Wednesday, 5 October 2016

London’s Smoky Gold Market.

Baltic Dry Index. 860 -04    Brent Crude 51.31

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

Some of our maids sitting up late last night to get things ready against our feast today, Jane called up about three in the morning, to tell us of a great fire they saw in the City. So I rose, and slipped on my night-gown and went to her window, and thought it to be on the back side of Mark Lane at the farthest; but, being unused to such fires as followed, I thought it far enough off, and so went to bed again, and to sleep. . . . By and by Jane comes and tells me that she hears that above 300 houses have been burned down tonight by the fire we saw, and that it is now burning down all Fish Street, by London Bridge. So I made myself ready presently, and walked to the Tower; and there got up upon one of the high places, . . .and there I did see the houses at the end of the bridge all 
on fire, and an infinite great fire on this and the other side . . . of the bridge.

Samuel Pepys Diary Entry, September 2 1666

For more on London’s smoky gold market scroll down to Crooks Corner. There’s more smoke swirling in the London gold Market, than Samuel Pepys saw during the Great Fire of London in 1666.

We open today with yet another warning about how central banks policies have turned the financial markets into nothing more than casinos. This time the warning comes from “The Bond King” Bill Gross. To which I would merely add the word “rigged” before “casinos.” Our compromised central banksters now routinely rig the casinos in favour of te Great Vampire Squids and the gambling rent seeking banksters.

Bill Gross of Janus warns financial markets have become 'a Vegas casino'

Tue Oct 4, 2016 | 8:32am EDT
Global central bank policy makers have turned world financial markets into a casino, thanks to their unprecedented monetary policies, warned bond investor Bill Gross of Janus Capital Group (JNS.N) on Tuesday.

“Our financial markets have become a Vegas/Macau/Monte Carlo casino, wagering that an unlimited supply of credit generated by central banks can successfully reflate global economies and reinvigorate nominal GDP growth to lower but acceptable norms in today's highly levered world,” Gross said in his latest Investment Outlook titled “Doubling Down.”

Gross, who oversees the $1.5 billion Janus Global Unconstrained Bond Fund, recommended Bitcoin and gold for investors who are looking for places to preserve capital.

"At some point investors – leery and indeed weary of receiving negative or near zero returns on their money, may at the margin desert the standard financial complex, for higher returning or better yet, less risky alternatives," Gross said.

Gross has been lambasting ultra-loose central bank policies for hindering global economies by keeping so-called "zombie" corporations alive and inhibiting "creative destruction."

For several years, Gross and others have warned that zero and negative interest rates not only fail to provide an easing cushion should recession occur, but they destroy capitalism's business models.

"A commonsensical observation made by yours truly and increasing numbers of economists, Fed members, and corporate CEOs (Jamie Dimon amongst them) would be that low/negative yields erode and in some cases destroy historical business models which foster savings/investment and ultimately economic growth," Gross said.
He added: "Our argument is that NIMs (net interest margins) for banks, and the solvency of insurance companies and pension funds with long dated and underfunded liabilities, have been negatively affected and that ultimately, the continuation of current monetary policies will lead to capital destruction as opposed to capital creation."
All told, Gross said central bankers have fostered a casino-like atmosphere that present “a Hobson's Choice, or perhaps a more damaging Sophie's Choice of participating (or not) in markets previously beyond prior imagination. Investors/savers are now scrappin’ like mongrel dogs for tidbits of return at the zero bound. This cannot end well.”

In other news, will anything positive come from this week’s Washington meetings at the IMF and World Bank.  At the IMF, at least, they have seen the error of their ways when they joined Dodgy Dave Cameron’s inept Project Fear Remainiac campaign.

Backlash to World Economic Order Clouds Outlook at IMF Talks

October 4, 2016 — 5:00 AM BST Updated on October 4, 2016 — 4:29 PM BST
Policy-making elites converge on Washington this week for meetings that epitomize a faith in globalization that’s at odds with the growing backlash against the inequities it creates.

From Britain’s vote to leave the European Union to Donald Trump’s championing of “America First,” pressures are mounting to roll back the economic integration that has been a hallmark of gatherings of the IMF and World Bank for more than 70 years.

Fed by stagnant wages and diminishing job security, the populist uprising threatens to depress a world economy that International Monetary Fund Managing Director Christine Lagarde says is already “weak and fragile.”

The calls for less integration and more trade barriers also pose risks for elevated financial markets that remain susceptible to sudden swings in investor sentiment, as underscored by recent jitters over Frankfurt-based Deutsche Bank AG’s financial health.

“The backlash against globalization is manifesting itself in increased nationalistic sentiment, against the outside world and in favor of increasing isolation,” said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong and a former IMF official. “If we lose consensus on what kind of a world we want to have, the world will probably be worse off.”

In its latest World Economic Outlook released Tuesday, the fund highlighted the threats from the anti-trade movement to an already subdued global expansion. After growth of 3.2 percent in 2015, the world economy’s expansion will slow to 3.1 percent this year before rebounding to 3.4 percent in 2017, according to the report, keeping those estimates unchanged from July projections. The forecasts for U.S. growth were cut to 1.6 percent this year and 2.2 percent in 2017.

IMF Lifts Forecast for U.K. Economy in 2016 Despite Brexit

October 4, 2016 — 2:00 PM BST Updated on October 4, 2016 — 2:49 PM BST
The International Monetary Fund became the latest forecaster to upgrade its outlook for the U.K. this year after the economy proved more resilient than expected following the vote to leave the European Union.

In its World Economic Outlook published Tuesday, the Washington-based lender predicted growth of 1.8 percent instead of the 1.7 percent projected in July. That would make it the fastest-growing economy in the Group of Seven. The IMF cut its 2017 forecast to 1.1 percent from 1.3 percent and noted its estimates depended on smooth negotiations with the EU.

“Slower growth is expected since the referendum as uncertainty in the aftermath of the Brexit vote weighs on firms’ investment and hiring decisions and consumers’ purchases of durable goods and housing,” it said.

Pro-Brexit campaigners accused the IMF of scaremongering ahead of the June 23 referendum. Managing Director Christine Lagarde had said “the economic risks of leaving are firmly to the downside” and warned the U.K. could slide into recession.

Reports since then have suggested the economy is holding firm, with IHS Markit reporting on Monday that British factories had their best month in more than two years in September.

The Bank of England, the OECD, Morgan Stanley and Goldman Sachs Group Inc. are among those to have peeled back their pre-vote predictions of an economic shock.

The IMF nevertheless said it had cut its medium-term growth forecast to 1.9 percent from 2.1 percent in April on the assumption that the economy’s ability to prosper will be impinged by weaker trade, migration and capital flows.
Meanwhile, the clock is still ticking away against Europe’s banks, led by Deutsche Bank. If anyone attending the Washington meetings has a solution for Deutsche Bank, please notify Berlin ASAP, where Mrs Merkel seems to be all at sea and out of ideas.

Deutsche Bank Brings Too-Big-to-Fail Conundrum Home to Merkel

October 5, 2016 — 12:01 AM BST
When it comes to speculation about German government support for Deutsche Bank AG, Chancellor Angela Merkel has no good answer.

After years spent leading the push for new European Union rules to contain banking crises without putting taxpayers on the hook, you might expect Merkel to rule out state aid for Deutsche Bank. She hasn’t, even though that would be politically expedient with an election looming next year.

Confronted with ailing banks, Merkel and other EU leaders face a quandary. Markets assume they won’t deploy their biggest weapon -- bail-in, or imposing losses on private investors -- when it comes to a giant like Deutsche Bank because of the risk of contagion. Yet policy makers are also increasingly ambivalent about the bloc’s solution for too-big-to-fail banks, largely for the same reason.

“There’s a good chance if Deutsche Bank were to go under there would be a series of bail-ins that would affect not just the German economy and the German financial system, but the entire European financial system as well,” said Megan Greene, chief economist at Manulife Asset Management. As a result, “you could end up seeing leaders decide they’re not going to comply with bail-in rules,” she said.

Merkel’s dilemma concerning Deutsche Bank, whose shares have fallen nearly 50 percent this year, can be seen in the government’s reticence to put the issue of state aid to bed.

Speculation about Deutsche Bank’s health was stoked last month when it received a $14 billion claim from the U.S. Justice Department to settle an investigation into the firm’s sale of residential mortgage-backed securities. Analysts said the bank might need to raise capital even if the amount of the fine came down.

In Berlin, lawmakers became concerned and talk of government intervention swelled. A response of sorts followed when Focus, a popular weekly news magazine, reported -- citing unidentified officials -- that Merkel had ruled out state assistance. Deutsche Bank’s shares took another tumble.

Asked about the Focus report at a press conference, however, government spokesman Steffen Seibert neither confirmed nor denied it: “There are no grounds for such speculation,” he said. A day later, Merkel also sidestepped the question, saying only that the government wants companies having “temporary difficulties” to “develop well.”
So down [I went], with my heart full of trouble, to the Lieutenant of the Tower, who tells me that it began this morning in the King's baker's house in Pudding Lane, and that it hath burned St. Magnus's Church and most part of Fish Street already. So I rode down to the waterside, . . . and there saw a lamentable fire. . . . Everybody endeavouring to remove their goods, and flinging into the river or bringing them into lighters that lay off; poor people staying in their houses as long as till the very fire touched them, and then running into boats, or clambering from one pair of stairs by the waterside to another.
Samuel Pepys Diary Entry, September 2 1666
At the Comex silver depositories Tuesday final figures were: Registered 29.29 Moz, Eligible 143.89 Moz, Total 173.18 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, the curious case of the “independent” Chairman of the London Gold Market, set up by the UK government owned Bank of England in 1987. “Has anyone seen my gold?”  Who is hiding what from whom, and why? What gold scandal needs to be covered up in “my word is my bond” London. There’s no smoke without fire, and the London Gold Market has enough smoke for the Great Fire of London. When the next Lehman hits, I smell a bullion scandal in  smoky old London. Of course it may all be completely innocent, the entire board are all od-ing, vaping electronic cigarettes.

But what was the number of that non-bank owned, private Swiss bullion bunker again. You know, the one with its own little airport and private catered lodgings. With transparency like this in London, that bunker will fill up with untouchable gold bullion pretty fast. With Sterling cratering with each passing day, even John Bull’s soon to be free Brits, now need some protection by owning some gold.

Newly arrived from The Bank of England: ‘Independent’ Chairman of the London Gold Market

Oct 3, 2016 12:45 PM  by Ronan Manly,
In a recent article titled “Blood Brothers: The Bank of England and the London Bullion Market Association (LBMA)“, I charted the extremely close historical and contemporary relationship between the LBMA and the Bank of England. This article highlighted that:
§  the LBMA was established in 1987 by the Bank of England
§  the original bullion bank founding members and steering committee members of the LBMA represented 6 commercial banks active in the London Gold Market, namely, N.M. Rothschild, Mocatta & Goldsmid, Morgan Guaranty Trust, J. Aron, Sharps Pixley (former Sharps Pixley), and Rudolf Wolff & Co.
§  the Bank of England has been involved in the affairs of the LBMA from Day 1 in 1987, and continues to this day to have observer status on the LBMA Management Committee
-----This article continues where the above analysis left off, and looks at the appointment of Fisher as the new ‘independent’ Non-Executive Chairman of the LBMA Board, considers the ‘independence’ of the appointment given the aforementioned very close relationship between the Bank of England and the LBMA, and examines the chairman’s appointment in the context of the UK Corporate Governance Code, which now governs the Constitution and operation of the LBMA Board.
----This was confirmed in Fisher’s speech to the 2004 LBMA Annual Conference in Shanghai, Fisher, when then Head of Foreign Exchange at the Bank of England, he stated:
I am glad to be invited to the LBMA’s Management Committee meetings as an observer.”
Fisher was Head of Foreign Exchange Division at the Bank of England from 2000 to 2009, so could in theory have been a Bank of England observer on the LBMA Management Committee throughout this period. The Foreign Exchange Division of the Bank of England is responsible for managing the Sterling exchange rate, and for managing HM Treasury’s official reserves held in the Exchange Equalisation Account (EEA), including HM Treasury’s official gold reserves. One would think that when the LBMA announced in a press release in July of this year that Fisher was being appointed as the new LBMA chairman, that the fact that he had previously attended the LBMA Management Committee meetings would be a fact of relevance to the appointment. However, surprisingly, or maybe not so surprisingly, this fact was omitted from the press release.
The LBMA press release, titled “Dr Paul Fisher to be the new LBMA chairman“, dated 13 July 2016, begins:
“The LBMA is delighted to announce the appointment of Dr Paul Fisher as the new Chairman of the Association, effective from 5 September, 2016. Paul is due to retire from the Bank of England at the end of July.”
The press release goes on to say:
“Paul brings with him a wealth of financial market experience following his 26 years at the Bank of England. Prior to joining the LBMA, his last role was as Deputy Head of the Prudential Regulation Authority. Paul was selected by the LBMA Board following an independent Executive search procedure.”
-----As well as endorsing the LBMA’s expansion to acquire the responsibilities of the London Platinum and Palladium Market (LPPM), which was the first motion for consideration at the meeting, the press release confirmed that the membership had endorsed the appointment of an independent Non-Executive Chairman:
“The second change was to further enhance the governance of the Association. The UK Corporate Governance Code was incorporated and will govern both the Constitution as well as the operation of the Board. While it is vital for the Board to have a strong voice for its Members, it is important that any actual and perceived conflicts between these parties are balanced by having independence on that Board. This independence protects the interests of the wider membership as well as the individuals themselves serving on the Board. To address this, theLBMA has added an independent Non-Executive Chairman as well as two additional Non-Executive Directors(NEDs).”
Notice the reference to 2 other independent non-executive directors. Nine business days later, on 13 July 2016, the LBMA issued a further press release revealing that ex Bank of England Head of Foreign Exchange and former observer on the LBMA Management Committee, Paul Fisher had been appointed as the “independent Non-Executive Chairman“.

Executive Search Procedure

Recall also that the 13 July press release stated “Paul was selected by the LBMA Board following an independent Executive search procedure.””
Nine days is an extremely short period of time to commence, execute, and complete an ‘independent Executive search procedure‘.  It immediately throws up questions such as which search firm was retained to run the independent Executive search procedure?, which candidates did the search firm identify?, was there a short-list of candidates?, who was on such a short-list?, what were the criteria that led to the selection of the winning candidate above other candidates?, and how could such a process have been run and completed in such a limited period of time when similar search and selection processes for chairpersons of corporate boards usually take months to complete?
How independent is it also to have a former divisional head of the Bank of England as chairman of the London Gold Market when the Bank of England is the largest custodian of gold in the London Gold Market, and operates in the London Gold Market with absolute secrecy on behalf of its central bank and bullion bank customers.
Since the LBMA voluntarily incorporated the UK Corporate Governance Code into the operations of its Board following the General Meeting on 29 June, its instructive to examine what this UK Corporate Governance Code has to say about the appointment of an independent chairman to a board, and to what extent the Corporate Governance Code principles were adhered to in the LBMA’s ‘independent‘ chairman selection process.
----The UK Corporate Governance Code is administered by the Financial Reporting Council (FRC). The April 2016 version of the Code can be read here. The main principles of the Code are divided into 5 sections, namely, Leadership (section A), Effectiveness (section B), Accountability (section C), Remuneration (section D), and Relations with Shareholders (Section E).
One of the main principles of Section B is as follows:
There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board. “
Section A also addresses the independence of the chairman, and Section A.3.1. states that:
“The chairman should on appointment meet the independence criteria set out in B.1.1″
Section B.1.1, in part, states that:
“The board should determine whether the director is independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, the director’s judgement. The board should state its reasons if it determines that a director is independent notwithstanding the existence of relationships or circumstances which may appear relevant to its determination, including if the director:
§  has, or has had within the last three years, a material business relationship with the company either directly, or as a partner, shareholder, director or senior employee of a body that has such a relationship with the company;
§  represents a significant shareholder;”
It goes without saying that the Bank of England has a material business relationship with the commercial banks which are represented on the LBMA Board, and I would argue that although the LBMA has no share capital, because the Bank of England has a material business relationship with the LBMA, and because since Paul Fisher was a senior employee of the Bank of England until July of this year, then the LBMA should “state its reasons as to why it determines that this director is independent“.

[I hurried] to [St.] Paul's; and there walked along Watling Street, as well as I could, every creature coming away laden with goods to save and, here and there, sick people carried away in beds. Extraordinary goods carried in carts and on backs. At last [I] met my Lord Mayor in Cannon Street, like a man spent, with a [handkerchief] about his neck. To the King's message he cried, like a fainting woman, 'Lord, what can I do? I am spent: people will not obey me. I have been pulling down houses, but the fire overtakes us faster than we can do it.' . . . So he left me, and I him, and walked home; seeing people all distracted, and no manner of means used to quench the fire.

Samuel Pepys Diary Entry, September 2 1666

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?

Solar outstrips coal in past six months of UK electricity generation

More power came from solar panels than from Britain’s ageing coal stations from April to September this year, report shows

Tuesday 4 October 2016

Electricity generated by solar panels on fields and homes outstripped Britain’s ageing coal power stations over the past six months in a historic first.

Climate change analysts Carbon Brief found more electricity came from the sun than coal from April to the end of September, in a report that highlighted the two technologies’ changing fortunes.

Solar had already eclipsed coal for a day in April and then for the whole month of May, with coal providing zero power for the first time in more than 100 years for several days in May. The latest milestone saw an estimated 6,964 gigawatt hours (GWh) generated by solar over the half-year, or 5.4% of the UK’s electricity demand. Coal produced 6,342GWh, or 4.7%.

Solar power generated more electricity than coal in the six months running up to the end of September
The trend will not continue into winter because of solar’s seasonal nature, but the symbolic records reveal the dramatic impacts solar subsidies and environmental penalties for coal have wrought.

Solar Power On Brink Of Huge Boom, Social Research Indicates

October 3rd, 2016 by Steve Hanley
Solar power stands at the precipice of explosive growth, according to Brewster McCracken, CEO of Pecan Street, a research institute located in Austin, Texas, that focuses on the utility industry. He bases his prediction on the economic theories of Everett Rogers first published in 1962. Rogers postulated that when 15% of people accept an innovation, it will quickly spread to 60% of the target population. McCraken says that in some markets — like Hawaii, California, and Arizona — residential solar power has already achieved that 15% level of acceptance. He thinks that means it is about to see explosive growth.

----If you are a utility company, mass adoption of rooftop solar power is a problem. Part of it is that electrical grids — the collection of poles, wires, transformers, and sub-stations — will always be necessary. They take a lot of money to build and maintain. The other part of the problem is that if people make their own electricity, utility companies will see a sharp decline in income. Uh oh. Less income means less profits and that means less money to pay utility company executives. It also means less money to pay investors and bond holders.
Utility companies have trillions of dollars invested in the grid. That money came from investors who thought they were guaranteed a stated rate of return. If utilities are suddenly unable to repay investors, a lot of people stand to lose a lot of money. No wonder utility companies are nervous and want to restrict the proliferation of rooftop solar.
Suddenly, a company that thought it had a monopoly finds itself in competition with its own customers. It’s as if people could suddenly start building their own cars. What would happen to the auto industry if that was the case? The problem for utilities only gets worse as people start adding battery storage to their rooftop solar systems.

The monthly Coppock Indicators finished September

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


  1. Graeme, I’m a bit slow to catch up on your thinking so correct me where I’m in error- Would it be fair to say that Quantitative Easing is effectively printing unfeasibly large amounts of money with a delay effect through the financial system and the tsunami has yet to hit? A return to the gold standard would restore a benchmark to the value of money - but we can’t trust how much of the stuff kept where. Is this broadly where you are coming from?

    1. Adrian. Pretty much correct. When the tsunami hits, many will try to run to their gold, only to find as in August with Deutsche Band with the DB ETF, that the bank is unable to deliver the gold. The LBMA specialises in in "unallocated" gold meaning no bars are assigned against the purchased gold bullion, which exists merely as an obligation to get the gold when the client asks for it and pays any remaining costs. Many fear, that when trouble comes, the LBMA won't be able to get the gold. The BOE will step in "freezing" gold accounts in the interest of the nation. As physical gold locks up, the SNB in Switzerland will do something similar. But gold held in these new gold bunkers, will not be affected and the ownwership off the radar of US and UK and EU authorities. QE and NIRP have completely ruined the fiat monetary system which is increasingly dysfunctional across the planet. What a time for two loons to run for POTUS.

      I dropped the emails last Christmas in favour of the far less time consuming blog. My niece suffers from MS and in the mornings I am often her driver to the nursery and on to work, when her husband is on shift work or finishing a night shift. Basically I needed the extra freed up time.

  2. Oh and I forgot to click the notify me box which might be why I’ve stopped receiving emails from you

  3. Thanks Graeme, really clear. I quite understand that your niece comes first. You have the right priorities. Best wishes. Adrian