Baltic Dry Index. 1249 -17 Brent Crude 51.74
John Kenneth Galbraith.
We open today with
Asian markets whistling by the graveyard. Can the Jackson Hole Junket really
deliver a miracle? Can the Grand Wizards of America and Europe, Yellen and
Draghi, really pull a white rabbit out of a deepening black hole? Can Yellen
out trump, President Trump, after Labor Day, across a US minefield of dirty
party politics all September long. While Asian gamblers opt for risk-on, this
old dinosaur market follower, thinks there’s never been a better time for
risk-off.
Below, while Asia
bets on black, I think it’s time to bet on red.
“The
market does not beat them. They beat themselves, because though they have
brains they cannot sit tight.”
Jesse
Livermore.
Asian markets gain despite Jackson Hole uncertainties
Published: Aug 22, 2017 11:06 p.m. ET
Nikkei leads gainers; typhoon halts Hong Kong trading
Global stocks kept rising and investors added to risk positions despite uncertainties about what could emerge from a central banking conclave in Jackson Hole, Wyo., which begins Thursday.Asia-Pacific stocks were widely higher early Wednesday, getting a lift from improved sentiment and a stronger U.S. dollar. But Chinese equities fell modestly on a 5% slide in metals futures and Australia’s benchmark turned lower as Commonwealth Bank of Australia faced a potential shareholder lawsuit in the wake of a government money-laundering case.
“The bulls seem to have taken back some control here,” said Chris Weston, chief market strategist at IG Group. After Asian stocks broadly rose Tuesday, “we expect another positive session ahead and traders adding to risk.”
Investors turned upbeat after days of concerns about American politics and North Korea tensions, which had kept a lid on equities and favored haven assets. But comments from U.S. House Speaker Paul Ryan that tax-reform proposals are gaining traction helped sentiment.
Meanwhile, investors were doing some strategic positioning ahead of the Jackson Hole economic gathering. Comments from Federal Reserve Chairwoman Janet Yellen and European Central Bank President Mario Draghi will be closely watched for clues on monetary policy.
Jane Fu, a sales trader at CMC Markets, said investors don’t expect either to break any news, but market participants “everywhere remain cautious ahead of the important gathering.”
After a week straight of declines, putting it at four-month lows, Japan’s Nikkei NIK, +0.37% led Asian stocks higher Wednesday. The index was recently up 0.6% as the dollar regained some ground against the yen; the dollar JPYUSD, +0.091350% rose to ¥109.70, a half-yen higher than where the pair was when equities trading ended Tuesday.
Tech stocks were strong in Asia, with that sector helping send Taiwan’s Taiex Y9999, +0.30% up 0.5%. Apple suppliers Hon Hai 2317, +0.43% and Largan 3008, +1.34% each rose at least 1%.
Meanwhile, a 1% gain for Samsung Electronics 005930, +0.64% helped South Korea’s Kospi SEU, -0.07% rise 0.2%.
Trading in Hong Kong HSI, +0.91% was halted for at least the morning session as Typhoon Hato neared the city with maximum sustained winds of 165 kilometers an hour.
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The stock market’s next Trump challenge starts right after Labor Day
Published: Aug 22, 2017 4:46 p.m. ET
---- Stock markets seemed relieved. On Monday the Dow Jones Industrial
Average DJIA, +0.90% and the S&P 500
index SPX, +0.99% reversed two
consecutive days of declines, and on Tuesday the Dow
enjoyed its best day in four months.The indexes haven’t fallen very much given what’s happened over the last couple of weeks, from the threat of war with North Korea to the CEOs’ revolt against Donald J. Trump over his botched response to the recent turmoil in Charlottesville, Va.
They’d fall a lot more if investors fully digested the implications of Charlottesville: Once again the president couldn’t control his temper and fostered polarization rather than unity.
This fundamental lack of self-discipline bodes ill for his handling of future foreign policy crises, especially North Korea, where the risk of war is growing and firm but flexible statesmanship is essential.
It also makes the coming trifecta of passing a new budget, avoiding a government shutdown, and raising the debt limit to avoid default—all within 12 legislative days after Congress returns from recess right after Labor Day—more challenging. Politico Playbook’s well-connected reporters write, “House and Senate Republicans and the Trump administration have no idea and no plan how it’s going to get done.”
That increases the chances of a big, bad September-October surprise for the markets.
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U.S. stock valuations haven’t been this extreme since 1929 and 2000
Published: Aug 22, 2017 3:52 p.m. ET
Indexing the S&P 500 is a speculative bet at these prices: GMO
“The stock market is now 35% passive and 65% terrified,” says financial adviser and blogger Josh Brown, a.k.a. “The Reformed Broker.” In other words, more investors nowadays are indexing their money and active managers fear for their futures.Which begs the question, did Brown get it backwards? Should the 35% of stock investments that’s indexed actually be the terrified money? Yes, James Montier and Matt Kadnar of Boston-based asset manager Grantham, Mayo, van Oterloo (GMO) assert in a new paper called “The S&P 500: Just Say No.” The S&P 500 SPX, +0.99% is so expensive, they say, any money tracking the benchmark U.S. stock market index at this point is more speculation than investment.
Here’s how the authors put it: “A decision to allocate to a passive S&P 500 index is to say that you are ignoring what we believe is the most important determinant of long-term returns: valuation. At this point, you are no longer entitled to refer to yourself as an investor. You may call yourself a speculator, but not an investor.
“Going passive eliminates the ability of an active investor to underweight the most egregiously overpriced securities in the index (we obviously prefer a valuation-based approach for stock selection as well). When faced with the third most expensive US equity market of all time, maintaining a normal weight in a passive index seems to us to be a decision that will likely be very costly. Yet despite this, it remains a popular path, with around 30% of all assets in the U.S. equity market in the hands of passive indexers.”
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Roulette Odds
Roulette, like all gambling games, is all about odds. To get the most
out of your roulette play it is critical to know how often you can expect
to win and how much of an advantage you need to overcome.
At the most basic level, we talk about roulette odds in terms of the house
edge – the advantage the casino holds over the player. In American roulette the
house edge on virtually all bets is 5.26% (or 2/38), while in European
roulette, the edge for the casino is 2.70% (1/37). Essentially, you can figure
out the edge by dividing the number of zeroes on the wheel by the total number
of pockets. That is true at least for standard roulette games that pay out at
odds that would be fair if the wheel only contained the 36 numbers without
zeroes.
However, these are only the most basic of roulette odds. Looking deeper
into the odds is a good way to get a better understanding of what’s actually
going on in this game.
----
For an even money bet – let’s say red/black – players win if the ball stops on
any of the 18 pockets that share that color. That makes your chances of winning
18/38, or approximately 47.37%. Calculating the house edge for a bet that pays
out even money is simple – 47.37% of the time you gain a bet and 52.63% of the
time you lose a bet.
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Up next, the reality
of why President Trump’s unwise, ill-fated, attempt to huff and puff down North
Korea’s house of cards, was doomed from the start. Pyongyang saw him coming
from a mile away. Living with a nuclear armed North Korea looks like more of a
certainty with each passing month. President Trump starts to talk like
President G. W. Bush!
A Second Korean War Could Quickly Spread Across All of Asia
By Brendan Scott and Adrian Leung
21 August 2017, 22:00 GMT+1 22 August 2017, 05:51 GMT+1
A
recent survey commissioned by the New York Times found that people who could find North
Korea on a map were more likely to favor talks over military action. A glance
at North Asia’s geography explains why.
More
than six decades after the Korean War ended without a peace treaty, the
peninsula remains bisected in a perpetual stalemate, with the U.S.-backed South
Korean military lined up against more than a million North Korean troops. While
tensions have occasionally flared -- such as after Kim Jong Un’s weapons tests
or threats of “merciless revenge” over
American-led military exercises that began Monday -- the two sides have so far
staved off another devastating conflict.
The 250-kilometer (160-mile) border defined in a 1953 armistice lays bare one obvious peril of any confrontation: The demilitarized zone sits on the doorstep of the Seoul metropolitan area, where about half of South Korea’s 51 million people live.
North Korea has spent decades concealing hundreds of artillery batteries along the frontier that could wreak havoc in the southern capital, according to Joseph Bermudez, an analyst for the 38 North website run by the U.S.-Korea Institute at Johns Hopkins University’s School of Advanced International Studies. Those weapons could kill thousands of people and damage scores of factories in the time it took the U.S. to project “fire and fury” across the border, as President Donald Trump has warned.
“If all of a sudden artillery rounds started plopping down in the middle of the city, hitting those high-rises, there would be panic like you would not believe,” Bermudez said. “Not only are people killed by direct explosion, they’re killed by all the debris, and they’re killed by accident. You don’t need much artillery to do that.”
After an initial exchange of fire, the danger could quickly engulf the rest of South Korea and neighboring Japan, countries that have been American allies since World War II. More than 80,000 troops are based across the two countries and the U.S. territory of Guam, which would provide key staging areas for any American-led attack.
Those U.S. bases were within reach of Kim’s bombs long before his first successful test of an intercontinental ballistic missile on July 4. Even if Kim still lacks the capacity to outfit those missiles with miniaturized nuclear warheads, he could cause plenty of damage with conventional and chemical weapons.
Kim would probably seek to maximize his advantage against more powerful foes by striking softer civilian targets in places like the greater Tokyo area, which is home to almost 40 million people. At the same time, North Koreans might look to escape the allied onslaught by flooding across the Yalu River to China. The region might also face environmental threats should the U.S. strike Kim’s heavy-water reactor north of the capital Pyongyang, scattering radioactive debris into the atmosphere and groundwater.
More
August 23, 2017 / 3:44 AM
North Korea's Kim orders production of more rocket engines, warhead tips - KCNA
SEOUL (Reuters) - North Korean leader Kim Jong Un ordered the production
of more solid-fuel rocket engines and rocket warhead tips, the North's official
media said on Wednesday in a report otherwise lacking threats against
Washington after weeks of heightened tension.
A report about Kim's visit to a chemical institute came not long after
U.S. Secretary of State Rex Tillerson appeared to make a peace overture to
Pyongyang, welcoming what he called the recent restraint shown by the reclusive
North.
U.S. President Donald Trump also expressed cautious optimism about a
possible improvement in relations with the North, after months of mounting
tension over its weapons programmes.
Kim was briefed about the process of manufacturing intercontinental
ballistic missile warhead tips and solid-fuel rocket engines during his tour of
the Chemical Material Institute of the Academy of Defence Science, the North's
official KCNA news agency said.
"He instructed the institute to produce more solid-fuel rocket
engines and rocket warhead tips by further expanding engine production process
and the production capacity of rocket warhead tips and engine jets by carbon/carbon
compound material," KCNA said.
North Korea has conducted two nuclear tests and dozens of missile tests
since the start of last year, significantly raising tensions on the heavily
militarised Korean peninsula. Two tests of intercontinental ballistic missiles
in July resulted in a new round of tougher global sanctions.
The last missile test on July 28 put the U.S. mainland in range,
prompting heated exchanges that raised fears of a new conflict on the
peninsula.
Tillerson, however, noted what he called the restraint the North had
shown lately and said on Tuesday he hoped a path could be opening for dialogue
some time in the near future.
Later on Tuesday at a campaign rally in Phoenix, Arizona, Trump said of
Kim: "I respect the fact that he is starting to respect us."
More
We
close today the poster child of folly, in scrapping “a more-than-century-old business model,” or an outlier
for something more serious arriving? Only time will tell.
U.K. Subprime Lender Plunges More Than 70%
By Stephen Morris and Lukanyo MnyandaThe U.K. Financial Conduct Authority is investigating the Vanquis Bank credit-card unit, and the regulator had previously ordered Provident to stop offering a particular repayment product, the company said Tuesday. Provident scrapped its interim dividend and said a full-year payout is also unlikely. Manjit Wolstenholme will temporarily run the firm as executive chairman.
The shares fell as much as 76 percent, the most on record. Provident also cited further deterioration at its home credit business after a botched roll-out of new technology as it scrapped a more-than-century-old business model. Crook, who was CEO for a decade, said in June that many of its 4,500 self-employed, door-to-door salesmen and debt collectors quit or worked less when they were informed they would be replaced by a smaller number of iPad-toting full-time staff.
“Given that the FCA investigation has the potential to be material to
the company, investors are likely to take the view that this investigation
should have been disclosed when it was known,” RBC Capital Markets analyst
Peter Lenardos said in a note. “The shares are not investible until greater
clarity is received, which may not be until next year,” he said, calling the
probe, loss, dividend suspension and CEO’s departure a “quadruple whammy.”
The FCA confirmed it is investigating Vanquis, but declined to comment
further on the status of the probe.
More
“The
average man doesn’t wish to be told that it is a bull or a bear market. What he
desires is to be told specifically which particular stock to buy or sell. He
wants to get something for nothing. He does not wish to work. He doesn’t even
wish to have to think.”
Jesse
Livermore.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, did globalisation, and rising automation, just kill off the
golden goose? Is a socialist, neo-communist, “people’s QE” coming next? Our
central banksters seem clueless at how to fix the financialised, gambling
economy that broke in 2008. Has the Great Nixonian Error of fiat money,
communist money, finally reached the end of the road? Probably not quite yet,
but best to keep a little fully paid up physical gold and silver around just in
case.
In any great organization it is far, far safer to be wrong with the majority than to be right alone.
John Kenneth Galbraith.
The Phillips Curve is broken — here's why that is keeping economists up at night
The Phillips Curve is a model that economists use to describe the inverse relationship between the level of unemployment and the rate of inflation
Last Updated August 21, 2017 10:38 AM EDT
Something has gone awry with the Phillips Curve.
It’s been roughly flat since 2008, which has some economists worried as
it points to stagnant wages, imperilled bottom lines for companies and a
stubborn economic slack that — despite massive stimulus efforts — isn’t being
eaten up.
So what’s the Phillips Curve?
It is a model that economists use to describe the inverse relationship
between the level of unemployment and the rate of inflation. In short, when
more people are working, prices tend to rise.
“The Phillips curve is central to macroeconomic modelling and the Bank
of Canada, the Federal Reserve and any other large central bank uses this as a
core component in its forecasting models to capture excess capacity. It’s key
to any standard monetary outlook,” TD economist Brian DePratto said.
Economist William Phillips initially studied the inverse relationship between wage increases and unemployment between 1861 and 1957. Phillips found that wages rise when employment rises to attract workers, who can afford to be more discerning. The curve was later adapted to note an inverse relationship between unemployment and inflation — prices rise, when falling unemployment lifts wages, to accommodate rising costs.
“As workers have more choices, they demand higher wages — and, at the same time — business who pay more in wages will raise prices to protect their bottom line. ‘More employment causes more inflation’ is how the theory has worked since the Second World War,” TD economist Michael Dolega said.
Until now.
Whereas historically, the curve was a curve — with an X axis for unemployment and a Y axis for inflation — sloping downwards as unemployment rises, it’s now a mostly flat line.
That’s a problem for central bankers and policy makers, and it suggests bad news.
Canada’s jobless rate has fallen to 6.3 per cent, its lowest since October 2008, but inflation has lagged. From 1996 to 2008, TD noted, headline inflation averaged 1.8 per cent, roughly in line with the Bank of Canada’s recently-renewed 2 per cent mandate. Since the crash, from January 2009 to present, headline inflation has averaged just 1.5 per cent, despite the benchmark interest rate dropping to record lows for much of that same period.
The picture looks the same throughout much of the western world and many economists are perplexed.
The current trend sets a “possibly very low limit to how far unemployment can fall without inflation starting,” James Forder, economics professor at Oxford, said.
That combination of low inflation and a falling jobless rate is odd, TD’S Dolega said. “Typically, inflation accelerating suggests economic slack is being absorbed and resources are rising in cost with more demand.”
Gustavo Indart, economics professor at the University of Toronto, said
the flattening of the curve most likely results from a domestic unemployment
figure that doesn’t capture global labour market competition. Prices aren’t
increasing as a result of rising employment “because wages aren’t increasing.”
A report from TD notes that before 2009, wage growth held at around 3.5
per cent year-over-year, however it’s been stuck around 1 per cent ever since.
Ranjit Dighe, economics professor at the State University of New York,
said the trend holds true across advanced economies. “Falling unemployment has
yet to translate into big wage gains for workers. This could be because of
weaker unions, increased worker anxiety due to globalization or low
employment-to population ratios,” he said.
---- A common reason given for low inflation in the post-crisis period is an influx of cheap goods, mainly from China, holding back prices.
But DePratto said this explanation fails to explain why prices for
services haven’t increased, since you can’t import them. And it explain why
inflation stalled after 2008, considering the price effects of China’s 2001
entry into the WTO had mostly faded by then.
Another common explanation is that e-commerce, which has lower overhead
costs, is keeping prices low. But while online sales growth is outpacing that
of traditional channels, digital retail sales still only account for about 2
per cent of total retail spending, TD says.
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In a narrow market, when
prices are not getting anywhere to speak of but move within a narrow range,
there is no sense in trying to anticipate what the next big movement is going
to be. The thing to do is to watch the market, read the tape to determine the
limits of the get nowhere prices, and make up your mind that you will not take
an interest until the prices breaks through the limit in either direction.
Jesse Livermore.
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?
Silk could improve sensitivity, flexibility of wearable body sensors
Date:
August 20, 2017
Source:
American Chemical Society
Summary:
From smart socks to workout clothes that measure exertion, wearable body
sensors are becoming the latest 'must-have' technology. Now scientists report
they are on the cusp of using silk, one of the world's most coveted fabrics, to
develop a more sensitive and flexible generation of these multi-purpose devices
that monitor a slew of body functions.
From smart socks to workout clothes that measure exertion, wearable body
sensors are becoming the latest "must-have" technology. Now
scientists report they are on the cusp of using silk, one of the world's most
coveted fabrics, to develop a more sensitive and flexible generation of these
multi-purpose devices that monitor a slew of body functions in real time.
The researchers are presenting their work today at the 254th National
Meeting & Exposition of the American Chemical Society (ACS).
"There is a whole world of possibilities for silk sensors at the
moment. Silk is the ideal material for fabricating sensors that are worn on the
body," Yingying Zhang, Ph.D., says. "One possibility we foresee is
for them to be used as an integrated wireless system that would allow doctors
to more easily monitor patients remotely so that they can respond to their
medical needs more rapidly than ever before."
Body sensors, which are usually made with semiconductors, have shown
great potential for monitoring human health. But they have limitations. For
instance, strain sensors, which measure changes in force, cannot be highly
sensitive and highly stretchable at the same time. Silk, a natural material
that is stronger than steel and more flexible than nylon, could overcome these
problems. The fiber is also lightweight and biocompatible. However, silk doesn't
conduct electricity very well. To address this challenge, Zhang and colleagues
at Tsinghua University in China sought to find a way to boost the conductivity
of silk so it could be successfully used in body-sensing devices.
The researchers decided to try two different strategies. In one
approach, they treated the silk in an inert gas environment with temperatures
ranging from 1,112 degrees to 5,432 degrees Fahrenheit. As a result, the silk
became infused with N-doped carbon with some graphitized particles, which is
electrically conductive. Using this technique, the scientists have developed
strain sensors, pressure sensors and a dual-mode sensor capable of measuring
temperature and pressure simultaneously.
In the other approach, the team fed either graphene or carbon nanotubes
to silkworms. Some of these nanoparticles were naturally incorporated into the
silk produced by the worms. So far, this method hasn't produced electrically
conductive fibers, but the researchers are still experimenting with this technique
and are hopeful they can make it work.
Based on the preliminary results, Zhang wants to explore ways to create
an integrated set of silk-based, self-sustaining sensors that would be powered
by nano-generators. She also suggests that her team's silk sensors might be
used to build more realistic robots that can sense touch, temperature or
humidity and can even distinguish between different people's voices.
The monthly Coppock Indicators finished July
DJIA: 21,891 +207 Up. NASDAQ: 6,348 +250 Up. SP500: 2,470 +171 Up.
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