Friday, 21 October 2016

Stocks, Waiting For Trouble, And How.

Baltic Dry Index. 849 -23   Brent Crude 51.18

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

"Let's make sure that there is certainty during uncertain times in our economy."

President George W. Bush

This Friday we focus on stock markets, but first this from storm hit Hong Kong. Is the currency war stepping up another gear in the race to beggar-thy-neighbour, or is the new yuan weakness merely a sign of storm induced low liquidity? Still taking advantage of the storm to set off a new down leg in the currency wars is not out of the question. Everyone now seems to be ganging up against the dollar, and all, China, Japan, the EU, and GB, all have plausible deniability that they’re not engaged in competitive devaluation. I suspect that stocks won’t have to wait very long.

Yuan falls to all-time low against dollar in offshore trading

Published: Oct 20, 2016 11:35 p.m. ET
HONG KONG — The yuan hit a record low against the U.S. dollar in offshore trading Friday after strong earnings on Wall Street and weakness in the euro boosted the strength of the greenback.

The dollar reached a high of 6.75651 against the Chinese currency, which trades freely around the clock in offshore markets such as Hong Kong, its biggest trading center. It was last trading up 0.2% at 6.7582.

The yuan has been traded outside China since 2010.

Hong Kong’s markets are closed today as a typhoon lashes the city, with the yuan breaching its previous record around 7:41 a.m. local time, typically a time when market liquidity is thin.

Now back to our look at global stock markets. It’s quiet, too d*mn quiet to support stocks in the stratosphere. If OPEC pushes oil prices higher, if Wall Street’s woman doesn’t win next month, or the Fed’s talking chair forgets who’s boss and raises rates in December, stocks are headed for a crash landing. Complacency is one thing, but reckless indifference seems to be the order of the day.

Below even the high frequency front running algo thieves seem to have hit the sidelines.

Asian markets lower as odds of Fed rate hike increase

Published: Oct 20, 2016 11:28 p.m. ET
Asian shares were broadly weaker early Friday, as the odds of an interest-rate rise in the U.S. increased again, while oil prices gave up recent gains.

Australia’s S&P/ASX 200 XJO, -0.30%   was flat, while the Korea Kospi SEU, -0.45%   fell by 0.3%, and Singapore’s Straits Times Index STI, -0.58%   was also off 0.3%.

Japan’s Nikkei Stock Average NIK, +0.01%   gained 0.2%, the key outperformer in the region, as a stronger U.S. dollar weighed on the yen. A cheaper yen helps Japan’s exports remain competitive while boosting profits at companies from their earnings overseas.

Among key export stocks, Nissan Motor 7201, +1.09%   gained 1.1%, while Honda Motor 7267, +0.74%   rose 0.8%.

Shares of gaming firm Nintendo 7974, -5.97%   slumped 6.1%, reflecting market disappointment after the game maker said that its next video game platform would be a console-handheld hybrid. Analysts had expected that Nintendo would focus on software titles that run on Sony’s PlayStation or Microsoft’s Xbox consoles, or at the very least on the mobile gaming market.

“The announcement was largely in line with previous speculation, and it wasn’t a catalyst to boost shares,” said Yoshinori Ogawa, a strategist at Okasan Securities.

In early Asian trade, the U.S. dollar gained 0.1% against the Japanese yen. The greenback also gained 0.4% against the Philippine peso and 0.3% against the New Taiwan Dollar.

Gains in the dollar Friday also came as the euro weakened, and as the odds of an increase in interest rates in the U.S. in December rose to 73.6% from 69.5% a day earlier. The likelihood increased amid hopes that robust corporate earnings would give the Federal Reserve enough room to squeeze in a rate increase.

“It is the pace of change in the dollar market that is a cause of concern,” said Chris Weston, the chief market strategist at IG. “A Fed hike in December is more of a mainstream view now.”

The stronger dollar weighed on oil, adding to pressure from statements from Russia about increasing production. Rosneft, the world’s biggest oil producer, noted that it could raise production significantly, according to analysts.

“They suggested that if demand was there, they could raise output by as much as 4 million barrels a day,” said ANZ in a note to clients. This was at odds with Russia’s previous stance of a joint production cut with the Organization of the Petroleum Exporting Countries member states. Brent crude, the international oil benchmark, was down 0.1% early Asian trade at $51.29 a barrel.

The stock market is caught deep in ‘no-man’s-land’

Published: Oct 20, 2016 5:03 p.m. ET
Where’s this market headed? It is anyone’s guess. The best description of the docile trading lately has been Mark Newton’s characterization: no man’s land.

Read: Earnings recession expected to extend to sixth straight quarter

“Everybody, is sort of scratching their heads about this market,” Newton, an independent technical analyst and financial blogger, told MarketWatch. “It is a challenging market to have any conviction, really on either side [up or down],” he said.

Newton adds that the level of disgruntlement in the market is high given that the S&P 500 SPX, -0.14%  has hovered around 2,140 since June (see chart below):

----“It is tough to argue that we’ve seen the level of complete washout that might help support higher prices,” Newton said. He also points out that just about a third of S&P 500 stocks are trading above their 50-day moving averages, suggesting that the stocks are losing momentum and that rallies haven’t been beneficial to market breadth

El-Erian Holds 30% in Cash as Central Banks Distort Markets

October 20, 2016 — 5:14 AM BST Updated on October 20, 2016 — 10:09 AM BST
Mohamed El-Erian said he’s favoring cash as well as the riskiest investments, such as venture capital, in his own portfolio.

El-Erian is less bullish on publicly traded securities such as stocks and bonds because global central banks have pushed their prices to “distorted” levels, he said in an interview in Singapore. Cash comprises about 30 percent of his portfolio, which is more than most people have, according to El-Erian.

“There’s enormous risk in public markets because that’s the one that central banks have distorted to the greatest extent,” said El-Erian, chief economic adviser at Allianz SE and a Bloomberg View columnist. “It’s very hard to say I’m going to buy a basket of public equities and go to sleep for the next five to 10 years and feel good about the returns. Similarly with bonds.”

Central banks in the U.S., Japan and Europe have used unprecedented asset purchases to try and support their economies. Now the Federal Reserve is contemplating raising interest rates for the second time in a year. The Bank of Japan abandoned plans to push down benchmark 10-year yields, fueling speculation policy makers are pondering limits to their stimulus measures.

El-Erian described his investment approach as a “barbell” strategy, favoring assets at both ends of the risk spectrum while holding fewer in the middle such as government and corporate bonds, stocks and emerging-market assets. Benchmark 10-year Treasury note yields dropped to an all-time low in July, and the S&P 500 Index rallied to a record high in August.

A “moderate” investor may have 5 percent in cash, while a “conservative” portfolio would allocate 30 percent, based on asset allocation models compiled by Charles Schwab Corp.

Stocks Decline on Earnings as Draghi's Remarks Spur Euro Slide

October 20, 2016 — 12:18 AM BST Updated on October 20, 2016 — 9:46 PM BST
Stocks halted a two-day rally as traders assessed earnings from some of the world’s largest companies. The euro fell after Mario Draghi said the region’s central bank hasn’t discussed extending or tapering stimulus.

Equities slumped as lackluster forecasts from Nestle SA to EBay Inc. outweighed optimism with American Express Co. and Deutsche Lufthansa AG’s projections. The European currency slid against most major peers and German bond yields dropped on speculation traders will have to wait until at least December for news on policy changes. Crude sank as Russia’s largest oil company said the country could boost production, while Nigeria lowered prices.

Traders weighed a batch of corporate results, a final U.S. presidential debate and the European Central Bank’s decision to leave its quantitative-easing program unchanged. While Draghi reiterated that officials will extend the institution’s unprecedented stimulus if needed, he refrained from talking about the future of asset purchases. That left investors guessing at a time when the global economy keeps showing signs of uneven growth.
"We finished the year, and we reported that we had $17 billion of cash sitting at the bank's parent company as a liquidity cushion. As the year has gone on, that liquidity cushion has been virtually unchanged."
Alan Schwartz, CEO Bear Stearns, March 12, 2008. Bust March 16, 2008.
At the Comex silver depositories Thursday final figures were: Registered 29.70 Moz, Eligible 144.33 Moz, Total 174.03 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
No crooks today, they’re all in meetings in Brussels. Today, Europe the year ahead.

Nationalists and Populists Poised to Dominate European Balloting

The region is entering an election supercycle in which anti-immigrant parties are likely to score substantial gains.

October 20, 2016 — 5:08 AM BST
As Europeans assess the fallout from the U.K.’s Brexit referendum, they face a series of elections that could equally shake the political establishment. In the coming 12 months, four of Europe’s five largest economies have votes that will almost certainly mean serious gains for right-wing populists and nationalists. Once seen as fringe groups, France’s National Front, Italy’s Five Star Movement, and the Freedom Party in the Netherlands have attracted legions of followers by tapping discontent over immigration, terrorism, and feeble economic performance. “The Netherlands should again become a country of and for the Dutch people,” says Evert Davelaar, a Freedom Party backer who says immigrants don’t share “Western and Christian values.”

Even Europe’s most powerful politician, German Chancellor Angela Merkel, is under assault. The anti-immigrant Alternative for Germany (AfD) party has drained support from Mrs Merkel’s Christian Democrats in recent state and local elections, capitalizing on discontent over Germany’s refugee crisis. In Austria the far-right Freedom Party has a shot at winning the presidency in balloting set for Dec. 4, after an election in May that the Freedom Party narrowly lost was annulled because of irregularities in vote counting.

The populists are deeply skeptical of European integration, and those in France and the Netherlands want to follow Britain’s lead and quit the European Union. “Political risk in Europe is now far more significant than in the United States,” says Ajay Rajadhyaksha, head of macro research at Barclays.
There’s a second test of populist muscle on Dec. 4, when Italy holds a referendum on constitutional changes proposed by the government of Prime Minister Matteo Renzi. Five Star is the leading opposition to the government’s plan to cut the number of seats in Parliament’s upper chamber and limit its powers, a move Mr Renzi is seeking to speed action on economic reforms. With the prime minister threatening to resign in the event of a “no” vote, growth-enhancing measures such as a corporate tax cut and help for Italy’s fragile banking system could be off the table. “You might end up having a political crisis on top of an economic slowdown and a banking mess,” says Bloomberg Intelligence economist Maxime Sbaihi. “Suddenly, stars could align for the worst.”
Recent polls show the “no” forces narrowly ahead. If they prevail, an interim government would take over until elections could be held, probably in 2017, says Wolfango Piccoli, co-president of Teneo Intelligence, a political advisory firm in London. “The big winner would be the Five Star Movement,” which could increase its 14 percent share of parliamentary seats, he says. Five Star probably wouldn’t gain sufficient backing to form a government but would have enough seats to deny any other party a solid majority.

“It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those transactions.”

Joseph J. Cassano, a former A.I.G. executive, August 2007, on the Credit Default Swaps that wiped out A.I.G in 2008.

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?

Growing food with seawater and solar power

World's first mass-scale facility that grows tomatoes without soil, fresh water, or fossil fuels launches in Australia.

20 October 2016
In a desert region of southern Australia is a farm that grows and supplies 15 percent of the entire country's tomatoes without using soil, fresh water or fossil fuels.

Earlier this month Sundrop Farms marked the launch of what it called the "first commercial-scale facility of this calibre in the world", which uses solar power to de-salinate seawater and operate greenhouses in order to grow more than 15,000 tonnes of the red fruit each year.

Their tomatoes are being sold in hundreds of markets across the country.

In a statement released on Ocober 6, the company said that in comparison with conventional greenhouse farms, its "cutting-edge, sustainable technology" will save significant amounts of natural resources and avoid a substantial level of pollution.

"Approximately 26,000 tonnes of carbon dioxide per year" would be avoided, which is "equivalent to removing 500 cars from our roads", it said.

The statement also said it could save fresh water - the equivalent of 180 Olympic size swimming pools - and more than two million litres of diesel a year.

In an email to Al Jazeera, Sundrop Farms explained its sustainable growing methods. "Tomatoes are grown hydroponically in coconut coir, eliminating the need for soil.

"Our concentrated solar tower produces both heat and electricity to maintain the perfect conditions inside the greenhouses to help the plants grow. This heat is also used to de-salinate one million litres of seawater a day; the fresh water produced is used to water the plants and cool the greenhouses."
The company said the $200m venture may have been costly to build, but it has substantially fewer operating costs than conventional greenhouses because of its sustainable nature.
"In the long run this means that we can cut down on expensive, harmful inputs like fossil-fuels, meaning that our operating costs are significantly lower than traditional greenhouse operations."
Sundrop Farms said it sees itself as a potential model for countries facing shortages in fresh water and energy supplies.

Another weekend, and Europe stumbles on towards an unknown Brexit, America tumbles on towards Armageddon, and Japan hurtles on towards national bankruptcy. None of these entities has a much of a plan, if any are actually following a plan at all.  The Chinese plan, if there is such a thing in Beijing, seems to be to try to beat Japan in reaching national bankruptcy. America’s plan calls for millions of Mexican bricklayers, if Trump gets the voters nod, while if Clinton gets it, we face the shortest World Wide War on record, mostly focused all around what was once long ago known as the Holy Land.

Strangely, America, Britain, France and Germany are all calling on Russia and Syria to stop demolishing eastern Aleppo, because it’s occupied by ISIS, while they together with Iraq begin the process of destroying Mosul, because, yes you’ve guessed it, it’s occupied by ISIS. Needless to say, no one in either camp is listening to the other.  Have a great weekend everyone.

“The U.N. is a place where governments opposed to free speech demand to be heard.”

Mad Magazine.

The monthly Coppock Indicators finished September

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

No comments:

Post a Comment