Friday, 21 July 2017

Red Flags And Klaxons Blaring.

Baltic Dry Index. 964 +16     Brent Crude 49.29

All the political parties alike have their origins in past ideas and not in new ideas — and none more conspicuously so than the Marxists.

John Maynard Keynes.

Today more red flags and klaxons, but this time for the American economy rather than China’s. The next recession gets closer by the day, even as the long, weak “recovery” prepares to enter its 99th month.

We open with another warning from the Bond King.

“If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.”

John Maynard Keynes.

Gross warns that a few more rate hikes could tip U.S. economy into recession

Published: July 20, 2017 5:20 p.m. ET

Janus’s Bill Gross says investors underestimate the number of rate hikes it would take to drag the economy into a recession.

Bond guru Bill Gross says it might only take a few more rate increases, even at the Federal Reserve’s gradual pace, to throw the economy into a recession. The Janus Henderson (formerly Janus Capital) fund manager warns that the resulting economic slowdown could spark a market meltdown.

“Today’s highly levered domestic and global economies which have ‘feasted’ on the easy monetary policies of recent years can likely not stand anywhere close to the flat yield curves witnessed in prior decades,” Gross wrote in his most recently monthly missive to investors. “Central bankers and indeed investors should view additional tightening and ‘normalizing’ of short-term rates with caution,” he said. Read the entire market musing, entitled “Curveball,” here.

The Fed has raised benchmark interest rates four times since its first rate increase in nearly a decade back in December 2015.

Gross’s latest views echo earlier admonishments and are similar to concerns that have been raised by other market participants, some of whom have suggested that the Fed should slow its pace of rate hikes amid signs of muted inflation. A Bank of America Merrill Lynch global fund managers’ survey indicated that the second-most concerning “tail risk” remained a central-bank policy misstep

Philly Fed manufacturing report in July slows to lowest level of the year

Published: July 20, 2017 9:54 a.m. ET
Manufacturers reported solid, but slowing, growth in July, according to data released Thursday.

The Philadelphia Federal Reserve said its manufacturing survey in July fell to 19.5 from 27.6 in June.

Any reading above zero indicates improving conditions. Economists polled by Econoday expected a reading of 22.

The indexes for activity, new orders, shipments, employment and work hours were all positive but fell from June levels. The new-orders index in particular plummeted, to a reading of 2.1 from 25.9 in June.

A similar report from the New York Fed released earlier this week also showed a deceleration in July.

The drops come at a time when manufacturing is showing signs of recovery, but largely because of gains in the oil and gas sector. A weaker dollar also has helped. Industrial production in June rose for the fifth consecutive month, according to separate data from the Fed.

July 21, 2017 / 12:45 AM

Exclusive: U.S. toughens stance on foreign deals in blow to China's buying spree

(Reuters) - A secretive U.S. government panel has objected to at least nine acquisitions of U.S. companies by foreign buyers so far this year, people familiar with the matter said, a historically high number that bodes poorly for China's overseas buying spree.

The objections indicate that the Committee on Foreign Investment in the United States (CFIUS), which reviews acquisitions by foreign entities for potential national security risks, is becoming more risk-averse under U.S. President Donald Trump.

Chinese companies and investors eyeing U.S. assets could face more roadblocks as a result, at a time when the Chinese government is also restricting the flow of capital out of China following a bonanza of Chinese overseas deals.

There have been 87 announced acquisitions of U.S. companies by Chinese firms so far in 2017, the highest on record and up from 77 deals in the corresponding period in 2016.

CFIUS's more conservative stance toward deals coincides with growing political and economic tensions between the United States and China. On Wednesday the two countries failed to agree on major new steps to reduce the U.S. trade deficit with China.

Since the start of the year, CFIUS has sent letters to companies involved in at least nine deals to say they would be blocked based on measures they have proposed to address potential national security risks, the people familiar said.

Many of these deals are in the technology sector, the sources said. A rise in cyber security threats and rapid advances in technology makes it more difficult to establish whether a deal poses any threat, lawyers who represent companies before CFIUS said.

In global fire news, the USA may have its own flammable cladding problem.  As in the UK, no one really knows.

U.S. hotel, NFL arena may have same flammable panels as Grenfell Towers

Juliet Linderman, Jason Dearen And Jeff Martin, THE ASSOCIATED PRESS
In promotional brochures, a U.S. company boasted of the “stunning visual effect” its shimmering aluminum panels created in an NFL stadium, an Alaskan high school and a luxury hotel along Baltimore’s Inner Harbor that “soars 33 stories into the air.”

Those same panels — Reynobond composite material with a polyethylene core — also were used in the Grenfell Tower apartment building in London. British authorities say they’re investigating whether the panels helped spread the blaze that ripped across the building’s outer walls, killing at least 80 people.

The panels, also called cladding, accentuate a building’s appearance and also improve energy efficiency. But they are not recommended for use in buildings above 40 feet because they are combustible. In the wake of last month’s fire at the 24-story, 220-foot-high tower in London, Arconic Inc. announced it would no longer make the product available for high-rise buildings.

Determining which buildings might be wrapped in the material in the United States is difficult. City inspectors and building owners might not even know. In some cases, building records have been long discarded and neither the owners, operators, contractors nor architects involved could or would confirm whether the cladding was used.

That makes it virtually impossible to know whether the Baltimore Marriott Waterfront hotel or Cleveland Browns’ football stadium — both identified by Arconic’s brochures as wrapped in Reynobond PE — are actually clad in the same material as Grenfell Tower, which was engulfed in flames in less than five minutes.

“If the materials used on a building appear similar to a known hazard, people need to know that,” said Douglas Evans, a fire protection engineer from Las Vegas, who has been studying fires on the exterior facades of buildings for nearly 25 years. “Anybody who is inside of these buildings has a right to know.”

The International Building Code adopted by the U.S. requires more stringent fire testing of materials used on the sides of buildings taller than 40 feet. However, states and cities can set their own rules, said Keith Nelson, senior project architect with Intertek, a worldwide fire testing organization.

The National Fire Protection Association conducts fire resistance tests on building materials to determine whether they comply with the international code. Robert Solomon, an engineer with the association, told the AP that the group’s records show the U.S.-made Arconic panels never underwent the tests. For that reason, he said, the group considered the products unsafe for use in buildings higher than 40 feet.

Tests conducted by the British government after the Grenfell fire found samples of cladding material used on 75 buildings failed combustibility tests.

Solomon said the use of Reynobond PE on the Baltimore Marriott and the city-owned Cleveland Browns stadium in particular should be reviewed because of their height.

We close for the day with a very 21st century media development. Fake News is very organised.

Troops, Trolls and Troublemakers: A Global Inventory of Organized Social Media Manipulation

Cyber troops are government, military or political party teams committed to manipulating public opinion over social media. In this working paper, we report on specific organizations created, often 8ith public money, to help define and manage what is in the best interest of the public. We compare such organizations across 28 countries, and inventory them according to the kinds of messages, valences and communication strategies used. We catalogue their organizational forms and evaluate their capacities in terms of budgets and staffing. This working paper summarizes the findings of the first comprehensive inventory of the major organizations behind social media manipulation.

We find that cyber troops are a pervasive and global phenomenon. Many different countries employ significant numbers of people and resources to manage and manipulate public opinion online, sometimes targeting domestic audiences and sometimes targeting foreign publics.
  • The earliest reports of organized social media manipulation emerged in 2010, and by 2017 there are details on such organizations in 28 countries.
  • Looking across the 28 countries, every authoritarian regime has social media campaigns targeting their own populations, while only a few of them target foreign publics. In contrast, almost every democracy in this sample has organized social media campaigns that target foreign publics, while political-party-supported campaigns target domestic voters.
  • Authoritarian regimes are not the only or even the best at organized social media manipulation. The earliest reports of government involvement in nudging public opinion involve democracies, and new innovations in political communication technologies often come from political parties and arise during high-profile elections.
  • Over time, the primary mode for organizing cyber troops has gone from involving military units that experiment with manipulating public opinion over social media networks to strategic communication firms that take contracts from governments for social media campaigns.
Citation: Samantha Bradshaw & Philip N. Howard, “Troops, Trolls and Troublemakers: A Global Inventory of Organized Social Media Manipulation.” Samuel Woolley and Philip N. Howard, Eds. Working Paper 2017.12. Oxford, UK: Project on Computational Propaganda. 37 pp.
Read the full report here.

A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done.

Walter Bagehot. Lombard Street. 1873

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today, how an uncrowned ex-British King, unwittingly helped promote the wartime bombing of London. Below, when cover ups mostly worked.

Churchill Tried to Cover Up Nazi Plan to Woo Former King

By Robert Hutton
20 July 2017, 00:01 GMT+1 20 July 2017, 08:44 GMT+1
Winston Churchill and Dwight Eisenhower tried to suppress captured Nazi documents that showed Britain’s former King Edward VIII discussing his desire for peace with Adolf Hitler, according to files newly released in London.

The National Archives published more papers Thursday from the U.K. government’s secret basement storeroom in the Cabinet Office where papers deemed “too difficult, too sensitive” for the regular filing system were hidden away. They include a 1953 memo from Churchill, marked “top secret,” explaining the existence of a series of German telegrams carrying reports of comments by the Duke of Windsor, as Edward VIII was known after he abdicated in 1936.

“He is convinced that had he remained on throne war would have been avoided and describes himself as firm supporter of a peaceful compromise with Germany,” reported a telegram from Lisbon in neutral Portugal, where the duke was staying in July 1940. “Duke believes with certainty that continued heavy bombing will make England ready for peace.”

Edward abdicated so he could marry an American divorcee, Wallis Simpson. The couple set up home in France, but when World War II broke out they moved to Spain. The government in Madrid, formally neutral but sympathetic to Germany, asked for guidance from Berlin as to what should be done with them. German Foreign Minister Joachim von Ribbentrop replied, asking if they could be kept there. Then he ordered a watch on their house.

Ribbentrop’s interest was piqued when he was told, a few days later, that in private “Windsor spoke strongly against Churchill and against this war.” While he considered what to do, the duke and duchess made their way to Portugal, where they made similar comments. The Nazis decided to act.

“The duke should return to Spain under all circumstances,” Ribbentrop wrote, adding that they should then be “persuaded or forced” to stay there. His plan was then to offer the duke “the granting of any wish,” including “the ascension of the English throne.”

Churchill, meanwhile, was alive to the danger of having an alternative monarch so close to being in Nazi hands. He appointed the duke as governor of the Bahamas. When the Windsors were reluctant to leave Europe, Churchill threatened Edward, who held honorary military rank, with court-martial. Ribbentrop, anxious not to let his prize escape, launched Operation Willi to persuade the Windsors to return to Spain, kidnapping them if necessary. But despite sabotage attempts and bomb threats, the Germans failed.

The plan was “to persuade the duke to leave Lisbon in a car as if he were going on a fairly long pleasure jaunt, and then to cross the border at a specified place, where Spanish secret police will ensure a safe crossing,” according to a note sent to Ribbentrop. 

The telegrams describing their operation were found in 1945 as Hitler’s regime collapsed. When they were passed to the British government, Clement Attlee, who had replaced Churchill as prime minister, wrote to his predecessor, saying that their publication “might do the greatest possible harm.” Churchill replied, agreeing and expressing the hope that it might be possible to “destroy all traces” of the files.
"Any nation which gives up its freedom in pursuit of economic advantage deserves to lose both."

Thomas Jefferson, US President 1801-1809.
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?

Gravitational anomaly from the beginning of the universe observed on Earth

Michael Irving July 20, 2017
When the universe was just a few microseconds old, it existed as a strange soupy substance called quark-gluon plasma (QGP), which exhibits a whole host of unusual quantum effects. Now, for the first time, IBM researchers have observed a gravitational anomaly in earthly materials, which was previously only thought to occur in QGP in deep space or just after the Big Bang.

The world of classical physics is governed by the laws of conservation, stating that a measurement like energy or mass in a system cannot change quantity, although it may change form. But exotic types of matter, like QGP, can exhibit quantum effects that throw those laws out the window.

These exotic materials, forged in the crucible of the Big Bang or high energy particle accelerators, were thought to be the only places such quantum phenomena could occur. But now IBM scientists have observed a quantum effect called an axial-gravitational anomaly in recently-discovered materials called Weyl semimetals.

The electrons in these crystals are divided into two groups according to the direction of their spin, and normally there are equal numbers of each type of electron. But when the researchers mimicked a gravitational field by imposing a temperature gradient, they found that quantum anomalies mess with this symmetry by changing electrons from one type to the other, and vice versa. This is the first time that this gravitational anomaly has been observed under normal circumstances here on Earth.

"This is an incredibly exciting discovery," says Karl Landsteiner, co-author of the paper. "We can clearly conclude that the same breaking of symmetry can be observed in any physical system, whether it occurred at the beginning of the universe or is happening today, right here on Earth."

Weyl semimetals are solid state crystals, so to find these anomalies at work inside them has implications for electronics built on solid state physics.

"For the first time, we have experimentally observed this fundamental quantum anomaly on Earth which is extremely important towards our understanding of the universe," says Johannes Gooth, lead author of the paper. "We can now build novel solid-state devices based on this anomaly that have never been considered before to potentially circumvent some of the problems inherent in classical electronic devices, such as transistors."

Another weekend, and one where most UK and continental legislators head off for their summer vacations. In GB at least, the long-suffering British public get a break from Parliaments constant, meddling, tinkering, and interfering in matters it poorly understand. Have a great weekend everyone.

“Well, very long ago, on the spot where the Wild Wood waves now, before ever it had planted itself and grown up to what it now is, there was a city - a city of people, you know. Here, where we are standing, they lived, and walked, and talked, and slept, and carried on their business. Here they stabled their horses and feasted, from here they rode out to fight or drove out to trade. They were a powerful people, and rich, and great builders. They built to last, for they thought their city would last for ever.”

Kenneth Grahame, The Wind in the Willows

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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