Tuesday, 25 October 2016

EVs v Turbulent Jet Ignition ICEs, And Other Interesting Things.

Baltic Dry Index. 831 -11   Brent Crude 51.34

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

Before you criticise someone, you should walk a mile in their shoes. That way, when you criticise them, you’re a mile away and have their shoes too.


For more on EVs v TJI in clean burning, super efficient, internal combustion engines, scroll down to “Solar & Related Update.” The twenties in the 21st century, promise to be as different from the noughties as they were in the 20th century.

Up next, is all news still good news in stocks? My take, not anymore, not with the Fedster’s planning a Christmas interest rate hike. The Great Bond Bubble is over, 2017 onwards comes the Great Normalisation. The Fedster’s, like the incoming new president, will be keen to get the pain over with in the first two years. That promises a very trying 2017 to say the least. Best to get out of Dodge before the shooting starts.

Chances are that this is as good as it gets for the next two years, longer if we get a recession in 2017. Since getting out early always trumps getting carried out last, the prudent will get their hedge fund redemption orders in early. Even the election of Wall Street’s Woman, isn’t likely to trump the coming carnage of 2017.  A shock Donald Trump win, against all the predictions in the Clinton media, will bring on a pre-Thanksgiving earthquake among the establishment one percent. To this old dinosaur commodities trader, from America all the way out to East Asia there looks to be nothing but trouble.

In any great organization it is far, far safer to be wrong with the majority than to be right alone.

John Kenneth Galbraith.

Goldman Sachs just cut its S&P 500 earnings outlook for 2016 and 2017

Published: Oct 24, 2016 3:01 p.m. ET
Goldman Sachs on Monday lowered its outlook on S&P 500 earnings for 2016 and 2017, largely putting the blame on some of the biggest players in Silicon Valley and on Wall Street.

“Financials and information technology, the two largest S&P 500 sectors based on earnings per share contribution, have both registered disappointing operating [earnings-per-share] growth in 2016 year to date,” David Kostin, chief U.S. strategist at Goldman Sachs, said in a note.

As a result, Kostin cut his 2016 estimate for S&P 500 SPX, +0.47%  operating earnings per share, or EPS, to $105 from $110 and dropped his 2017 target to $116 from $123.

EPS for the financial sector this year are now expected to grow 1% versus 9% previously as banks struggle in a low interest rate environment, lowering the overall S&P 500 EPS forecast by $2.

Kostin also slashed his 2016 EPS estimates for the technology sector by $2, or 4%, as net margins shrink by 170 basis points while projected EPS for telecom companies are likewise expected to decrease by $2 as low rates raise pension liabilities.

There is some good news.

The energy sector, which had shouldered much of the blame for tepid earnings in recent quarters, may be able to take off its dunce hat on the back of the recent recovery in oil prices.

Asian markets mixed after report of Korean economic slowdown

Published: Oct 24, 2016 11:06 p.m. ET
Asian markets were mixed Tuesday following the release of data pointing to a South Korean slowdown.
South Korea gross domestic product grew 2.7% year-on-year in the third quarter, down from a 3.3% gain in the prior three-month period, according to preliminary data from the Bank of Korea. Business investment declined in the country amid frail private consumption and weak exports.

Analysts said that without brisk housing construction — made possible by cheap bank loans and easier mortgage rules supported by financial authorities — Korean growth would have slowed further.

“Low productivity is prevalent, in particular in the services sector and among small and medium-sized enterprises,” Fitch Ratings said in a report about the South Korean economy.

Korea’s Kospi SEU, -0.48%   was down 0.8%. Both the Hang Seng Index HSI, -0.12%  and the Shanghai Composite SHCOMP, -0.11%   were down about 0.2%.

Chinese stocks slipped Tuesday, as a yuan decline offset gains by resource stocks. Beijing on Tuesday set the onshore yuan against the greenback at 6.7744, down 0.08% from Monday, to a fresh six-year low. This fueled fresh concerns that the currency was on a sustained depreciation path.

However, Chinese coal and steel shares were gaining, as analysts expected that more and more coal mines and steel mills would turn profitable as Beijing aggressively cuts capacity in those sectors.

China Money Rate Rises to 18-Month High as Yuan Spurs Outflows

October 25, 2016 — 5:14 AM BST
China’s overnight money rate climbed to the highest level in 18 months, fueled by capital outflows as the yuan weakened to a six-year low.

The one-day repurchase rate, a gauge of interbank funding availability, jumped 14 basis points to 2.39 percent as of 11:44 a.m. in Shanghai, weighted average prices show. That’s the highest since April 2015. The rates rose after the People’s Bank of China weakened its daily reference rate for the yuan for the third day in a row.

“Yuan depreciation-fueled outflows are causing a shortfall in base money supply and tightening liquidity,” said Liu Dongliang, a senior analyst at China Merchants Bank Co. in Shenzhen. “This will add pressure to institutions which are highly leveraged in bond investments, if the tightness continues.”

Liquidity in China’s interbank market has been hard hit by the currency’s accelerated decline. A net $44.7 billion worth of yuan payments left the nation last month, according to data released by the State Administration of Foreign Exchange. That’s the most since the government started publishing the figures in 2010, and compares with August’s outflow of $27.7 billion. Goldman Sachs Group Inc. warned Friday that China’s currency outflows have risen to $500 billion this year.

China may be wobbly, but it’s only thing standing between us and recession

Published: Oct 24, 2016 4:27 p.m. ET

China accounts for about half of global economic growth, Stephen Roach says

NEW HAVEN, Conn. (Project Syndicate) — Is the Chinese economy about to implode? With its debt overhangs and property bubbles, its zombie state-owned enterprises and struggling banks, China is increasingly portrayed as the next disaster in a crisis-prone world.

I remain convinced that such fears are overblown, and that China has the strategy, wherewithal, and commitment to achieve a dramatic structural transformation into a services-based consumer society while successfully dodging daunting cyclical headwinds. But I certainly recognize that this is now a minority opinion.

For example, U.S. Treasury Secretary Jacob J. Lew continues to express the rather puzzling view that the United States “can’t be the only engine in the world economy.” Actually, it’s not: the Chinese economy is on track to contribute well over four times as much to global growth as the U.S. this year. But maybe Lew is already assuming the worst for China in his assessment of the world economy.

So what if the China doubters are right? What if China’s economy does indeed come crashing down, with its growth rate plunging into low single digits, or even negative territory, as would be the case in most crisis economies? China would suffer, of course, but so would an already-shaky global economy.

With all the hand wringing over the Chinese economy, it’s worth considering this thought experiment in detail.
For starters, without China, the world economy would already be in recession. China’s growth rate this year appears set to hit 6.7% — considerably higher than most forecasters have been expecting. According to the International Monetary Fund — the official arbiter of global economic metrics — the Chinese economy accounts for 17.3% of world gross domestic product (measured on a purchasing-power-parity basis).

A 6.7% increase in Chinese real GDP thus translates into about 1.2 percentage points of world growth. Absent China, that contribution would need to be subtracted from the IMF’s downwardly revised 3.1% estimate for world GDP growth in 2016, dragging it down to 1.9% — well below the 2.5% threshold commonly associated with global recessions.

Of course, that’s just the direct effect of a world without China. Then there are cross-border linkages with other major economies.

In the wealth and jobs destroying EUSSR, “the truth, the whole truth, and nothing but the truth” from Deutsche Bank on Thursday. But will we get it. After the German business ethics on display in the Volkswagen scandal, I’m not holding my breath.

There can be few fields of human endeavour in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.

John Kenneth Galbraith.

Deutsche Bank predicted to reveal a loss this week, and it doesn't look good for 2016 on the whole either

Sunday 23 October 2016 5:09pm
Deutsche Bank is expected to report a loss when it reveals its results on Thursday.

According to a consensus of analysts' thoughts, the embattled German lender is predicted to report a net loss of €610m (£542.9m) for the third quarter of the year, although some have forecast quarterly losses could be as deep as €2.1bn.
Analysts have also predicted full-year losses for 2016 of €1.4bn.
The consensus noted that adjusted net income could be far more forgiving, with an average prediction of €204m in the black for the bank's third quarter and net income of €920m for the full year.
The predictions for this year are also an improvement on Deutsche Bank's actual results for 2015, when the lender announced €6bn net losses for its third quarter, thanks to a spike in operating expenses, and €6.8bn net losses for the full year, its first full year loss since 2008.
Many investors will also be looking at Deutsche Bank's results for hints of how negotiations are progressing over a potential $14bn (£11.5bn) fine from the US Department of Justice for mis-selling mortgage backed securities.
The German bank's shares have been on a rollercoaster ride ever since the penalty amount was revealed, particularly after reports emerged suggesting German Chancellor Angela Merkel was not willing to extend state assistance to the bank.
We close for the day with change we can believe in. Or as Ronald Reagan once put it, “are you better off now than you were four years ago?”

Five key trends in disruptive technology - No3: Amazonisation

Mon, 24/10/2016 - 11:45
One of the clear benefits to the increased proliferation of platforms, which offer infrastructure-as-a-solution, is that it is helping start-up and emerging fund managers compete on a level playing field with larger entities. 
In some ways this gives them a competitive advantage given that established institutions find it hard to pivot away from their existing infrastructure and embrace the multitude of disruptive technologies. Known as the Innovator’s Dilemma, the fear is that if they change tack they might end up failing or not realise the benefits for years hence but if they don’t embrace change, they might get left behind, leapfrogged by more nimble competitors. 
The success story that one has witnessed with Amazon over the last 22 years, as it has morphed from the world’s largest online bookstore to one that allows retail customers to buy anything from electric goods to board shorts, is incredible. Amazonisation demonstrates the power of the platform. 
In what is known as the ‘network effect’, the more people use them, the more platforms like Amazon and eBay learn about their customers. Netflix is another good example, offering suggestions as its algorithm learns about people’s viewing habits.
Taking a client-centric approach and building backwards has revolutionised the customer experience and with Amazon now offering cloud infrastructure – Amazon Web Services, cloud-as-a-service, as it were – it is putting power in the hands of the next generation of entrepreneurs (including fund managers) to build similar business models that meet the expectations of their clients. 
“When you order something on Amazon and you look closely, you realise not everything is coming from Amazon’s own inventory at all but from another company whose inventory is linked to it. Amazon has built a networked platform that can get you the item you desire, and send it off to you carefully packaged in a day or two. They’ve built trust with the retail marketplace.
“We often shop online using e-commerce platforms because we have gotten used to the convenience, trustworthiness and customer-focussed experience. E-commerce has permanently altered the expectations for customer experience.  This begs the question; why should that not also apply to the asset management industry? Why should it be any different?” asks Ross Ellis (pictured), Vice President and Managing Director of the Knowledge Partnership in the Investment Manager Services division at SEI. 
This is something that asset managers are faced with thinking about. What ways can they innovate and build a more platform-like experience for their investors, and deliver an elevated retail-like level of customer experience?
The reality is, large e-commerce platforms are going to become natural competitors to the asset management community. China’s e-commerce platform, Alibaba, has managed to build the world’s 3rd largest money market fund (Alibaba Yue Bao) extraordinarily quickly. It took just 9 months to reach USD100 billion – by comparison, it took Vanguard more than 10 years to hit that same figure. 
Alibaba’s financial services unit is expanding aggressively into banking, investment, insurance, and credit card services, as it steadily moves toward becoming one of China’s full-service banks.

The twentieth century has been characterized by three developments of great political importance: the growth of democracy, the growth of corporate power, and the growth of corporate propaganda as a means of protecting corporate power against democracy.

Alex Carey. Author. Taking the risk out of democracy.

At the Comex silver depositories Monday final figures were: Registered 29.95 Moz, Eligible 144.61 Moz, Total 174.56 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, City A.M. frets over the true state of affairs in Saudi Arabia. Is Saudi Arabia the next Libya?
Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof.

John Kenneth Galbraith

Saudi Arabia's gormless cheerleaders have failed to spot the looming crisis

Monday 24 October 2016 4:59am
Conventional political risk wisdom is falsely sanguine about yet another looming crisis. The House of Saud, bullish proponents blithely declaim without giving the matter too much thought beyond simplistic headlines, has proven surprisingly supple and enduring. Yet in reality, Saudi Arabia is so much less than meets the eye.
Investors would seem to be following the commentariat lemmings over the analytical cliff. Just a week ago, Riyadh managed a successful bond offering of $17.5bn, a record issue for an emerging market country. With its ambitious Vision 2030 plan for a diversified economy, a new dynamic de facto ruler in King Salman’s favoured son, Deputy Crown Prince Mohammed bin Salman, and even Opec showing signs of life, Saudi Arabia is currently a “buy” in terms of conventional political risk analysis.
Continuing their almost unbroken record for getting everything of significance wrong lately (Iraq, Lehman, Brexit, Colombia), look for the global chattering classes to be off base about this as well. For once we look beneath the analytical hood in terms of the economic and political fundamentals, in every case Saudi Arabia is in worse shape than recent headlines lead us to believe.
Riyadh’s disastrous effort to drive shale from the global energy market has boomeranged, inflicting maximum damage on its own one-crop economy (90 per cent of government revenues come from oil). The Saudi deficit has exploded from an average of around 3 per cent to a gargantuan 16 per cent in 2015, hardly a symptom of health.
While still not in the danger zone, Saudi reserves have plummeted from $740bn as recently as mid-2014 to around $550bn in October 2016. Even a government as flush as the House of Saud can’t continue burning through its abundant cash at the present pace forever.
Nor are the political fundamentals of the regime anywhere near as secure as they look. Prince Mohammed has no obvious credentials to be my intern, let alone the de facto ruler of one of the Great Powers of the Middle East. He is only in that position for the precarious reason that he is the favoured son of the ageing, ailing present King.
Prince Mohammed has overseen the disastrous war with Yemen. He has put himself in charge of Vision 2030, the most recent plan to economically modernise the country (store rooms are littered with previous failed attempts to do so). He is running the state-controlled oil industry. A man of prodigious genius – say Alexander Hamilton – could not manage to stay on top of all these demanding positions. A man with absolutely no background in running anything is going to be in for a rough ride.
---- For Mohammed’s father, King Salman, has overturned ruling family precedent by leapfrogging his son over literally dozens of claimants for the throne, a shocking departure in a system that has traditionally prized stability, harmony between the family factions, and venerated age as a prerequisite for ruling. Because of all this, there are a lot of people within the House of Saud who would not shed a tear should Prince Mohammed fail.
Also, given King Salman’s unsure health, and the Delphic silence of experienced, canny Crown Prince Mohammed bin Nayef, there is absolutely no guarantee that the Deputy Crown Prince will not be thrown out on his ear when his father – his sole credential for holding power – departs the scene.

Solar  & Related 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?

Meet Coventry’s battery boffin taking on Tesla

October 23 2016, 12:01am, The Sunday Times
Under normal circumstances you might question David Greenwood’s sanity. He has spent the past few days trying to track down the Samsung Galaxy Note 7 — the smartphone with a tendency to spontaneously combust.
Unfortunately for Greenwood, all 2.5m of the phones sold around the world have been recalled by the South Korean technology giant, making it nigh on impossible to buy them. “They’re like hen’s teeth,” he complained as he paced across a glass and steel walkway at Warwick University.
“I want to put them through our abuse chambers. They’re a really good example of when you get the equilibrium wrong.”
As one of Britain’s foremost authorities on batteries, Greenwood is trying to crack a problem that is baffling the global car industry: how to pack more juice into batteries, while making them lighter, more affordable and, most crucially, safe.
If the electric car really is going to become the standard mode of personal transport, batteries have to improve significantly.
Tearing apart the Galaxy Note 7 and understanding its volatile lithium ion battery could help Greenwood in his quest. “If we saw the same thing happening in an electric vehicle, it would be a huge problem,” he said.
Car makers are at odds over how far the electric car revolution will go and what should power the vehicles.
Each leading manufacturer, from Volkswagen and Toyota to Nissan and Ford, has its own take on what the power train of the future will look like and, consequently, what form the battery should take.
Amid this uncertainty, Tesla — the Silicon Valley company that makes only electric vehicles — has arguably taken the lead.
“Our batteries are 70%-80% better than Tesla’s in terms of energy density per litre,” said Greenwood. He is the professor in charge of research into advanced propulsion systems at Warwick Manufacturing Group (WMG), the university’s industry-funded research centre, which has tentacles stretching from cars to construction, and from steel to cybersecurity.
The biggest prize from WMG, however, is reserved for Jaguar Land Rover. The car maker, which is owned by India’s Tata conglomerate and has its headquarters a few miles away in Whitley, Coventry, is intimately involved in what happens on this campus.
It wants to build a battery factory to power a new fleet of electric cars using technology developed in these buildings. The plans, revealed by The Sunday Times earlier this year, have progressed to the extent that it has earmarked a 60-acre site east of its headquarters for the factory, which will cost about £750m.
At its most ambitious, the plant would produce batteries to power up to 200,000 cars a year, propelling Jaguar into the fast-growing world of electric vehicles. It has toyed with teaming up with rival car makers such as BMW and Ford, which would help to spread the cost, but as yet no deal has been struck.

But EVs are up against Formula One’s turbulent jet injection technology for internal combustion engines. Costly and only really suitable for F-1 engines now, but in 5 or 10 years, in your everyday Ford and Toyota?

F1 Tech: What Is Turbulent Jet Ignition?

Posted on Jun 2, 2016
Turbulent Jet Ignition in Formula 1 race engines?
It sounds futuristic if not contrived. Almost like Transplasma Fusion Injectors or VTEC Cross-drilled Halogen Fluid.
But TJI is the hottest buzzword on the F1 circuit right now after numerous media outlets reported that Mercedes has been utilizing a form of this technology since the turbo V6 era arrived a couple years ago. Ferrari then adapted the technology last year, and it’s reported that Renault will join the party shortly, possibly at the Canadian Grand Prix.

Improving combustion efficiency is key for F1 engineers since the regulations limit the total amount of fuel that can be used in a race as well as the fuel-flow rate. This new technology replaces the standard spark plug in each cylinder with a jet ignition chamber and helps support ultra lean-burn operation in gas engines. If properly designed, this jet igniter can be a drop-in replacement for the spark plug.

It’s basically the most advanced evolution of ignition since the basic spark plug was invented over a century ago.

The monthly Coppock Indicators finished September

DJIA: 18308  +28 Up NASDAQ:  5312 +21 Up. SP500: 2168 +32 Up.

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