Thursday, 11 May 2017

Rising Uncertainty Meets Rising Complacency.

Baltic Dry Index. 1005 -02     Brent Crude 50.48

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.

We open today with some of America’s leading “city slickers” talking up their books. “Follow me,” they say, “help me make a profit, jump in.” Cui bono?

In any great organization it is far, far safer to be wrong with the majority than to be right alone.

John Kenneth Galbraith.

Here’s What Some of the World’s Top Money Managers Are Betting On

Bloomberg News
9 May 2017, 00:12 GMT+1
Money managers including David Einhorn and Bill Ackman descended on New York’s Lincoln Center on Monday where about 3,000 people gathered at the annual Sohn Investment Conference, one of the hedge fund industry’s marquee events, to hear the latest trade picks.

Jeffrey Gundlach, who at last year’s conference told attendees to prepare for a Donald Trump presidency, said to buy the iShares MSCI emerging markets exchange-traded fund and bet against the SPDR S&P 500 ETF. “What the heck, let’s have some fun,” he said. “Let’s leverage it one time.” Davide Serra said investors should short U.K. rates ahead of Brexit, while Josh Resnick sent shares of Frontier Communications Corp. falling as he predicted the telecom operator was headed for bankruptcy.

For our real-time coverage of the event, see the TopLive Blog here.

Here’s a list of the conference’s biggest takeaways:

Greenlight’s Einhorn Says He’s Shorting Core Laboratories
Einhorn said oilfield-service company Core Laboratories NV is poised to disappoint investors as lower prices dry up business opportunities outside the U.S. “Investors are paying a peak multiple for earnings that are poised to disappoint,” he said.

Gundlach Says to Short S&P 500 and Go Long Emerging Market ETF
Gundlach also said it’s a myth that the Federal Reserve raising rates necessarily leads to a stronger dollar.

In Brexit news, guess what, smart financial firms can handle it. Who knew? GB’s skills shortage is workable too, and should also result in more GB jobs. GB First, great.

Barclays CEO Says London Financial Firms Can Work Around Brexit

by Stephen Morris and Erik Schatzker
11 May 2017, 00:01 GMT+1
Barclays Plc Chief Executive Officer Jes Staley said London’s financial sector is inventive enough to find a way around Brexit and remain integral to the European Union’s economy, provided politicians don’t erect walls to shut out the U.K.

“So long as those barriers are not put up, there will be workarounds around Brexit so that London will remain a very important source of capital for continental Europe,” Staley said in a Bloomberg Television interview on Wednesday. “There will be uncertainty, but having been in the financial industry as long as I have, it’s amazing how creative it can be.”

Staley, 60, has consistently been among the most optimistic of bank executives on the impact Brexit will have on financial firms’ ability to service EU clients. While he said Brexit talks could lead to decisions that restrict the flow of capital, he’s encouraged by increased cooperation since the financial crisis between major nations on avoiding such barriers.

----Barclays has settled on Dublin for its expanded EU base, but is expecting to have to add only about 150 staff there, people with knowledge of its plans said earlier this year. That compares with HSBC Holdings Plc, which is planning to move 1,000 investment bankers to Paris, as well as JPMorgan Chase & Co. and Deutsche Bank AG, which have each warned as many as 4,000 of their U.K.-based jobs are at risk of being moved.

“We have a bank subsidiary in Ireland that is part of the EU, we have 1,200 staff in continental Europe from Milan to Paris to Frankfurt to Madrid,” Staley said in the interview. “Continuing to engage is important for us. The EU is going to require us to set up structures that make it more robust and more within the fold of Europe, and that’s OK.”

'Brickie Visa' Could Plaster Over Skills Shortage After Brexit

by Charlotte Ryan
As employers warn of a looming skills shortage following Britain’s exit from the European Union, a “brickie visa” has been touted as the solution.

The U.K. could face a shortage of workers in industries such as bricklaying and plumbing in 2019, when the country leaves the bloc, Migration Watch U.K. said in a report on Thursday. It suggested the introduction of an annual visa -- extendable to a maximum of three years -- as a stop gap measure. Employers would pay a levy and prove that they genuinely tried to recruit in the U.K.

The visas “would meet a genuine need for a few years but with strong financial incentives for employers to train British workers,” said Alp Mehmet, Vice Chairman of Migration Watch UK. “Training outside the workplace has fallen off a cliff since 2000. Employers must now step up to the mark.”

In EUSSR news, Germany’s Sun King crashes, France readies for yet another contentious, uncertain election.

Wed May 10, 2017 | 2:51pm EDT

German Sun King's SolarWorld to file for insolvency

Germany's SolarWorld (SWVKk.DE), once Europe's biggest solar power equipment group, said on Wednesday it would file for insolvency, overwhelmed by Chinese rivals who had long been a thorn in the side of founder and CEO Frank Asbeck, once known as "the Sun King".

SolarWorld (SWVKk.DE) was one of the few German solar power companies to survive a major crisis at the turn of the decade, caused by a glut in production of panels that led prices to fall and peers to collapse, including Q-Cells, Solon and Conergy.

SolarWorld was forced to restructure and avoided insolvency thanks to a debt-for-equity swap and the support of Qatar, which took a 29 percent stake in the group four years ago through Qatar Solar S.P.C.

A renewed wave of cheap Chinese exports, caused by reduced ambitions in China to expand solar power generation, was too much to bear for the group, which made its last net profit in 2014.

"Due to the ongoing price erosion and the development of the business, the company no longer has a positive going concern prognosis, is therefore over-indebted and thus obliged to file for insolvency proceedings," SolarWorld said in a statement on Wednesday.

Frankfurt-listed shares (SWVKk.F) in the group last traded down 77 percent at 0.81 euros.
SolarWorld, which earlier this year announced staff cuts after reporting increased losses, said it would immediately file for insolvency and that it was assessing whether affiliated companies would also have to do the same.

Asbeck, 57, still holds a 20.85 percent in the group which he founded in 1998 and within 10 years had grown to be one of the world's three biggest solar power companies.

Wed May 10, 2017 | 2:39pm EDT

After Macron win, France's main parties fret over parliament elections

France's mainstream parties of the left and right struggled on Wednesday to adjust to the new political landscape created by centrist Emmanuel Macron's victory in Sunday's presidential election that has broken their dominance of national politics.

With parliamentary elections looming next month, Macron's triumph fueled power struggles between moderates and hardliners on the left, while leaders of the conservative The Republicans warned against defections to the president-elect's camp.

The Socialists, whose term in government comes to an end in tandem with the departure of President Francois Hollande, have traditionally disputed power with the centre-right in France over the past half century.

But neither party got through to Sunday's presidential runoff, when Macron defeated the far-right's Marine Le Pen.

The legislative elections on June 11 and 18 will now decide whether Macron's 'Republic on the Move' party - barely a year old and still without seats in parliament - will win enough seats to let him govern effectively for the next five years.

Benoit Hamon, the unsuccessful Socialist Party candidate in the presidential contest, said he would set up a new movement after several of his hallmark proposals during that campaign were abandoned by his own party.

Radical left-winger Jean-Luc Melenchon, also eliminated in the presidential contest after coming fourth, criticized his erstwhile allies in the Communist Party and vowed to campaign without them for seats in the 577-seat National Assembly.

In commodities news, the world’s largest oil trader says that the Brent Crude benchmark is tired and needs a makeover next decade.

Shell Says Russia's Oil Must Be Considered for Global Benchmark

by Laura Hurst, Javier Blas, and Rupert Rowling
10 May 2017, 11:14 GMT+1
Royal Dutch Shell Plc, the world’s largest oil trader, said the time has come to debate using Russian crude to help determine the global Brent benchmark, in what would be the most radical shift in how European prices are calculated since the 1970s.

Mike Muller, the head of crude trading at Shell, told a Platts forum in London that he wants a discussion about calculating the price in Europe using not just crude oil pumped in the North Sea, as has been the case since the 1970s, but potentially including Russian crude and even grades pumped in West Africa, the Caspian Sea basin.

Shell is not just the largest oil trader but also the custodian of the master contract that governs the physical Brent market and as such its views are closely watched in the market.
Although Muller said some of the suggestions he floated were “concepts and ideas,” he made clear that the company wanted to see reform. “These are the sort of things Shell wishes to see in benchmarks going forward.”
The changes outlined would take years rather than months to implement, assuming the rest of the market agreed they were appropriate. Oil industry executives largely agree that the Brent benchmark will need significant reforms early next decade.

We close for today with China. Slowly but surely global money conditions are tightening. What could possibly go wrong for global stock markets flying in the stratosphere on fumes and a wing and a prayer?

China's $246 Billion Foreign Buying Spree Is Unraveling

by Jack Sidders and Vinicy Chan
10 May 2017, 17:00 GMT+1
China’s biggest-ever foreign acquisition frenzy is ending almost as dramatically as it began.

After stunning the world with a record $246 billion of announced outbound takeovers in 2016, Chinese dealmakers are now struggling to cope with tighter capital controls and increasingly wary counterparties. Cross-border purchases plunged 67 percent during the first four months of this year, the biggest drop for a comparable period since the depths of the global financial crisis in 2009, according to data compiled by Bloomberg.

Analysts see few signs of a rebound as Chinese regulators make it difficult for acquirers to move money overseas. Foreign sellers have also thrown up new hurdles after getting spooked by a string of canceled deals. Some are forcing suitors to pay unusually large penalties if offers fall through, while others are shunning Chinese bids in favor of lower-priced offers from elsewhere.

“China’s outbound M&A activity will likely remain slow for the rest of this year,” said Bee-chun Boo, a Beijing-based partner at the mergers and acquisitions practice of law firm Baker & McKenzie LLP.

The drop-off in deals should help stem capital flight and stabilize China’s battered currency. But it could also undermine a big pillar of support for corporate valuations around the world. Last year’s 137 percent surge in Chinese takeovers vaulted the country to No. 2 behind the U.S. on the ranking of global acquirers.

"In economics, hope and faith coexist with great scientific pretension."

John Kenneth Galbraith.

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, France opens Germany’s can of worms. Macron now needs a Schulz win in Germany in the autumn or his grand EU reform plan is dead on arrival. The long overdue reform in the wealth and jobs destroying EUSSR, is apparently only alive on another galaxy. If Mrs Merkel wins in the autumn, Macron merely becomes another, if higher class, second fiddle Hollande. Brexit now before war breaks out in the asylum.

Zumutungen! Buyer’s Remorse in France, Impossible Situation for Germany

Posted by Mish | May 9, 2017 3:56:16
Now that the cheering over the French election has died down, reality will strike France and Germany like a cold bucket of water thrown in one’s face on a Winter’s day.
Germany was guaranteed to not like the result no matter who won. The final choice was between an anti-EU Marine Le Pen and a budget-comingling Emanuel Macron who needs EU treaty changes to get what he wants.
And in France, buyer’s remorse has set in. Unions are already protesting against Emmanuel Macron’s policies.
The word of the day is Zumutungen. Google translates that from German as “impositions” but the actual meaning is quite a bit stronger according to Eurointelligence.
The German political establishment clearly favored Emmanuel Macron over Marine Le Pen during the election campaign, but they are nervous about Macron’s eurozone agenda. As FAZ notes this morning, the relief over his victory still weighs heavier than the reality – which is that Macron and Angela Merkel have diametrically opposed views on the future of the eurozone. Merkel yesterday confirmed her readiness to engage in a dialogue with Macron, but said that eurozone bonds are a no-go. And without Eurobonds – or other forms of a eurozone-level fiscal backstop – none of the Macron agenda would work.
The FAZ article uses a word for which there is no straight translation – “Zumutungen” – which means an excessive and immoral demand that one can conceivably not fulfil. The paper makes the point that François Hollande also favoured the same kinds of reforms, but let go when he realized that there was no support from Berlin. The article notes that Macron’s ideas go way beyond those of Hollande. His eurozone agenda is not about crisis resolution, but economic shock absorption in general, as evidenced by his ideas for a pan-European unemployment insurance. FAZ is appalled by all of this, as well as by Macron’s idea of a Buy-European act. The paper noted that the eurozone finance ministers, at their meeting in Malta, criticised similar ideas by the European Commission.
On day one after Macron’s election, there is a first taste of resistance in the form of street protests against his labor law reforms. Labor reforms have been a particularly traumatic experience for the outgoing government. The radical trade unionists are taking to the streets, while the more cautious headquarters warn against implementing the whole agenda.
If all else fails, immortality can always be assured by spectacular error.

John Kenneth Galbraith.
Technology 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 could revolutionise nuclear power say Manchester scientists

Graphene was pioneered in Manchester
ByPaul Britton 09:55, 9 MAY 2017
Scientists have hailed a ‘crucial milestone’ for graphene after revealing the wonder material could be used to clean up the nuclear industry.
Research carried out by the University of Manchester has shown graphene-based membranes could make the production of ‘heavy water’ more efficient, leading to greener and cheaper nuclear power.
Heavy water - also known as deuterium oxide - is a key component within nuclear reactors.
It’s now hoped that graphene could be used to reduce carbon dioxide emissions associated with producing the liquid by up to a million tonnes per year.
The same group of researchers found last year that graphene could efficiently sieve hydrogen isotopes. Industrial opportunities regarding the discovery weren’t analysed because there were no membranes or fabrication methods suitable for scalable manufacturing.
But the research group has now developed fully scalable prototype membranes and demonstrated the isotope separation in pilot studies.
Dr Lozada-Hidalgo, a research fellow at the University of Manchester, said: “This is a crucial milestone in the path to taking this revolutionary technology to industrial application.

The monthly Coppock Indicators finished April

DJIA: 20,941 +149 Up. NASDAQ:  6,048 +190 Up. SP500: 2,384 +152 Up.

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