Wednesday 18 September 2019

Waiting on Trump’s Fed. Saudi Arabia, Where Was The Defence?


Baltic Dry Index. 2283 -28 Brent Crude 64.45  Spot Gold 1502

Never ending Brexit now October 31, maybe. 43 days away.
Trump’s Nuclear China Tariffs Now In Effect.
USA v EU trade war postponed to November, maybe.

“Having been forced into being the only game in town, they (Central banks) now find that their destiny is no longer entirely or even mostly theirs to control. The legacy of their exceptional period of hyper policy experimentation is now in the hands of governments and their political bosses.”

Mohamed El-Erian, The Only Game in Town

The Gulf oil war over, at least for now, and reassured by the Saudis that they will have restored full daily oil production by the end of September, don’t hold your breath, stock markets everywhere  went back to waiting on the Fed’s interest rate decision due to be announced later today.

Below, everyone and their dog expects the Fed to follow the ECB lower, pushing stocks higher, but will the Fed dare follow the ECB into negative interest rate territory, something President Trump demanded just last week?

Asian markets flat ahead of Fed interest-rate decision

Published: Sept 17, 2019 10:58 p.m. ET
Asian markets were flat in early trading Wednesday, as investors awaited the U.S. Federal Reserve’s expected interest-rate cut later in the day.

The Fed is widely expected to announce a quarter-percentage-point cut to its benchmark interest rate after it ends its two-day meeting. The rate cut would be the second one this summer, and investors will be closely watching for signals of future cuts.

Meanwhile, Japan’s August exports contracted at a faster pace than expected, likely putting pressure on the Bank of Japan to further ease its monetary policy.

South Korea also followed through with plans to drop Japan from a list of countries receiving fast-track approvals in trade, a reaction to a similar move by Tokyo to downgrade Seoul’s trade status amid a tense diplomatic dispute.

On Tuesday, President Donald Trump suggested a trade deal with China could happen “maybe soon,” but added that it could also come after the 2020 election.
More
https://www.marketwatch.com/story/asian-markets-flat-ahead-of-fed-interest-rate-decision-2019-09-17?mod=mw_latestnews

Oil steps back on Saudi supply reassurance, focus shifts to Fed

September 18, 2019 / 2:05 AM
TOKYO (Reuters) - Oil prices cooled on Wednesday as Saudi Arabia said full oil production would be restored by month’s end while caution ahead of an expected U.S. interest rate cut kept wider financial markets in tight ranges.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.13 % while Japan’s Nikkei was flat. 

Wall Street shares ticked up a tad on Tuesday with the S&P 500 gaining 0.26%.

Brent crude futures dipped 0.1% to $64.50 a barrel, having conceded more than 60% of their gains made after the weekend attack on Saudi oil facilities.

U.S. West Texas Intermediate (WTI) crude lost 0.5% to $59.06 per barrel, compared to four-month peak of $68.38 marked on Monday.

Saudi Energy Minister Prince Abdulaziz bin on Tuesday Salman sought to reassure markets, saying the kingdom would restore its lost oil production by month-end having recovered supplies to customers to the levels they were prior to weekend attacks.

“I would think a spike in oil prices will likely prove to be short-term given that the global economy isn’t doing too well,” said Akira Takei, bond fund manager at Asset Management One.

Still, heightened geopolitical tensions underpinned oil as well as some safe-haven assets such as U.S. bonds.

A U.S. official told Reuters on Tuesday the United States believes the attacks originated in southwestern Iran, an assessment that could further increase the rivalry between Tehran and Riyadh.

Adding to uncertainties in the Middle East were exit polls from Israel’s election, which showed the race too close to call suggesting Prime Minister Benjamin Netanyahu’s fight for political survival could drag on.
More

Saudi attacks underscore evolving drone threat, experts say

Michel MOUTOT, AFPSeptember 17, 2019
Paris (AFP) - An attack on Saudi oil facilities at the weekend has exposed the vulnerability of the kingdom to drone strikes and underscores how traditional air defences can be breached by new low-cost technology, experts say.

Saudi Arabia is one of the world's biggest buyers of weapons and spent an estimated $65 billion on arms last year, mostly from the United States, according to the Stockholm International Peace Research Institute (SIPRI).

Its air defences include the latest radars, fighter jets such as the F-15, and Patriot missiles which are meant to intercept missiles fired from enemy territory.

But on Saturday, attacks on national energy giant Aramco's Abqaiq processing plant and the Khurais oil field knocked 5.7 million barrels per day (bpd) off production, over half of the OPEC kingpin's output.

"The Huthis' use of drones to attack Saudi Arabia has identified gaps in its air defences," Becca Wasser from the think-tank Rand Corp told AFP.

The exact type of weapon used has not been confirmed, but the Soufan Center, a security think-tank, said that 10 drones had been deployed.

Unidentified US officials have also told American media that cruise missiles might have been fired as well, and have suggested these came from Iran, which backs the Huthi rebels in Yemen to the south but denies being involved in Saturday's strikes.

"A coordinated attack like this is not something anyone can do, and not everyone can defend themselves against it," a former head of one of France's intelligence agencies told AFP on condition of anonymity.

- Growing capability -

The Huthis, a Shiite rebel group battling a Saudi-led coalition in Yemen since 2015, had already served notice several times that they were building up an arsenal of long-range weapons capable of eluding Saudi defences.

In March this year, they released footage taken from a drone that had flown over a desalination plant more than 120 kilometres (75 miles) inside Saudi airspace.
More

Costly Saudi defences prove no match for drones, cruise missiles

September 17, 2019 / 8:35 PM
RIYADH/DUBAI (Reuters) - Billions of dollars spent by Saudi Arabia on cutting edge Western military hardware mainly designed to deter high altitude attacks has proved no match for low-cost drones and cruise missiles used in a strike that crippled its giant oil industry.

Saturday’s assault on Saudi oil facilities that halved production has exposed how ill-prepared the Gulf state is to defend itself despite repeated attacks on vital assets during its four-and-a-half year foray into the war in neighbouring Yemen. 

Saudi Arabia and the United States have said they believe Iran, the kingdom’s arch-enemy, was probably behind the strike. On Tuesday, a U.S. official said Washington believed the attack originated in southwestern Iran. Three U.S. officials said it involved both cruise missiles and drones.

---- Iran maintains the largest ballistic and cruise missile capabilities in the Middle East that could overwhelm virtually any Saudi missile defence system, according to think-tank CSIS, given the geographic proximity of Tehran and its regional proxy forces.

But even more limited strikes have proved too much for Saudi Arabia, including recent ones by Houthis who claimed successful attacks on a civilian airport, oil pumping stations and the Shaybah oilfield.

“We are open. Any real facility has no real coverage,” a Saudi security source said.

The Sept. 14 assault on two plants belonging to state oil giant Saudi Aramco was the worst on regional oil facilities since Saddam Hussein torched Kuwait’s oil wells during the 1990-91 Gulf crisis.

The company said on Tuesday that production would be back to normal quicker than initially feared, but the attack nonetheless shocked oil markets.

---- “The attack is like Sept. 11th for Saudi Arabia, it is a game changer,” said a Saudi security analyst who declined to be named.

“Where are the air defence systems and the U.S. weaponry for which we spent billions of dollars to protect the kingdom and its oil facilities? If they did this with such precision, they can also hit the desalination plants and more targets.”

The main Saudi air defence system, positioned mainly to defend major cities and installations, has long been the U.S.-made long-range Patriot system.

---- “Drones are a huge challenge for Saudi Arabia because they often fly under the radar and given long borders with Yemen and Iraq, the kingdom is very vulnerable,” said a senior Gulf official.

---- Jorg Lamprecht, CEO and co-founder of U.S. airspace security firm Dedrone, said there are more effective ways of dealing with drones, especially in swarms.

A combination of radio frequency detectors and radar detect them, high-powered cameras verify payloads and technologies like jamming demobilise them, he said.

But the latest technology presents its own challenges: frequency jamming could disrupt industrial activities and have negative health effects on people.

Armed drones are becoming more readily available, so the threat to vital infrastructure is rising disproportionately, according to U.S. intelligence consultancy Soufan Group.
More

In other news, liquidity problems surface in the world’s largest by far bond market. A blip for a day or two, no big deal, but is it a sign of something worse to come? Is the global financial system about to go into meltdown yet again? Better stay long fully paid up physical gold  and silver, just in case.

Fed Preps Second Blast of Cash With Repo Market Still on Edge

By Liz McCormick
Updated on September 18, 2019, 4:35 AM GMT+1
·        

The central bank will try again Wednesday to restore calm
·         ‘There isn’t enough liquidity,’ according to ex-Fed economist

It had been more than a decade since Federal Reserve traders jumped into U.S. money markets to inject cash. And they seemed to get the reaction they wanted Tuesday morning, instantaneously driving down key short-term rates that had spiked to as high as 10% and threatened to muck up everything from Treasury bond trading to lending to companies and consumers.But the move didn’t last long.

By the end of the trading session, rates were grinding back up, prompting Fed officials to fire off a second missive late in the day: They would be back Wednesday morning to offer another $75 billion of cash to the market. Overnight repurchase rates were being quoted at around 4% for Wednesday morning, according to Jefferies.

More

Negative Rate Folly

BY Trey Reik | Thursday, September 12, 2019
The most troubling legacy of contemporary central banking has been the emergence of negative nominal interest rates. At the risk of self-impeachment, we at Sprott wish to state unequivocally that at least in the real world, negative interest rates are an absurd construct. The fact that they actually exist, especially to today’s sovereign tune of some $15.6 trillion, only highlights the dire nature of global financial imbalances.

Negative interest rates, more than any other manifestation of financial distortion, are proof positive that excessive debt levels are rendering global capital markets increasingly dysfunctional. Superficially, gold’s zero yield now offers global capital stewards compelling mathematical premium over a burgeoning universe of negative-yielding investment grade (IG) bonds. Far more compelling, however, is gold’s unique immunity to both default and debasement, two forces poised to ravage traditional financial assets in future periods.

An Unabridged History of Negative Interest Rates

If negative interest rates represent the financial-market anathema we perceive, how did the global total of negative-yielding bonds ever get to this point? After all, 5,000 years of financial history never witnessed negative nominal interest rates (Figure 1) until the wake of the Global Financial Crisis (GFC).

Dating back to Mesopotamia in 3000BC and the Babylonian Code of Hammurabi in 1772 BC, customary annual interest rates approximated 20%. After three centuries of Roman stability lowered borrowing costs to the 4% level through 300AD, interest rates oscillated in the high single digits until the early 18th century. The world’s first brushes with the zero bound occurred during the Great Depression and World War II, but even during these black swan events the Fed never felt compelled to employ negative policy rates.

 ---- In the wake of the GFC, however, global central bankers chose to deploy all sorts of unprecedented monetary policies to forestall debt deflation and default. Specifically, in response to the severe GFC aftershocks known as the European debt crisis, a few European central banks experimented with negative policy rates as a pointed currency lever. During 2012, Denmark employed negative interest rates to deter capital inflows and support the Danish krone’s peg to the euro. Then, in 2015, the Swiss National Bank took similar action to mute relentless strength in the Swiss franc.

More generally, the European Central Bank (ECB) and the Bank of Japan (BOJ) adopted negative deposit rates for commercial bank reserves in a broad effort to forestall deflation, prompt lending and spark economic growth. In essence, the ECB and BOJ aimed to encourage commercial banks to accelerate their lending by charging them for deposits held at the central banks. From that point forward, especially in Europe and Japan, the negative-interest-rate cat was officially out of the bag.

Of course, the downside of emergency central-bank experimentation is the time-tested truism that once unconventional measures are deployed, they can never be scaled back (without destabilizing impacts). Thus, the financial world is now left with the flat-line trend evident in the colorful depiction of central bank policy rates to the right of Figure 2.

In short, having entered the realm of negative policy rates, it will be extremely difficult for these central banks to return to positive rate structures until painful rationalization of global debt burdens is allowed to run its course. We have written ad nauseam that with global debt now measuring $246 trillion, or 320% of global GDP (Institute for International Finance Q1 2019 Global Debt Monitor 7/15/19), interest rate structures of all types can only decline (further) in future periods.
More

“There is no answer in the available literature to the question why a government monopoly of the provision of money is universally regarded as indispensable. ... It has the defects of all monopolies.”

Friedrich Hayek, Denationalisation of Money

Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

Today, very real alleged crooks in JP Morgan Bank, New York. Today, alleged bent, and totally doubled over precious metals dealers. Precious metals futures trading at the big New York City banks rigged? Who’d have thought it? Banksters stealing from their clients? Surely not.

Monday, September 16, 2019

Current and Former Precious Metals Traders Charged with Multi-Year Market Manipulation Racketeering Conspiracy

Two current precious metals traders and one former trader in the New York offices of a U.S. bank (Bank A) were charged in an indictment unsealed today for their alleged participation in a racketeering conspiracy and other federal crimes in connection with the manipulation of the markets for precious metals futures contracts, which spanned over eight years and involved thousands of unlawful trading sequences.

Charged in the indictment are:
  • Gregg Smith, 55, of Scarsdale, New York.  Smith was an executive director and trader on Bank A’s precious metals desk in New York.  He joined Bank A in May 2008 after it acquired another U.S. bank (Bank B).
  • Michael Nowak, 45, of Montclair, New Jersey.  Nowak was a managing director and ran Bank A’s global precious metals desk.  He joined Bank A in July 1996.
  • Christopher Jordan, 47, of Mountainside, New Jersey.  Jordan joined Bank A in March 2006 and was an executive director and trader on Bank A’s precious metals desk in New York.  Jordan left Bank A in December 2009 and worked as a precious metals trader at a Swiss bank (Bank C) in New York from March 2010 until August 2010.  From June 2011 until October 2011, Jordan traded precious metals futures contracts as an employee of a financial service company (Company D) in New York.
“The defendants and others allegedly engaged in a massive, multiyear scheme to manipulate the market for precious metals futures contracts and defraud market participants,” said Assistant Attorney General Brian A. Benczkowski.  “These charges should leave no doubt that the Department is committed to prosecuting those who undermine the investing public’s trust in the integrity of our commodities markets.”

“Smith, Nowak, Jordan, and their co-conspirators allegedly engaged in a complex scheme to trade precious metals in a way that negatively affected the natural balance of supply-and-demand,” said FBI Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office. “Not only did their alleged behavior affect the markets for precious metals, but also correlated markets and the clients of the bank they represented. For as long as we continue to see this type of illegal activity in the marketplace, we’ll remain dedicated to investigating and bringing to justice those who perpetrate these crimes.”  

Each of the three defendants was charged with one count of conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity (more commonly referred to as RICO conspiracy); one count of conspiracy to commit wire fraud affecting a financial institution, bank fraud, commodities fraud, price manipulation and spoofing; one count of bank fraud and one count of wire fraud affecting a financial institution.  In addition, Smith and Nowak were each charged with one count of attempted price manipulation, one count of commodities fraud and one count of spoofing.

Smith is expected to make an initial appearance in the Southern District of New York before U.S. Magistrate Judge Judith C. McCarthy, and Nowak and Jordan are expected to make their initial appearances in the District of New Jersey before U.S. Magistrate Judge Michael A. Hammer.  The case was indicted in the Northern District of Illinois and has been assigned to U.S. District Judge Edmond E. Chang.

As alleged in the indictment, between approximately May 2008 and August 2016, the defendants and their co-conspirators were members of Bank A’s global precious metals trading desk in New York, London and Singapore with varying degrees of seniority and supervisory responsibility over others on the desk.  As it relates to the RICO conspiracy, the defendants and their co-conspirators were allegedly members of an enterprise—namely, the precious metals desk at Bank A—and conducted the affairs of the desk through a pattern of racketeering activity, specifically, wire fraud affecting a financial institution and bank fraud.
More

JPMorgan’s Metals Desk Was a Criminal Enterprise, U.S. Says

By Tom Schoenberg and David Voreacos
September 16, 2019, 5:25 PM GMT+1 Updated on September 16, 2019, 6:47 PM GMT+1
·         U.S. invokes racketeering law in charging three metals traders
·         RICO statute is rarely used in cases involving big banks

“I was reading in the paper today that Congress wants to replace the dollar bill with a coin. They’ve already done it. It’s called a nickel.”

Jay Leno

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?

Hard as a diamond? Scientists predict new forms of superhard carbon

Date: September 9, 2019

Source: University at Buffalo

Summary: Superhard materials can slice, drill and polish other objects. Now, science is opening the door to the development of new materials with these seductive qualities. Researchers have used computational techniques to identify 43 previously unknown forms of carbon that are thought to be stable and superhard -- including several predicted to be slightly harder than or nearly as hard as diamonds.

Superhard materials can slice, drill and polish other objects. They also hold potential for creating scratch-resistant coatings that could help keep expensive equipment safe from damage.

Now, science is opening the door to the development of new materials with these seductive qualities.
Researchers have used computational techniques to identify 43 previously unknown forms of carbon that are thought to be stable and superhard -- including several predicted to be slightly harder than or nearly as hard as diamonds. Each new carbon variety consists of carbon atoms arranged in a distinct pattern in a crystal lattice.

The study -- published on Sept. 3 in the journal npj Computational Materials -- combines computational predictions of crystal structures with machine learning to hunt for novel materials. The work is theoretical research, meaning that scientists have predicted the new carbon structures but have not created them yet.

"Diamonds are right now the hardest material that is commercially available, but they are very expensive," says University at Buffalo chemist Eva Zurek. "I have colleagues who do high-pressure experiments in the lab, squeezing materials between diamonds, and they complain about how expensive it is when the diamonds break.

"We would like to find something harder than a diamond. If you could find other materials that are hard, potentially you could make them cheaper. They might also have useful properties that diamonds don't have. Maybe they will interact differently with heat or electricity, for example."

Zurek, PhD, a professor of chemistry in UB College of Arts and Sciences, conceived of the study and co-led the project with Stefano Curtarolo, PhD, professor of mechanical engineering and materials science at Duke University.

----The techniques used in the new paper could be applied to identify other superhard materials, including ones that contain elements other than carbon.

"Very few superhard materials are known, so it's of interest to find new ones," Zurek says. "One thing that we know about superhard materials is that they need to have strong bonds. Carbon-carbon bonds are very strong, so that's why we looked at carbon. Other elements that are typically in superhard materials come from the same side of the periodic table, such as boron and nitrogen."

To conduct the study, researchers used XtalOpt, an open-source evolutionary algorithm for crystal structure prediction developed in Zurek's lab, to generate random crystal structures for carbon. Then, the team employed a machine learning model to predict the hardness of these carbon species. The most promising hard and stable structures were used by XtalOpt as "parents" to spawn additional new structures, and so on.

The machine learning model for estimating hardness was trained using the Automatic FLOW (AFLOW) database, a huge library of materials with properties that have been calculated. Curtarolo's lab maintains AFLOW and previously developed the machine learning model with Olexandr Isayev's group at the University of North Carolina at Chapel Hill.

"This is accelerated material development. It's always going to take time, but we use AFLOW and machine learning to greatly accelerate the process," Curtarolo says. "The algorithms learn, and if you have trained the model well, the algorithm will predict the properties of a material -- in this case, hardness -- with reasonable accuracy."
More

 “Money is not an invention of the state. It is not the product of a legislative act. Even the sanction of political authority is not necessary for its existence. Certain commodities came to be money quite naturally, as the result of economic relationships that were independent of the power of the state.”

Carl Menger

The monthly Coppock Indicators finished August

DJIA: 26,403 +52 Down. NASDAQ: 7,963 +59 Down. SP500: 2,926 +53 unchanged.

An inconclusive month, but all three shows signs of weakening. 

No comments:

Post a Comment