking products, elevated corporate debt and surging home prices. Early private indicators for October give mixed readings, reflecting tension between resilient domestic demand and fresh challenges as policy switches to reining in financial risks.

Exclusive: Chinese miners in talks for stake in Barrick's Veladero mine - sources

Tue Oct 25, 2016 | 5:06pm EDT
China's Zijin Mining Group Co Ltd and Shandong Gold Mining Co Ltd have held separate talks with Barrick Gold Corp to buy a 50 percent stake in its Veladero gold mine in Argentina, according to four sources with knowledge of the process.

Veladero is one of Barrick's five core mines; all are in the Americas. It is expected to produce between 580,000 and 640,000 ounces of gold this year.

The high quality of the mine, production capacity and the prospect for geographical diversification have appealed to the state-owned Chinese suitors, said three of the sources, who requested anonymity because the matter is private. All spoke over the past week.

Barrick, the world's biggest gold miner, has not launched a formal sales process for Veladero, and there is no certainty that the talks will result in a transaction, the sources said.

A potential sale of a 50 percent stake could fetch Barrick more than $1 billion, two of the sources said.
Barrick, Shandong and Zijin declined to comment.

Meanwhile back in the insane asylum.

Belgian talks on EU-Canada trade deal break up, to continue on Thursday

Wed Oct 26, 2016 | 5:13pm EDT
Belgian talks designed to end the deadlock over a planned EU-Canada free trade agreement ended on Wednesday without a breakthrough, but participants said they would resume on Thursday morning.
Belgian Prime Minister Charles Michel worked with the heads of Belgium's regions and linguistic communities to produce a common text to allay their concerns.

"We made a lot of progress, but we are not there yet. We will continue tomorrow, but we are close to an agreement," said Oliver Paasch, the head of Belgium's 76,000-strong German-speaking community.

Italy's Renzi threatens to 'veto' future EU budget over migrants

Wed Oct 26, 2016 | 12:25pm EDT
Italian Prime Minister Matteo Renzi on Wednesday threatened to block the European Union's next budget with a "veto" should Eastern European countries fail to take in their share of refugees.

"If the Eastern countries who are growing with the help of our money do not open their doors to migrants as has been agreed, then we'll put a veto on the future European budget," Renzi said at a rally in Avellino, Italy, for an upcoming referendum over his flagship reform of the constitution.

The proposal for the next EU budget, for the 2021-27 period, is supposed to be completed by the end of next year. Technically, Italy does not have a veto over the budget, which can be approved with a qualified majority vote, though unanimity is often sought.

The prime minister has frequently denounced a lack of European solidarity amid the migrant crisis as Italy seeks EU approval for an expansionary budget that includes some 3.9 billion euros ($4.25 billion) in spending on migrants next year, and as he campaigns for a referendum on which he has staked his future.

And now poor Italy has further problems to deal with.

Two Quakes Rattle Italy, Crumbling Buildings And Causing Panic

October 26, 2016 — 6:26 PM BST Updated on October 27, 2016 — 5:12 AM BST
Rome (AP) -- A pair of strong aftershocks shook central Italy late Wednesday, crumbling churches and buildings, knocking out power and sending panicked residents into the rain-drenched streets just two months after a powerful earthquake killed nearly 300 people.

But hours after the temblors hit, there were no reports of serious injuries or signs of people trapped in rubble, said the head of Italy's civil protection agency, Fabrizio Curcio. A handful of people were treated for slight injuries or anxiety at area hospitals in the most affected regions of Umbria and Le Marche, he said. A 73-year-old man died of a heart attack, possibly brought on by the quakes, local authorities told the ANSA news agency.

"All told, the information so far is that it's not as catastrophic" as it could have been, Curcio said.

The temblors were actually aftershocks to the Aug. 24 quake that struck a broad swath of central Italy, demolishing buildings in three towns and their hamlets, seismologists said. Several towns this time around also suffered serious damage, with homes in the epicenter of Visso spilling out into the street.

The first struck at 7:10 p.m. and carried a magnitude of 5.4. But the second one was eight times stronger at 6.1, according to the U.S. Geological Survey. Because many residents had already left their homes with plans to spend the night in their cars or elsewhere, they weren't home when the second aftershock hit two hours later, possibly saving lives, officials said.

Every generation imagines itself to be more intelligent than the one that went before it, and wiser than the one that comes after it.

George Orwell.

At the Comex silver depositories Wednesday final figures were: Registered 29.99 Moz, Eligible 144.44 Moz, Total 174.43 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today another unintended consequence of the Great Nixonian Error of fiat money.  Over time. banksterism, rent-seeking for the cronies close to the central banks, became the main game in the casino. Asset stripping, and firing, by any other name. Unsaid by the Economist article, the taxpayers bailed them all out in 2008-2009 when they had to bailout the too big to fail gambling banksters. Without that bailout none would be around now. Charity for the rich under pain of blackmail.
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, threat 2008.

The barbarian establishment

Private equity has prospered while almost every other approach to business has stumbled. That is both good and disturbing

Oct 22nd 2016 | NEW YORK
THIS year Henry Kravis and George Roberts, the second “K” and the “R” of KKR, celebrated their 72nd and 73rd birthdays, respectively. Steve Schwarzman, their equivalent at Blackstone, turned 69; his number two, Hamilton James, 65. In the past few months David Rubenstein, William Conway and Daniel D’Aniello, the trio behind and atop Carlyle, turned 67, 67 and 70. Leon Black, founder and head of Apollo, is just 65.
These men run the world’s four largest private-equity firms. Billionaires all, they are at or well past the age when chief executives of public companies move on, either by choice or force. Apple, founded the same year as KKR (1976), has had seven bosses; Microsoft, founded the year before, has had three. On average, public companies replace their leaders once or twice a decade. In finance executives begin bowing out in their 40s, flush with wealth and drained by stress. 
The professional longevity of the private equiteers—whose trade is the use of pooled money to buy operating companies in whole or in part for later resale—is thus rather remarkable. But do not expect to see a lot of fuss made about it. Since the uproar over a lavish 60th birthday party for Mr Schwarzman on the eve of the financial crisis (guests were entertained by his contemporary, Rod Stewart), such celebrations have become strictly private affairs. At KKR there has been little fuss over the company’s 40th anniversary—a striking milestone, given the fate of the institutions that previously employed the big four’s founders: Bear Stearns (gone), Lehman Brothers (gone), First National Bank of Chicago (gone) and Drexel Burnham Lambert (gone). The company has announced a programme encouraging civic-minded employees to volunteer for 40 hours.

There are good reasons for this low profile. The standard operating procedures of private equity—purchasing businesses, adding debt, minimising taxes, cutting costs (and facilities and employment), extracting large fees—are just the sort of things to aggravate popular anger about finance. Investors in private-equity firms (as opposed to investors in the funds run by those firms) have their own reasons to withhold applause. All of the big four have seen their share prices fall over the past year; Blackstone, Carlyle and KKR are all down more than 20%. Apollo, Blackstone and Carlyle trade for less than the prices at which their shares initially went public years ago (see chart 1). First-quarter earnings were bleak, though things have picked up a little since.

---- It is not just that old private-equity firms persist; new ones continue to spring up at a remarkable rate. According to Preqin, a London-based research house, there were 24 private-equity firms in 1980. In 2015 there were 6,628, of which 620 were founded that year (see chart 2). Such expansion looks all the more striking when you consider what has been happening elsewhere in business and finance. In America, for which there are good data, the number of banks peaked in 1984; of mutual funds in 2001; companies in 2008; and hedge funds, probably, in 2015. Venture-capital companies are still multiplying; but they are effectively just private equity for fledglings.
"We finished the year, and we reported that we had $17 billion of cash sitting at the bank's parent company as a liquidity cushion. As the year has gone on, that liquidity cushion has been virtually unchanged."
Alan Schwartz, CEO Bear Stearns, March 12, 2008. Bust March 16, 2008.

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?

Making Solar Inverters Smarter

October 25, 2016 By Carl Weinschenk
The regulatory regime under which solar power is integrated into the grid is a moving target. Many moving targets, in fact, because states will exert as much or more control over rules and regulations as the federal government.

This long evolution is as important to energy managers and facility managers as it is to the utilities. The days in which solar energy was a minuscule percentage of the energy utilized are passing. Its dramatic growth is bringing these issues to the fore.

Currently, homes and businesses are allowed to freely send the electricity they generate but don’t use back to the grid. Their bills are credited. The utility industry maintains that this is an untenable model because the amount of energy and the timing of its entry into the grid is not under its control. This can play havoc both with its financial structure. “The utility has no visibility into what’s going on at the customer premise,” said Stewart Kantor, the CEO of Full Spectrum. “If a company generates solar or renewables, there is no visibility other than the billing aspect.”

The rise of renewables presents a second problem that must be addressed. The IEEE Spectrum this week posted a story discussing the dangers of the proliferation of solar power. Today’s systems are programmed to disengage from the grid if there is a problem. If that is done en masse, the grid can become destabilized. What started as a small problem can become much more serious. Thus, the growth of renewables on the grid, using current technology, adds energy – but threatens reliability.

The key to addressing both the cost and reliability issues, ironically, is a piece of equipment that is under the control of the end user, not the utility. The basic role of an inverter is to transform the direct current generated by a solar panel into the alternating current used by the grid.

In the past, inverters were “dumb” conduits. This was fine when solar was a boutique source of power. It no longer is. Enter the smart inverter. Solar Power World offers the basics. Smart inverters let the utility control the flow of electricity. Thus, as regulations change, smart inverters will give the utility the ability to accept, reject or otherwise control solar or wind power energy being returned to the grid. It will provide them with precise information about what is being sent upstream by homes and businesses. This, combined with emerging storage capabilities, can take pressure off the utilities.

The new devices can play a second role in maintaining stability. The new technology can keep a small problem from triggering a cascading series of automatic disengagements that will endanger the system:

But newer “smart” inverters can prevent a PV system from going off-line when it doesn’t have to. By doing so, they can actually make the grid more stable, by preventing the sudden deterioration of voltage and frequency that would otherwise occur when hundreds or thousands of PV panels are suddenly taken off-line, according to recent research by NREL and its partners.

Smart inverters are being made and the infrastructure around them being created. Full Spectrum has contributed intellectual property to an effort by the Institute of Electrical and Electronics Engineers (IEEE) – the organization behind WiFi standards — to create 802.16s, a wireless standard that will enable communications between the smart inverters and the utilities.

Much of the story on the integration of solar power into the grid has yet to be written. Energy and facility managers need to keep abreast of developments, of course. More specifically, they must make sure than the inverters that they buy either are smart or can be upgraded to that status when the time comes.

The monthly Coppock Indicators finished September

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

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