Tuesday 5 September 2017

Talking Ourselves Into War.



Baltic Dry Index. 1187 +04    Brent Crude 52.19

“Sometimes you move publicly, sometimes privately. Sometimes quietly, sometimes at the top of your voice.”

James Baker.  United States Secretary of the Treasury under President Ronald Reagan, and U.S. Secretary of State and White House Chief of Staff under President George H. W. Bush.

This morning the USA and japan seem determined to talk themselves into a new Korean war. President Trump has threatened to halt all trade with any country that does business with Kim Jong Un’s regime. That would inevitably involve an open clash with China. But just supposing China kow-towed to President Trump and cut-off all supplies and trade with North Korea, what incentive has North Korea got left, not to fire first in an existential war? Japan went to war after the USA cut-off petroleum exports, and Australia’s unions attempted to stop loading pig-iron destined for Japan.  Does history repeat, but with nuclear weapons?

Below, today’s instalment of the geopolitical follies.

September's Bringing Tons of Catalysts to Shatter Market Calm

By Luke Kawa
Welcome to the cruellest month for U.S. equities.

The S&P 500 Index limps into September after stalling amid heightened tensions on the Korean peninsula and historic flooding in Texas. Those broke a stretch of calm that’ll be hard to replicate in a month loaded with major events that could set the tone on financial markets the rest of the year -- from a dozen G-20 central bank decisions to a deadline on the U.S.’s ability to pay its bills and elections in Europe and Oceania.

Here’s what’s coming.

The fate of currency and bond markets will hinge on a slew of central bank policy meetings, with the euro the most likely to get jostled as the European Central Bank decides the timeline for ending its unconventional easing. President Mario Draghi said officials will discuss potential tweaks in autumn and refused comment when asked if that included Thursday’s meeting. They’ll have to contend with a euro that’s now at its highest level in more than two years.

Treasuries, meanwhile, have been on a tear -- something that’s got to start to concern Federal Reserve officials looking to begin the process of balance sheet normalization as soon as on Sept. 20. The move has been well-telegraphed in order to avoid a repeat of 2013’s taper tantrum.

So far, so good as 10-year yields hover near 2017 lows and U.S. equities sit within spitting distance of all-time highs. But don’t get too complacent that will endure, warns Deutsche Bank AG chief international economist Torsten Slok.

“Now, when QE is about to be reversed, I don’t see any papers or speeches talking about the coming big negative impact on equities, widening credit spreads, and boosting yields,” he wrote of monetary policymakers who championed the benefits of asset purchasing programs. “It cannot be asymmetric such that QE only has positive effects and reversing QE will have no negative effects.”
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Yen, Treasuries Advance as Korea Threats Linger: Markets Wrap

By Andreea Papuc
Asian equities were mixed, the yen and gold extended gains, and Treasuries rallied as traders digested reports of North Korean plans for a ballistic missile launch on the heels of Sunday’s nuclear test.

Japanese stocks fell and equity indexes declined in Sydney and Seoul, while they fluctuated elsewhere as the United Nations Security Council met to discuss the threat from Pyongyang. S&P 500 Index futures inched lower before American markets reopen after the Labor Day holiday. Yields on Treasuries declined.

“Markets are a little bit bifurcated,” Mizuho Bank Ltd. head of economics and strategy Vishnu Varathan told Bloomberg Television. “They do realize that the tail risks are rather large, so in fact there is an adverse outcome, they are not well prepared for it, but they are also betting against that, which is exactly why they are buying the dips.”

There is a high chance North Korea will fire an ICBM missile before the Sept. 9 foundation day after the Pyongyang regime started moving such a weapon, Asia Business Daily reported Tuesday, citing unidentified intelligence officials. North Korea was “begging for war” by testing a nuclear weapon over the weekend, the U.S. ambassador to the UN said. Nikki Haley demanded the strongest sanctions possible to bring the Kim Jong Un regime to heel.

---- Among key events coming this week:
  • The Reserve Bank of Australia holds it monetary policy meeting today. Expectations are for the central bank to hold rates. Governor Philip Lowe speaks this evening. 
  • Caixin’s China services PMI rose to 52.4 in August from 51.9 in July.
  • Australia’s net exports added 0.3 percent to GDP in the second quarter, more than economists expected. GDP is due Wednesday. Meanwhile, current-account deficit widened more than forecast.
  • Among other economic numbers out of China this week, trade figures are anticipated to show another month of solid export growth, while FX reserves probably continued to rise on stricter capital controls, robust growth and a stronger yuan, according to Bloomberg Intelligence.
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China’s Oil Lifeline to North Korea Targeted After Nuclear Blast

Bloomberg News
Even before North Korea detonated its most powerful nuclear bomb yet, Japan was calling for moves to cut off its oil supply.

Afterward, U.S. President Donald Trump threatened to halt all trade with any country that does business with Kim Jong Un’s regime. China, which supplies most of its food and fuel, on Monday called the warning “unacceptable.”

Some sort of oil embargo is likely to come up as the international community discusses a response to the nuclear test, with the United Nations Security Council meeting overnight. China has resisted such a move in the past over fears that North Korea might collapse, but has grown increasingly frustrated with its rogue ally.

Still, while China might make a gesture to Trump in an effort to defuse his criticisms, it may not be the panacea the U.S. president is looking for, and do little in a practical sense to slow Kim down.

“A temporary or partial ban is possible, but the Chinese government will definitely refuse to cut off oil exports completely or permanently to North Korea,” said Shi Yinhong, an adviser to China’s cabinet and international relations professor at Renmin University in Beijing. “If China agreed to cut off oil exports completely, China would use all its tools but not achieve any purpose, and the consequence could be costly.”

Since the Korean War, Beijing has avoided prodding North Korea to the point it might collapse, fearing a destabilizing economic blow and the possibility of the U.S. military gaining influence on its border via a unified Korea. That calculation has held even while China’s interests have diverged from those of North Korea.

---- China supplies most of North Korea’s crude oil, according to the U.S. Energy Information Administration, but it’s hard to know exactly how much: China hasn’t reported any volumes in its published customs data since 2013. Based on reported volumes, North Korea’s oil use over an entire year would be less than the U.S. East Coast consumes in a single day.

Oil products are transported by North Korean tanker to the port of Nampo, near the capital Pyongyang, while crude oil is sent via an aging pipeline from the Chinese border city of Dandong, Reuters reported earlier this year. While other countries supply the regime with fuel, the total figures are suspected to be under-reported, according to the EIA.

Even if China did agree to ban all oil supplies, North Korea would likely have stockpiles to sustain critical operations for months and could earn cash for its weapons programs from its remaining non-sanctioned exports, Rajiv Biswas, Asia-Pacific chief economist for IHS Markit, said in an email.
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In other news, the BRICS are urged to prepare for life after the dollar.

Xi Calls for BRICS to Play a Bigger Role in World Governance

THE ASSOCIATED PRESS (LOUISE WATT)
Xiamen, China (AP) -- Five major emerging economies opened a summit Monday to map out their future course, with host Chinese President Xi Jinping calling on them to play a bigger role in world governance, reject protectionism and inject new energy into tackling the gap between the world's wealthy and developing nations.

"We need to make the international order more just and equitable," he told the leaders of Brazil, Russia, India and South Africa in his opening address. "Our ever closer ties with the rest of the world require that our five countries play a more active role in world governance. Without us, ... many challenges cannot be effectively resolved."

Xi said they should "speak with one voice" to jointly present their solutions to global problems and safeguard their common interests.

He also called on his BRICS partners, Brazilian President Michel Temer, Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, and South African President Jacob Zuma to oppose a growing tide of protectionism across the world. The leaders are holding their annual summit in the southeastern Chinese city of Xiamen through Tuesday.

BRICS was formed as an association of fast-growing large economies about a decade ago to advocate for better representation for developing countries and challenge the Western-dominated world order that has prevailed since the end of World War II. It soon achieved agreement to increase the share of voting rights for emerging markets in world financial bodies the International Monetary Fund and World Bank. It has also started operating its own development bank.

Xi wants BRICS to play a more important role in international affairs, even as some observers suggest its power is waning given rivalry between China and India and the economic woes of Brazil, Russia and South Africa.

"BRICS country cooperation is not a talking shop but a task force that gets things done," Xi said in a speech to BRICS business leaders Sunday. "Our goal is to build a big market of trade and investment, promote smooth flow of currency and finance, improve connectivity of infrastructure and build close bonds between the peoples."
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“If you're not gonna pull the trigger, don't point the gun.”

James Baker. United States Secretary of the Treasury under President Ronald Reagan, and U.S. Secretary of State and White House Chief of Staff under President George H. W. Bush.

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.

Today, more on the aftermath of hurricane Harvey, and no it’s not good for the US economy, no matter how bizarre the GDP accounting gets.

09.03.17 07:00 am

Harvey Wrecks Up to a Million Cars in Car-Dependent Houston

As the Hurricane Harvey storm system dissipates and the water it dropped recedes, Houstonians left without shelter face the daunting task of rebuilding their lives. Many people are focused on the staggering figure of 40,000 homes lost, but another number also deserves close scrutiny: The flooding destroyed as many as a million cars in the Houston metro area.

Reliable transportation is a daily, fundamental need, almost more so in the wake of a disaster. Add in the fact that Houston is a car-dependent city, and the consequences of the destruction of so many vehicles comes into stark focus. How will rental companies and dealerships suddenly supply cars to people who need them right now? How do people get permanent cars? And what is the fate for the many people who can’t afford to replace their way of getting around?

Cartown, USA

“You really have to have a car if you’re in Houston,” says Andrea French, executive director of Transportation Advocacy Group Houston, which advocates for better funding for all modes of transportation. People in the city center may commute by bus or bike, and Uber and Lyft have made it easier to go without a personal vehicle, but as a rule it’s hard to get by without your own wheels. That’s why 94.4 percent of households in the Houston area have cars—1.8 each on average, according to analyst firm Cox Automotive. Only Dallas has a higher percentage.

As of Thursday morning, insurance companies had received about 100,000 claims for cars hit by Harvey’s flooding, 75 percent of them totaled. “In an event like this, that number’s gonna be rising daily,” says Mark Hanna of the Insurance Council of Texas. “There are probably cars still submerged that people can’t get to.” A lot of people are just now returning to Houston to assess what they’ve lost and start rebuilding.

Counting just licensed cars (though many of the destroyed were waiting on dealer lots), the cost of the losses sits somewhere between $2.7 and $4.9 billion.

New Wheels

The need for replacement vehicles, therefore, is massive and immediate. For many with insurance, the first step will be getting a rental car until their payment comes through and they can take home a new forever car. Exacerbating the problem, bereaved car owners aren’t the only ones in need: FEMA staff, emergency services, and other groups like the Red Cross also have to get around.

To cope with the surge in demand, rental companies are shipping thousands of extra cars from all over the country into the region. “We are moving vehicles into the affected areas as quickly as possible to increase inventory,” says Katie McCall, head of communications for Avis, which is also waiving fees for extended loans, late returns, and one-way trips. Hertz locations in Harvey-hit areas have extended their operating hours.

---- But some ruined cars won’t be replaced at all—and that’s where Harvey’s impact may prove most devastating. Roughly 15 percent of Texas vehicle owners don’t have any kind of car insurance, despite laws saying they must, according to Hanna, at the Insurance Council of Texas. Of the remaining 85 percent, just three-quarters have comprehensive insurance policies that are sure to cover flood damage. Assuming those percentages apply to the Houston area—and using a lowball estimate of 300,000 destroyed vehicles—that’s 100,000 people who may have to pay for a replacement out of pocket. Many of them may have also lost homes and most of their belongings.
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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?

2 September 2017 at 9:21pm

£1 billion solar power deal to lower social housing tenants' energy bills



Over 1,000 new jobs are to be created under a £1 billion scheme to install solar panels on social housing across England and Wales.

The plans will see 100,000 households receive panels over the next 18 months, reducing their energy bills to an average of £240.

According to Ovo Energy, in 2014, the average dual fuel bill was £1,344, the average electricity bill was £592, and the average gas bill was £752.

Under the scheme, around 800,000 households will be fitted with a solar panel over the next five years, with over 40 local authorities and other landlords already signed up to the programme.

The north-west will benefit most from the plans, with over 290,000 homes receiving solar panels in towns like Oldham and Bradford, followed by the north-east and midlands, with 184,000 and 154,000 homes from Leeds to Derby.

Many of the jobs to install and maintain the panels will go to veterans from the armed forces.

The Government has welcomed £160 million of capital spending by Dutch firm Maas Capital, which will help fund solar panels from UK company Solarplicity.

International Trade Minister Greg Hands visited a social housing development in Ealing, West London to see solarpanels being fitted.

Mr Hands said: "After a record year for new foreign investment into the UK, this initial £160 million capital expenditure program will deliver massive benefits to some of the UK's poorest households.

"As well as creating 1,000 jobs and delivering cheaper energy bills for up to 800,000 homes, it shows yet another vote of confidence in the UK as a place to invest and do business."

David Elbourne, chief executive of Solarplicity, said: "Today's announcement is a reflection of our exciting growth in the energy market, backed by international capital investment through the Department for International Trade."
Last updated Sun 3 Sep 2017

How a simple ethanol injection could revolutionize some cancer treatments

Rich Haridy September 3, 2017
Scientists have known for some time that ethanol can kill cancer cells, but several limitations held it back from becoming a broadly used treatment. A team at Duke University has recently developed a new type of ethanol solution that can be injected directly into a variety of tumors to potentially offer a new, safe, and cheap form of cancer treatment.

Ethanol ablation is a form of cancer therapy where ethanol is injected directly into a tumor. It is currently used only for some types of liver and thyroid cancers and the treatment is notoriously limited because of the need to use large volumes of ethanol that can damage surrounding tissue. This means it is primarily only effective for tumors surrounded by a fibrous capsule that can contain the ethanol.

Researchers at Duke University have overcome these limitations by developing a solution that mixes ethanol with ethyl cellulose. This novel solution turns into a gel when injected into a tumor, allowing it to remain concentrated at the site of injection.

The team studied the effects of the new ethanol treatment in hamsters with induced cheek cancers. A control group was established and its tumors were injected with pure ethanol. Positive results were identified only when large volumes of ethanol were used, and even then only four of 12 treated tumors regressed completely after eight days.

The ethanol gel group, on the other hand, displayed rather extraordinary results. After eight days all seven tumors treated with the ethanol gel had completely disappeared.

The Duke University team is clear in pointing out this is still just an early proof-of-concept trial with a very small sample size, but the results are encouraging. One of the primary outcomes suggested by the research is an ability to increase cancer treatments offered in the developing world. While this kind of ethanol ablation may be just as effective as tumor removal by surgery, it is significantly easier and cheaper, allowing for simple, non-surgical treatments for those in areas that lack effective medical resources.

The treatment could also prove useful for a variety of other tumors, from some breast cancers to cervical precancerous lesions.

The team's research was published in the journal Scientific Reports.

The monthly Coppock Indicators finished August

DJIA: 21,948 +215 Up. NASDAQ:  6,429 +266 Up. SP500: 2,472 +174 Up.

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