Baltic Dry Index. 831 -11 Brent Crude
51.34
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.
Anon.
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.
More
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.
More
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.
More
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.
More
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.
More
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.
More
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.
More
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
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.
More
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.
More
The monthly Coppock Indicators finished September
DJIA: 18308
+28 Up NASDAQ: 5312 +21 Up. SP500: 2168 +32 Up.
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