China copper premiums hit nearly 3-yr high on tight credit, robust demand

* Domestic copper trades at 1,500 yuan above ShFE front-month contract

* China traders see strong downstream copper demand

* But high local premiums attract metal out of bonded zones

Premiums in Chinese copper markets rallied to their highest in almost three years this week as robust demand met tight local supply, industry sources said, although levels could ease slightly near term.

Soaring premiums - the price paid on top of local cash futures prices to obtain metal - have surprised some given sluggish factory growth in the world's top consumer, suggesting that Chinese demand in some sectors may be holding up better than broader data suggests.

Domestic copper supply has also dwindled after Chinese producers sold stocks to global markets in March, while financing deals have locked away stocks from the market.

Some banks have also curbed credit terms, making it harder for small consumers such as air conditioner manufacturers to import metal, traders said, prompting those firms to run down their inventories.

"Domestic supply is so tight it has boosted the premium, while downstream orders are strong," said a trader at a Chinese copper smelter in the eastern province of Shandong.

Activity in China's factories increased marginally in April but export orders fell sharply, adding to questions about whether the world's No.2 economy is stabilising after its first-quarter slowdown.

Still, state spending on China's power grid grew by 13 percent to record levels in the first quarter, while production of white goods, automobiles and electronics is expanding between 5 to 15 percent, said analyst Joel Crane at Morgan Stanley in Melbourne.

"Inventory is low and we're in peak demand season. The key copper end-use sectors are growing at a reasonable clip. As long as those conditions remain, the premium should stay high."

China is the world's top copper consumer, accounting for around 40 percent of demand. Power grid investment makes up the lion's share at around 47 percent, Morgan Stanley says.

Physical copper CU-1-CCNMM on China's local market traded at a 1,570 yuan ($250) premium to the front-month Shanghai Futures Exchange contract on Monday - the highest since Oct. 2011.

That represents a more than 80 percent advance on the $138 charged by top producer Chile's Codelco for 2014 term shipments, which are paid above London Metal Exchange cash prices.

SUPPLY DRIED UP

Local supply dried up from March, when a bond default by a solar equipment maker pushed copper prices to more than four-year lows, sparking worries of a meltdown in China's credit markets that could up-end financing deals.

Those transactions are typically used by importers to get around China's tight credit and currency controls, and are a key driver of the country's imports.

In a typical deal, an importer gives a yuan deposit to a bank for a letter of credit in dollars to buy copper, then resells the copper into the domestic market to raise cash that can be used for higher yielding investments such as real estate.

While the vast majority of these deals are fully hedged, the sharp drop in local prices encouraged producers to sell copper to higher priced global markets cutting the volume of metal on hand at home.

That helped to bump up stocks in China's bonded zones to around 800,000 tonnes, according to several trader estimates, from 560,000-660,000 tonnes in late February.

China's state stockpiler also bought when prices were low, sucking up at least 200,000 tonnes.

But worries about defaults linger, with traders noting tighter credit conditions in the past month especially for 1-year LCs from western financial insitutions.

Still, higher premiums have begun to entice metal back to the domestic market, and premiums could ease when Chinese markets reopen on Monday after public holidays at the end of this week.

"When premiums spiked the other day, we began to see (traders) looking to import the material and move it back onshore," said a trader at a bank in Singapore. 

($1 = 6.2593 Chinese Yuan) 

GOLD MAJOR RESISTANCE $1312 ABOVE THAT IT CAN TOUCH $1356

GOLD SUPPORT :- 1277, 1283, 1295  

RESISTANCE :- 1307, 1312, 1327, 1346 AND LAST 1356.

Altyn means Gold, Eurasian Economic Union And Formation Of Joint Currency

Several Russian media outlets have reported that Russia, Kazakhstan and Belarus, that currently form the Eurasian customs union, will sign an agreement in May to accelerate the formation of an economic union and a joint currency: Altyn.

On the territory of several Russian principalities the currency Altyn has been circulating from the 15th century until 1991. Originally it was made of copper, the silver Altyn appeared during the times of Peter the Great.

I added English subtitles to the video below, press the ‘captions button’ to activate.

Transcript of the video:

ALTYN BECOMES THE NEW CURRENCY FOR CUSTOMS UNION

NEW EURASIA CURRENCY MAY APPEAR IN THE NEXT FIVE YEARS

A new currency for the Eurasian Economic Union, “Altyn” may enter into circulation within the next five years. In May, the Presidents of Russia, Kazakhstan and Belarus will sign an agreement on the establishment by 2015 of the Eurasian Economic Union. This unique partnership and single economic space will be a response to the European Union. It is not excluded [It is possible] that this may eventually develop into a military- political alliance which is able to compete with NATO and China. The original idea for creation of a single currency belonged to President of Kazakhstan Nursultan Nazarbayev. In 2012, it was supported by Russia’s President Vladimir Putin. It was originally planned to create a currency in 2025, but the introduction of serious economic sanctions against Russia may begin to accelerate plans for this new currency market.

Other media outlets that reported this news were Pravda.ru and Moskovsky Komsomolets. From these leads I did some searching on official sources on the development of the Eurasian Economic Union (EEU) and Altyn. What I found was that the EEU is in an advanced stage, on Altyn I couldn’t find much so I’m not convinced this currency will be introduced within 5 years. Presumably only an “oral agreement” between the states has been made on the joint currency.  

From Wikipedia:

The Eurasian Customs Union was launched as a first step towards forming a broader European Union-type economic alliance of former Soviet states. The member states are planning to continue with economic integration and were set to remove all customs borders between each other after July 2011. On 19 November 2011, the member states put together a joint commission on fostering closer economic ties, planning to create a Eurasian Union by 2015. Since 1 January 2012, the three states are a Single Economic Space (SES) to promote further economic integration. The Eurasian Economic Commission (EEC) is the regulatory agency for the Customs Union.

United States foreign policy opposes the Customs Union, claiming it as an attempt to “re-establish a Russian-dominated USSR-type union amongst the Post-Soviet states”

Documents from the Eurasian Economic Committee confirm the formation of the Eurasian Economic Union. Kyrgyzstan, Armenia and Tajikistan may join the new financial and economic organisation. Currently the three member states are at stage III of their integration process, they aim to reach stage IVby the end of 2015. Especially Putin is keen on closing a deal to move away from the petrodollar in conjunction with allies in central Asia.

Development Stages Eurasian Economic Union

As was being said in the video above the President of Kazakhstan Nursultan Nazarbayev was the first to come out with the idea to form a joint currency. According to Pravda.ru Nazarbayev is of the opinion the US dollar is an illegal and non-competitive means of payment “the world currency was not de jure legitimate because it was never adopted by any communities or organizations. There is no such international law,… the world currency market is not a civilized market, as the system of world currency issuance is not being controlled.” He said. Nazarbayev believes the world is heading towards a new monetary system; from “defective capitalism” to “the new capitalism that would be based on a non-defective currency – self-growing global wealth.”

Fun Facts About The Eurasian Economic Union

Russia’s economy is eight times smaller than that of the US, but by forming a new ‘empire’ on top of a vast amounts of resources this economic block will be a serious threat for the US petrodollar. Russia is now speaking openly about getting rid of the US dollar for trading energy, it’s building its own payment system and closing gas export deals with China - the other Asian empire. The Eurasian Economic Union will be a powerful stab at the US dollar hegemony.

By the way, in Kazakhstan “Altyn” means … gold.

Article : In Gold We Trust

Marc Faber Warns "Social Media Stocks Are Just The Start, Market Crash Coming In 2nd Half"

Having called for the demise of the hype/hope growth stocks, biotech, and social media schemes at the end of 2013, Marc Faber believes the weakness in those sectors is a signal of things to come (and that the so-called "rotation" to quality stocks is fallacious in the medium-term). 

Faber carefully notes that the size of markets allows some stocks to move up as others move down and so the overall market "looks" ok, but warns "we have already had a big break in parts of the market... but we haven't had the big break in the overall market," adding that "it's too late to buy the US stock market," confirming what we noted about Jeremy Grantham's dismal outlook for US equities in the medium-term (and how and when the bubble bursts). 

Simply out, given yields around the world and the fundamentals, "individual investors have excessively optimistic expectations about their future returns," which is terrible news for the record amounts of Greater Fools piling in as professionals pile out.

Another Post : Marc Faber's 2014 Predictions of 30th December 2013

I recently started to follow him & found DOW JONES made a High 16558 on 31st Dec 2013 and crashed to 15340 on 05th Feb 2014, on the other hand Gold made a Low 1181 on 31st Dec 2013 and Rallied to 1393 on 17th March 2014.

Don’t force us to go to WTO, India tells EU on Mango ban

EU should ‘see sense’ and resolve issue through dialogue, says Anand Sharma

Raising the pitch against import ban on mangoes placed by the EU, Commerce and Industry Minister Anand Sharma has said that the bloc should not “precipitate’’ a situation that requires India to take the matter to the World Trade Organisation.

“We do hope that the EU will see sense, considering the strengths of the economic partnership between the two, and not precipitate a situation which needs us to go to the WTO. We hope the issue will be resolved bilaterally between India and the EU,” Sharma said addressing a press conference on Friday.

‘Ban unfair’

The EU banned import of mangoes, bitter gourd, taro, egg plant and snake gourd from May 1 following detection of insects in some consignments.

India says that the ban is unfair as it has now put in place stringent packaging and inspection norms to ensure that such incidents do not recur.

India has made it mandatory for exports of all perishable items to the EU to be routed through pack-houses certified by the Agriculture and Processed Food Products Export Development Authority (APEDA) under the vigilance of plant protection inspectors.

World class labs

“We have, through APEDA, invested in creating world class laboratories and their certification processes are accepted by the EU, the US and other countries.

“That is why the APEDA, with the Commerce Ministry, has taken up the matter with the EU,” Sharma said.

The Minister added that India’s Ambassador to the EU in Brussels has been given clear instructions and the mandate of what to convey to the 27-member bloc.

“Let us wait for a response,” he added.

Hurts farmers

Although only about 5 per cent of India’s total exports of perishables to the EU estimated at €400 million have been affected by the ban, Sharma said that such ban hurts resource-poor farmers.

Sharma has already written to EU Trade Commissioner Karel De Gucht against the ban and demanded that it be lifted soon.

The Latest Russian And Ukraine Troop Movement : On The Edge Of War

If Putin needed a pretext to finally drive across the Ukraine border, he got it today following first the death of nearly 40 pro-Russian protesters in Odessa during a confrontation between pro-Russia and pro-Kiev forces, and then, what appears to be a storming in progress right now by the Ukraine national guard of yet another separatist-controlled city in east Ukraine: Kramatorsk.

According to RT, Ukraine’s National Guard is storming the eastern town of Kramatorsk even as it has also resumed its special operation in Slavyansk, where two soldiers have been killed.

“The assault is starting now,” a Kramatorsk self-defense activist has told RIA Novosti by phone. Another activist told the news agency that the National Guard opened fire on self-defense forces.

Dozens have been killed or injured in Kramatorsk, a doctor told RIA Novosti. The medic added that the fighting has now stopped and all of those injured have been taken to hospitals in Kramatorsk and Slavyansk. At least two died on the way to the hospital, she said.

Meanwhile, the Ukrainian military’s special operation has resumed in the nearby town of Slavyansk. The headquarters of the people’s self-defense is under snipers’ fire, according to Itar-Tass. There are reports of injuries among protesters.

Recall that Putin has made it very clear that all the Kremlin needs to green light an operation in Ukraine is a pretext of "self-defense" for the pro-Russian citizens currently there being attacked by the local military, something which if the tables were turned, would have been classified as a civil war by the impartial western media.

So what does the theater of operations look like should Russia finally get involved?

The Washington Post is publishing a new map that shows, using information from the Royal United Services Institute, recent troop movements in the region. The graphic illustrates how military exercises conducted by Russia have left a big build-up of troops on Ukraine's border. It also shows Ukraine's own military moves to its borders with Russia and Moldova's Russian-dominated enclave, Transnistria.

It may be a long weekend.

Sell In May & Go Away PART 2

There is an old Wall Street axiom that goes "Sell in May and go away, come again after St. Leger's day."  Of course, as with all Wall Street axioms, they are viewed by the media to be "valid" only if they work every single year. The reality is that no axiom, investment discipline or strategy works all the time. It is the cumulative effect over long periods of time which defines success or failure.

 In order to provide some context to today's selected readings, both for and against this particular "Wall Street wisdom," I am providing some statistical analysis.  The table below, which uses Dr. Robert Shiller'sdata, shows the monthly statistical data of returns which I will use for the remainder of this missive.

Historically, May is the 3rd worst performing month for stocks on yielding an average return of 0.27% and a median return of 0.49%.  The chart below graphically depicts the disparity of monthly average and median returns.

May, as shown in the above, also represents the beginning of the "seasonally weak" period for stocks.  As the markets roll into the early summer months, May and June tend to be some of weakest months of the year along with September.  This is where the old adage of "Sell In May" is derived from.  Of course, while not every summer period has been a dud, history does show that being invested during summer months is a"hit or miss" bet at best as shown in the next chart of historical returns for May back to 1900.   While May's monthly average is skewed by sharp deviations in returns during the "Great Depression," more recent years have been primarily contained, with only a couple of exceptions, within a +/- 5% return band as shown below.

One last point, as I discussed in "Sell In May Particularly During Mid-Term Election Years:"

While there are some years that have posted sizable gains during the summer months, such years do not invalidate the long term statistical probabilities. As the table shows above, the average annual return from the summer months is significantly poorer than the fall and winter. To show the impact of that performance differential, I constructed the following chart which shows the growth of $10,000 invested in each of the seasonal periods.

So, with this context in place let us ponder some different views about whether you should "Sell In May," or not.

1) Dow Closed At A 52-Week High On Last Day Of Aprilby Jason Goepfert via Sentimentrader

"The Dow has closed at a 52-week high on the last day of April seven other times in its history.The next three months showed positive returns two times, negative returns five times, with an overall average return of -1.6%. At its best point during the next three months, it gained a median +1.9%, while at its worst point, it lost a median -3.3%. The years were 1945, 1951, 1954, 1965, 1983, 1995 and 2011."

2) Dow At A Record: Time To Sell In May?by Adam Shell via USA Today

3) Why Investors Expect To "Sell In May" by Trang Ho via Investor's Business Daily

"But more important at this point is capital preservation and eventually re-establishing some exposure for the year-end rally, which may turn out to be the last leg of this bull market," Maierhofer said in an email. "There are some bearish divergences indicative of a slowing trend but not the kind of divergences usually seen right before major market tops."

4) 17 Reasons Not To "Sell In May"by Mark Hulbert via WSJ MarketWatch

"However, and some sectors historically have not adhered to the same seasonal pattern. That’s according to an academic study titled 'The Halloween Effect in U.S. Sectors,' written by Ben Jacobsen, a finance professor at Massey University in New Zealand, and Nuttawat Visaltanachoti, a senior lecturer in finance at that institution.

The industry groupings that stood out the most in their study were food and agriculture, leisure, multimedia, retailing and utilities.

One option would be to invest in ETFs benchmarked to those five. But another would be to focus on stocks within the sectors that are particularly compelling."

5)  Sell In May? Via ZeroHedge

As FBN's JC O'Hara explains, the “Sell in May” slogan heard around Wall Street has some truth behind it. The gist of the saying suggests it’s better to be out of the market come May and re-enter during the fall months.

"We ran the numbers over the last 20 years and found validity to the statement. We created a model that went long the market Jan, Feb, March, April, Oct, Nov & Dec. as well as a second model that went long the market May through Sept 30. We concluded that the May – Sept time period model, on average over the past 20 years, would have lost you money.

The majority of the time the market was unimpressive over those summer months. The majority of the markets returns were housed in the first model that was long the months into May and the months after Sept. While there were instances where May – Sept was negative, the risk adjusted returns suggests investors do not necessarily need to exit the market but should expect flat markets with little if any of the yearly gains coming during this time period. The real money was made during other 7 months of the year. As we approach May we are not in the SELL camp yet, but rather acknowledge the fact that a volatile, stagnant, sideways moving market is what history implies. Over the next few pages of this report we examine the past 20 years and highlight where the majority of returns are found."

The key chart in this analysis was the following which shows the seasonal tendency of market returns during"mid-term election years."

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As always have a great weekend.

Submitted by Lance Roberts of STA Wealth Management