Baltic Dry Index. 1266 +06 Brent Crude 51.82
"The world urgently needs to create a
diversified currency and financial system and fair and just financial order
that is not dependent on the United States."
Shi
Jianxun. China People’s Daily. September 16, 2008
The Great Hole in the Sun over America diversion
over, our global markets are nervously attempting a weak dead cat bounce today,
hoping for some sort of miracle from the Federal Reserve’s annual fly-fishing
junket to ritzy Jackson Hole, Wyoming. Strangely, I’d never thought of Chairman
Yellen, nor ECB Fuhrer Draghi, as avid fly-fishers before, but as someone who
has driven across the great state of Wyoming, perhaps they are just there for
the stunning scenery, five star lifestyle, and to get away from over excited Washington and deadly dull Frankfurt.
With the German vote just about a month away,
ECB Cappo Draghi, will be bland, bland, bland. Can you imagine the anger in
Germany if his upcoming speech inadvertently cost Chancellor Merkel her job, or
inadvertently slammed her main opponents, the SDP into a concrete wall.
Chairman Yellen’s job is far easier. Try not
to say anything too close to President Trump, but without getting on his lynch
mobs bandwagon. Try to sound positive about the US economy, without setting off
panic selling in expectation of an October interest rate rise. Try to sound
cautious over developments in the global economy, without overly bashing China
or Japan. Try not to sound too wet.
In central banking as in diplomacy, style, conservative
tailoring, and an easy association with the affluent count greatly and results
far much less.
John
Kenneth Galbraith
August 21, 2017 / 12:46 PM
S&P 500 index gains after recent selloff; energy stocks fall
(Reuters) - The benchmark U.S. S&P 500 stock index ended up slightly
on Monday after two days of declines, though a drop in oil prices weighed on
energy shares and tensions between the United States and North Korea kept
investors on edge.
Market participants began to turn their focus to the Federal Reserve
meeting at Jackson Hole, Wyoming later this week which will be attended by Fed
Chair Janet Yellen, European Central Bank president, Mario Draghi, and other
global central bankers.
Investors are looking for further direction on where monetary policy is
headed given persistently low inflation in the U.S. and Europe. Fed Vice Chair
William Dudley, who has in the past supported accommodative monetary policy,
earlier this month said that the recent easing in financial conditions, despite
Fed interest rate increases, is a reason to keep plans to tighten policy in
place.
"That confluence of strong growth and low inflation, which is
somewhat like nirvana for equity investors, we don't think can last forever,"
said Wayne Wicker, chief investment officer at ICMA-RC in Washington.
More
Fed's Big Bond Unwind May Clobber U.S. Stocks, Corporate Debt
By Rich Miller and Sally BakewellA committee of investors and banks highlighted that outside risk in a presentation to Treasury Department officials this month. A week after that, strategists at Morgan Stanley separately warned that investors are underestimating the trouble that the Fed’s plans could bring to corporate debt markets.
Money managers don’t seem alarmed so far. Stocks have gained 10 percent this year, including dividends, while corporate bonds are up 4.8 percent as of Friday’s close. Both Treasury debt and mortgage bonds, the securities most directly influenced by the Fed’s plans to reinvest less money, have lagged the broader U.S. bond market in 2017, although their returns tend to be more stable.
The threat to the stock and corporate bond markets underscores the bind that the Fed is in as it tries to scale down the extraordinary stimulus it gave the economy during and after the financial crisis. Its quantitative easing program has more than quadrupled its debt holdings, and Fed policy makers plan to start slimming down those investments soon now that the economy is on more solid ground. But cutting back could hurt markets and perhaps the broader economy in ways that are hard to forecast.
As the Fed contracts its balance sheet, “all we can do is hypothesize what the paths are because this is unprecedented,” said Joubeen Hurren, credit fund manager at Aviva Investors, which managed $456 billion as of June 30.
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Yellen, Draghi Head to Jackson Hole Amid Inflation Unease
By Jeanna Smialek and Carolynn Look
As the world’s top central
bankers gather in Wyoming this week, their relief about a stronger global economy will be tempered by a
growing unease that inflation remains inexplicably low.
Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi will be among the officials addressing this year’s installment of the annual conference hosted by the Kansas City Fed. The summit, held at a Jackson Hole mountain retreat, comes as central banks in advanced economies creep toward the policy exit after years of unprecedented easing, even with outlooks are clouded by stubbornly tepid inflation.
Prices have been slow to pick up despite solid growth and falling unemployment, suggesting that the long-observed relationship between inflation and labor-market slack might have frayed. That puzzle will likely surface as the conference debates this year’s theme of “Fostering a Dynamic Global Economy” against the backdrop of the Grand Teton mountains.
“Inflation has been the big question mark, both here and abroad,” said Michelle Meyer, head of U.S. economics at Bank of America Corp. in New York.
Yellen will speak about financial stability at 8 a.m. local time (10 a.m. in New York) on Aug. 25. Draghi will take the podium at 1 p.m. His remarks will focus on the theme of the conference, an ECB spokesman said, responding to speculation over whether the Italian might choose to send a policy signal on the central bank’s bond-buying program.
Advanced economies face common challenges that range from rising asset valuations to the uneven effects of globalization that galvanized the populism behind Brexit and the election of Donald Trump. It’s a lot easier to solve these problems with faster growth.
“What we’re
trying to analyze is -- how do we improve growth?” Dallas Fed President Robert
Kaplan told reporters in Lubbock, Texas, on Thursday, when asked about Jackson
Hole.
Still, inflation may be the most pressing riddle facing central banks, which are failing to meet their price mandates.
More
In Asian news, it’s largely a waiting week.
Will the Fed’s annual Jackson Hole fishing junket, deliver enough to save US
and global stock markets from the fast-approaching traditional stock market
crash season? Will the Fed meeting in September start the process of Quantitative
Tightening as early as the Great Crash month of October? They wouldn’t do that, would they?
August 22, 2017 / 5:40 AM
China stocks rise as Unicom surges limit up for 2nd day, Hong Kong also firms
SHANGHAI, Aug 22 (Reuters) - China shares rose on Tuesday thanks to
strong support from China Unicom's Shanghai-listed unit and financial firms,
but consumer and technology companies lost ground as investors took profits on
recent gains.
The CSI300 index rose 0.4 percent to 3,755.31 points by the end of the
morning session, while the Shanghai Composite Index gained 0.2 percent to
3,291.71.
China CSI300 stock index futures for September rose 0.3 percent, to
3,731.6, 23.71 points below the current value of the underlying index.
However, analysts said profit-taking may continue to hold the indexes
back in the near term.
"From a sector perspective, mainland investors have recently been
unloading shares that had relatively larger gains in July ... this indicates
that the market is overall still in a profit-taking mood," China
International Capital Corporation analysts said in a research note.
Shanghai-listed China United Network Communications Ltd surged the daily
limit of 10 percent for a second consecutive day.
The gains follow a statement from the China Securities Regulatory
Commission on Sunday that it would treat China Unicom's $11.7 billion ownership
reform plan "as an exceptional case", granting it approval.
Chinese media had previously speculated that the plan would violate
rules on private placements.
The financials sub-index gained 0.9 percent, led by Ping An Insurance
Group Co of China, which rose 2.7 percent. Last week, Ping An reported its
biggest half-yearly profit in at least a decade.
More
Slumping Japanese Retailers Push Nikkei 225 Toward the Red
By Yuko Takeo and Eric Lam 21 August 2017, 04:39 GMT+1 The Nikkei 225 Stock Average, Japan’s blue-chip barometer, is on the cusp of erasing its 2017 gains.Angst over terrorist attacks and simmering tension between the U.S. and neighboring North Korea have been a boon to the yen, which typically translates into Japanese stock losses. Add to that declines in Fast Retailing Co. -- the Uniqlo clothing-brand owner that has the biggest weighting on the Nikkei 225 -- and convenience-store operator FamilyMart UNY Holdings Co., which is being hit by lackluster consumer confidence and wage growth.
The index is about 1.5 percentage points from erasing its year-to-date gains.
China's Debt Swaps Surpass $100 Billion
By Denise Wee and Lianting Tu
20
August 2017, 22:00 GMT+1 21 August 2017, 06:36 GMT+1
Almost a year after China rolled out steps
to rein in soaring corporate leverage, concerns are rising that undeserving
companies are benefiting while households are getting saddled with risks.
China unveiled guidelines for
debt-to-equity swaps in October, part of measures to trim the world’s biggest
corporate debt loads. The idea was that healthy firms would use the program to
cut interest-bearing borrowings, while bloated companies would be shunned. But
it hasn’t always worked out that way, even as the total value of swaps reached
776 billion yuan ($116.3 billion) in the second quarter when volumes jumped to a
record, according to Natixis SA.
While China’s State Council said in October that zombie firms may not take part, 55 percent of the swaps last quarter were in the coal and steel industries, which are plagued by overcapacity, Natixis says. The stakes are high for lenders and even individual investors, some of whom buy wealth management products repackaged from the swaps.
The absence of a clear definition of “zombie” is part of the problem, according to Fitch Ratings. Views vary on whether further guidelines on the program released this month by the banking regulator will help address these issues.
The program is attracting bad companies because they see debt-to-equity swaps as a way to get a bailout, said Chi Lo, Greater China senior economist at BNP Paribas Asset Management. “You can imagine the zombie companies will be just like cancer cells that eat into the system.”
The swaps generally work like this: A bank agrees to take over a company’s debt from its original lenders. The bank sets up a unit which has other shareholders that help share risk. The unit assumes the debt and conducts a transaction with the company to convert it into equity. It can then dispose of the stake.
More
Jackson Hole
Economics is
extremely useful as a form of employment for economists.
John Kenneth Galbraith
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, the rump-EUSSR sets out on a suicide mission. John Bull prepares
for life after the EUSSR.
Nobody
should pin their hopes on a miracle.
Vladimir
Putin.
Unintended Consequences of MiFID: Job Losses, Trading Turmoil?
By Sarah Jones
21 August 2017, 05:01 GMT+1
With the start of Europe’s MiFID II rules less than five months away, banks
and asset managers are scrambling to prepare for a regulatory overhaul that
risks doing more harm than good to the finance industry.Aimed at making markets fairer and more transparent, the European Union’s revised Markets in Financial Instruments Directive impacts everything from how firms trade to how research is distributed. Yet practitioners are concerned that the hundreds of pages of rules conceal problems that regulators never fully considered.
“The bubble of MiFID II feels painful,” said Gerard Walsh, who heads up equities business development for Northern Trust Securities in London. “It’s a bit like Britain all of a sudden changing to driving on the right-hand side. It will create disruption but eventually people will adapt.”
Below are just a few of the consequences of the new rulebook that officials may not have intended:
Less research
- Forcing banks to charge for research separately from trading services is among the most controversial aspects of the new regime. An immediate consequence might be that spending on analysis declines as the buy side becomes more discerning. U.S. and European fund managers will probably cut more than $300 million from their research budgets, according to a survey earlier this year by Greenwich Associates. This equates to a 7 percent drop in commission spend for European firms and 5 percent for U.S. ones.
- Wall Street banks may not be able to sell their U.S. research to European clients because of the regulatory conflict between the two regions -- which looks unlikely to be resolved before MiFID’s January implementation date. Charging separately for research is banned in the U.S. unless lenders register as investment advisers.
Job losses (and some gains)
- Less demand for research will mean less demand for analysts. McKinsey & Co. expects the rule change to cost hundreds of jobs as banks cut about $1.2 billion of investment in the area. The top 10 sell-side banks currently spend about $4 billion a year on research, but that will drop 30 percent after MiFID, the consultant said. And this is an area that’s held up relatively well since the crisis: Headcount in cash equity research has fallen by just 12 percent since 2011, compared with as much as 40 percent in sales and trading.
- There is an upside, for a lucky few anyway, as asset managers including Schroders Plc build up their in-house research teams to offset MiFID’s impact. Vanguard Group, the world’s largest mutual-fund company, also plans to rely more on internal analysis.
Specialist research houses
- With banks likely to cut analysts, whole industry teams that aren’t ranked in the top three or four in their field could be axed from trading floors. Northern Trust’s Walsh reckons those teams may choose to strike out on their own, helping to create “a cottage industry of specialization.” It’s not just low-ranked researchers, either: Three analysts from Barclays Plc in New York are said to have jumped ship and started their own boutique firm.
More
August 20, 2017 / 12:11 AM
UK to release tranche of Brexit position papers
LONDON (Reuters) - Britain will issue a cluster of new papers this week
to outline its strategy positions in divorce talks with the European Union,
ranging from regulation of goods to data protection, the UK's Brexit department
said on Sunday.
Prime Minister Theresa May's government wants to push discussions with
the EU beyond a focus on settling divorce arrangements to its future
relationship with the bloc to bring clarity to anxious businesses, citizens and
investors.
Last week, Britain issued proposals for a future customs agreement with
the EU and a solution for Northern Ireland to avoid a return of border posts
with the Republic of Ireland which might inflame tensions.
Britain's Brexit department said on Sunday it would issue two formal
position papers this week along with a batch of proposals for discussions on
future relations ahead of the next round of negotiations scheduled for later
this month.
"In the coming days we will demonstrate our thinking even further,
with five new papers - all part of our work to drive the talks forward, and
make sure we can show beyond doubt that we have made sufficient progress on
withdrawal issues by October so that we can move on to discuss our future
relationship," Britain's Brexit minister David Davis said in a statement.
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?
Fizzy soda water could be key to clean manufacture of flat wonder material: Graphene
Date:
August 16, 2017
Source:
University of Illinois College of Engineering
Summary:
As graphene's popularity grows as an advanced 'wonder' material, the speed and
quality at which it can be manufactured will be paramount. With that in mind,
the research group has developed a cleaner and more environmentally friendly
method to isolate graphene using carbon dioxide in the form of carbonic acid as
the electrolyte solution.
Whether you call it effervescent, fizzy, or sparkling, carbonated water
is making a comeback as a beverage. Aside from quenching thirst, researchers at
the University of Illinois at Urbana-Champaign have discovered a new use for
these "bubbly" concoctions that will have major impact on the
manufacturer of the world's thinnest, flattest, and one most useful materials
-- graphene.
As graphene's popularity grows as an advanced "wonder"
material, the speed and quality at which it can be manufactured will be
paramount. With that in mind, the research group of SungWoo Nam, assistant
professor of mechanical science and engineering at Illinois, has developed a
cleaner and more environmentally friendly method to isolate graphene using
carbon dioxide (CO2) in the form of carbonic acid as the electrolyte
solution. The findings are published in the most recent Journal of Materials
Chemistry C.
Nam, an expert in the area of 2D materials, is especially interested in
graphene for its use in sensors or flexible devices -- for instance, a wearable
patch that, when placed directly on skin, is so thin and transparent, it isn't
noticeable. Nam currently has projects with industry for making wearable
graphene sensors.
Graphene is synthesized by using chemical vapor deposition onto a metal
substrate, typically copper foil. One particularly tricky aspect of producing
graphene is how to separate this atomically thin material from its native metal
substrate for integration into useful devices. This typically involves either
dissolving away the high-purity metal or delaminating it from the substrate --
which require the use of harsh chemicals that leave stubborn residue. The
ultra-thin graphene also needs to be coated with a polymer support layer such
as polycarbonate or PMMA (poly methyl methacrylate), which requires the use of
often toxic and carcinogenic solvents.
"In our case, we are using a bio-mass derived polymer, ethyl
cellulose, for the coating," said Michael Cai Wang, Nam's PhD student and
lead researcher on the project. "A common and inexpensive polymer often used
as a food additive, ethyl cellulose is solvated in just ethanol. This not only
makes our graphene transfer process more environmentally friendly, it is now
also compatible with a variety of polymeric and soft biological materials such
as common plastics and hydrogels that would otherwise not tolerate harsh
solvents."
"After you transfer the graphene, the carbonic acid simply
evaporates away as carbon dioxide and water, which doesn't require any further
rinsing," Nam noted. "We're thus saving both water and time by
eliminating the conventional need for the repetitive and tedious rinsing
process. In using electrolytes such as NaOH or NaCl, for example, the sodium
tends to remain on the graphene, which is very difficult to completely get rid
of."
"By delaminating the graphene off from the copper foil using
carbonic acid, we are also able to reuse the growth substrate multiple times
instead of expending it, realizing significant material and cost savings"
Wang said.
"I think scientifically what we are bringing to the community is to
really motivate people to think about a cleaner way for making graphene,"
Nam said. "We are trying to improve upon the well-established protocols so
that industry can easily adopt our techniques. Because a lot of devices are
contaminated by these previously used chemicals, it inevitably affects the
property of graphene."
"Graphene is just starting to mature from the laboratory and into
commercial applications," Wang said. "Once you start large-scale
manufacturing, workers' health is also a major consideration, another benefit
of our greener process."
More
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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