Thursday, 6 October 2016

Watching Hurricane Matthew.

Baltic Dry Index. 869 +09    Brent Crude 5166

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

The really big story for later today will be whether hurricane Matthew slams into Florida’s expensive east coast, merely brushes against it as it heads north towards the Carolinas, or takes a more easterly turn out into the Atlantic, much to everyone’s relief.  The next 24 hours will tell.

We open today with yet another red flag from China. What could possibly go wrong with this, and when?
"Let's make sure that there is certainty during uncertain times in our conomy."

President George W. Bush

China's outstanding P2P loans hit record high in September

BEIJING, Oct. 4 (Xinhua) -- Outstanding peer-to-peer (P2P) loans in China soared 153.5 percent year on year to hit a record high at the end of September, a latest industry report showed.
Loans had reached 956 billion yuan (145 billion U.S. dollars) at the end of September, according to P2P industry portal
P2P lending -- lending without a traditional financial intermediary such as a bank -- has grown quickly in China as investors pursue higher returns and small businesses and individuals seek secure funds online.
Lack of supervision has made the industry risky for investors and many P2P platforms have been implicated in shady fund raising. As of the end of September, there were 2,297 P2P platforms, 37.1 percent of the total, with operational problems, the report said.
The average interest rate for P2P lending stood at 8.7 percent, unchanged from a month earlier and still near a record low.
In August, the China Banking Regulatory Commission introduced new rules prohibiting P2P lenders from accepting deposits from the general public, preventing them from pooling investors' money for their own projects and capping the amount of individual loans.
And this from the “dismal scientists” of the IMF, assembled once again in Washington, District of Crooks.

Economic Recovery Won’t Be Enough for 25% of Banks, IMF Says

October 5, 2016 — 1:45 PM BST
A global economic recovery would still leave about a quarter of banks in developed countries too weak to support further growth and susceptible to future shocks, the International Monetary Fund said.

Banks controlling about $12 trillion of assets would remain vulnerable during a rosy economic environment marked by faster economic activity, rising interest rates and declining defaults, the IMF said Wednesday in its semiannual report on financial stability. Most of those banks, with $8.5 trillion in assets, are in Europe, according to the report.

Persistent low interest rates, sluggish capital markets activity, higher capital requirements and legacy nonperforming loans have strained profits for banks in the developed world. The firms need to reduce bad debt stocks and undertake structural reforms -- such as closing branches and sector consolidation -- to improve profitability, the IMF said.
---- Governments can help with legal changes to make it easier for banks to get rid of bad loans, the IMF said. In the euro zone alone, the effect on bank capital would be to swing from a loss of 80 billion euros ($89 billion) to a gain of 60 billion euros, the IMF estimated. Italian and Greek banks would be the biggest beneficiaries of such changes, the report said, adding that recent steps taken by the Italian government to implement such reductions might not be enough, according to the report.
---- Japanese banks are becoming more exposed to currency fluctuations as they expand overseas to make up for low profitability at home, the report said. Emerging market banks face the risk of surging defaults if companies’ efforts to deleverage coincide with rising interest rates or market turbulence, it added.
Back in that other district of crooks Germany, home to Volkswagen and Deutsche Bank, the roof continues falling in on Germany’s leading banksters. The latest revelation doesn’t help DB’s case for state aid.
A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done.

Walter Bagehot. Lombard Street. 1873

Deutsche Bank Mismarked 37 Loans Like Monte Paschi’s, Audit Says

October 6, 2016 — 5:01 AM BST
Deutsche Bank AG, indicted for colluding with Banca Monte dei Paschi di Siena SpA to conceal the Italian lender’s losses, mismarked the transaction and dozens of others on its own books, according to an audit commissioned by Germany’s regulator.

Executives at Deutsche Bank arranged 103 similar deals with a total value of 10.5 billion euros ($11.8 billion) for 30 clients, according to the audit, a copy of which was seen by Bloomberg. The Frankfurt-based lender, Germany’s largest, adjusted the accounting of 37 of those trades in 2013, in addition to Monte Paschi’s, changing them from loans that had been kept off the books to derivatives, the audit said.

The widespread use of a transaction that’s now the subject of a criminal case highlights the lender’s appetite for complexity at a time when the bank was expanding its fixed-income empire. While Deutsche Bank has since cut risky assets and eliminated thousands of jobs to bolster capital, mounting legal costs have become a source of increasing concern to investors, driving shares to a record low.

The audit found that while Monte Paschi was the only client that used a transaction to “window dress” its books, Deutsche Bank didn’t correctly account for similar deals with banks from Italy to Indonesia made between 2008 and 2010. The report also said senior executives didn’t properly authorize the Monte Paschi trade, dubbed Santorini, or adequately review the transaction after receiving a subpoena from the U.S. Federal Reserve in 2012.

French Lawmakers Say Deutsche Bank U.S. Fine Could Cause Crisis

October 5, 2016 — 6:11 PM BST
Europe could face financial turmoil if the U.S. forces Deutsche Bank AG to pay $14 billion to settle civil claims over the company’s handling of mortgage-backed securities, French lawmakers said.

“The amount is such that it could provoke a potentially systemic crisis,” Socialist politician Karine Berger told journalists in Paris Wednesday. Any banking collapse tied to Deutsche Bank’s U.S. legal woes would have “incalculable economic consequences” in Europe, said Pierre Lellouche of the opposition Les Republicains party.
The lawmakers spoke as they prepared to present parliament with proposals to create a corporate settlement system similar to that in the U.S. Lawmakers say the measure will speed up resolution of disputes and serve as a counterweight to America’s growing legal reach. The U.S. has levied large fines against French companies including BNP Paribas SA and Alstom SA under out-of-court agreements in recent years.
We end for the day in the oil patch, where everything is going all at sea.  After the big new energy discovery news from Texas last month, this month its Alaska’s turn. And Iran hasn’t yet finished ramping up their production either.  What will OPEC do now on November 30th?

Oil Tankers Piling Up in North Sea Highlight Glut Facing OPEC

October 5, 2016 — 12:28 PM BST
A pile up of tankers waiting in the North Sea suggests a glut is building again in the market where benchmark crude is traded, highlighting the task facing OPEC as it seeks to rein in a global glut.
At least 10 tankers are at or near locations off the coasts of England and Scotland where they must wait to transfer their cargoes, according to vessel-tracking information compiled by Bloomberg. The increase is happening amid seasonal work at the U.K.’s largest oil field.
"The physical crude market is already showing signs of weakness with floating storage threatening to build up in the North Sea, in spite of ongoing field maintenance," according to a research note from JBC Energy GmbH. It cited the vessel pile up at the ship-to-ship transfer sites as one of the indicators of a surplus.
The Organization of Petroleum Exporting Countries is trying to prop up oil prices despite signs that a worldwide supply surplus isn’t getting any better. The group is now ironing out the details of a pact, announced last week in Algiers, that would curb output to 32.5 million to 33 million barrels a day.
The pact triggered a rally in crude prices, which in turn spurred a rush by U.S. shale producers to lock in future prices.

Libya, Nigeria Rebound

The OPEC accord exempts Iran, which is emerging from international sanctions, from production cuts. While precise details of the plan have yet to be thrashed out, Nigeria has also said it won’t have to comply and Libya is unlikely to be asked to because its oil production is a fraction of what it should be. The deal will be finalized at the end of next month.

European refiners "have more options again now that Nigerian and Libyan loadings are rebounding" and crude and petroleum-product stocks remain high, JBC Energy analyst Eugene Lindell said in an e-mail.

Alaska Oil Known Reserves May Have Just Grown 80% on Discovery

October 5, 2016 — 2:18 AM BST Updated on October 5, 2016 — 10:00 AM BST
Alaska’s oil reserves may have just gotten 80 percent bigger after Dallas-based Caelus Energy LLC announced on Tuesday the discovery of 6 billion barrels under Arctic waters.
The light-oil reserves were found in the company’s Smith Bay leases between Prudhoe Bay and Barrow along the Arctic shore, according to a statement from Caelus. As much as 2.4 billion barrels is estimated as recoverable, according to a release issued by the company. That compares with the state’s proved reserves of 2.86 billion barrels in 2014, almost 8 percent of the U.S. total, Energy Department data show. 
“This discovery could be really exciting for the state of Alaska,” Caelus Chief Executive Officer Jim Musselman said in the statement. “It has the size and scale to play a meaningful role in sustaining the Alaskan oil business over the next three or four decades.”

Alaska’s oil output has been gradually declining, to 483,000 barrels a day last year from a peak of more than 2 million barrels a day in 1988, Energy Department data show. The last major field brought online was Alpine in 2000, which averaged 62,000 barrels a day in September, Alaska Department of Revenue data show.

Caelus said its newly discovered field could produce as much as 200,000 barrels a day. That compares with 483,000 barrels a day pumped in Alaska last year, Energy Department data show. The Eagle Ford shale region, the largest U.S. field, yielded 238,000 barrels a day in 2013.

The discovery of light oil was made after seismic data was collected and two wells were drilled this year, the company said. Another well will be drilled in early 2018, Casey Sullivan, a company spokesman, said in a phone interview. The discovery would be the biggest in four decades, the company said. Prudhoe Bay, the state’s biggest field, was discovered in 1967.

A driller on the North Slope needs oil at about $40 a barrel on average to be profitable, Sarah Erkmann, external affairs manager at the Alaska Oil and Gas Association, said in a phone interview. Oil traded at about $49 a barrel today in New York.

“At these depressed prices, that makes it very challenging,” she said.
"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."

Henry Hazlitt
At the Comex silver depositories Wednesday final figures were: Registered 29.29 Moz, Eligible 144.82 Moz, Total 174.11 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, more on the dying EUSSR. Blame it on Brexit probably. Oh wait, John Bull never joined-in in the insanity of the Eurozone. Blame it on Brussels and Berlin.

Euro zone business growth at 21-month low in September

Wed Oct 5, 2016 | 6:31am EDT
Euro zone business growth fell last month to its weakest since the beginning of 2015, according to surveys providing the latest evidence the bloc's economy is losing momentum.
Businesses have reined in spending amid growing caution about the economic outlook and political uncertainty as Britain gears up to start divorce proceedings from the European Union and Germany and France face elections.
What growth existed last month was once again lopsided, which may concern policymakers, with only France showing signs of its upturn gaining momentum while growth trended lower in Germany, Italy and Spain.
"Anecdotal evidence suggests that economic and political uncertainty is weighing on euro area confidence, and we expect sentiment to be further dampened in the coming month as Brexit negotiations kick in," noted Apolline Menut at Barclays.
"Increasing uncertainty and falling confidence underpin our forecast of deteriorating growth in Q4 2016 and Q1 2017."
Markit's final composite Purchasing Managers' Index for the euro zone was 52.6 in September, matching a flash estimate but below August's 52.9 and marking a low since January 2015.
It has been above the 50 mark that divides growth from contraction since mid-2013.
The PMI points to third quarter economic growth of 0.3 percent, Markit said, in line with a prediction from a Reuters poll last month which highlighted the need for fiscal stimulus rather than more aggressive monetary policy easing. [ECILT/EU]
Despite years of ultra-loose monetary policy the European Central Bank has so far failed to get inflation anywhere close to its near 2 percent target. Policymakers may take some cheer from data in the survey indicating firms held prices steady last month instead of cutting them.
The output price index, which has held stubbornly below the 50 mark for most of the past five years, came in on the dividing line for the first time since September 2015.
Inflation in the 19 countries sharing the euro doubled to 0.4 percent in September from 0.2 percent in August, the EU's statistics agency Eurostat said on Friday.

The market, like the Lord, helps those who help themselves. But, unlike the Lord, the market does not forgive those who know not what they do.

Warren Buffett.

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?

Researchers bring theorized mechanism of conduction to life

Date: October 3, 2016

Source: Stanford University

Summary: Using recent innovations in 2-D materials, scientists have realized a mechanism of conduction that could someday lead to new forms of energy conversion and higher-resolution scanning machines, such as those used in airports and quality control for manufacturing.
Humans have harnessed large portions of the electromagnetic spectrum for diverse technologies, from X-rays to radios, but a chunk of that spectrum has remained largely out of reach. This is known as the terahertz gap, located between radio waves and infrared radiation, two parts of the spectrum we use in everyday technologies including cell phones, TV remotes and toasters.
A theory developed by the late Stanford professor and Nobel laureate Felix Bloch suggested that a specially structured material that allowed electrons to oscillate in a particular way might be able to conduct these sought-after terahertz signals.
Now, decades after Bloch's theory, Stanford physicists may have developed materials that enable these theorized oscillations, someday allowing for improvements in technologies from solar cells to airport scanners. The group published their findings in the Sept. 30 issue of Science.
Innovations in superlattice materials
Researchers have long thought that materials with repeating spatial patterns on the nanoscale might allow for Bloch's oscillations, but technology is only just catching up to theory. Such a material requires that electrons travel long distances without deflection, where even the smallest imperfection in the medium through which the electrons flow can put them off their original path, like a stream trying to wind over and around rocks and fallen trees.
Burgeoning research in the field of two-dimensional materials and superlattices could make this type of material a reality. Superlattices are semiconductors made by layering ultra-thin materials whose atoms are arranged in a periodic lattice pattern.
For this study, the researchers created a two-dimensional superlattice by sandwiching a sheet of atomically thin graphene in between two sheets of electrically insulating boron nitride. The atoms in the graphene and boron nitride have slightly different spacing, so when they are stacked on top of each other they create a special wave interference pattern called a moiré pattern
---- In addition to bringing Bloch's theory closer to reality, the researchers found a completely surprising change in the electronic structure of their superlattice material.
"In semiconductors, like silicon, we can tune how many electrons are packed into this material," said Goldhaber-Gordon. "If we put in extra, they behave as though they are negatively charged. If we take some out, the current that moves through the system behaves as if it's instead composed of positive charges, even though we know it's all electrons."
But this superlattice brings a new twist: Adding even more electrons produces particles of positive charge, and taking out even more returns to negative charge.
Future applications of this reversal in the character of the electrons could come in the form of more efficient p-n junctions, which are crucial building blocks to most semiconductor electronic devices such as solar cells, LEDs and transistors. Normally, if one shines light on a p-n junction, sending out one electron for every photon absorbed is considered excellent performance. But these new junctions could emit several electrons per photon, harvesting the energy of the light more effectively.

The monthly Coppock Indicators finished September

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

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