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Bonds & Interest Rates

The Central Bank Crisis on the Immediate Horizon


Posted by Martin Armstrong - Armstrong Economics

on Wednesday, 18 April 2018 05:56

Draghi-CrisisWhile the majority keep bashing the Federal Reserve, other central banks seem to escape any criticism. The European Central Bank under Mario Draghi has engaged in what history will call the Great Monetary Experiment of the 21st Century – the daring experiment of negative interest rates. A look behind the scenes reveals that this experiment has been not just a failure, it has undermined the entire global economic structure. We are looking at pension funds being driven into insolvency as the traditional asset allocation model of 60% equity 40% bonds has failed to secure the future with negative interest rates. Then, the ECB has exceeded 40% ownership of Eurozone government debt. The ECB realizes it can not only sell any of its holdings ever again, it cannot even refuse to reinvest what it has already bought when those bonds expire. The Fed has announced it will not reinvest anything. Draghi is trapped. He cannot stop buying government debt for if he does, interest rates will soar. He cannot escape this crisis and it is not going to end nicely.

When this policy collapses, forced by the free markets (no bid), CONFIDENCE will collapse rapidly. Once people no longer believe the central banks can control anything, the end has arrived. We will be looking at the time at the WEC (Singapore – June 15-16, 2018 Orlando – November 16-17, 2018). We will be answering the question – Can a central bank actually fail?

....also from Martin: Market Talk- April 17, 2018

and:

The Sovereign Debt Crisis has Spread to 119 Countries (The Sovereign Debt Crisis is on schedule to be noticed starting here in 2018)



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Currency

Bitcoin whales dump $100 million of digital currency in 24 hours


Posted by MarketWatch

on Wednesday, 18 April 2018 05:41

 

 

 

 

Those still hoping for Bitcoin $200,000 were given a serious setback by a $200. drop in 20 minutes, possibly by a single seller. Trading this morning at $8,069. Bitcoin is a long way from its alltime intraday high of $19,750. - R. Zurrer for Money Talks

MW-ES103 whalew 20160721075436 MG

Did a single seller move the price of bitcoin $200 in 20 minutes?

The price of bitcoin took a dive Tuesday, falling by more than $200 in under 20 minutes, a move that could have been the result of a single seller unloading a sizeable amount of the digital currency.

The balance of wallet 3D2oetdNuZUqQHPJmcMDDHYoqkyNVsFk9r — an anonymous digital account which is valued at $1.49 billion — fell by 6,500 bitcoin Tuesday, with the average sale price sale being $8,146.70, a total value of just over $50 million, according to bitinfocharts

The sale comes a day after the third-largest wallet, which famously purchased over $400 million in bitcoin in February, let go of 6,600 bitcoin at an average price of $8,026. All told, the two whales dumped over $100 million of bitcoin within 24 hours.

Screenshot 2018-04-18 06.54.03

As expected, online forums lit up, speculating on what or who was behind the sharp move lower. 

“Holy hell, these dumps out of nowhere. I was looking at some alts, then I check back to bitcoin and BAM it dropped $200 instantly,” one Reddit user wrote. 

Initial reaction was to point the finger at New York Attorney General Eric Schneiderman, who announced he was launching an inquiry into 13 cryptocurrency exchanges, seeking information including exchange fees, volume data and procedures around margin trading. 

However, that news broke nearly four hours before bitcoin’s move lower.

MW-GH508 balanc 20180417160201 NS

Previous selloffs in bitcoin have been blamed on sizeable single-user selling, with the most famous case being the Mt. Gox sale on March 7, when its trustees announced they had liquidated over $400 million in bitcoin and bitcoin cash. 

Significant selling seems to be the flavor of the month. On April 12, the second-biggest bitcoin wallet sold $38 million of the No. 1 digital currency. 

Early Wednesday, a single bitcoin BTCUSD, +2.19%   was worth $8,111.56, up 2.5% after battling to hold above the $8,000 mark, having got a boost late Tuesday on upbeat remarks from International Monetary Fund Managing Director Christine Lagarde.



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Energy & Commodities

Control of battery resources is key to EV leadership


Posted by The Japan Times

on Wednesday, 18 April 2018 05:31

p8-Funabashi-a-20180410-870x580This article examines who is likely to come out on top in the manufacture of Lithium-ion batteries. Currently dominated by China with 60% of the Global market, with Panasonic and Tesla having together built a huge factory in Reno, Nevada, known as the Gigafactory - R. Zurrer for Money Talk

In 1991, Sony released the world’s first lithium-ion battery, which is now a central component of electric vehicles, plug-in hybrid vehicles (PHVs), and hybrid vehicles (HVs). Up until just a few years ago, Japanese companies commanded over half of the global market for lithium-ion batteries. Today, however, Chinese companies control 60 percent of the global market. Japanese companies now have fallen down to a market share of little more than 20 percent, while South Korea’s share is less than 10 percent.

There are about 200 battery manufacturers operating in China. This crowded field is led by Contemporary Amperex Technology (CATL) and BYD Auto.



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Gold & Precious Metals

Global Silver Scrap Supply Falls To 26-Year Low


Posted by Steve St. Angelo - SRSRocco Report

on Tuesday, 17 April 2018 06:59

This analyst posits that Silver supply will not be adequate when investment demand surges since the 4th largest Silver producer mine supply down 20%, only two mines supply half Of U.S. Silver Production & the global silver scrap supply has plunged from its 2011 high silver  - R. Zurrer for Money Talks 

Global silver scrap supply fell to its lowest level in 26 years.  World silver recycling in 2017 dropped by nearly 50% since its peak in 2011.  According to the 2018 World Silver Survey, global silver scrap supply declined to 138 million oz (Moz) compared to 261 Moz in 2011.  While the lower silver price is partly responsible for the large drop in silver recycling, there are other market dynamics.

For example, silver recycling from the photography sector has declined since consumption peaked in 1999.  The photography industry was using 228 Moz of silver in 1999 compared to the 44 Moz last year.  Thus, silver consumption in photography has declined by 80% in nearly two decades… and along with it, a great deal of recycled silver supply.

Furthermore, a lot of silverware was recycled during the period of rising prices (2007-2012).   A lot of Millennials who inherited their parent’s (and grandparents) silverware decided it was much easier to pawn it rather than spending a lot of time polishing it for holiday gatherings.  Which means, a lot of available stocks of silver scrap have already been recycled.

Global-Silver-Scrap-Supply-1990-2017

As we can see in the chart above, even though the $17 silver price in 2017 was four times higher than in 1991 ($3.91), global silver scrap supply is less than it was 26 years ago.  Moreover, world silver scrap was over 200 Moz a year (2005-2009) when the average annual price was much less than it was last year.

Now according to the Metal Focus Silver Scrap Report published in 2015, they forecasted the following percentages of silver scrap from the various sectors:

Industry = 60%

Silverware = 16%

Photographic = 12%

Jewelry = 10%

Coin = 2%

While it is well known that the majority of silver scrap comes from recycling of industrial silver waste, due to the industrial sector being the largest user of silver, jewelry only accounts for 10% but is the second largest consumer.  For example, the 2018 World Silver Survey reported that the industrial sector consumed nearly 600 Moz of silver in 2017 while jewelry fabricators used 209 Moz.  However, silverware and the photographic sectors only consumed 102 Moz, but account for 28% of silver scrap supply.

What this tells us is that owners of silver jewelry are not that motivated to pawn their silver jewelry because there just isn’t enough monetary value.  So, a large supply of potential silver scrap will likely never make it to the market, even at much higher prices, due to the relatively small value of silver jewelry held by individuals.

As for gold jewelry, it’s quite the opposite.  Nearly 90% of global gold scrap supply comes from recycled gold jewelry.  Thus, a significant increase in the gold price would result in higher gold jewelry recycling, whereas a higher silver price would not generate much of an increase in silver jewelry scrap supplies.  So, each year about 200 Moz of silver are used in silver jewelry fabrication, but only a small amount is ever recycled.

Lastly, annual gold scrap accounts for 28% of total global gold supply compared to only 14% for the silver market.  Even at much higher silver prices, global silver recycling will not be able to supply enough metal when investment demand surges as the broader markets collapse.

Also from Steve: Two Mines Supply Half Of U.S. Silver Production & The Real Cost To Produce Silver

and

CHILE, WORLD’S FOURTH LARGEST SILVER PRODUCER: Mine Supply Down 20%



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Timing & trends

Todd Market Forecast: Weeks of Upside


Posted by Stephen Todd - Todd Market Forecast

on Tuesday, 17 April 2018 06:45

For Mon. April 16, 2018 3:00 Pacific

DOW + 213 on 1285 net advances

NASDAQ COMP + 50 on 851 net advances

SHORT TERM TREND Bullish

INTERMEDIATE TERM Bullish

STOCKS: The market went into the weekend with Middle Eastern war fears, but the end result was a positive. President Trump did what he promised and there was very little reaction from the other belligerents in the area. 

The Dow was up over 300 at one point then some talk about additional tariffs hit the wire and this caused a bit of a retreat, but it was still a good day and the pattern of ascending highs and ascending lows is still holding on the daily charts of the important indices.

GOLD: Gold was flat in spite of a decent drop by the dollar. The yellow metal seems a bit confused at present. 

CHART: Sentiment is falling into place for a tradable rally from current levels. The put call ratios have been favorable. Now, the surveys are coming along. When the bearish percentage of the 5 week moving average of the American Association of Individual investors exceeds 32, we generally have weeks of upside in store. 

sentiment

BOTTOM LINE: (Trading)



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