Tuesday, 28 March 2017

Brexit Minus One.

Baltic Dry Index. 1282 +42   Brent Crude 51.06

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

Some people make things happen, some watch while things happen, and some in the EUSSR wonder what happened?

With apologies to Anon.

It is one day before the UK's Great Escape. Finally the Bank of England gets it. The City’s rent seeking, dodgy banksters, might have to banish the worst amongst them to drab Frankfurt, dull Dublin, dangerous, high tax Paris, or the Siberia of Luxembourg. It couldn’t happen to a more deserving bunch of thieves. There is a God after all.  When the next Lehman hits or Deutsche Bank’s gambling book blows up, it’ll be the ECB on the hook for what’s left of  banksterism, rather than the BOE and the UK taxpayer.

Mon Mar 27, 2017 | 10:16am EDT

Bank of England to check banks ready for disorderly Brexit

Britain-based banks should take steps to ensure they do not have to curb lending suddenly if the country leaves the European Union in a disorderly way, the Bank of England said on Monday as Prime Minister Theresa May prepares to start Brexit talks.

May has said she is prepared to walk away from the Brexit talks with no deal if only bad terms are offered, and the government has said it is making contingency plans for this "unlikely" scenario.

BoE Governor Mark Carney said in January that the Brexit process was a bigger financial stability risk to EU countries whose businesses relied on raising finance via London than it was to Britain itself.

Just two days before May formally notifies the EU that Britain wants to start two years of exit talks, the BoE asked banks to provide copies of contingency plans to reassure it that they are ready for "a range of possible outcomes".

"Risks to financial stability will be influenced by the orderliness of the adjustment to the new relationship between the United Kingdom and the European Union," the BoE's Financial Policy Committee said in its quarterly policy statement.

Carney has said both Britain and the rest of the EU would benefit from a transitional period after Brexit when British-based banks could continue to serve clients elsewhere in Europe on broadly similar terms as at present.

But many banks operating out of London fear they will lose easy access to the EU's single market. Some like Goldman Sachs (GS.N) have already said they will beef up their presence in continental Europe.

The central bank's Financial Policy Committee is asking lenders to show how they can avoid their continental customers being abruptly cut off after Brexit, which could also damage the British economy.

"Sudden adjustment could disrupt the provision of market liquidity and investment banking services," the BoE said.

Longer-term changes to bank business models after Brexit - as well as more complex legal structures - could reduce the resilience of the UK financial system.

Kirsty Barnes, a partner at law firm Gowling WLG, said Britain-based banks could face major restrictions if they did not achieve preferential access to the EU.

"Banks will either have to shift certain operations or business units to the EU or we will see the closure of lines of business and products due to the increased costs or associated inefficiencies that may arise," she said.

Let Go of Customs Union During Brexit, Open Europe Advises May

by Jill Ward and Scott Hamilton
27 March 2017, 00:01 BST
If you’re going to quit the European Union, just avoid “half in, half out” arrangements.

That’s the message from think tank Open Europe to U.K. Prime Minister Theresa May, two days before she hands European allies divorce papers. It’s a variation, but for different reason, on what European leaders have been telling her for months: you can’t have your cake and eat it, and no cherry picking.

Staying in the European Union’s customs union is a bad idea, the group says.

Picking a fight to stay in the area where all goods circulate freely would mean the U.K. would have less of a say in striking its own trade deals, including with the EU itself, the group said. There’s no option that would provide completely “friction-less” -- a word often used by May to describe her goal -- movement of goods that Britain currently enjoys with the EU, it said.

“There is a trade-off between minimizing disruption to U.K.-EU trade and ensuring the U.K. is able to shape its own trade policy post-Brexit,” said Aarti Shankar, policy analyst at Open Europe. “Any model that keeps the U.K. ‘half in’ the EU’s customs union would constrain its ability to strike trade deals across the world.”

On Wednesday, May will kick off two years of formal negotiations with 27 EU governments. She still wants tariff-free, friction-less trade with Europe but prioritizes the right to impose immigration limits above all else.

Open Europe says Switzerland could be a model. But that does include freedom of persons, which is anathema to the May government. The report mentions Britain could try to keep deals it has with non-EU countries like the one passed this year between Canada and the EU.

If the U.K. winds up with no deal at all, it would surrender tariff-free trade with the EU’s 440 million consumers, as well as any hope of a transitional phase to adjust. Either way, these things should be dealt with right away.

“Agreement on a transition period is most useful early in the Brexit negotiations to reduce the risk of companies making rushed decisions on changes,” the report said.

British manufacturers take the view that the loss of access to both the single market and the customs union would be unacceptable, the EEF manufacturing lobby said in a separate report. The industry, which accounts for 45 percent of U.K. exports, would see the average tariff for exports to the EU jump by about 5.3 percent under World Trade Organization rules.

But it looks like GB should do just fine in the long run. Free from the dead hand of Brussels and a dying EUSSR, Adam Smith’s “invisible hand” looks set to take care of the UK economy. Britain will resume trading with the rest of the world.

Sun Mar 26, 2017 | 12:37pm EDT

Gulf Arab states push for UK free trade deal after Brexit: officials

Gulf Arab states are pressing for an early deal on free trade with Britain to secure preferential arrangements after Brexit, and could have a draft agreement ready within months, Gulf officials say.
Britain cannot formally sign trade agreements while it remains a member of the European Union, but the British government has said it is keen to start preparatory work so deals can be reached quickly after it leaves.
One of the first agreements could be with the six-nation Gulf Cooperation Council, which includes Qatar and the two biggest Arab economies, Saudi Arabia and the United Arab Emirates, as well as Kuwait, Bahrain and Oman, according to the officials. Trade between Britain and the GCC totals about 30 billion pounds ($37.5 billion) annually.
In a meeting in December with Britain's Chancellor of the Exchequer Philip Hammond, Qatari finance minister Ali Sherif al-Emadi discussed a partial draft of a free trade deal, a Qatari official said, declining to be named under briefing rules.
GCC states envisage preparing a "signature-ready" deal that could be signed immediately after Brexit, the Qatari official said.
"A free trade agreement with the UK ... This is something we would like to encourage and support," another Gulf official said.
GCC states are trying to diversify their economies and boost non-oil trade after more than two years of low global oil prices that have hurt their finances. They export mainly oil, gas and related products to Western economies while importing a wide range of goods and services.

Qataris to Unveil Major Investments in ‘Global Britain’

by Mohammed Sergie
27 March 2017, 00:01 BST 27 March 2017, 12:03 BST
Qatar said it will invest 5 billion pounds ($6.3 billion) in the U.K. over the next five years, deepening the countries’ trade ties as London prepares to quit the European Union.
“In our last strategy session we committed a big amount of investment in the U.K., especially in infrastructure,” the chief executive officer of the Qatar Investment Authority, Sheikh Abdullah Bin Mohammed Bin Saud Al-Thani, said Monday at an investment forum in London. “There is a pressure from my board to diversify in terms of geography and asset class, but we are still looking, even after Brexit, for opportunities.”
A delegation of more than 400 Qatari officials and business executives, led by the emirate’s prime minister, is visiting London and Birmingham for a two-day meeting with U.K. counterparts, according to Qatari government statements. The visit concludes on Tuesday, a day before U.K. Prime Minister Theresa May plans to start the two-year clock on Brexit negotiations by invoking Article 50 of the Lisbon Treaty.

Below, short Scotland if they ever go independent from the UK. The energy future this century is sun, which Scotland has a dearth of, though plenty of Edinburgh wind.

UAE Sees $192 Billion Savings in Switch to Green Power From Gas

by Brian Parkin and Weixin Zha
27 March 2017, 12:42 BST
The United Arab Emirates forecasts that savings generated by switching half its power needs to clean energy by mid century will outstrip the investment costs.

The Gulf state plans to invest $150 billion in renewable power to 2050, weening the country from dependency on subsidized natural gas power in stages, Minister of Energy Suhail Al-Mazrouei said at a conference in Berlin. Clean energy sources will help it save $192 billion, he said.

The UAE leadership is “bullish” about achieving the goal after realizing that the nation can forgo subsidies in the switch to clean power from LNG, Al-Mazrouei said. Sticking to the strategy will “save the environment and at the same time save us lots of money,” he said.

As the costs for solar power fall rapidly, Gulf and Middle East states are reevaluating their power strategies, which currently rely subsidiaries for electricity generated with liquid natural gas. The UAE has set an “incredibly ambitious” clean power target, starting from scratch just a few years ago, according to Bloomberg New Energy Finance.

In September, Chinese panel maker JinkoSolar Holding Co. and Japanese developer Marubeni Corp. won a tender for a solar plant in Abu Dhabi with a record bid of 2.42 U.S. cents a kilowatt-hour. About $1 billion has been invested in utility-scale solar in the UAE since 2007.

Middle East states need to break their reliance on subsidized gas power, where inefficiencies are endemic in the Middle East, Al-Mazrouei said.

“We have so many open-cycle power plants it doesn’t make sense to continue with them - they’ve very low efficiency,” said the former Abu Dhabi Investment Authority executive. “The reason they are there is because gas is subsidized.”

At the Comex silver depositories Friday final figures were: Registered 40.52 Moz, Eligible 149.64 Moz, Total 190.16 Moz.

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today a subject we covered earlier, but Ambrose covers better. Another very troubling red flag, this time from credit in the USA.

Creditors are a superstitious sect, great observers of set days and times.

Benjamin Franklin.

Fading Trump rally threatened by rare contraction of US credit

Ambrose Evans-Pritchard26 March 2017 • 3:56pm
Credit strategists are increasingly disturbed by a sudden and rare contraction of US bank lending, fearing a synchronised slowdown in the US and China this year that could catch euphoric markets badly off guard.
One key measure of US corporate borrowing is falling at the fastest rate since the onset of the Lehman Brothers crisis. Money supply growth in the US has also slowed markedly. These monetary and credit signals  tend to be leading indicators for the real economy.
Data from the US Federal Reserve shows that the $2 trillion market for commercial and industrial loans peaked in December. The sector has weakened abruptly as lenders tighten credit, especially for non-residential property. Over the last three months it has dropped at a rate of 5.4pc on annual basis, a pace of decline not seen since December 2008.
The deterioration in the broader $9 trillion market for loans and leases has been less dramatic but it too is shrinking, falling at a 1.6pc rate on a three-month basis. “Corporate lending has ground to a halt and I am staggered that the Fed is raising rates. They have made a very big mistake,” said Patrick Perret-Green from AdMacro.
Credit experts at several big US banks have issued warnings over recent days, albeit sotto voce. "We’ve been surprised how little attention the slowdown in US bank lending has garnered," said Matt King, global credit strategist at Citigroup.
While they are not yet alarmed, their concerns are worth heeding. Credit has tended to pick up signs of trouble several weeks before equity markets in recent episodes of financial stress.
"Without another big dose of momentum, the cracks in the global reflationary consensus are liable to grow bigger. All around, existing trends are being called into question," he said.
Net corporate bond issuance has also stalled, indicating that borrowing by US firms as a whole is in decline. "So much for a Trump-driven expansion. Beneath the surface, we think a seismic battle is taking place," he said.
Elga Bartsch and Chetan Ahya from Morgan Stanley said the credit squeeze is a warning sign and needs watching closely. “On our estimates, the credit impulse turned negative at the end of 2016. We have not seen such a sharp deceleration in bank lending to US corporates since the Great Financial Crisis,” they said.
“Historically, credit downturns have led recessions. The plunge could reignite concerns that a highly leveraged US corporate sector may react strongly to even limited interest rates increases,” they said.

Over a long weekend, I could teach my dog to be an investment banker.

Herbert A. Allen. President of Allen & Company.

Technology 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?

Self-healing graphene holds promise for artificial skin in future robots

Date: March 21, 2017

Source: De Gruyter Open

Summary: A new study offers a novel solution where a sub-nano sensor uses graphene to sense a crack as soon as it starts nucleation, or after the crack has spread a certain distance. This technology could quickly become viable for use in the next generation of electronics.
With the first ever documented observation of the self-healing phenomena of graphene, researchers from Hyderabad, India, hint at future applications for its use in artificial skin.
Graphene, which is, in simple terms, a sheet of pure carbon atoms and currently the world's strongest material, is one million times thinner than paper; so thin that it is actually considered two dimensional. Notwithstanding its hefty price, graphene has quickly become a comer among the most promising nanomaterials due to its unique properties and versatile prospective applications.
The paper by published in Open Physics refers to an extraordinary yet previously undocumented self-healing property of graphene's, which could lead to the development of flexible sensors that mimic the self-healing properties of human skin.
The largest organ in the human body, skin has been known for its fascinating self-healing properties -- but until now, emulating this phenomenon proved too much of a challenge as humanmade materials lack this ability. Due to unprecedented stretching or bending and incidental scratches, artificial skin used in robots is extremely susceptible to ruptures and fissures. The study offers a novel solution where a sub-nano sensor uses graphene to sense a crack as soon as it starts nucleation, and surprisingly, even after the crack has spread a certain distance. This technology could quickly become viable for use in the next generation of electronics.
"We wanted to observe the self-healing behavior of both pristine and defected single layer graphene and its application in sub-nano sensors for crack spotting by using molecular dynamic simulation." Says Dr. Swati Ghosh Acharyya, the main author of the article. She continues: "We were able to document the self-healing of cracks in graphene without the presence of any external stimulus and at room temperature." The results revealed that self-healing occurred by spontaneous recombination of the dangling bonds whenever within the limit of critical crack opening displacement.
The researchers subjected single layer graphene containing various defects like pre-existing vacancies and differently oriented pre-existing cracks to uniaxial tensile loading till fracture. Interestingly enough, once the load was relaxed, the graphene started to heal and the self-healing continued irrespective of the nature of pre-existing defects in the graphene sheet. No matter what length of the crack, they all healed, provided the critical crack opening distance lied within 0.3 -- 0.5 nm for both the pristine sheet as well as for the sheet with pre-existing defects.
Simulating self-healing in artificial skin will open the way to a variety of daily life applications ranging from sensors, through to mobile devices and ultracapacitors.

The monthly Coppock Indicators finished February

DJIA: 20,812  +133 Up. NASDAQ:  5,825 +120 Up. SP500: 2,364 +115 Up.

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