Monday, 7 August 2017

Complacency Rules [For Now.]

Baltic Dry Index. 1032 +09   Brent Crude 52.25

The utter fragility of the latest and greatest Fed bubble could not be better proxied than in this astounding fact…

During the last 6,000 trading days (since the early 1990s), the VIX Index closed below 10 on 26 occasions or just 0.4% of the time. No less than 16 out of those 26 ‘below-10’ closes occurred in the last three months!

Stated differently, in just the last 0.6% of the trading days since 1997, over 65% of the ultra-low VIX readings have occurred.

David Stockman.


The CBOE's Volatility Index, known by its ticker symbol VIX, is a popular measure of the implied volatility of S&P 500 index options, calculated and published by the Chicago Board Options Exchange (CBOE). It is colloquially referred to as the fear index or the fear gauge.

The formulation of a volatility index, and financial instruments based on such an index, were developed by Menachem Brenner and Dan Galai in 1986 and described in academic papers.[1][2] The authors stated the "volatility index, to be named Sigma Index, would be updated frequently and used as the underlying asset for futures and options. ... A volatility index would play the same role as the market index play for options and futures on the index."

In 1986, Brenner and Galai proposed to the American Stock Exchange the creation of a series of volatility indices, beginning with an index on stock market volatility, and moving to interest rate and foreign exchange rate volatility. In 1987, Brenner and Galai met with Joseph Levine and Deborah Clayworth at the Chicago Board of Options Exchange to propose various structures for a tradeable index on volatility; those discussions continued until 1991.

The current VIX concept formulates a theoretical expectation of stock market volatility in the near future.
The current VIX index value quotes the expected annualized change in the S&P 500 index over the next 30 days, as computed from the options-based theory and current options-market data.[3]

We open with Asia’s complacent stock markets, sailing along in convoy behind America’s scripted stock markets. There’s not a dark cloud in the sky, say the stock promoters, buy more. And fast! What could possibly go wrong?

August 7, 2017 / 1:47 AM 

Asia stocks buoyant, dollar steadies after solid U.S. job gains

SINGAPORE (Reuters) - Asian stocks advanced on Monday, taking their cue from Wall Street, while the dollar moderated but retained most gains made on stronger-than-expected July jobs growth and the promise of a U.S. tax plan that will repatriate corporate profits.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.5 percent.
Japan's Nikkei .N225 was up 0.6 percent.

Chinese blue chips .CSI300 rose 0.1 percent, while the Shanghai Composite .SSEC was flat. Hong Kong's Hang Seng .HSI climbed 0.4 percent.

South Korea's KOSPI .KS11 was up 0.5 percent, while Australian shares surged 1 percent.

The dollar moderated on Monday following a strong climb on Friday after data showed U.S. nonfarm payrolls rose by 209,000 jobs last month, and June's employment gain was revised higher.

Growing signs of labour market tightness offer Federal Reserve policymakers some assurance that inflation will gradually rise to the central bank's 2 percent target, and likely clear the way for a plan to start shrinking its massive bond portfolio.

What could possibly go wrong? Well inflation for one thing, says BlackRock and Vanguard, somewhat echoing the views of fallen former guru Alan Greenspan last week.  I see too many similarities to that fateful year 1987. There’s plenty that can go wrong in a hurry in complacent scripted stock markets. Not to mention major missteps between the USA and North Korea, or China v India. Never has complacency seemed less appropriate.

BlackRock, Vanguard Say Bond Market's Got This Trade All Wrong

By Liz McCormick
  • Inflation in the U.S. bound to accelerate in matter of months
  • Bond traders are too complacent and TIPS ‘incredibly cheap’
Two titans of the bond market are still clinging to the idea that inflation is going to make a comeback.
Time and again, weak economic data have made the market’s inflationistas -- many of whom were beguiled by President Donald Trump’s pro-growth promises -- look a little foolish.

But for Vanguard and BlackRock, it’s only a matter of months before inflation is back at 2 percent. Regardless of what does (or doesn’t) happen in Washington, a tight job market will boost wages, lead Americans to spend more and push up consumer prices. Add to that a weak dollar and prospects the Federal Reserve will hold off raising interest rates until 2018, and they see a good chance the bond market is too downbeat about inflation.

“The underlying trends in core inflation will be higher,” said Gemma Wright-Casparius, a senior money manager at Vanguard, which oversees $4 trillion.

Getting it right matters. Despite rock-bottom rates and trillions of dollars in quantitative easing by the Fed, inflation has been one indicator that’s stubbornly failed to return to levels consistent with a healthy U.S. economy. Inflation eased for a fourth month in June, dropping to an annual rate of 1.6 percent. The Fed’s preferred gauge was even weaker, slipping to 1.4 percent.

That’s made it more difficult for the Fed to unwind its easy-money policies, which a growing chorus of critics say have only succeeded in inflating the price of financial assets and left the central bank with little margin for error.

Fed officials, for their part, have repeatedly said the inflation slowdown is transitory, though they acknowledged in their July statement that price measures have “declined and are running below” goal.

Finally, great the 21st century “gold rush” is on in Australia’s lithium lands. But has China just trumped the rest of the world?

Electric Car Boom Drives Rush to Mining's $90 Billion Hub

By David Stringer
  • Lithium scramble likened to Big Oil’s race to Middle East
  • Australia cementing status as a dominant supplier, UBS says
A scramble by the lithium market’s biggest players to tie up supply of the high-tech metal is gathering pace in the 170-year-old heartland of Australia’s $90 billion mining industry.

Rising Chinese demand for lithium-ion batteries needed for electric vehicles and energy storage is driving significant price gains and an asset boom in Australia, already the world’s largest lithium producer. The fast-developing hub is drawing investment and deals from global producers as well as chemical-to-battery manufacturers in China, the top consumer.

Western Australia has four operations in production and three more major projects being advanced to begin output. Major players are likely to continue to scope for deals in the state to secure supply for the next 20 or 30 years, according to consultant Benchmark Mineral Intelligence.

There are serious companies investing and people are starting to lock up the biggest, long-life resources. The question is -- who’s next?” Simon Moores, managing director of Benchmark Mineral said by phone from London. Though on a smaller scale, “it’s a land grab like in the petroleum industry when BP, Shell and others rounded on the Middle East in the 1960s and 1970s,” he said.

Grenbushes in Western Australia, the world’s biggest hard-rock lithium mine, is being expanded to more than double annual capacity, Talison Lithium, a joint venture between China’s Tianqi Lithium Corp. and North Carolina’s Albemarle Corp., said in an email. The site, first mined for tin from about 1888, already accounts for about 30 percent of global lithium production, according to Australia’s government. Tianqi is also planning about A$717 million ($578 million) of processing plant expansions.

Jiangxi Ganfeng Lithium Co., which has interests in projects in countries including Ireland and Argentina, holds about 43 percent of Australia’s Mt. Marion operation and in May agreed a supply and investment pact with Pilbara Minerals Ltd. for a mine development. Battery maker Shaanxi J&R Optimum Energy Co. in July struck an agreement for future output from Altura Mining Ltd.’s project.

“It’s the most significant expansion in lithium supply ever, and we are still undershooting demand,” said Chris Reed, chief executive officer of Neometals Ltd., a partner with Ganfeng and Mineral Resources in the Mt. Marion operation. Reed is scheduled to speak Wednesday at the close of the three-day Diggers and Dealers mining forum in Kalgoorlie, Western Australia.

"The President has watched today with concern the continued drop in the stock market. He directed members of his Administration to consult with the chairmen of the Federal Reserve, the Securities and Exchange Commission, the New York Stock Exchange, the Chicago commodities and future exchanges, and the leaders of the investment community. These consultations confirm our view that the underlying economy remains sound. We are in the longest peacetime expansion in history. Employment in at the highest level ever. Manufacturing output is up. The trade deficit, when adjusted for changes in currencies, is steadily improving. And, as the chairman of the Federal Reserve has recently stated, there is no evidence of a resurgence of inflation in the United States. The President is keeping close watch on the markets here and in other countries. We will continue to closely monitor these developments."

Statement released on October 19, 1987 by the Whitehouse

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Today a rare double bill. But who watches the watchers, and why?

Protect the White Hat Hackers Who Are Just Doing Their Jobs

The great irony of defending the world against malware is it requires security researchers to, well, mess with malware. This often leads them into gray areas, where something they might consider legitimate investigation or essential software development could, in the eyes of the law, be seen as criminal behavior.

This conundrum roiled the security community this week when the FBI arrested British security researcher Marcus Hutchins as he left the DefCon security conference in Las Vegas. The 22-year-old played a key role in shutting down the devastating WannaCry attack in May when he found a flaw in the ransomware that slowed its spread. But the Justice Department alleges that this white-hat hacker dabbled in more malicious endeavors three years ago, when, authorities say, he created a banking trojan called Kronos and conspired to sell it to criminals.

Many details of the case against Hutchins—who goes by the monikers MalwareTech and MalwareTechBlog—remain unknown, and it would not be the first time an upstanding hacker dabbled in criminal activity. But security experts who have read the federal indictment and those familiar with Hutchins' work expressed skepticism at the suggestion that he intentionally created and distributed a malicious tool. Many security researchers consider the case a stark reminder that those who do not understand the nature or context of their work might question their intentions.

---- Often security researchers break or compromise the defenses of a computer, network, or other system to prove such an intrusion is possible, and find a way of addressing the vulnerability before criminals exploit it. Malware researchers in particular tend to examine and map criminal communities to better understand trends and potential attacks. This often requires working under a pseudonym, all of which can seem suspect to outsiders who might question why a researcher is hanging out on dark web forums or adapting and sharing malware samples. Similarly, writing software to expose security flaws helps organizations bolster their defenses, but can sometimes fuel criminal activity if the code inspires so-called black-hat hackers or finds its way into malicious tools.
More. Much, much more.

This Mysterious Military Spy Plane Has Been Flying Circles Over Seattle For Days

Nobody seems to know who specifically the aircraft belongs to or what it's up to, but based on its configuration, its capabilities are pretty clear.

A very unique USAF surveillance aircraft has been flying highly defined circles over Seattle and its various suburbs for nine days now. Nobody at the DoD seems to know who the aircraft belongs to or what exactly it is doing flying so many missions over the Seattle area. But based on its visibly exotic configuration, and information collected by open source flight tracking websites, we can get a good idea of its capabilities and guess as to what it’s up to.

The aircraft, which goes by the callsign “SPUD21” and wears a nondescript flat gray paint job with the only visible markings being a USAF serial on its tail, is a CASA CN-235-300 transport aircraft that has been extensively modified for the surveillance mission. You can see more pictures of the aircraft here.

It is covered in a dizzying array of blisters, protrusions, humps and bumps. These include missile approach warning detectors and large fairings on its empennage for buckets of forward-firing decoy flares, as well as both microwave—the dome antenna behind the wing and flat antenna modification in front of the wing—and ultra high-frequency satellite communications—the platter-like antenna behind the dome antenna. A communications intelligence suite also appears to be installed on the aircraft, with the antenna farm on the bottom of its fuselage being a clear indication of such a capability.

But what's most interesting is the aircraft's apparent visual intelligence gathering installation. It is placed in a fixed position, on the left side of the aircraft, below the plane’s forward emergency door. The rectangle structure has a sliding door that covers the system's sensors when not in use.

On the lower end of the capabilities spectrum, the system installed could be similar to the DB110 reconnaissance system, which can provide very high fidelity imagery of a target area from standoff "slant" ranges. The system, which is popular among F-16 operators in a podded version, can be acquired in varying configurations. Some have multi-spectral fusion capability, where electro-optical and infrared imagery is combined to bring out unique details that neither can see alone. An additional wider angle camera is also available as well, along with an assortment of data-link options that can send the system’s imagery to analysts and “customers” on the ground for rapid exploitation. In this case, the analysts could fly inside the aircraft, eliminating the requirement—or at least the outright need—for such a feature.
More. Much, much more.
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?

Solar panels innovation gives round-the-clock power without pricey battery storage

By Kathryn Diss  August 6, 2017
Imagine if energy from your solar panels could give you hot water around the clock without the need to buy an expensive battery storage unit.

That concept is already a reality, with cost-cutting energy devices which leverage the power of "big data" helping households get more out of their solar panels by effectively using their hot water system as a battery.

Now, rapid advances in the technology have made that system far more efficient, and are allowing homeowners to save much more.

One of the biggest gripes for solar panel owners is they typically only use around half of the energy they produce before it is exported back to the electricity grid.

Households are paid a tariff for the power they export to the grid — but that fee has been dramatically scaled back in recent years, providing further incentive for householders to want to use as much of the power they generate themselves as possible.

Expensive battery systems were touted as the only option to secure more power, but high-tech monitoring devices can provide households with a cheaper option.

The devices, which cost around $790, utilise "big data", which is the collection of extremely large data sets that are computer-analysed to reveal patterns and trends.

It is what allows people to do things like stream music, look up GPS directions and post pictures online. But it is also helping consumers cut their power bills.

"Big data allows households to optimise their energy use and allows people to have more control of what electricity they use from the solar panels," Curtin University sustainability expert Dev Tayal said.

"As electricity prices rise and as some of the more generous rebates and feed-in tariffs wind back, we're only going to see an increased uptake of smart intelligent devices."

The Jukes family were early adopters and are learning how big data works in the real world at their house in central Queensland.

The household of six are trialling a new device called Paladin, designed to make sure 95 per cent of their solar power is used in their home and not sent to the grid.

"I have quite a large family, I have four children and and my husband so our power bills were quite large," Leticia Jukes said.

"Since we've had the Paladin put in it has further reduced our bill by another $180 per quarter, so big savings for a big family."

"The borrowing has to stop. The market slide was a shot right between the eyes that had better wake us all up to simple fact that we can't keep romping forever on borrowed money."

Lee Iacocca, Chrysler Corp Chairman, October 20, 1987.

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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