Baltic Dry Index. 1260 +13 Brent Crude 52.68
In ancient
China, a celestial dragon was thought to lunch on the Sun, causing a solar
eclipse. In fact, the Chinese word of an eclipse, chih or shih,
means to eat.
The main media story
today, provided there no miscalculation on the Korean peninsula, is likely to
be today’s total solar eclipse visible across a large part of the USA. World
media will be offering hour by hour coverage of an escapism event from our
global travails. With it well covered
elsewhere and in the LIR weekend update, we will get on with the business of
business as usual.
Except it isn’t
really business as usual. Have the US
stock markets already topped? If they
have, for whatever reason(s,) what will that mean for the rest of the world’s
stock and commodity markets? Will the demons of bear market darkness come down
to planet earth today, to eat up America’s bulls?
According
to ancient Hindu mythology, the deity Rahu is beheaded by the gods for capturing
and drinking Amrita, the gods' nectar. Rahu's head flies off into the sky and
swallows the Sun causing an eclipse.
August 21, 2017 / 2:13 AM
Asian shares fragile as Trump turmoil, Korea tensions weigh
TOKYO (Reuters) - Asian shares were fragile on Monday as investors
remained unconvinced about U.S. President Donald Trump's ability to fulfil his
economic agenda, even as the departure of his controversial policy strategist
raised hopes of some progress.
Japan's Nikkei shed 0.4 percent to hit a 3-1/2-month low, shrugging off
a Reuters poll which showed confidence at Japanese manufacturers rose to its
highest level in a decade in August.
MSCI's broadest index of Asia-Pacific shares outside Japan was barely in
the black thanks to modest gains in China, but in most other markets, including
Australia, South Korea and Taiwan were in the red.
S&P Mini futures were down 0.1 percent at 2,423, not far from their
one-month low of 2,419.5 touched on Friday.
Wall Street shares got only a short-lived boost on Friday after Trump
fired White House chief strategist Steve Bannon.
"Markets seem to think that the administration will remain fragile
and its ability to carry out its policies will be hampered even after Bannon's
departure," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui
Asset Management.
Although Bannon's departure removes a major source of friction within
the White House, Trump's attacks on fellow Republicans following violence in
Virginia earlier this month have isolated him, prompting some Republicans to
beginning questioning Trump's capacity to govern.
Investors were also wary of any flare-up of tensions between North Korea
and United States as U.S. troops and South Korean forces started a joint
exercise on Monday.
More
The Pomo,
an indigenous group of people who live in the northwestern United States, tell
a story of a bear who started a fight with the Sun and took a bite out of it.
In fact, the Pomo name for a solar eclipse is Sun got bit by a bear.
All Things Bearish
By John Mauldin August
20, 2017
----Today we’ll review some unusually bearish indicators from several
sources, not all of them perma-bears, who lean bearish right now, even as US
benchmarks post new highs. You can discount what follows if you wish – but
don’t ignore it. Next week I’ll do an “All Things Bullish” letter. Please note,
I am not necessarily calling for an end to this amazing bull market. I’m
agnostic about that right now, because the traditional forecasting tools have
been taken to the woodshed, an issue I’ve talked about in many previous
letters. So we simply have to diversify trading strategies as opposed to being
permanently long or short anything.Now, before we jump into the bear pit, let me announce an event that some of you will want to attend. George Friedman of Geopolitical Futures is holding a special one-day conference on October 25 at the Yale Club in New York City. The theme is “Rising and Falling Powers: Separating Signal from Noise.” George says he will reveal a blueprint for the future international power structure. Click here for more information and to register.
OK, let’s take the plunge.
Evaluating Value
What’s a fair price for a share of stock? In theory, it’s easy to define.
The fairest price lies at the intersection of the company’s supply and demand
curves. The market price at any given moment reveals exactly where that point
is. The averaged prices of all stocks in an index, appropriately weighted, tell
us the same for market benchmarks.In practice, the calculation is not so simple, because it is human beings who make the decisions – if not themselves then by telling their computers how to decide. Humans don’t always make rational choices. The stock market is the scene of a never-ending debate over who is the most rational actor.
My good friend Steve Blumenthal of CMG and I wrote a joint letter earlier this year called “Stock Market Valuations and Hamburgers.” Four months later, that letter is even more relevant. So are charts that my friends at Skenderberg Alternative Investments shared in their latest monthly review. (It’s free, by the way, and you should definitely ask to join their list. Just be aware, they seem to have a permanently bearish view, or at least they have recently. They are a fascinating source of all things bearish each month.)
We begin with this Bank of America chart. Look how many hours the average worker has to work in order to buy a notional share of the S&P 500. Amazing. Kudos to the B of A analyst who worked this data up.
----You can see how valuations that are measured in this way skyrocketed in the 1990s bull market, then plunged in the following bear market and recession. They climbed again ahead of the 2008 crash yet could not reach their late-1990s peak – but now they have.
Equity capital is now at a historical high (going back to 1964) relative
to labor. Two factors could tug the line down to a more normal level: sharply
higher wages or sharply lower stock prices. Of course, I guess prices could go
sideways for a few decades as wages rise. But on the probability scale I put
that outcome pretty close to zero.
The S&P 500 is just one index, of course. There are many others. In
fact, choosing an index is now even harder than choosing a stock is.
More
With the northern
hemisphere summer of 2017 heading towards its close, Bloomberg takes stock of
the EUSSR’s largely self-inflicted problems. And let’s not mention Poland
bringing up German war reparations, or the German election where Mrs. Merkel’s
mad migrant policy, has lately started to hurt her in the polls, or Germany’s
never ending, dirty killer diesel engines scandal and fraud.
The
ancient Greeks believed that a solar eclipse was a sign of angry gods and that
it was the beginning of disasters and destruction.
These Are the Most Pressing Challenges Facing Europe's Leaders
By Viktoria Dendrinou and Ian WishartBrussels will have its hands full as negotiations ramp up with the U.K. on its impending exit from the 28-nation bloc, with some eastern European countries testing the boundaries of anti-democratic initiatives and the euro area still working on reforms to protect its economic well-being.
Here are the main topics to look out for in the coming months:
Brexit talks
The U.K. and EU have three more rounds of negotiations on Britain’s departure from the bloc before a summit in October. It’s at that gathering in Brussels that leaders are supposed to give approval for the start of phase two of the talks -- dealing with how the relationship between the two sides will look once the U.K. has left in March 2019.But there’s already doubt about whether there will be sufficient progress by then on phase one -- how the U.K. will protect rights of EU citizens and Britain’s financial obligations to the EU -- to allow that to happen as scheduled. And if timing is delayed, it raises the prospects of the U.K. slipping out of the EU without a deal, which would mean no foundation for a future trade agreement and no transitional period to soften the blow, something that neither side wants.
----Rule of law
In the coming months, Poland is facing the threat of unprecedented EU penalties from the first-ever probe of a member’s respect for the rule of law. The European Commission said last month there was excessive political influence over the legal system in Poland and launched action against the country for violating EU law in a process that could see the EU suspending its voting rights. The European Commission sent Warsaw a “letter of formal notice” in July, giving the government one month to reply. The next step in the infringement process would involve a final warning by the commission to the Polish government in the form of a “reasoned opinion,” after which a lawsuit could be filed.----Reform of the euro area
Discussions over how to reboot the euro have already started taking place in recent months, having been given fresh impetus by the election of Emmanuel Macron in France, a staunch advocate of further integration. While there is no consensus yet among the currency bloc’s 19 members on if and how the euro area should get its own finance minister, budget or a regional Monetary Fund, talks are expected to pick up steam after the German election in September. The EU’s biggest economy has so far resisted calls for further fiscal integration, but Chancellor Angela Merkel has signaled her willingness to discuss some of these issues in the future.
More
August 20, 2017 / 11:19 PM / 7
hours ago
Emissions scandal is a risk to German economy - ministry
BERLIN (Reuters) - The emissions scandal ensnaring German carmakers is a risk to Europe's largest economy, the Finance Ministry said on Monday, adding that it was impossible at the moment to quantify its impact.
In its monthly report, the ministry named the issue, which
broke out almost two years ago after Volkswagen (VOWG_p.DE)
admitted to cheating U.S. diesel emissions tests, as a threat to Germany along
with Britain's decision to leave the European Union and protectionist trade
policies by the U.S. government.
The car industry is Germany's biggest exporter and provides
about 800,000 jobs.
"Risks linked to how Brexit will shape out and future
U.S. trade policies remain," the ministry said. "In addition, the
so-called diesel crisis should be classified as a new risk to the German
economy even though its effects are not possible to quantify at the moment."
Strong household and state spending provided most of the
impulse for the German economy in the second quarter when growth was measured
at 0.6 percent. Weaker net foreign trade dampened growth, as exports grew
strongly less than imports.
The ministry said it expected the industrial sector to
continue its upswing also in the third quarter, pointing to robust orders and
strong business sentiment indicators.
But the diesel crisis could cloud the German growth outlook,
it said, adding: "Given the importance of the automotive industry they
(the effects of the diesel crisis) must be classified in the medium term as a
risk to the overall economic development."
More
The
Batammaliba, who live in Benin and Togo, used a solar eclipse as a teaching
moment. According to their legends, an eclipse of the Sun meant that the Sun
and the Moon were fighting and that the only way to stop them from hurting each
other was for people on Earth to resolve all conflicts with each other.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Below, China’s credit boom for the Communist Party’s 19th
Congress this fall, heralds China’s [and the ROW’s] bust in 2018, as President
Xi drastically scales back the credit boom, at the very latest in early 2018.
David Stockman Warns "Don't Forget About The Red Swan"
Aug 19, 2017 1:20 PM
Given the anti-Trump feeding frenzy, we continue to believe that a Swan
is on its way bearing Orange. But if that’s not enough to dissuade the dip
buyers, perhaps the impending
arrival of the Red Swan will at least give them pause.
The chart below comprises a picture worth thousands of words. It puts the lie to the latest Wall Street
belief that the global economy is accelerating and that surging corporate
profits justify the market’s latest manic rip.
What is actually going on is a short-lived
global credit/growth impulse emanating from China. Beijing
panicked early last year and opened up the capital expenditure (CapEx) spigots
at the state-owned enterprises (SOEs) out of fear that China’s great machine
was heading for stall speed at exactly the wrong time.
The 19th national communist party Congress scheduled for late fall of
2017. This every five year event is the single most important happening in the
Red Ponzi. This time the event is slated to be the coronation of Xi Jinping as
the second coming of Mao.
Beijing was not about to risk an economy
fizzling toward a flat line before the Congress. Yet that threat was clearly on
the horizon as evident from the dark green line in the chart below which
represents total fixed asset investment.
The latter is the spring-wheel of China’s booming economy, but it had
dropped from 22% per annum growth rate when Mr. Xi took the helm in 2012 to 10%
by early 2016.
There was an eruption as dramatized in the
chart. CapEx growth suddenly more than doubled in the one-third of China’s
economy that is already saturated in excess capacity. The state owned
enterprises (SOE) in steel, aluminum, autos, shipbuilding, chemicals, building
equipment and supplies, railway and highway construction etc boomed.
It was as if a switch had been flicked on by Mr. Xi himself, SOE CapEx
soared back toward the 25% year-over-year rate by mid-2016, keeping total CapEx
hugging the 10% growth line.
However, you cannot grow an economy
indefinitely by building pyramids or any other kind of low-return/no return
investment – even if the initial growth spurt lasts for years as China’s had.
Ultimately, the illusion of Keynesian spending gets exposed and the
deadweight costs of malinvestments and
excess capacity exact a heavy toll.
If the investment boom that was financed with reckless credit expansion
is not enough, as was the case in China where debt grew from $1 trillion in
1995 to $35 trillion today, the
morning-after toll is especially severe and disruptive. This used to be called a “depression.”
China’s propagated spurt in global trade and
commodities was artificial and short-term. It was done to flatter China’s
rulers at the 19th party congress.
Now that a favorable GDP glide path has been assured, China’s planners
and bureaucracy are already back at it trying to find some way to reel in its
runaway credit growth and bloated economy before it collapses.
The sell-by date has expired on this latest China credit impulse, as
evident in the chart below. During the first quarter of this year, total social
financing (bank credit plus shadow banking loans) reached the incredible rate
of $4 trillion per annum. That’s nearly one-third of China’s entire GDP.
The figure scared the daylights out of leadership in Beijing, who have
now moved forcefully to reel in China’s debt machine.
What is coming down the pike is the great
China Debt Retrenchment. Expect a global braking motion that will get
underway once Mr. Xi dramatically consolidates his power at the 19th party
congress.
More
During a 16th-century
eclipse, ancient Aztecs reacted to an eclipse in what was described as “tumult
and disorder.” The detailed account, taken by the missionary Fray Bernardino de
Sahagún, goes on to describe shouting and sacrifices of lighter-skinned people
alongside general panic that the Sun might disappear forever, and demons of
darkness would come down and eat people.
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?
Graphene-like materials printed with inkjet printer
Date:
August 17, 2017
Source:
Aalto University
Summary:
Researchers have developed inks made of graphene-like materials for inkjet
printing. New black phosphorous inks are compatible with conventional inkjet
printing techniques for optoelectronics and photonics. The inkjet printing
demonstration makes possible for the first time the scalable mass fabrication
of black phosphorous based photonic and optoelectronic devices with long-term
stability necessary for a wide range of industrial applications.
An international research team has developed inks made of graphene-like
materials for inkjet printing. New black phosphorus inks are compatible with
conventional inkjet printing techniques for optoelectronics and photonics.
Since the discovery of the Nobel Prize winning material graphene, many
new nanomaterials promise to deliver exciting new photonic and optoelectronic
technologies. Black phosphorus is a particularly interesting post-graphene
nanomaterial for next generation photonic and optoelectronic devices. Yet
despite remarkable performance in the lab, practical real-world exploitation of
this material has been hindered by complex material fabrication and its poor
environmental stability. "Our inkjet printing demonstration makes possible
for the first time the scalable mass fabrication of black phosphorus based
photonic and optoelectronic devices with long-term stability necessary for a
wide range of industrial applications," tells Professor Zhipei Sun at
Aalto University in Finland.
Scientists optimized the chemical composition to achieve a stable ink
through the balance of complex and competing fluidic effects. This enabled the
production of new functional photonic and optoelectronic devices by inkjet
printing with excellent print quality and uniformity -- just like the printing
of intricate graphics or photographs on paper. The researchers' work
demonstrated the benefits of their novel technique by inkjet printing devices
that take advantage of the properties of black phosphorus, not least its
semiconducting bandgap that can be readily varied by engineering the number of
atomic layers and can cover the visible and near-infrared region of the
electromagnetic spectrum.
The researchers also demonstrated printed black phosphorus based
nonlinear optical devices that can be easily inserted into lasers to act as
ultra-quick optical shutters, converting a continuous beam of laser radiation
into a repetitive series of very short bursts of light suited for industrial
and medical applications, such as machining, imaging and sensing. In the study,
black phosphorus was also able to act as an efficient and highly-responsive
detector of light, extending the wavelength range over which conventional
silicon-based photodetectors can operate.
Importantly, the researchers showed that the black phosphorus ink can be
seamlessly integrated with existing complementary metal-oxide-semiconductor
(CMOS) technologies, while the inkjet printing technique developed offering the
prospect of supporting the fabrication of so-called heterostructured materials
that aim to capitalize on the benefits of distinct, yet complementary
properties of multiple nanomaterial layers through controlled fabrication.
The new ink was developed by an interdisciplinary team of international
researchers at Aalto University, University of Cambridge (UK), Imperial College
London (UK) and Beihang University (China). The research was supported by the
Academy of Finland, Tekes -- the Finnish Funding Agency for Innovation, Nokia
Foundation and European Commission.
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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