Baltic Dry Index. 894 -32 Brent Crude 55.21
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
What’s China hiding and why?
But first
this from Trump minus eight. American corporations planning to invest abroad,
have probably left it too late.
Trump’s Border Tax Threat May Weaponize the Dollar
Things may even out
in the U.S., but emerging markets will suffer.
by Sid Verma 11 January 2017, 19:44 GMT
Is fiscal war the new currency war?President-elect Donald Trump’s threat to impose a “major” border tax on U.S. manufacturers that make products abroad to sell in the U.S. could fuel the next leg in the post-election dollar rally, some analysts reckon.
In his first post-election press conference, Trump doubled down on his proposal to impose policies aimed at boosting onshore production of U.S. goods and services through penalties on imports. “There will be a major border tax on these companies that are leaving and getting away with murder,” Trump said on Wednesday, without elaborating. “You’ve got a lot of places you can move,” he added. “As long as it’s within the U.S.”
His pronouncement on Wednesday followed a Jan 3. tweet in which the Republican castigated General Motors Co. for its Mexico car plant, channeling the “make-where-we-sell” political movement.
The impact of any such border-tax policy, the implementation of which would likely require an act of Congress and may be prohibited (PDF) by World Trade Organization rules, could be significant for the greenback—and for emerging markets in particular.
Policy-driven efforts to boost America’s net trade position, either through an increase in tariffs or a border-adjustment tax, could trigger a fierce appreciation of the dollar, which would tighten financial conditions across the world.
Fiscal devaluation—an attempt to boost competitiveness through changes
to the tax system—could upend projections for the dollar this year, which has
staged a post-election advance amid expectations of higher interest rates and
fiscal stimulus.
“We believe the FX market is too sanguine about the possibility of
border adjustment being included in a final [fiscal] package,” Morgan Stanley
strategists led by Todd Castagno wrote in a prescient report on Tuesday.
The dollar fell while demand for U.S. Treasuries rose in
the wake of Trump's tumultuous press conference. Nevertheless,
the Bloomberg Dollar Spot Index, which tracks the currency against 10 of
its peers, remains 4.9 percent higher since the election.
In
simple terms, the border-tax policy is a destination-focused corporate tax that
boosts exporters while disallowing deductions for imports, which would
come as a blow to retailers and automakers in particular, given the high import
component in their supply chains.
More
Now back to what’s going on in China.
Is a Trump face off with China coming with the Chinese New Year?
Exclusive: Banks forced to cover tracks of China's forex regulator
Both demands are seen as an attempt by the authorities to prevent alarm that could trigger further declines in the yuan, the bankers from local and foreign banks said.
The yuan lost more than 6 percent against the dollar last year and is at eight-year lows, prompting a flurry of restrictive measures on capital outflows from the State Administration of Foreign Exchange (SAFE), including setting limits on banks' currency volumes in some cities or provinces and requiring approval for ever smaller transactions.
SAFE, which is part of the People's Bank of China (PBOC), is insisting in oral instructions to dozens of banks that they don't reveal its role in such restrictions, six bankers said, which was damaging their relationships with clients since they were unable to explain why they were turning away business.
SAFE and the PBOC have yet to respond to requests for comment.
SAFE's reticence began at least as far back as August, when its Shanghai branch called at least 20 of the major foreign and domestic banks operating in the city to a meeting with the regional heads of several SAFE departments.
A representative from an international bank attending the meeting said there were no written instructions, but a high-ranking SAFE official told them explicitly what was expected of them.
"You must control your forex deficit, but you can't say that SAFE is controlling capital outflows," the official told the bankers.
The banks were told to "manage sentiment" to prevent public panic, the banker said, and the banks' research analysts should not broadcast any negative views on the yuan.
"They told us not to publish bad house views - analyst house views - on the yuan", the person said.
More
Trump's secretary of state pick says China should be barred from South China Sea islands
In comments expected to enrage Beijing, Rex Tillerson told his confirmation hearing before the U.S. Senate Foreign Relations Committee that China's building of islands and putting military assets on those islands was "akin to Russia’s taking Crimea” from Ukraine.
Asked whether he supported a more aggressive posture toward China, he said: "We’re going to have to send China a clear signal that, first, the island-building stops and, second, your access to those islands also is not going to be allowed.”
The former Exxon Mobil Corp (XOM.N) chairman and chief executive did not elaborate on what might be done to deny China access to the islands it has built up from South China Sea reefs, equipped with military-length airstrips and fortified with weapons.
Trump's transition team did not immediately respond to a request for specifics on how China might be blocked from the artificial islands.
More
In oil news below, Bloomberg gets very unfair to drunken sailors.
Energy’s Drunken-Sailor Legacy Hangs Over Plans for Debt Rescues
by Alex Nussbaum 11 January 2017, 10:00 GMT
Debt-laden energy companies that still don’t have a financial escape
plan in place are running out of time and willing lenders even after oil doubled
from its February lows.
Crude prices topping $50 a barrel helped to ease pressure on distressed
energy companies, allowing at least 27 issuers to sell $16 billion of
junk-rated bonds in last year’s final quarter, according to data compiled by
Bloomberg. That still leaves about $44.5 billion maturing by the end of 2020,
according to Fitch Ratings. A "mountain" of more than $18 billion in
credit-line commitments comes due in 2019, said Spencer Cutter at Bloomberg
Intelligence.
Those still vying for new capital such as Vanguard Natural Resources LLC
and Pacific Drilling SA need prices above $55 to $60 to win over lenders,
according to credit analysts. What’s more, banks face tougher limits from
U.S. regulators on energy loans, spurred by memories of previous booms and
busts.
Creditors remain mindful that drillers "get very happy about their
cash flow” during good times, Evercore ISI analyst James West said. “And when
financial markets become wide open, they spend like drunken sailors."
Borrowers are trying to avoid the fate of more than 230 exploration,
drilling, production, servicing, transportation and storage companies that have
gone bankrupt since the start of 2015, affecting about $96.2 billion of debt,
according to data tracked by the Haynes and Boone law firm.Despite last year’s rally, oil prices are still down from more than $107 a barrel in mid-2014, making debt loads based on those near-record levels unaffordable. Lenders may want to see sustained prices of at least $55 a barrel before agreeing to extensions, Cutter said.
More
In VW fraud news, it just keeps getting
worse. There was criminality right from the start, malice aforethought,
financial gain for VW, duped victims, environmental damage, health damage, and
a cover up.
VW Officials Destroyed Files, E-Mails as Diesel Scheme Unraveled
by David McLaughlin, Andrew M Harris, and Margaret Cronin Fisk
Volkswagen AG’s nearly decade-old plot to cheat
U.S. emissions tests -- all while marketing its diesel cars as environmentally
friendly -- was quickly unraveling by 2015. A campaign to mislead
regulators was failing so badly that top executives signed off on a script for
employees to use when questioned.
It didn’t work. The next day, Aug. 19, 2015, an employee went off script and told regulators for the first time that its diesel cars were designed to behave differently during emissions tests, according to court documents. In the home office in Germany, some executives and engineers began deleting documents related to U.S. emissions and the company’s head of engine development told an assistant to dispose of a hard drive containing e-mails from him and other supervisors.
All this was laid out by U.S. prosecutors on Wednesday as they announced charges against five officials they said had been key to developing and carrying out the scheme. As part of the carmaker’s settlement concluding criminal and civil probes in the U.S., VW agreed to plead guilty to conspiracy to defraud the government and consumers and obstruction of justice, and to pay $4.3 billion in penalties. Prosecutors continue to look into the roles individuals played and the investigation is still open, U.S. Attorney General Loretta Lynch said at a press conference Wednesday.
Indicted with Heinz-Jakob Neusser, the engine development chief, were Richard Dorenkamp, who led the failed effort to design a diesel engine that would meet the tougher emissions standards the U.S. adopted for 2007 and appeal to drivers; Jens Hadler, who led engine development from 2007 to 2011; Bernd Gottweis, who was responsible for quality management from 2007 to 2014; and Jurgen Peter, who worked on Gottweis’s group since 1990 and was one of VW’s liaisons with U.S. regulators during the critical months when they were growing more suspicious.
One Arrested
A sixth man, Oliver Schmidt, the company’s liaison with U.S. regulators, was arrested Saturday as he attempted to return to Germany after a Florida vacation. Schmidt, also charged with participating in the alleged scheme, is scheduled to appear in court Thursday in Miami. Neusser and the other four are in Germany, and Lynch said it wasn’t clear how their cases would proceed.
More
At the Comex silver depositories
Wednesday final figures were: Registered 29.20 Moz, Eligible 151.45 Moz,
Total 180.65 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, so you still think that nuclear power is
safe.
U.S. lists 17 nuclear reactors with parts from forge under probe
The U.S. Nuclear Regulatory Commission (NRC) on Tuesday unveiled a
letter showing that 17 of the country's nuclear reactors have parts from Areva
SA's Le Creusot forge in France, which is under investigation for allegedly
falsifying documents on the quality of its parts.
The number of reactors was more than the nine the NRC had previously
disclosed.
Last month authorities in France opened an investigation into decades of
alleged forgery of documents relating to the quality of parts produced at Le
Creusot and used in power plants around the world.
Areva, a nuclear and renewable energy firm, furnished the information to
the U.S. regulator last month but had urged the agency to keep it private,
saying it was material to the business of nuclear power generators. The NRC
told Areva it did not consider the information to be so and released it 10 days
after receiving it.
The parts at reactors include a reactor head at Xcel Energy Inc's
Prairie Island reactor in Minnesota, reactor vessel heads at two of Dominion
Resources Inc's reactors at the North Anna plant in Virginia, and another
vessel head at Dominion's reactor in Surry, Virginia. Some of the components
were made by other companies but include parts from the Le Creusot.
“We have four components with forgings from Le Creusot and have verified
that all are fine. They all check out and meet our design criteria and there
are no problems,” said Richard Zuercher, nuclear spokesman at Dominion
Resources Inc.
Xcel Energy Inc said previously that some components of the two reactor
vessels were made at Le Creusot in the early 1970s. "Our testing and
inspections are rigorous and have not identified any issues," Colleen
Mahoney, an Xcel spokeswoman said last week.
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?
Nature inspires 30% more efficient Hybrids
Darren Quick 11/1/2017
According
to EV-volumes.com, over 500,000
plug-in electric vehicles were sold globally in the first 8 months of 2016,
around 40 percent of which were hybrids (PHEVs). Taking inspiration from
nature, engineers at the University of California, Riverside (UCR) have found a
way to cut the fuel consumption of many of these PHEVs by over 30 percent, just
by changing the way the split between combustion engine and battery power is
handled.
Deciding
whether to draw on power from the internal combustion engine or the battery
pack is handled by the vehicle's energy management system (EMS). Although there
are some exceptions, most of these operate in a very simple way: prioritizing
battery power before battery power levels reach a certain threshold that
triggers a switch to the vehicle's engine.
Blended
discharge strategies, whereby the choice of power is split throughout the trip
so that the battery pack reaches its minimum threshold only at the very end of
the trip, have been proposed as a way to reduce fuel consumption and emissions.
The UCR team says lab tests have borne such theories out, but the variability
of car travel has made it difficult to apply this approach in the real world.
"In
reality, drivers may switch routes, traffic can be unpredictable, and road
conditions may change, meaning that the EMS must source that information in
real-time," says Xuewei Qi, a postdoctoral researcher at the Center for
Environmental Research and Technology (CE-CERT) in UCR's Bourns College of
Engineering who led the research with Matthew Barth, CE-CERT director and a
professor of electrical and computer engineering at UCR.
To address
this issue, the team developed a more efficient EMS by combining vehicle
connectivity data, such as cellular networks and crowdsourcing platforms like
Waze, with evolutionary algorithms, which mathematically describe natural
phenomena like evolution and bird flocking.
"By mathematically
modeling the energy saving processes that occur in nature, scientists have
created algorithms that can be used to solve optimization problems in
engineering," says Qi. "We combined this approach with connected
vehicle technology to achieve energy savings of more than 30 percent. We
achieved this by considering the charging opportunities during the
trip—something that is not possible with existing EMS."
This
latest work builds on the team's previous research into teaching individual
vehicles how to improve fuel efficiency based on their own historical driving
records. By combining this with evolutionary algorithms, the team says it will
be possible for vehicles to learn and improve their own energy efficiency, with
this information then able to be shared with other vehicles in the same traffic
network through connected vehicle technology.
"Even
more importantly, the PHEV energy management system will no longer be a static
device – it will actively evolve and improve for its entire life cycle,"
says Qi. "Our goal is to revolutionize the PHEV EMS to achieve even
greater fuel savings and emission reductions."
The monthly Coppock Indicators finished December
DJIA: 19763
+74 Up NASDAQ: 5383 +70 Up. SP500: 2239 +75 Up
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