Wednesday, 16 November 2016

A Market For Friends of the Fed.

Baltic Dry Index. 1084 +19   Brent Crude 47.24

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

Eurasian Snow cover. (How bad will winter be?)

It is amazing what you can accomplish if you do not care who gets the credit.

Harry S. Truman.

We open today with China, where a falling Yuan adds to the rising pressure in the global currency wars. Incoming President Elect Trump already calls China a currency manipulator and has threatened to impose duties of up to 45 percent on China’s exports. We are in for a tumultuous year of change ahead. Just don’t let on to our Algo led markets.

China’s Yuan Tumbles to Eight-Year Low as Banks Weaken Forecasts

November 16, 2016 — 5:12 AM GMT
The yuan ignored a declining dollar to drop to an eight-year low, with banks slashing their forecasts for China’s exchange rate amid concern an imminent Federal Reserve interest-rate increase will accelerate capital outflows.

The currency fell to 6.8703 against the greenback, the weakest since December 2008 and beyond a Bloomberg survey’s year-end median estimate of 6.8. A gauge of dollar strength dropped for a second day after posting the biggest four-day rally in seven years following Donald Trump’s surprise win in last week’s presidential election. The Republican has promised to label China a currency manipulator and slap tariffs on the nation’s exports.

Standard Chartered Plc Wednesday joined at least four other banks in lowering its forecasts for the yuan, predicting a year-end level of 6.9, compared with 6.75 earlier. The odds of Fed tightening this year have shot up to 94 percent amid speculation the U.S. monetary authority will move to cap inflation as a Trump-led administration steps up spending. This would reduce the allure of emerging-market assets.

----A record $44.7 billion left China in September in yuan payments, while the nation’s foreign-exchange stockpile shrank the most since January last month. Chinese officials have taken a series of steps to plug capital control loopholes, such as a potential plan to curb transactions that use the bitcoin digital currency to take funds out of the country. UnionPay Co. late last month limited mainlanders from using its cards to buy insurance in Hong Kong.

Another Financial Warning Sign Is Flashing in China

November 15, 2016 — 9:00 PM GMT
Add another credit indicator to the financial warning signs flashing in China.

The adjusted loan-to-deposit ratio, which includes a range of off-balance sheet items and is an indicator of the banking system’s ability to weather stress, climbed to 80 percent as of June 30, according to S&P Global Ratings. For some smaller lenders, the ratio has already topped 100 percent, S&P estimates.

S&P’s adjusted measure is rising much faster than the official loan-to-deposit ratio as banks pile into off-balance sheet lending, sidestepping government efforts to rein in credit. At the current pace, overall credit could surpass deposits on an adjusted basis within a few years -- a level that would give China little leeway to stave off financial turmoil, S&P says.

"The next two to three years is a crucial window for China to rein in the ratio, or we will be in serious trouble," said S&P’s Beijing-based director Liao Qiang. "Reaching 100 percent doesn’t mean a crisis will ensue immediately, but it shows China’s entire deposit base is used up and any loss of confidence from savers will severely destabilize the banking system."

China data point to steadier economy for now, but Trump victory adds to risks

Mon Nov 14, 2016 | 7:56am EST
China's economy largely showed further signs of steadying in October as expected, but disappointing retail sales growth and fears of U.S. trade frictions under incoming President Donald Trump are increasingly clouding the outlook.

Fixed-asset investment quickened slightly and beat expectations in January-October as the government stepped up infrastructure spending to support growth, official data showed on Monday.

But a number of other indicators released over the past week from exports to bank lending, as well as expectations of a slowdown in the heated property market, suggest economic momentum may falter in the months ahead.

"On balance, today's data suggest that the recent recovery in economic activity continued into the fourth quarter," Capital Economics said in a note.

"We expect growth to hold up well for another quarter or two. However, with credit growth now slowing and the property market beginning to cool the drivers of the recent recovery look set to fizzle out early next year."

China's leaders have depended on a surging real estate market and government infrastructure spending to drive activity this year and look set to meet their growth target of 6.5 to 7 percent. The construction boom in turn has helped perk up the ailing industrial sector, spurring demand for cement to steel.

But top policymakers and investors are also clearly growing more concerned about the risks of prolonged debt-fueled stimulus.

China's overall debt has jumped to more than 250 percent of GDP from 150 percent at the end of 2006, the kind of surge that in other countries has resulted in a financial bust or sharp economic slowdown, analysts say.

Below, the 1981-2016 bond bull market comes to its end. Despite what the HFT  Algo traders think, rising interest rates will not be good for most stocks. These are now not markets for “the little guy.” Until future US policy under a President Trump becomes clearer, these are markets only for the professional casino gambling set, generally known as “friends of the Fed.”

Fed Rate-Hike Odds Approach 100% in Anticipation of Trumpenomics

November 16, 2016 — 1:12 AM GMT Updated on November 16, 2016 — 3:02 AM GMT
Analysts spent early November warning a Trump victory in the U.S. presidential election would make the Federal Reserve less likely to raise interest rates. What happened instead is that it made a December increase almost a certainty.

Traders assign about a 94 percent probability, the highest level this year, to a Fed move at its final meeting for the year on Dec. 13-14, futures contracts indicate. Trump’s spending plans are driving speculation the Fed will pick up its pace of rate increases as inflation expectations climb.

“It’s hard not to think this is incredibly reflationary for the global economy,” said Mark Nash, the head of global bonds in London at Old Mutual Global Investors, which oversees about $37 billion. “We believe there should be more hikes priced in and bond yields should rise,” he said Tuesday in an interview on Bloomberg Television.

Benchmark 10-year note yields were little changed at 2.21 percent as of 12:01 p.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 2 percent security due in November 2026 was 98 5/32. The next target for 10-year yields is 2.5 percent, Nash said.

The odds of a Fed move have climbed from 68 percent at the start of the month as inflation expectations surged.

Trump’s election helped drive a bond-market rout that has pushed Bank of America Corp.’s Global Broad Market Index down 1.5 percent in November, heading for the biggest monthly decline since May 2013.

A gauge of expectations for U.S. consumer prices this week climbed to the highest level since April 2015. The difference between yields on 10-year notes and similar-maturity Treasury Inflation Protected Securities rose as high as 1.97 percentage points on Monday.

U.S. manufacturing groups urge Trump to think hard about trade threats

Tue Nov 15, 2016 | 9:17pm EST
America's manufacturers are urging President-elect Donald Trump to back off from his most threatening trade rhetoric and pursue a more nuanced approach to trade with China and Mexico, avoiding unilateral tariff actions and focusing on negotiations.

Corporate lobbying groups, some chief executives and pro-trade lawmakers also say they eventually even hope to persuade Trump that free-trade agreements can help grow the U.S. economy and create jobs.
For now, these groups are bracing for higher trade tensions with China and potential changes to the 22-year-old North American Free Trade agreement with Canada and Mexico.

Trump has said he would quit NAFTA unless it is renegotiated to his satisfaction and that he would declare China a currency manipulator to force negotiations for better trade terms. His suggestions that his administration could impose 45 percent across-the-board tariffs on goods from China have drawn threats of retaliation by Chinese state media against U.S. soybeans and companies such as Boeing Co (BA.N) and Apple Inc (AAPL.O).

"I think it's easy to paint this is a trade war versus nothing," said Scott Paul, president of the Alliance for American Manufacturing, a group representing steel and other basic industries that has argued in favor of tougher trade remedies to combat Chinese imports.

"I'm of the belief that there is a lot of space between our current policy and an all-out trade war," Paul said, adding that he would like to see Trump be more proactive on enforcing existing trade rules.

While U.S. steelmakers have been successful in anti-dumping and anti-subsidy cases against Chinese competitors that have led to substantial U.S. duties, consumer products makers often are reluctant to pursue such cases due to the cost, complexity and potential retaliation.

The Commerce Department under the Trump administration could launch more of investigations on its own of targeted U.S. industries, Paul said.

My father was not a failure. After all, he was the father of a president of the United States.

Harry S. Truman.

At the Comex silver depositories Tuesday final figures were: Registered 30.90 Moz, Eligible 146.18 Moz, Total 177.08 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, Pat Buchanan on the coming Trump Presidency. If he’s even halfway right, Europe is in for a massive shock.
If you can't convince them, confuse them.

Harry S. Truman.

A Trump Doctrine — ‘America First’

Monday - November 14, 2016 at 7:52 pm
By Patrick J. Buchanan
However Donald Trump came upon the foreign policy views he espoused, they were as crucial to his election as his views on trade and the border.
Yet those views are hemlock to the GOP foreign policy elite and the liberal Democratic interventionists of the Acela Corridor.
Trump promised an “America First” foreign policy rooted in the national interest, not in nostalgia. The neocons insist that every Cold War and post-Cold War commitment be maintained, in perpetuity.
On Sunday’s “60 Minutes,” Trump said: “You know, we’ve been fighting this war for 15 years. … We’ve spent $6 trillion in the Middle East, $6 trillion — we could have rebuilt our country twice. And you look at our roads and our bridges and our tunnels … and our airports are … obsolete.”
Yet the War Party has not had enough of war, not nearly.
They want to confront Vladimir Putin, somewhere, anywhere. They want to send U.S. troops to the eastern Baltic. They want to send weapons to Kiev to fight Russia in Donetsk, Luhansk and Crimea.
They want to establish a no-fly zone and shoot down Syrian and Russian planes that violate it, acts of war Congress never authorized.
They want to trash the Iran nuclear deal, though all 16 U.S. intelligence agencies told us, with high confidence, in 2007 and 2011, Iran did not even have a nuclear weapons program.
Other hardliners want to face down Beijing over its claims to the reefs and rocks of the South China Sea, though our Manila ally is talking of tightening ties to China and kicking us out of Subic Bay.
In none of these places is there a U.S. vital interest so imperiled as to justify the kind of war the War Party would risk.
Trump has the opportunity to be the president who, like Harry Truman, redirected U.S. foreign policy for a generation.
After World War II, we awoke to find our wartime ally, Stalin, had emerged as a greater enemy than Germany or Japan. Stalin’s empire stretched from the Elbe to the Pacific.
In 1949, suddenly, he had the atom bomb, and China, the most populous nation on earth, had fallen to the armies of Mao Zedong.
As our situation was new, Truman acted anew. He adopted a George Kennan policy of containment of the world Communist empire, the Truman Doctrine, and sent an army to prevent South Korea from being overrun.
At the end of the Cold War, however, with the Soviet Empire history and the Soviet Union having disintegrated, George H.W. Bush launched his New World Order. His son, George W., invaded Iraq and preached a global crusade for democracy “to end tyranny in our world.”
A policy born of hubris.
Result: the Mideast disaster Trump described to Lesley Stahl, and constant confrontations with Russia caused by pushing our NATO alliance right up to and inside what had been Putin’s country.
How did we expect Russian patriots to react?
The opportunity is at hand for Trump to reconfigure U.S. foreign policy to the world we now inhabit, and to the vital interests of the United States.
What should Trump say?
“As our Cold War presidents from Truman to Reagan avoided World War III, I intend to avert Cold War II. We do not regard Russia or the Russian people as enemies of the United States, and we will work with President Putin to ease the tensions that have arisen between us.
“For our part, NATO expansion is over, and U.S. forces will not be deployed in any former republic of the Soviet Union.
“While Article 5 of NATO imposes an obligation to regard an attack upon any one of 28 nations as an attack on us all, in our Constitution, Congress, not some treaty dating back to before most Americans were even born, decides whether we go to war.
“The compulsive interventionism of recent decades is history. How nations govern themselves is their own business. While, as JFK said, we prefer democracies and republics to autocrats and dictators, we will base our attitude toward other nations upon their attitude toward us.
“No other nation’s internal affairs are a vital interest of ours.
“Europeans have to be awakened to reality. We are not going to be forever committed to fighting their wars. They are going to have to defend themselves, and that transition begins now.

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?

Graphene plasmons reach the infrared

Date: November 14, 2016

Source: The Optical Society

Summary: The highest plasmon energy ever observed in graphene plasmons has now been demonstrated by scientists, bringing graphene into the regime of telecommunication applications.

Graphene's unique properties can be both a blessing and a curse to researchers, especially to those at the intersection of optical and electronic applications. These single-atom thick sheets feature highly mobile electrons on their flexible profiles, making them excellent conductors, but in general graphene sheets do not interact with light efficiently.
Problematic for shorter wavelength light, photons in the near infrared region of the spectrum, where telecommunication applications become realizable. In a paper published this week in the journal Optics Letters, from The Optical Society (OSA), researchers at the Technical University of Denmark have demonstrated, for the first time, efficient absorption enhancement at a wavelength of 2 micrometers by graphene, specifically by the plasmons of nanoscale graphene disks.
Much like water ripples arising from the energy of a dropped pebble, electronic oscillations can arise in freely moving conduction electrons by absorbing light energy. The resulting collective, coherent motions of these electrons are called plasmons, which also serve to amplify the strength of the absorbed light's electric field at close proximity. Plasmons are becoming increasingly commonplace in various optoelectronic applications where highly conductive metals can be easily integrated.
Graphene plasmons, however, face an extra set of challenges unfamiliar to the plasmons of bulk metals. One of these challenges is the relatively long wavelength needed to excite them. Many efforts taking advantage of the enhancing effects of plasmons on graphene have demonstrated promise, but for low energy light.
"The motivation of our work is to push graphene plasmons to shorter wavelengths in order to integrate graphene plasmon concepts with existing mature technologies," said Sanshui Xiao, associate professor from the Technical University of Denmark.
To do so, Xiao, Wang and their collaborators took inspiration from recent developments at the university's Center of Nanostructured Graphene (CNG), where they demonstrated a self-assembly method resulting in large arrays of graphene nanostructures. Their method primarily uses geometry to bolster the graphene plasmon effects at shorter wavelengths by decreasing the size of the graphene structures.
Using lithographic masks prepared by a block copolymer based self-assembly method, the researchers made arrays of graphene nanodisks. They controlled the final size of the disks by exposing the array to oxygen plasma which etched away at the disks, bringing the average diameter down to approximately 18 nm. This is approximately 1000 times smaller than the width of a human hair.
The array of approximately 18 nm disks, resulting from 10 seconds of etching with oxygen plasma, showed a clear resonance with 2 micrometer wavelength light, the shortest wavelength resonance ever observed in graphene plasmons.

If I'd known how much packing I'd have to do, I'd have run again.

Harry S. Truman.

The monthly Coppock Indicators finished October

DJIA: 18142  +32 Up NASDAQ:  5189 +31 Up. SP500: 2126 +46 Up.

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