Baltic Dry Index. 840 -22 Brent Crude
56.18
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.
While Trumpmania rolls on in America,
it’s a very troubling view of the global economy as seen from London this
morning. We open with alarming developments in NAFTA, where Mexico has trumped
China and Germany, to become bad boy number one in the eyes of the Trump
government.
If
all else fails, immortality can always be assured by spectacular error.
John Kenneth
Galbraith.
U.S. Edges Toward Trade War as Trump Clash With Mexico Escalates
by Austin Weinstein Eric Martin, and Justin Sink
27 January 2017, 00:53 GMT
U.S. and Mexico relations plunged into chaos on Thursday, pushing the
countries closer to a trade war that threatens to spoil decades of friendship
and economic cooperation.The feud grew increasingly hostile throughout the day, as Mexican President Enrique Pena Nieto scrapped his trip to Washington after his U.S. counterpart Donald Trump doubled down on campaign pledges to rewrite North American Free Trade Agreement and charge his southern neighbor to build a border wall. The Trump administration retaliated to Pena Nieto’s cancellation by floating the idea of imposing a 20 percent tax on all Mexican imports.
“This is a very bad day for U.S.-Mexican relations -- the worst day in memory,” said Michael Shifter, president of the Inter-American Dialogue in Washington. “There is the real risk of things spiraling out of control.”
The Mexican peso plunged and the clash slowed gains in the U.S. stock market amid growing concern that one of the world’s largest trading relationships was headed for divorce.
For all of Trump’s complaints about Mexico, the two nations’ economies are deeply intertwined, especially in the border states -- so much so that it might be nearly impossible to pull them apart without serious political or economic unrest.
Cars, auto parts, farm goods, textiles and food all flow freely back and forth -- and any move to disrupt that could cause economic harm on both sides of the border, including in the Rust Belt industrial states that propelled Trump to the presidency.
Automakers would be the hardest hit, as Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles NV have assembly plants in Mexico. Several foreign automakers also have Mexican factories that export vehicles to the U.S., including Honda Motor Co. Ltd., Volkswagen AG and Mazda Motor Corp. Other American companies that benefit from Nafta include Whirlpool Corp. and General Electric Co.
More
In EUSSR news, it’s more of the same
wealth and jobs destruction.
Volkswagen plant in Germany extends production stop
Production of the Passat at VW's northern German plant in Emden will be stopped on Feb. 16-17 and Feb. 21, a spokesman said, adding to disruptions agreed earlier this month.
Europe's largest automaker said last week it will shut down the Emden plant which employs about 9,000 people for eight days between Jan. 25 and Feb. 3 and on Feb. 20, he said.
"We are having problems in England, Turkey and Russia," the
spokesman said. "Demand for the Passat is declining, we cannot rule out
further shutdowns until Easter. No one knows how the world will develop."
German news agency Deutsche Presse-Agentur reported the production stop
earlier on Tuesday.
The plant in Emden was affected by disruptions last summer when
suppliers halted parts deliveries to more than half of VW's German factories
over a contract dispute.
The factory, adjacent to one of Europe's largest vehicle transshipment
ports, is particularly exposed to weakening demand for the Passat since it
stopped making the CC saloon in October and has not yet taken up assembly of VW's new Arteon model.
EU could fall apart if populists win Dutch, French elections-Germany's Gabriel
German Economy Minister Sigmar Gabriel warned on Thursday that the European Union could fall apart if populists in
France or the Netherlands win in elections this year.
"The French presidential elections this spring are bitter fateful
elections for Europe," Gabriel told the Bundestag lower house of
parliament.
He added: "After Brexit last year, if enemies of Europe manage
again in the Netherlands or in France to get results then we face the threat
that the largest civilization project of the 20th century, namely the European
Union, could fall apart."
Elsewhere, China’s capital flight
crackdown, is bursting real estate bubbles everywhere. On my Trump synthetic
double option play, I would now close out the longs and ride with the put side.
China’s Army of Global Homebuyers Is Suddenly Short on Cash
Bloomberg News
26 January 2017, 16:00 GMT 27 January 2017, 00:30 GMT
China’s escalating crackdown on capital
outflows is sending shudders through property markets around the world.In London, Chinese citizens who clamored to purchase flats at the city’s tallest apartment tower three months ago are now struggling to transfer their down payments. In Silicon Valley, Keller Williams Realty says inquiries from China have slumped since the start of the year. And in Sydney, developers are facing “big problems” as Chinese buyers pull back, according to consultancy firm Basis Point.
“Everything changed’’ as it became more difficult to send money offshore, said Coco Tan, a broker associate at Keller Williams in Cupertino, California.
Less than a month after China announced fresh curbs on overseas payments, anecdotal reports from realtors, homeowners and developers suggest the restrictions are already weighing on the world’s biggest real estate buying spree. While no one expects Chinese demand to disappear anytime soon, the clampdown is deterring first-time buyers who lack offshore assets and the expertise to skirt tighter capital controls.
“If it’s too difficult, I’m out,’’ said Mr. Zheng, 66, a retired civil servant in Shanghai who declined to give his first name to avoid attracting regulatory scrutiny. He may abandon a 2.4 million yuan ($348,903) home purchase in western Melbourne, even after shelling out a 300,000 yuan deposit last August. He’s due to make another big payment next month.
The change spooking Zheng and his compatriots came in a statement from
the State Administration of Foreign Exchange on Dec. 31, hours before the reset
of Chinese citizens’ annual foreign currency quotas. Among other requirements,
SAFE said all buyers of foreign exchange must now sign a pledge that they won’t
use their $50,000 quotas for offshore property investment. Violators will be
added to a government watch list, denied access to foreign currency for three
years and subjected to money-laundering investigations, SAFE said.
“A lot of clients are worried and have started hesitating,’’ said Wang
Ning, vice president of the international department at Fang Holdings Ltd.,
China’s most popular property website. While the regulator has long banned the
use of foreign currency for real estate, its call for additional documentation
was seen as a signal that the government is serious about cracking down.
More
Hong Kong Yuan Deposits Post Record Monthly Decline in December
27 January 2017, 06:41 GMT
Yuan deposits in Hong Kong posted their biggest monthly drop on record
as the currency’s steepest depreciation in more than two decades undercut its
appeal for savers.
Savings in the Chinese currency fell 12.9 percent on month to 546.7
billion yuan ($79.4 billion) in December, the most since local banks started
taking such funds in 2004, Hong Kong Monetary Authority data showed Friday. The
onshore exchange rate weakened 6.5 percent last year as capital outflows picked
up amid higher U.S. interest rates -- a trend that’s projected to continue in
2017.
"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."
William F. Rickenbacker
At the Comex silver depositories
Thursday final figures were: Registered 29.34 Moz, Eligible 152.19 Moz,
Total 181.53 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Despite Trumpmania in America, all does not seem to
be well in the wider global economy. Below a worrying red flag from the Swiss.
And add Italy to the list of problematic European elections in 2017.
Swiss Watch Exports Have Worst Year Since Financial Crisis
by Corinne Gretler 26 January 2017, 07:48 GMT Swiss watch exports fell 9.9 percent in 2016, the biggest drop in seven years, as high-end timepieces went unsold on retailers’ shelves in Hong Kong, the industry’s largest market.Exports declined to 19.4 billion francs ($19.4 billion) in December, the Federation of the Swiss Watch Industry said in a statement Thursday. The annual decline is the worst performance since exports fell 22 percent in 2009 in the wake of the bankruptcy of Lehman Brothers and the subprime mortgage crisis.
The boom years, when exports doubled during the early 2000s, are long gone. The industry is retrenching following the Chinese government’s four-year campaign against bribery, improper gift-giving and extravagance, and the Hong Kong market has been cut in half in the past four years. Richemont spent more than 200 million euros ($215 million) buying back unsold watches last year, and it’s cut about 200 jobs in watchmaking at Cartier, Vacheron Constantin and Piaget.
The watch federation said it expects exports to stabilize in 2017 as initial signs of a rebound emerge. Richemont, which makes watches under a dozen brands, has reported a return to growth in sales of watches at its own stores in the final three months of 2016.
China rebounded in the second half, with exports rising 9.1 percent, according to the trade group. The total number of watches exported in 2016 dropped to 25.4 million, also the lowest since 2009.
Italian court ruling paves way for possible 2017 election
Italy's constitutional court on Wednesday threw out aspects of an
electoral law approved by former prime minister Matteo Renzi but presented a
reworked version that can be used immediately, raising the chance of early
elections this year.
Italy's largest parties - Renzi's Democratic Party (PD) and the anti-establishment
5-Star Movement - are both calling for a vote by the summer, about a year ahead
of schedule.
The system laid out by the court, which only applies to the lower house
Chamber of Deputies, is based on proportional representation and hands a clear
parliamentary majority to any
party winning 40 percent of the vote.
Both of these aspects were part of Renzi's law, but the court also said
the election should be held in just one round, eliminating the run-off between
the two largest parties which Renzi had envisaged if none got 40 percent in the
first round.
No opinion polls put any of Italy's plethora of parties anywhere near 40
percent, meaning the new system will probably lead to a coalition government.
That may benefit traditional parties, including the PD, and penalize
5-Star, which has always refused to form alliances.
The court said the amended law could be used immediately if elections
were called, even though following its ruling there are now different voting
systems in the lower house and the upper house Senate.
However, President Sergio Mattarella is the only one with the power to
dissolve parliament, and he has said a vote should not be held until the
systems are harmonized, in order to try to ensure political stability.
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?
MIT 3D Graphene Material Opens Up Lightweighting Possibilities
Graphene, widely hailed for its strength, has not been readily harnessed
for lightweighting applications in automotive or electronics product design
primarily because the existing atom-thin 2D materials haven’t been adapted to
deliver adequate structural stability.
That scenario may change thanks to a recent development by researchers
at MIT. The team was able to design a lightweight graphene material through a process
that compressed and fused graphene flakes into a porous, sponge-like 3D form
that boasts 5% of the density of steel, but is nearly 10 times stronger,
according to a study published in the Science Advances journal.
Using a combination of heat and pressure, the MIT research team created
a 3D structure similar to corals and microscopic creatures called diatoms, the
researchers said. The shapes turn out to have a large surface area in
proportion to their volume—a design decision that resulted in a structure that
delivers the strength and stability that was so elusive with straight up 2D
graphene.
Because of the extraordinary thinness of 2D graphene sheets, “they are
not very useful for making 3D materials that could be used in vehicles,
buildings, or devices,” noted Markus Buehler, the head of MIT’s Department of
Civil and Environmental Engineering (CEE) and the McAfee Professor of
Engineering, in a press release announcing the new finding. Moreover, the team
said the strength targets achieved had less to do with the use of graphene and
more to do with the usual geometric configuration, which opens the door to
using a similar process to create other lightweight, strong materials,
researchers said.
While other research teams had strived for similar lightweight
structures, they kept running into problems in the lab, with experiments not
matching up to their predictions and with strength targets reaching far lower
levels than expected. This MIT team tried a different approach, analyzing the
material’s behavior at an individual atom level, which enabled them to produce
a mathematical framework that turned out to closely match their observations
during the experiments, the researchers said.
Before the physical tests, the researchers conducted a range of
simulations to mimic the loading conditions in tensile and compression tests
performed in a tensile loading machine. In addition, the 3D structures were
also produced on a multi-material 3D printer so they could be tested, and their
mechanical response under loading was simulated using the team’s theoretical
models—a process that resulted in an accurate match, the researchers said.
More
Another weekend and
time for me to be out of balanced risk. With the global economy looking
vulnerable to a downdraft, I would just add a few more highly speculative, deep-out-of-the-money
purchased stock put options here. We seem to be entering trouble times. Have a
great weekend everyone.
The monthly Coppock Indicators finished December
DJIA: 19763
+74 Up NASDAQ: 5383 +70 Up. SP500: 2239 +75 Up
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