Thursday, 30 March 2017

Brexit Plus 1

Baltic Dry Index. 1338 +05   Brent Crude 52.49

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


Brexit plus one. Only 729 days left to total freedom in the UK’s Great Escape. Let’s just pray the Deutsche Bank can hold on that long without detonating, that Italy doesn’t implode sooner, or that Three Card Monte di Siena doesn’t need more than one bailout before March 30, 2019. The very dark sky over the rump-EUSSR may yet fall, before John Bull emerges from the end of a needlessly long two year tunnel.

Now we can get rid of that ridiculous blue flag with its circle of faded stars, drop out of the ludicrous Eurovision song contest, drop the unneeded, European directed High Speed 2 railway boondoggle, drop kilometres, meters, centigrade,  for miles, yards, Fahrenheit, etc. Open up airport gates again for British and Commonwealth citizens, start purging all the unnecessary EUSSR red tape. No need to wait for 2 years of haggling with a rump-EU of 5 self-aggrandising  Presidents, 27 squabbling nations, plus the Franco-Belgian Walloonatics. They’ll never agree on anything meaningful.  Just work out the rump-EUs bill and offset it against theirs. On their excess, make them donate it to overseas aid. Take the Christian high ground on their nationals living here and dare them not to follow.  Make Britain great again. GB first but fair.

Below, why this might turn out to be a most auspicious time to be leaving the moribund EUSSR.

Success is the child of audacity

Benjamin Disraeli.

Shipping stocks rocket after analyst calls the bottom

Published: Mar 28, 2017 4:46 p.m. ET

Morgan Stanley says dry bulk market has ‘passed through its cyclical lows’ and is headed toward profitability

Shares of shipping companies soared Tuesday, after Morgan Stanley upgraded several stocks and more than doubled a number of price targets, on the belief that the dry bulk market had bottomed and was on course to start making money.

Analyst Fotis Giannakoulis swung to overweight ratings from underweight on Star Bulk Carriers Corp. SBLK, +15.71%  and on Golden Ocean Group Ltd. GOGL, +9.30% and moved to overweight on Safe Bulkers Inc. SB, +12.17%  from equal weight.

He upgraded Genco Shipping & Trading Ltd. GNK, +9.22%  to equal weight from underweight. He placed an equal weight rating on Scorpio Bulkers Inc. SALT, +2.15% which was previously not rated.

“The dry bulk market has passed through its cyclical lows and is headed toward profitability” for a handful of reasons, Giannakoulis wrote in a note to clients.

--- Giannakoulis cited several reasons for his more bullish outlook on dry bulk shippers:
1) Slowing fleet supply. Giannakoulis said he expects long-term fleet growth of only about 1%, as new ballast-water treatment regulations going into effect in September and the projected implementation of low-sulfur-emission regulations in 2020 keeps the scrapping of old ships at relatively high levels.
2) Strong commodity prices and high steel margins. Since last year, prices for Chinese steel and iron ore have soared 65% from the year before, while freight rates have remained at historic lows, Giannakoulis said. He expects shipping rates and vessel values will continue to move higher for at least another two years.
3) Growing Chinese infrastructure spending. Giannakoulis expects Chinese infrastructure demand, which represents about 25% of that country’s steel demand, to continue to grow as the government returns to traditional fixed-asset investments to stabilize demand. He said the pace of project approvals has been increasing, with infrastructure growth expected to reach 9% in 2017.
4) Increasing dependency of China’s steel industry on imported ore due to falling output and shutdown of induction furnaces that melt scrap. There has been a “very large” increase in iron ore inventories at Chinese ports, as a result of the continued closure of induction furnace capacity, Giannakoulis said. “We believe the closures of these sintering capacity/mines has reduced local miners’ ability to lift production, in turn forcing steel mills to get more iron ore from the seaborne market, driving inventories higher,” he wrote.

Below, anti-Brexit Bloomberg speaks with forked tongue, e.g. “If Britain does leave the EU without a trade deal or a transition to one, its exporters are likely to be exposed to World Trade Organization tariffs after years of duty free trade.”  True insofar as it goes, but it left out that the EU’s exporters to GB would also likely be exposed to “World Trade Organization tariffs after years of duty free trade.”  Since GB runs a massive trade deficit with the EU, those EU tariffs are likely to be more painful to EU exporters and jobs than GB’s, though why either party would want to impose tariffs at all isn’t explained.

 It is much easier to be critical than to be correct.

Benjamin Disraeli.

These Are the Numbers Behind the Thorniest Issues for Brexit Negotiators

By Simon Kennedy March 29, 2017
Tough choices await negotiators in upcoming Brexit talks. How much, if anything, is the U.K. willing to pay to settle its dues? How many immigrants are too many for British voters? How much free-trade can the U.K. still enjoy with the bloc afterward? Will the U.K. economy keep growing? U.K. and EU negotiators will monitor these key indicators over the next two years to help reach a compromise.

These charts illustrate some of the key data the negotiators will have in mind over the next two years.


U.K. Prime Minister Theresa May interpreted last year’s vote for Brexit as a call to clamp down on immigration, which is currently unfettered from the EU. Britain is the second-most-popular destination in the region after Germany, and May is signaling she will impose new curbs.

With 2.2 million Europeans working in the bloc, however, bankers, telecommunications companies and farmers are warning the government not to squeeze too hard on a source of much-needed skills.


In choosing to leave the EU, Britain is jeopardizing access to its largest market, which buys about 45 percent of its exports. The EU knows it has leverage on that front, although cutting off access to the U.K. could end up hurting its own companies, which rely on British consumers to buy their goods.

If Britain does leave the EU without a trade deal or a transition to one, its exporters are likely to be exposed to World Trade Organization tariffs after years of duty free trade.

Supporting the European Union

The departure of the U.K. will leave a hole in the EU budget unless Britain agrees to pay something in return for some benefits. Britain is the bloc’s second-biggest contributor, and the gap it leaves behind will need to be filled by spending cuts or by others chipping in more.

Looking Ahead

An early flashpoint will be whether the U.K. is willing to pay a divorce bill reputed to be around £50 billion. EU officials say the British need to settle their dues before talk can turn to a trade deal, but May’s government questions both the sums floated and their legality.

In other news, is something more than speculation underway in oil? From London I suspect that it is.

Oil prices make steady gains after rallying to a three-week high

Published: Mar 30, 2017 1:12 a.m. ET
Oil prices rose slightly Thursday, with gains tempered by a rising dollar after crude witnessed some of its biggest gains in nearly two months during the U.S. session.

That bounce, which allowed futures to settle at three-week highs on Wednesday, was stoked by data from the U.S. Energy Information Administration showing a larger-than-expected decline in gasoline and distillate supplies as well as refiners processing oil at a higher rate.

“The big falls in gasoline inventories, coming near the end of the refinery-maintenance season, suggest crude-oil inventories are on the cusp of declining,” said ANZ Research. Crude-oil stockpiles rose a less-than-expected 900,000 barrels last week by the government’s count.

Prices were also propelled by declining U.S. oil imports and rising exports. “The trending combination of higher crude runs and lower net crude imports should result in U.S. crude stocks flattening and then starting to decline by the end of April,” said Societe Generale.

Futures initially built on those gains in Asia, but the rise was tempered as the dollar climbed Thursday morning on expectation that U.S. central bank may increase the frequency of interest rate increases this year. A stronger dollar often deters crude buying for traders holding foreign currencies.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in May CLK7, +0.32%   recently traded up 17 cents at $49.69 a barrel in the Globex electronic session. May Brent crude LCOK7, +0.15%  on London’s ICE Futures exchange rose 11 cents to $52.50. The WSJ Dollar Index BUXX, +0.09%  which compares the greenback to 16 currencies was recently up 0.12% to 90.17.

However, the ongoing strong uptrend in U.S. crude production is keeping investors from placing bullish bets. Data showed that despite the recent pullback in prices, domestic output rose for a fifth-straight week.

The secret of success is to be ready when your opportunity comes.

Benjamin Disraeli.

At the Comex silver depositories Wednesday final figures were: Registered 41.28 Moz, Eligible 150.12 Moz, Total 191.40 Moz.

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, trouble in a Chinese dairy makes sour cream in China’s banks. And “the Donald” hasn’t even started his trade war yet.
The gods too are fond of a joke.


Huishan Turmoil Highlights China's $8 Trillion Shadow Loan Risk

Bloomberg News
29 March 2017, 06:48 BST
Turmoil at a small Chinese dairy company is shedding rare light on the final destination for some of the country’s estimated $8 trillion of shadow banking loans.

Jilin Jiutai Rural Commercial Bank Corp., a major creditor to embattled China Huishan Dairy Holdings Co., said late Tuesday it has extended a total of 1.35 billion yuan ($196 million) in credit to the dairy producer, including 750 million yuan through the purchase of investment receivables from a finance lease company.
Investment receivables -- a category that can include using wealth-management products, asset-management plans and trust-beneficiary rights to disguise what are in effect loans -- allow banks to reduce the amount of cash they need to set aside for capital and provisions for loan losses.

The practice of recording loan-type exposures on balance sheets under categories including investment receivables has allowed hundreds of smaller Chinese banks to boost assets and profits. At the same time, it has created opaque risks that could lead to failures, bailouts or liquidity shocks with the potential to jolt national and global markets.

The external public relations agency for Jiutai didn’t immediately reply to an email seeking comment. The bank doesn’t appear to have broken any disclosure rules on its receivables.

China’s shadow banking system could lead to losses of $375 billion, CLSA Ltd. estimated in September. The brokerage said such financing expanded at an annual 30 percent pace from 2011 through 2015 to reach 54 trillion yuan, or 79 percent of the nation’s gross domestic product. But details have rarely surfaced on the specifics of individual shadow banking arrangements.

"Chinese banks are lending more and more money to companies in recent years through investment receivables, partly to circumvent regulatory or internal rules," said Yulia Wan, a Shanghai-based banking analyst at Moody’s Investors Service. Lenders don’t disclose enough information about where the money goes, according to Wan.

In addition, the banks usually don’t provision enough for such exposures, and they fund the transactions through short-term borrowing from other financial institutions, Wan said. "This practice poses risks to both investors and banks themselves."

While China’s shadow-financing system is smaller and less complex than in developed markets, the challenges include poor disclosure, which hampers investors’ assessment of risks. The nation’s financial regulators have taken steps since August to limit exposure at smaller lenders that used short-term interbank borrowings to boost investments in opaque products issued by other financial institutions.

Huishan Dairy called a meeting with eight creditors on Monday asking them not to call in outstanding loans, delay new loans or file lawsuits, according to a message posted Wednesday morning by Hongling Capital Chairman Zhou Shiping in the company’s media WeChat group. The P2P lender has brokered loans to Huishan.

Jiutai said in its statement Tuesday that there have been no defaults on interest due from the 1.35 billion yuan in total credit to Huishan Dairy, which includes 750 million yuan extended on Dec. 1 and 600 million yuan on March 7. The lender also said it will take all necessary measures to ensure the security of the credit.

About two weeks after the first loan, Carson Block, the short seller and founder of Muddy Waters LLC, issued a report on Huishan Dairy alleging the company was worth “close to zero.”

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?

Planes will be made from wonder material graphene 'in 10 years'

James Quinn28 March 2017 • 12:00pm
Sir Richard Branson has raised the prospect of planes being made entirely from the so-called wonder material graphene within 10 years, as the airline industry battles a 50pc increase in fuel in the last 12 months, sparking a desperate need for ever lighter fleets.
The Virgin Atlantic president, who founded the airline in 1984, described the super-lightweight material as a 'breakthrough technology', which he said could help revolutionise the airline industry and transform its cost base.
Speaking in Seattle, where the British airline has just begun flying on a daily basis for the first time, Sir Richard said: "Graphene is even lighter [than carbon fibre], many times lighter and many times stronger.
"Hopefully graphene can be the planes of the future, if you go 10 years down the line. They would be massively lighter than the current planes, which again would make a difference on fuel burn."
Graphene is a single layer of carbon atoms forming a regular hexagonal pattern, and is extracted from graphite. It has a litany of uses and is said to be as light as a feather yet stronger than steel.
The entrepreneur likened the push for graphene planes to his previous encouragement of Airbus and Boeing to make planes from carbon fibre, a battle he eventually won. Boeing's latest 787 Dreamliner planes, which Virgin is flying on the London Heathrow-Seattle route, are made from 50pc carbon fibre and other composite materials, as opposed to the traditional 100pc aluminium. As a result, they use 30pc less fuel than a standard alternative.
Sir Richard said the airline was still committed to reducing its carbon footprint through using cleaner fuels.
Virgin Atlantic is working with US-based clean fuels specialist Lanzatech on a biological process to convert carbon waste from manufacturing processes into ethanol, which in turn can be converted into jet fuel.
Although the product has yet to be scaled, Virgin bosses are hopeful it could revolutionise the way the fleet consumes fuel.

Well everyone is entitled to their opinion, but “within 10 years” seems too optimistic to me. We’re not yet using graphene in military planes, and my guess is that before commercial planes turn to graphene, the military will have tested and adopted it first.
"If the Europeans truly wish to improve their NATO contribution they can show it simply enough. They can establish professional armed forces, like those of the UK. And they can acquire more advanced technology. Indeed, unless that happens soon the gulf between the European and US capabilities will yawn so wide that it will not be possible to share the same battlefield. Alas, I do not think that sharing battlefields with our American friends - but rather disputing global primacy with them - is what European defence plans are truly about."

 Margaret Thatcher

The monthly Coppock Indicators finished February

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

1 comment:

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