Wednesday, 19 July 2017

Bubble On!

Baltic Dry Index. 932 +20     Brent Crude 48.66

“Why, sometimes I’ve believed as many as six impossible things before breakfast.”

Ebenezer Squid, with apologies to Lewis Carroll.

Another day, buy more stocks. Bubble on like its 1987 again, or even 2007. The Fed’s got us covered, along with the ECB, Bank of Japan, and Peoples Bank of China. We will all get filthy rich by front running the central banks.

Trouble is, it’s not 1987 again or even 2007. It’s 2017 and the planet is buried in a mountain of unrepayable debt, with a populist voting public ready to vote in populists from the far left and far right. Centreist realist politicians have failed, and an increasing section of the voting public are saying, “what have we got to lose?”

Below the Greatest Disconnect.

S&P 500, Nasdaq Composite Hit Records; Gold Climbs: Markets Wrap

By Samuel Potter
The dollar slid to an 11-month low and U.S. stocks clawed back earlier losses to reach record levels, as President Donald Trump’s economic revitalization agenda once again faltered. European shares dropped amid earnings disappointments, and gold rose to the highest level this month.

The greenback lost ground against all but one of its G-10 peers on signs Trump’s health-care reform bill is effectively dead in its current form, after two more Republican senators announced their opposition to the plan. Sterling bucked the trend, slipping against the dollar as U.K. inflation unexpectedly slowed in June, while the euro surged ahead of this week’s ECB meeting.

The S&P 500 Index rose slightly to reach an all-time high, while the Nasdaq Composite Index also climbed to a record close. The Stoxx Europe 600 Index fell following a grim earnings report from Ericsson AB. Iron ore futures hit their highest since May on strong demand from Chinese steel mills.

While many traders had already dialed back their expectations Trump will be able to execute his pro-growth policies, the apparent death of the health-care bill lent a risk-off tone to markets. Some notable investors have become less sanguine as global equities continue to trade near record highs.

“Any hopes of dollar support from a successful vote on the Senate’s health-care bill look to be vanishing,” said Rodrigo Catril, a currency strategist at National Australia Bank Ltd. in Sydney. “Near term, the dollar path of least resistance is down. We still think the data -- inflation in particular -- will provide the Fed with enough ammunition to hike in December and boost the dollar, but this is a fourth-quarter story.”

Here are some key upcoming events:
  • The European Central Bank meets Thursday. Bloomberg Intelligence expects no change then, and no rate hike before 2019. Reuters cited unidentified officials as saying the bank is keen to keep asset purchases open-ended.
  • The Bank of Japan is forecast to stand pat at its meeting Thursday.
  • Round two of Brexit talks is underway in Brussels.

But what could possibly go wrong? How do you spell central bankster R_I_G?

“But I don’t want to go among mad people," Trump remarked.
"Oh, you can’t help that," said Yellen: "we’re all mad here. I’m mad. You’re mad."
"How do you know I’m mad?" said Trump.
"You must be," said Yellen, "or you wouldn’t have come here to Washington.”

With apologies to Lewis Carroll.

Trading volume slows sharply even as stock market hits highs

Published: July 18, 2017 5:06 p.m. ET

Daily trading volume well under already low July averages

Summer trading volume has gone from a slowdown to more of a near halt even as stock-market benchmarks fitfully carve out records.

Following some of the slowest trading of the year over the past few sessions, Tuesday volume improved fractionally. On Tuesday, 2.94 billion shares exchanged hands on the New York Stock Exchange, compared with a month-to-date daily average of 2.91 billion shares and a daily average of 3.48 billion shares for the year to date, according to Dow Jones data.

On Monday, 2.76 billion shares changed hands on the NYSE. That was just slightly better than Friday’s woeful action, which represented the lowest volume day of the year at 2.71 billion shares, according to Dow Jones data.

On the Nasdaq, 1.73 billion shares traded on Tuesday, compared with a month-to-date average of 1.68 billion for July and the year-to-date average of just under 1.9 billion shares a day. That followed the lowest volume day of the year on Monday, when 1.36 billion shares changed hands.

While the Dow industrials DJIA, -0.25%  walked back from record territory on Tuesday, the S&P 500 index SPX, +0.06% and Nasdaq COMP, +0.47%  both notched all-time highs.

Combined, the Nasdaq and the NYSE (along with the NYSE MKT and NYSE Arca exchanges) still fell short of the monthly average volume Tuesday with 5.62 billion shares changing hands, compared with a daily average of 5.63 billion shares and a year-to-date average of 6.64 billion. That follows the second-lowest volume trading day of the year on Monday, with 5.12 billion shares traded.

Japan Central Bank's ETF Shopping Spree Is Becoming a Worry

By Masahiro Hidaka and Toru Fujioka
18 July 2017, 01:30 GMT+1 18 July 2017, 04:01 GMT+1
Some officials at the Bank of Japan are increasingly concerned about the sustainability of the BOJ’s purchases of exchange-traded funds, according to people familiar with discussions at the central bank. But the chances of any change at this week’s policy meeting are low, they said, with no need for an immediate change to the program.

Concerns include the risk that the central bank could end up owning such large amounts of the free-floating shares of some listed companies in the Nikkei-225 Stock Average that it could seriously distort the market, according to the people, who declined to be identified because the talks are private. Still, they say it’s unlikely the matter will be discussed in detail at the two-day policy meeting ending July 20.

If the BOJ were to make a change sometime down the road, it could increase the proportion of purchases in the broader Topix stock index while cutting back on the Nikkei, said the people, rather than reducing the overall quantity of purchases. The timing of any such change would depend on a range of conditions, including the state of the economy and inflation, and possibly the extent of public criticism of its ETF buying, they said.

----Not all BOJ officials are concerned about the sustainability of ETF purchases, reasoning that the previous shift toward Topix buying should prevent problems with sustainability for the foreseeable future, said people with knowledge of the matter.

Still, the growing focus on the risks associated with the BOJ’s monetary stimulus program -- which includes enormous asset purchases, particularly of Japanese government bonds, as well as negative interest rates and yield curve control -- comes as its inflation target remains elusive. With no end to its program in sight, the BOJ is under increasing pressure to mitigate risks and explain its thinking about an eventual exit. 

Its ETF buying, now targeted at around 6 trillion yen ($53 billion) annually, is the subject of continued questioning. The concern inside the BOJ coincides with its growing presence in the market. The BOJ owned about 71 percent of all shares in Japan-listed ETFs at the end of June, according to a Bloomberg analysis of data from the central bank and Japan’s Investment Trusts Association.

In other news, national security is back, and not just in a Trump trade war on steel dumping. Will America really try to take on China in rare earths?

This CEO Wants Trump to Nationalize the Only Rare-Earth Mine in America

By Sally Bakewell and Steven Church
18 July 2017, 21:43 GMT+1
The head of an advanced-materials manufacturer said he met with President Donald Trump’s chief strategist, Steve Bannon, on Monday to persuade him that the U.S. should nationalize the country’s only mine of rare earth minerals, which are used in military applications.

“The staff understood the urgency of the matter,” Michael Silver, chief executive officer of closely held American Elements Corp., said in a phone interview after his White House meeting, which he said was also attended by presidential deputy assistant Sebastian Gorka and White House Chief of Staff Reince Priebus.

The rare-earth mining operations in Mountain Pass, California, the last remaining assets of bankrupt Molycorp Inc., were bought in June by a group that drew objections from rival bidders, who said the winner has ties to the Chinese government.

The mine should be converted to a national laboratory “dedicated to rebuilding America’s rare-earth mining industry so the world knows it is safe to build high-tech manufacturing plants in the U.S.,” Silver said.

The production of rare-earth minerals -- used in applications from hybrid electric cars to iPhones and military hardware such as night-vision goggles and guided weapons -- is dominated by low-cost Chinese companies. Molycorp Minerals and its parent, Molycorp Inc., filed for bankruptcy in 2015 after prices for the minerals fell below the mine’s costs to produce them.

Silver said he was invited to brief the president on the issue on Tuesday. The White House didn’t respond to requests for comment.

Silver said he’s proposing the U.S. government apply the Takings Clause of the 5th Amendment and acquire Mountain Pass by eminent domain.

Any attempt to make the mine commercially viable would fail because no one can compete with China, which accounts for almost all the world’s rare-earth production, Silver said.

“The perception is the only place in the world you can go for reasonably priced rare earth materials for your product is in China,” he said. “You have to change that perception.”

“It’s no use going back to yesterday, because it was a different world then.”

With apologies to Lewis Carroll.

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.

Today, more on Turkey v Germany. Is Turkey heading for the NATO exit? Will Jordan try to join NATO?

Turkey turns away from NATO with US$2.5B plan to purchase Russian missile defence system

The Russian system would not be compatible with other NATO defence systems, but also wouldn't be subject to the same constraints imposed by the alliance

July 17, 2017 2:59 PM EDT
Turkey has agreed to pay US$2.5 billion to acquire Russia’s most advanced missile eefense system, a senior Turkish official said, in a deal that signals a turn away from the NATO military alliance that has anchored Turkey to the West for more than six decades.

The preliminary agreement sees Turkey receiving two S-400 missile batteries from Russia within the next year, and then producing another two inside Turkey, according to the Turkish official, who asked not to be named because of the sensitivity of the matter. A spokesman for Russia’s arms-export company Rosoboronexport OJSC said he couldn’t immediately comment on details of a deal with Turkey.

Turkey has reached the point of an agreement on a missile defence system before, only to scupper the deal later amid protests and condemnation from NATO. Under pressure from the U.S., Turkey gave up an earlier plan to buy a similar missile-defence system from a state-run Chinese company, which had been sanctioned by the U.S. for alleged missile sales to Iran.

Turkey has been in NATO since the early years of the Cold War, playing a key role as a frontline state bordering the Soviet Union. But ties with fellow members have been strained in recent years, with Turkish President Recep Tayyip Erdogan pursuing a more assertive and independent foreign policy as conflict engulfed neighbouring Iraq and Syria.
July 16, 2017 / 1:06 PM / 2 days ago

NATO urges Turkey, Germany to settle air base row

BRUSSELS/BERLIN (Reuters) - NATO's Secretary General has urged the Turkish and German foreign ministers to resolve their differences over visits to Turkish air bases, part of a wider row between the two allies.

Germany has refused to extradite asylum seekers Turkey says were involved in a coup attempt last year, Berlin is demanding the release of a Turkish-German journalist, and Ankara has refused to let German lawmakers visit soldiers at two air bases.

German soldiers contribute to a NATO air surveillance mission at Konya, 250 km (150 miles) south of the Turkish capital Ankara, and its troops stationed at another air base, in Incirlik, have already been moved to Jordan.

NATO said Jens Stoltenberg had called Sigmar Gabriel and Mevlut Cavusoglu on Friday to ask them to settle the dispute.

"We hope that Germany and Turkey are able to find a mutually acceptable date for a visit," a NATO spokesman said.

Germany's armed forces are under parliamentary control and Berlin says the lawmakers must have access to its soldiers.

German Chancellor Angela Merkel insisted in a television interview on Sunday that German lawmakers should be allowed to visit the Bundeswehr soldiers at the NATO air base in Konya.

"This whole issue is unfortunate, very unfortunate," Merkel told public broadcaster ARD, adding that more talks were needed to find a solution, also with the help of NATO.

On whether Ankara had asked Berlin to extradite asylum seekers in exchange for granting lawmakers access to the air base, Merkel said she was not aware of any such a request.

 German lawmakers postpone visit to Konya NATO base in Turkey

Ankara denied German lawmakers permission to visit Bundeswehr troops stationed at a NATO base near the Turkish town of Konya. Similar incidents at Incirlik prompted Berlin to relocate some 250 troops to Jordan.

Germany's parliamentary defense committee was told on Friday that its trip to a NATO military base in south-western Turkey will be postponed, at the request of the Turkish government.

Committee chairman Wolfgang Hellmich told local media that Ankara had blocked the committee's trip to German troops serving on AWACS surveillance planes in Konya which had been scheduled for Monday. Turkey asked for a delay, citing the tense state of German-Turkish bilateral relations.

"Under these conditions, I see no way to extend the mandate," said Hellmich, adding that Turkey's decision had been conveyed to the German Foreign Ministry a day earlier on Thursday.

Read more: Taking German troops out of Incirlik: The least preferred option for NATO

"The government, especially Chancellor Angela Merkel, must now take the necessary steps to ensure lawmakers can soon visit the soldiers in Konya," said Social Democrats defense spokesperson, Rainer Arnold.

Talks to resolve dispute

Speaking on ARD television on Sunday, Merkel said lawmakers should be allowed to visit Bundeswehr soldiers at the NATO air base in Konya and that more talks were needed to resolve the dispute. But she refused to link the issue of extradition of Turkish asylum seekers with access to Konya in talks with Ankara. She said the two issues were completely unrelated.
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?

Solar Plants Aim to Keep Lights on at Night

By Anna Hirtenstein and Mathew Carr
18 July 2017, 04:00 GMT+1
Solar plants that supply electricity at competitive prices after the sun goes down are about to become a reality in the Middle East, according to one of the region’s biggest developers of power plants.

ACWA Power International Chief Executive Officer Paddy Padmanathan confirmed his company is the low bidder on a $1 billion project that will feed electricity to the grid for the Dubai Water & Electricity Authority between 4 p.m. and 10 a.m. More such plants are likely to follow because Chinese companies will start driving down the cost of equipment, he said.

The 200-megawatt Dubai contract, which runs for 25 years, will harness a two-decade old technology called concentrated-solar, or solar thermal. Unlike photovoltaics, which generate a charge directly from the sun’s power, thermal plants use mirrors to concentrate heat on water, turning it to steam to drive a turbine. The heat can be stored in molten salt to be used later. The technology to date has slipped behind PV on cost but is quickly becoming more competitive, the executive said.

“I expect concentrated-solar power, within 18 months, to be head to head with combined-cycle gas, if not more competitive,” Padmanathan said in an interview in London. “The focus has been on PV and batteries, but there’s a limit on how long they can hold a charge for. We’re proving that CSP can work through the night.”

Since it can retain heat, the plant can keep working after dark. The sun’s energy in some cases can heat molten salt to 490 degrees Celsius (914 degrees Fahrenheit), which allows operators to predict when electricity will flow.

Uncertain Outlook

While solar thermal plants are becoming cheaper, PV costs are falling too, raising questions whether the Dubai project really will be as attractive as ACWA expects, said Jenny Chase, head of solar analysis at Bloomberg New Energy Finance.

“This plant in Dubai is for delivery by 2021,” Chase said. “By then, we’re expecting solar PV and batteries to be in the same order of magnitude for cost and will be a lot more flexible than a solar thermal plant. Also, a lot of these projects are operating below what they’re meant to, such as the entire Spanish fleet and some in India as well.”

There are 319 gigawatts of photovoltaic panels installed worldwide, compared to about 5 gigawatts of solar thermal, according to BNEF data. The mass deployment has driven down costs of solar panel equipment by about 70 percent since 2010, with the latest record set in Abu Dhabi at 2.45 cents per kilowatt-hour. In comparison, solar thermal was around 15 to 18 cents per kilowatt-hour until recently.

Yellen and the BOJ: “Would you tell me, please, which way I ought to go from here?"
BIS: "That depends a good deal on where you want to get to."
Yellen and the BOJ: "I don't much care where –"
BIS: "Then it doesn't matter which way you go.”

With apologies.

The monthly Coppock Indicators finished June

DJIA: 21,350 +196 Up. NASDAQ:  6,140 +235 Up. SP500: 2,423 +166 Up.

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