Tuesday 11 July 2017

Populism Surges.



Baltic Dry Index. 820 -02     Brent Crude 47.00

“Those who don't know history are destined to repeat it.”

Edmund Burke.

After watching populist economics surge in the UK general election, crashing Prime Minister May’s majority austerity government into a snake bit minority government, populist policies are now surging across much of the EUSSR. The “tax-the-rich,” free lunch for all, freedom from reality politics, are the new order of the day. “I want my free lunch, and I want it now,” seems to be sweeping the voters, especially the young.

The Great Nixonian Error of fiat money, communist money, is now entering its terminal ending. The benefits of fiat money were all front loaded and long ago dissipated in endless wars, gambling, and louche lifestyle. Now no one wants to pay the bill that’s come in, least of all the young who never got any of the front loaded benefits. Why work, if populism offers a free ride?

But first this from Asian markets.  Has the Great Bubble run out of steam and is turning into the Great Churn? Look out below if there’s a summer rush for the exits.

"The modern mind dislikes gold because it blurts out unpleasant truths."

Joseph Schumpeter

Asian markets rise, driven by tech-stock gains

Published: July 11, 2017 12:08 a.m. ET
Technology shares across the Asia-Pacific rose, tracking overnight strength in U.S. tech companies and boosting the region’s equities markets early Tuesday.

Taiwan’s Taiex index Y9999, +0.92%   was up 0.8%, with iPhone lens maker Largan Precision 3008, +4.03%   surging 3.3% and fellow Apple suppliers Hon Hai Precision 2317, +2.16%   and Taiwan Semiconductor 2330, +2.18%   gaining 1.7% each. The three stocks make up 26.5% of the benchmark’s weighting, and the gains come as U.S. tech stocks sent the Nasdaq Composite higher for a second straight session on Monday.

In Japan, index heavyweight and tech investor SoftBank 9984, +1.60%   gained 1.8%, while messaging giant Line 3938, +1.17%   rose 1.2%. The benchmark Nikkei Stock Average NIK, +0.42%   was up 0.2%, building on Monday’s move past the 20,000-point mark.

A weaker yen against the U.S. dollar also supported the Nikkei, benefiting export-oriented stocks. Hitachi 6501, +1.00%   rose 0.7%, and construction-equipment maker Komatsu 6301, +0.95%   gained 0.8%.
The dollar-yen pair JPYUSD, -0.320782%   was last at 114.12, up from 114.06 late Monday.

After recent pullbacks, investors are adding tech stocks to their portfolios at the cost of old-economy stocks, said William Cheung, regional strategy analyst at Kim Eng Securities. However, “they must exercise caution and be selective in picking these stocks,” he said.

In Hong Kong, the Hang Seng Index HSI, +1.12%   gained 0.8% with tech heavyweight Tencent 0700, +1.40%   adding 1.3%. However, the Shanghai Composite Index SHCOMP, -0.18%   was down 0.4%, despite a recovery in Chinese metals and coal futures prices.

Weakness began in mainland Chinese markets on Monday after state media reports that the stock market regulator was clamping down on stock buying by fund managers ahead of purchases by their funds.

Outside the tech space, there was caution among traders in Asia ahead of scheduled appearances by U.S. Federal Reserve officials this week. Investors are watching for more cues from the Fed on the pace of interest-rate increases.

“There are no major macro moves, and most of the trading is people moving in and out of sectors,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

Fed Gov. Lael Brainard was due to speak in New York on Tuesday, ahead of Chairwoman Janet Yellen’s testimony to congressional committees on Wednesday and Thursday.
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Up next a warning from the world’s largest, and most reckless, derivatives gambler. What me worry? Well yes says Germany’s all too wobbly Deutsche Bank.

Banks are an almost irresistible attraction for that element of our society which seeks unearned money.

J. Edgar Hoover

Deutsche Sees Trouble Ahead for the World's ‘Frothy’ Stock Markets

By Colin Simpson
10 July 2017, 11:21 GMT+1
There could be trouble ahead for developed world equity markets with "frothy" valuations as central banks start shifting policy, according to Deutsche Bank AG.

Price-to-earnings ratios increased steadily after the global financial crisis as waves of monetary stimulus pulled down the yields on safe assets, spurring investors into riskier options. That dynamic may be on the verge of reversing with a turnaround in policy now underway in developed nations other than Japan, Mikihiro Matsuoka, chief economist of the Japanese unit of Deutsche Bank AG, wrote in a note dated July 10.

The average of the standard deviation of stock-market capitalization as a percentage of GDP in seven major developed countries has been approaching the previous peaks of 2000 and 2008, Matsuoka highlighted.

The first sign of the 2008 crisis was a suspension of redemptions at a hedge fund. This time around, signs of a problem may include a deterioration in the quality of securitized U.S. auto loan products, and/or the deterioration of the financing of emerging market countries following U.S. interest rate rises, he said.

And, like the way that the first round of Federal Reserve quantitative easing was the most powerful, “likewise, the first round of the withdrawal of monetary accommodation could well deliver a bigger negative effect on the financial market and the real economy than the ensuing second and third shots of monetary-policy turnaround,” he wrote.

Matsuoka said a number of factors have been preventing or postponing a large-scale and prolonged correction in asset prices:
  • Higher nominal GDP growth above long-term bond yield thanks to massive monetary accommodation.
  • Shorter cycles of capital investment and capital stock in the real economy.
  • Dividend yields rising higher than the long-term bond yield, spurring stock purchases thanks to the search for higher returns and resulting in a rise in price-to-earnings ratios
  • The financial surpluses of non-financial businesses in developed countries.
“It would be better to assume that these four buffers will weaken over the long run,” Matsuoka said. At the same time, he said it’s impossible to say now whether the market conditions he describes amount to simple froth, or something more worrying: “We would never know if this is a bubble until it bursts.”

Up next, back to the death of austerity in Europe. Will unfunded tax cuts help or hurt the French economy? How will French unions react to socialism for the French one percent? In Italy, EU rules? What rules? Seven years after Greece was slaughtered, and Cyprus banks bled dry, EUSSR giants France and Italy are making up their own EUSSR rules. Call it Europe’s Comrade Corbyn effect. Nine years on from the gambling banksters Great Recession, Europe’s voters are all to ready to sign on to populist fantasy policies. Feel good snake oil is in. Reality medicine is out. What could possibly go wrong?

“Europe exemplifies a situation unfavourable to a common currency. It is composed of separate nations, speaking different languages, with different customs, and having citizens feeling far greater loyalty and attachment to their own country than to a common market or to the idea of Europe".

Professor Milton Friedman, The Times 19 November 1997.

Mon Jul 10, 2017 | 10:32am BST

France to push ahead with tax cuts in 2018 after Macron overrules PM

France will press ahead with tax cuts promised by new President Emmanuel Macron, a finance ministry source said on Monday, despite warnings from the official state audit body about an 8 billion euro ($9.1 billion) hole in the budget.

Macron insisted at a meeting on Sunday that plans to rein in France's wealth tax and scrap local property taxes for 80 percent of those currently paying them begin to take effect in 2018, the ministry source said, confirming earlier French media reports.

The president's intervention comes just days after his Prime Minister Edouard Philippe had suggested the cuts would be postponed into 2019 as France struggles to contain its public deficit.

In an alarming report last month, the Court of Auditors said a budget shortfall left by former president Francois Hollande's government would result in a deficit of 3.2 percent of national output this year compared with the Hollande government's forecast of 2.8 percent.

Macron has promised to meet the EU's 3 percent target in 2017. His pledges to cut local property taxes and limit the scope of the wealth tax to property could put a strain on revenues in the years ahead.

French business leaders have bridled at the proposed delay, warning that the country needs urgent action on tax reform to restore competitiveness.
http://uk.reuters.com/article/uk-france-tax-idUKKBN19V0OS

July 10, 2017 / 5:02 PM

Italian ministers, EU cool on Renzi's plan to flout fiscal rules

ROME (Reuters) - Italian ministers and European Union officials gave a cool reception on Monday to a proposal by former prime minister Matteo Renzi that Italy flout the EU's fiscal rules for the next five years.
Renzi, leader of the ruling Democratic Party (PD), proposed Italy should run a stable budget deficit of 2.9 percent of gross domestic product for five years instead of trying to lower the deficit towards zero, as current plans call for.

Economy Minister Pier Carlo Padoan told reporters in Brussels that Renzi's proposal, contained in extracts of a book released on Sunday, "seems to be a question for the next legislature," and declined any other comment.

Industry Minister Carlo Calenda said Italy's next budget would be drawn up in September by Padoan and Prime Minister Paolo Gentiloni and would respect current commitments.

Those envisage a deficit of 2.1 percent of GDP this year and 1.2 percent in 2018.

Renzi, who quit as prime minister in December after losing a referendum on constitutional reform, should open a broad discussion on Italy's economic strategy rather than focus on deficit targets, Calenda told the newspaper Corriere della Sera.

He also said any increased deficit leeway would be best used to increase investments. Renzi, on the other hand, said "fiscal space should be used entirely and only for tax cuts."

----His proposal means none of Italy's main parties are in favor of respecting the fiscal compact, with parliamentary elections to be held by May next year.

Jeroen Dijsselbloem, president of the Eurogroup of euro zone finance ministers, told reporters in Brussels that EU fiscal rules had been jointly agreed, were re-discussed only last year and changing them "is not going to be easy."
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Staying with the rump EUSSR, Sweden wants to test “driverless,” “medium-duty, electric trucks on its roads next year. Well if they say so, I suppose. Better to test them there, than in the UK or more important parts of Europe or America.  If the Swedes are willing to be guinea pigs for the rest of us, we can only wish them well, though I for one have reservations about driverless T-pods skidding out of control into my half of the highway. If it’s driverless, it ought to be strict liability in future tort cases.

"Any nation which gives up its freedom in pursuit of economic advantage deserves to lose both."

Thomas Jefferson, US President 1801-1809.

Einride launches full prototype T-pod

July 09, 2017

Driverless electric vehicles could travel on Swedish roads later this year

Einride, a startup based in Sweden, has this week released a full-scale prototype of its T-pod.
The T-pod is a driverless, fully electric truck with a range of 200km and is designed to replace smaller medium-duty trucks on short trips.

But where the Einride T-pod differs from other autonomous electric trucks is that it can be driven by remote control. The deal is that the T-pods will travel autonomously on highways, then when they enter cities and towns, a ‘driver’ will take over by remote control and guide the T-pod to its final destination. Obviously, the T-pods are monitored when travelling autonomously and the driver can take over should the need arise.

This way, drivers don’t need to be away from home, don’t need sleep time and the trucks have less downtime.

The T-pods are seven metres long and because they have no cabin, and not even any seats, they can carry up to 15 pallets and have a total weight of 20 tonnes.

The company’s goal is to have a fleet of 200 T-pods running in Sweden by 2020, with plans to test its first route between the Swedish cities of Gothenburg and Helsingborg late this year.

Einride plans to test its first fleet in 2018 and the founders say that although current laws haven’t been tested for self-driving vehicles, there is nothing technically illegal about using the trucks on Swedish roads. Sweden has also proposed progressive legislation to allow testing of self-driving vehicles, and though the law may not be in place by this summer, companies can apply for permission to start testing early.

The company says it will have to build a network of charging stations for longer journeys but the T-Pods could dock and charge themselves during a trip.

Einride maintains that once in full operation, the T-pod network made up of these driverless trucks will have the capacity to move up to 2,000,000 pallets of goods per year. Einride claims that they may grow the route network across Sweden faster if the trucks work well.

Finally, today, the changing face of the US auto market. Something suggests to me, that this is a one trick pony, which can delay, but not stop, a second hand motor glut depressing the new autos market. The real questions are, how much of a delay, and how much higher do used auto prices have to rise, to really switch buyers back to buying new autos again, given their steep value drop, once driven out of the dealership showroom. A new car sales crash is underway, but will it be enough to delay the Fed’s next interest rate hike?  A difficult summer gets more difficult with each passing day. When will the tipping point be reached? Populism America style.

Fri Jul 7, 2017 | 1:21pm BST

Let's make a deal: Automakers, U.S. auctions align to prop up used car prices

Two lanes apart at a noisy, fast-paced auto auction near Detroit, two vehicles show why major U.S. automakers have a problem with used cars.

In one lane of the Manheim auction facility, a black 2015 Chevy Malibu sedan with barely 20,000 miles on it sold for just over $13,000 (10,086.12 pounds), less than half its original sticker price. In the other lane, a white 2013 Chevy Silverado pick-up truck sold for $11,500 - despite having 200,000 miles on the odometer.

America's renewed lust for new SUVs and trucks instead of smaller cars is already hurting major auto companies, which posted their fourth consecutive month of declining new vehicle sales.

But millions cars that were leased two or three years ago, many of them used compact and midsized cars with low mileage, are heading towards auction lots and used car dealerships.

That surge in supply threatens to depress prices for new and used vehicles, raising the risk of losses for automakers and finance companies on lease deals. It also undercuts the value of cars customers want to trade in for a new vehicle.

So major carmakers, including General Motors Co (GM.N) and Ford Motor Co (F.N), are aligning with auto auction houses with aggressive moves to make sure they are getting the best prices for their vehicles. Such manoeuvres include transporting the automobiles to where the greater demand is based on real-time pricing data, spending more to spruce up used cars and slowing the pace which leased cars get moved to used car lots or auction houses.

Auto auction houses such as Manheim in southeastern Michigan are where the romance of new car marketing goes to die. The dominant player in the U.S. auction market along with rival KAR Auction Services Inc (KAR.N), Manheim treats vehicles like commodities, grading them on a fine-tuned scale from one (poor) to five (excellent) that provides dealers with certainty and transparency.

"If a dealer sees a 2015 Ford Fusion with a rating of 4.3, they know what to pay for it and what they can sell it for," said Matt Trapp, a Manheim vice president on a tour of the auction, scanning tags on vehicles with his smartphone to pull up a multitude of transactions for that make, model, year, condition and mileage.

----Increasingly, the auction houses and automakers are collaborating to try to raise the scores, and the prices, of vehicles running through auctions. Auction houses have offered add-on reconditioning services on used vehicles for decades, but after the lean years following the Great Recession, demand is rising for those higher-margin services.

----Armed with detailed, real-time pricing data that was not available during the last downturn, auctioneers can now help automakers figure out where a used car could fetch the best price.

Manheim has an expanded logistics arm that can aggregate cars for transport to the place they'll fetch the highest price at auction, or arrange their sale before they even move.

Jason Ferreri, KAR's executive vice president of online services, said this is happening "significantly more often."

Neither he nor Manheim officials would give specifics. In April, KAR agreed to buy DRIVIN, a data aggregator that matches vehicle inventory to dealer demand, whose founders include Brad Keywell and Eric Lefkofsky, the co-founders of Groupon Inc (GRPN.O), for $43 million in stock.

Ferreri said the deal was in response to automakers' demands for greater data services amid the influx of off-lease vehicles. This real-time pricing data helps the companies steer the used cars towards higher demand.

For example, the national price for a 2015 Chevrolet Malibu with average mileage the week of June 11 was $15,514, according to data compiled for Reuters by car-shopping website CarGurus.

In Memphis, that Malibu cost nearly 9 percent above the national average fair price, but in Miami it would sell for more than 9 percent below that price, representing a difference of $2,700.

----But Mark Wakefield, head of the North American automotive practice for consultancy AlixPartners, said propping up used car values makes sense, but automakers will have to do more to stem the flow of used cars longer-term by trimming inventory levels.

"I expect to see more production cuts," he said.
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Seattle Approves New Income Tax for Wealthy Residents

THE ASSOCIATED PRESS (PHUONG LE)
Seattle (AP) -- Seattle's wealthiest would become the only Washington state residents to pay an income tax under legislation approved by the City Council, a measure designed as much to raise revenue as to open a broader discussion about whether the wealthy pay their fair share.

The council voted unanimously Monday to impose a 2.25 percent tax on the city's highest earners. Personal income in excess of $250,000 for individuals and in excess of $500,000 for married couples filing joint returns would be taxed.

The measure is certain to face a court challenge from opponents who call the tax proposal illegal, unconstitutional and a waste of taxpayer money. If passed, city leaders are likely to keep expanding and increasing the tax over time, they said.

The council is "going to unanimously adopt an illegal income tax that has no hope of taking effect and will waste taxpayer resources on litigation the city is sure to lose," said Jason Mercier, who directs the center for government reform with the Washington Policy Center,

Supporters of the new tax say the city's economic growth and prosperity has created significant wealth and opportunity, but it has also exacerbated the affordable housing crisis that has put a strain on those in lower income brackets.

Washington is one of seven states without a personal income tax, and a state law passed in 1984 prohibits a county, city, or city-county from levying a tax on net income.

"We have an increasing affordability gap between the have and have nots. The middle class is being squeezed as well. And one of the reasons is our outdated, regressive and unfair tax structure," said Councilmember Lisa Herbold, who co-sponsored the measure.

"This is a big step forward in Seattle but it's also hopefully a big step forward for our state," she said before the 9-0 vote.
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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.

J. K. Galbraith.

Crooks and Scoundrels Corner

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

Today, did Germany do a corrupt deal with Israel over selling Israel German U-boats? Something about bears and woods comes to mind.

Mon Jul 10, 2017 | 12:08pm BST

Police question six in Israel-Germany submarine deal

Israeli police said they had questioned six people on Monday on suspicion of corruption in a $2 billion (£1.6 billion) naval defence deal with Germany.

The 2016 deal has been under public scrutiny since it emerged that Prime Minister Benjamin Netanyahu's personal lawyer also represented the local agent of the German conglomerate ThyssenKrupp Marine Systems set to build the vessels.

The six people, who were questioned under caution on suspicion of bribery, fraud and tax offences, include public officials and private citizens, police spokeswoman Luba Simri said. No further details were immediately available.

German authorities are also looking into the submarine deal.

In June, German magazine Der Spiegel reported Germany's national security council had approved the sale of the three nuclear-capable submarines to Israel and that authorities inserted a clause into the contract giving it the right to void it if corruption allegations were proven.

The Justice Ministry said in February that Netanyahu himself was not a suspect in the investigation into the 2016 contract for ThyssenKrupp to build three submarines and a 2015 agreement with the company to purchase four patrol vessels for Israel's navy.

Israeli Channel 10 reported last year that ThyssenKrupp Marine Systems' Israeli intermediary had retained Netanyahu's personal lawyer, David Shimron, to act on his behalf.

Shimron has denied any wrongdoing and has said he never discussed the deal with the prime minister so as to avoid any conflict of interest. Netanyahu has given his full backing to his lawyer, who is a distant relative.

Netanyahu is under investigation in two other criminal cases and he denies any wrongdoing in both.

One case involves gifts from businessmen and the other focuses on discussions Netanyahu held with a newspaper publisher on more favourable media coverage in return for curbs on competition from a rival newspaper.
"My daughter asked me when she came home from school, “What’s the financial crisis?” and I said, it’s something that happens every five to seven years."

Jamie Dimon, US CEO of JP Morgan Chase
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?

Zero gravity: Graphene for space applications

Date: July 7, 2017

Source: Graphene Flagship

Summary: Researchers are preparing for two exciting experiments in collaboration with the European Space Agency (ESA) to test the viability of graphene for space applications. The microgravity parabolic flight drop tower experiments will launch between November 6-17, 2017, testing graphene in zero-gravity conditions to determine its potential in space applications including light propulsion and thermal management.

Researchers and students in the Graphene Flagship are preparing for two exciting experiments in collaboration with the European Space Agency (ESA) to test the viability of graphene for space applications. Both experiments will launch between 6-17th November 2017, testing graphene in zero-gravity conditions to determine its potential in space applications including light propulsion and thermal management.

The Graphene Flagship is a pan-European research initiative dedicated to developing new technologies based on graphene, the single-atom-thick allotrope of carbon with excellent electrical, mechanical, thermal and optical properties. A fundamental aspect of the Graphene Flagship is training students and young researchers. These ambitious space-related experiments are an excellent opportunity for Flagship students and researchers to gain new experiences in cutting-edge research. Join the Graphene Flagship as we follow the progress -- from the early stages in the laboratory to the moments of weightlessness!

In a fully student-led experiment, a team of Graphene Flagship graduate students from Delft Technical University (TU Delft; Netherlands) will participate in ESA Education's Drop Your Thesis! programme. Their successful proposal will use microgravity conditions in the ZARM Drop Tower (Bremen, Germany) to test graphene for light sails. By shining laser light on suspended graphene-membranes from Flagship partner Graphenea, the experiment will test how much thrust can be generated, which could lead to a new way of propelling satellites in space using light from lasers or the sun.

The PhD student team -- named GrapheneX -- consists of Santiago Cartamil Bueno, Davide Stefani, Vera Janssen, Rocco Gaudenzi, all research students in Herre van der Zant's research group in TU Delft. Santiago Cartamil Bueno, project leader for the GrapheneX team, said "We split tasks between the team and things are working well. We are very ambitious with the quality of the experiments. We really want to do it properly, so we are committed to do real science in this project."

ESA Education's Drop Your Thesis! programme offers students the opportunity to design an experiment for the ZARM Drop Tower in Bremen, Germany, which simulates the low gravity and vacuum conditions of space. The 146 m ZARM Drop Tower creates extreme microgravity conditions down to one millionth of Earth's gravitational force. In vacuum, a capsule containing the experiment is catapulted up and down the tower, providing a total of 9.3 seconds of weightlessness.

Running concurrently is an experiment investigating how graphene can improve efficiency in heat transfer in loop heat pipes -- cooling systems used extensively in satellites and aerospace instruments. The experiment is a collaboration between Graphene Flagship partners at the Microgravity Research Centre, Université libre de Bruxelles, Belgium; the Cambridge Graphene Centre, University of Cambridge, UK; Institute for Organic Synthesis and Photoreactivity, National Research Council of Italy (CNR), Italy; and Leonardo Spa, Italy, a global leader in aerospace, producing of a variety of components and systems for space applications.
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"I've abandoned free market principles to save the free market system."

Mario Draghi, with apologies to George W. Bush, Washington, D.C., Dec. 16, 2008

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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