Monday 13 November 2017

Bubble On Or What?



Baltic Dry Index. 1464 -17   Brent Crude 63.54

Fear and euphoria are dominant forces, and fear is many multiples the size of euphoria. Bubbles go up very slowly as euphoria builds. Then fear hits, and it comes down very sharply. When I started to look at that, I was sort of intellectually shocked. Contagion is the critical phenomenon which causes the thing to fall apart.

Alan Greenspan

We open this morning with Asia, cautiously measuring developments. To bubble on regardless, or to get back to some valuation sanity, that is the unspoken question dogging the weeks up to Christmas.

Asia Stocks Mixed; Pound Slides With May Pressured: Markets Wrap

By Adam Haigh
Updated on November 13, 2017, 5:12 AM GMT
Equities in Asia put in a mixed start to the week as investors seek fresh catalysts after last week’s run to record highs. The British pound took a hit as pressure mounts on U.K. Prime Minister Theresa May after a raft of political scandals and scant progress on Brexit talks.

Stock indexes declined in Tokyo, Sydney and Seoul. Hong Kong stocks were firmer after a reshuffle of the benchmark Hang Seng Index. The dollar advanced against all its major counterparts, with the pound falling the most. The Aussie dollar slipped amid fresh political turmoil that risked undermining confidence. Australian bond yields tracked an increase in the U.S. at the end of last week.

Some of the euphoria came out of Bitcoin, with the cryptocurrency tumbling 11 percent on Monday, bringing its retreat from last week’s record high to about 26 percent in the wake of the cancellation of a technology upgrade.

Sterling retreated after a report that as many as 40 Conservative MPs have agreed to sign a letter of no confidence in May, almost enough to trigger a leadership challenge. Meanwhile, the U.K. Labour Party accused May of lacking the support within her Conservative Party to deliver the Brexit transition period she’s proposed. The news kick starts a week that also features a slew of Bank of England members speaking, along with updates on U.K. inflation, the labor market and retail sales.

Also in focus this week for investors: continuing talks on tax legislation in the U.S. Congress, along with American inflation and growth data that will play into the Federal Reserve’s decision whether to lift rates next month. Pessimism over the state of play on U.S. tax cuts helped drag global equities down from this month’s record high late last week. Measures of equity-market volatility have risen, albeit from near record low levels.
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November 13, 2017 / 2:52 AM

Nikkei drops to 1-week low; real estate, brokers weak

TOKYO, Nov 13 (Reuters) - Japan’s Nikkei dropped to a one-week low on Monday morning as many sectors including real estate firms and brokers languished after a recent rally, offsetting gains in companies with strong results such as Nissin Foods.

The Nikkei declined 0.7 percent to 22,522.61 in midmorning trade after hitting as low as 22,474.16, the lowest since Nov. 6.

Big losers included real estate firms, brokerage firms and construction companies, with Mitsui Fudosan shedding 3.0 percent, Mitsubishi Estate Co falling 1.7 percent, Nomura Holdings declining 2.3 percent and Taisei Corp tumbling 1.6 percent.

Bucking the weakness, instant food maker Nissin Foods Holdings Co rose 6.2 percent to a record high of 7,700 yen after its April-Sept net profit jumped 15.5 percent to 14.11 bln yen ($124.2 million).

Mitsui Mining and Smelting Co jumped 10 percent to a 10-year high of 6,550 yen after it raised its net profit forecast to 24 billion yen ($211.1 million) for the fiscal year ending March 2018 from previously forecast 20 billion yen.

Tech shares also lost ground, with Tokyo Electron and Advantest both shedding 0.8 percent.

The broader Topix dropped 0.5 percent to 1,791.67.

The U.S. Yield Curve Is Flattening and Here's Why It Matters

By Brian Chappatta
If you haven’t been paying attention to the persistent flattening of the U.S. yield curve, you’re way behind it.

Peter Cecchini, chief market strategist at Cantor Fitzgerald, calls it “the most important thing to have a clear idea about now.” Billionaire fund manager Bill Gross says we’re rapidly approaching a point at which the trend will induce an economic slowdown. Others claim it’s only natural, with the Federal Reserve raising short-term interest rates in the face of stubbornly low inflation.

No matter which theory you subscribe to, the world’s biggest bond market is sending a signal that traders can’t ignore. The longer the trend continues, the more likely its effects could spread to bank earnings and the real economy, while at the same time it would limit the Fed’s ability to respond when these risks emerge.

To get a sense of just how dramatic this trend has been, here’s a look at a handful of curve measures now versus the start of 2017. At the end of last week, they were all close to the flattest levels in a decade.
  • From two years to 10 years: 74 basis points, down from 125
  • From two years to 30 years: 122 basis points, down from 187
  • From five years to 10 years: 35 basis points, down from 52
  • From five years to 30 years: 83 basis points, down from 114
Everyone has their favorite theory for why this is happening and what it means for the economy and the markets, and all of them likely play a part so here’s a breakdown of each one:
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In other Asian news, Japan’s Prime Minister Abe deliberately stamps of China’s President Xi’s toes. I suspect a return “favour” will not be long in coming. President Trump sings his own praise. Full details available on Wednesday, he says.

Japan's Abe Meets Taiwanese Lawmaker Hours After Xi Warning

By Isabel Reynolds
November 12, 2017, 5:30 AM GMT
Japanese Prime Minister Shinzo Abe held a meeting with a Taiwanese politician Sunday, hours after Chinese President Xi Jinping warned him not to break with past consensus on what Beijing regards as a renegade province.

Abe held a 30-minute meeting with James Soong, head of the People First Party on the sidelines of the Asia-Pacific Economic Cooperation summit in Danang, Vietnam, according to Japan’s foreign ministry. After the meeting, the prime minister left for summits in the Philippines.

The meeting risks criticism from China even as Abe says he wants deeper cooperation on the threat from North Korea. In a summit with Xi the previous night, Abe received no clear response to a proposal that he visit China next year to mark the 40th anniversary of a friendship treaty.

Ties between China and Japan are less hostile than when Abe took office five years ago amid anger over a worsening territorial dispute. But he hasn’t succeeded in taking the chill off relations with his country’s biggest trading partner.

In the meeting, Abe told Soong that Taiwan was an important partner with shared values and close economic ties. Both sides agreed there had been progress in ties over the past year and Abe said he looked forward to further strengthening, while maintaining the unofficial nature of the relationship.

Xi told Abe on Saturday that the stable development of China-Japan ties was in the interest of both countries and that both sides should “work tirelessly to create conditions for the continued improvement of Sino-Japanese relations,” according to remarks published by the People’s Daily’s web portal.

 “The key to improved Sino-Japanese relations lies in mutual trust,” Xi told his counterpart, urging Japan to deal with questions over history and Taiwan according to consensuses already reached by the two sides.
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November 13, 2017 / 5:14 AM

Trump vaunts trade progress, red carpets on 'fruitful' Asia trip

MANILA (Reuters) - U.S. President Donald Trump said on Monday he had made significant progress on trade issues during a fruitful trip across Asia that saw governments roll out red carpets “like nobody has ever seen”.

“We’ve made some very big steps with respect to trade, far bigger than anything you know,” Trump told reporters in Manila on the sidelines of a summit with leaders of Southeast Asian and East Asian nations.

He did not give details of his achievements on trade matters during a tour that took him to Japan, South Korea, China and Vietnam before his last leg in the Philippines capital.

He said a statement would be issued from the White House on Wednesday about North Korea, and on trade, key issues of a trip he described as fruitful.

“It was red carpet like nobody, I think, has probably ever seen,” he said.

In Vietnam at the weekend, Trump and leaders of Pacific Rim nations agreed to address “unfair trade practices” and “market- distorting subsidies”, a statement that bore the imprint of Trump’s efforts to reshape the global trade landscape.

His “America First” vision has upset a traditional consensus favouring multinational trade pacts that China now champions. On the sidelines of the Vietnam meeting, 11 countries kept alive a Trans Pacific trade deal whose future was thrown into doubt when Trump withdrew from it in the name of protecting American jobs.

Chinese President Xi Jinping told the summit in Vietnam that Asia-Pacific nations must “uphold multilateralism”, countering Trump’s message that the United States would stay out of trade deals that surrender its sovereignty.

Trump, by contrast, blasted the World Trade Organization and multilateral trade deals during his tour. Some analysts expect tougher U.S. action may be imminent to fight trade imbalances with China exacerbated by its state-led economic model.

Meanwhile back in almost forgotten Europe, another week and yet more corporate scandal in paymaster Germany. Poland tosses a very big spanner at Germany.  Italy remained, well Italy. Germany stumbled towards the coalition government from hell, well Jamaica. Europe can’t find a “strong and stable” leader anywhere, to save its life. Brexit now.

November 10, 2017 / 5:43 PM

German regulator launches another probe into VW over scandal

BERLIN (Reuters) - Germany’s financial watchdog said on Friday it was investigating whether Volkswagen illegally disclosed information about its emissions scandal to third parties, adding to the carmaker’s legal headaches more than two years after the scandal broke.

Europe’s largest automaker is already the subject of a probe by the BaFin watchdog over suspected insider trading related to its “Dieselgate” scandal, and an investigation by Braunschweig prosecutors over suspected market manipulation.

Earlier this week, a German court also ruled an independent auditor should be appointed to investigate Volkswagen’s (VOWG_p.DE) cheating of U.S. diesel engine tests, boosting investors’ hopes for compensation.

On Friday, German magazine Der Spiegel reported that Volkswagen’s (VW) CEO at the time, Martin Winterkorn, informed then-Transport Minister Alexander Dobrindt and the head of Germany’s KBA motor vehicle watchdog on Sept. 21, 2015, about the extent of the carmaker’s cheating.

But VW did not make public until Sept. 22, 2015, that about 11 million cars worldwide were fitted with emissions-cheating software and that it would set aside billions of euros to cover the potential cost of the scandal.

“We are looking at this process with a view to a potentially unauthorized disclosure of inside information,” a spokesman for BaFin said, confirming the Der Spiegel report.

VW declined to comment on the latest BaFin investigation, but reiterated its view that its management board “duly fulfilled” its obligations regarding capital market disclosure rules.

November 10, 2017 / 1:45 PM

German prosecutors raid Commerzbank in tax evasion probe

FRANKFURT (Reuters) - Germany’s Commerzbank (CBKG.DE) has become the target of a tax evasion probe in which several current and former managers are suspected of evading 40 million euros (35.59 million pounds) in taxes via so-called dividend stripping.

Prosecutors said on Friday they had searched the offices of a major Frankfurt bank and private homes this week.

The bank involved was Commerzbank, according to a person familiar with the matter who was speaking on condition of anonymity.

Commerzbank, Germany’s second-biggest lender, said it was cooperating with authorities.

Dividend stripping, also known as “cum-ex” transactions, involved buying a stock just before losing rights to a dividend, then selling it, taking advantage of a now-closed legal loophole that allowed both buyer and seller to claim tax credits.

Frankfurt prosecutors, together with federal crime police and tax officials, conducted the Commerzbank searches on Tuesday. They included the offices of the bank as well as the flats of three suspects in Frankfurt and nearby Hanau.

The legal news agency Juve first reported the news.

Investigations into the use of such schemes by a number of banks in Germany have been going on for several years. The practice may have cost the state billions of euros in tax over many years.

Last year, Portigon Financial Services (WDLGge.F), formed from parts of failed German lender WestLB, was searched by prosecutors as part of a probe into allegations that WestLB may have been involved in cum-ex trades..

Last month, prosecutors raided the Frankfurt offices of law firm Freshfields Bruckhaus Deringer in relation to a former client’s cum-ex transactions. A number of banks have already paid hundreds of millions of euros in back taxes and tens of millions to settle disputes with German authorities.

Last year, German financial watchdog BaFin closed the German operations of Maple Bank due to over-indebtedness relating to the tax evasion investigations.

The Commerzbank investigation focuses on five current and former employees aged between 51 and 63, as well as unknown individuals suspected of involvement in the scheme to evade 40 million euros of taxes from 2006 to 2010, prosecutors said.

The investigation also extends to unknown individuals and trades in 2008 at Dresdner Bank, which was taken over by Commerzbank in 2009. Prosecutors said the volume of those trades was more than 10 billion euros, with a further 75 million euros in evaded taxes.
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November 11, 2017 / 7:20 PM

German war reparations 'matter of honour' for Poland

KRAKOW, Poland (Reuters) - Demanding reparations from Germany for its actions in Poland during World War Two is a matter of honour for Warsaw, Jaroslaw Kaczynski, the leader of Polish ruling Law and Justice (PiS) party, said on Saturday.

The issue of reparations, revived by Poland’s eurosceptic PiS after decades of improving relations with Germany, could escalate tensions between the two European Union members.

In September Polish parliamentary legal experts ruled that Warsaw has the right to demand reparations from Germany, although Poland’s foreign minister indicated that no immediate claim would be made.

“The French were paid, Jews were paid, many other nations were paid for the losses they suffered during World War Two. Poles were not,” Kaczynski said.

“It is not only about material funds. It is about our status, our honour ... And this is not theatre. This is our demand, a totally serious demand,” added Kaczynski, Poland’s de facto leader.

The PiS government, deeply distrustful of Germany, has raised calls for wartime compensation in recent months but Foreign Minister Witold Waszczykowski has said further analysis was needed before any claims were lodged.

Six million Poles, including three million Polish Jews, were killed during the war, and the capital Warsaw was razed to the ground in 1944 after a failed uprising in which 200,000 civilians died.

November 11, 2017 / 2:49 PM

Italy's populist 5-Star strengthens lead after Sicily vote-poll

MILAN (Reuters) - The outcome of local elections in Sicily has further weakened the ruling party of former Prime Minister Matteo Renzi and strengthened the populist 5-Star Movement’s lead, a poll conducted after the regional vote showed.

Based on the IPSOS poll published in Saturday’s Corriere della Sera, a centre-right coalition would win next year’s general election with 253 seats while the 5-Star would have 173 and Renzi’s Democratic Party 164 together with a smaller ally, leading to a hung parliament.

As Italy nears a national vote it must hold by May 2018, concerns are mounting it may leave the country ungovernable.

The poll conducted on Nov. 8-9, showed the 5-Star Movement now leads with 29.3 percent of preferences while the Democratic Party stands at 24.3 percent, having lost six percentage points in six months.

Italy has just introduced a new electoral system that is expected to handicap the anti-establishment 5-Star favouring instead mainstream political blocs.

The voting system - a mix of proportional representation and first-past-the-post - will benefit parties that form pre-election coalitions, something the 5-Star has always ruled out.

Seen as a dry run for next year’s nationwide election, the Sicilian ballot held on Nov. 5 marked a strong political comeback for Silvio Berlusconi, handing government of the island to a centre-right bloc backed by the four-times prime minister.
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November 11, 2017 / 3:44 PM

Merkel tries to bridge climate gap as coalition talks heat up

BERLIN (Reuters) - Germany should lead the fight against climate change and cut emissions without destroying jobs, Chancellor Angela Merkel said on Saturday, treading a fine line as she tries to clinch a coalition deal with environmentalist and pro-business parties.

Merkel’s comments, made in her weekly podcast in the midst of 200-nation talks on limiting global warming in Bonn, show the dilemma of the center-right leader in tricky coalition negotiations to form the next government.

Merkel’s conservatives, which bled support to the far-right Alternative for Germany (AfD) in the Sept. 24 election, are trying to forge a coalition government with the pro-business Free Democrats (FDP) and the environmentalist Greens.

The unlikely partners have cited progress after three weeks of exploratory talks about a three-way coalition. But the Greens raised the pressure on Merkel ahead of a meeting on Sunday in which party leaders are due to thrash out differences over climate, immigration and euro zone policy.

The Greens want Merkel and the other parties to spell out which additional measures the next government will implement for Germany to reach its 2020 goal of lowering emissions by 40 percent from 1990 levels.
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What we need to understand is, one, that there are market failures; and two, that there are things like asset bubbles and irrational exuberance. There are periods of booms, bubbles, and manias. These things, if left to themselves, can lead to crashes, to busts, to panics.

Nouriel Roubini

Crooks and Scoundrels Corner

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

No crooks or scoundrels today, just a time when high minded English and then Scots Law, partially contributed to first the US Revolution, and in today’s terms, Brexit. Who wants to be ruled by dodgy, variable, EUSSR continental laws when fine British jurisprudence exists or used to.

Today, a long forgotten part of GB’s contribution to the world as it exists today, although sadly no longer in the UK thanks to a one sided extradition treaty (2003,) with the USA, and a monstrosity against justice and rule of law called the European Arrest Warrant.

Somerset v Stewart

Somerset v Stewart (1772) 98 ER 499 (aka Somersett's case, or in State Trials v.XX Sommersett v Steuart) is a famous judgment of the English Court of King's Bench in 1772, which held that chattel slavery was unsupported by the common law in England and Wales, although the position elsewhere in the British Empire was left ambiguous. Lord Mansfield decided that:

The state of slavery is of such a nature that it is incapable of being introduced on any reasons, moral or political, but only by positive law [statute], which preserves its force long after the reasons, occasions, and time itself from whence it was created, is erased from memory. It is so odious, that nothing can be suffered to support it, but positive law. Whatever inconveniences, therefore, may follow from the decision, I cannot say this case is allowed or approved by the law of England; and therefore the black must be discharged.[1]

Slavery had never been authorized by statute in England and Wales, and Lord Mansfield's decision found it also unsupported in common law. Lord Mansfield narrowly limited his judgment to the issue of whether a person, regardless of being a slave, could be removed from England against his will, and said he could not. Even this reading meant that certain property rights in chattel slaves were unsupported by common law. It is one of the most significant milestones in the abolitionist campaign.

Some historians believe the case contributed to increasing colonial support for separatism in the Thirteen Colonies of British North America, by parties on both sides of the slavery question who wanted to establish independent government and law.[2] The southern colonies wanted to protect slavery and expanded its territory dramatically in the decades after independence was won
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Joseph Knight (slave)

Joseph Knight was a man born in Africa and sold as a slave in Jamaica to John Wedderburn of Ballendean, Scotland. Wedderburn had Knight serve in his household, and took him along when he returned to Scotland in 1769. Inspired by Somersett's Case (1772) in England, in which the English courts had held that slavery did not exist under English common law, Knight brought a freedom suit against his master. Knight won his claim after two appeals, in a case that established the principle that Scots law would not uphold the institution of slavery.

Joseph Knight was born in Africa. He was captured in the slave trade and transported to Jamaica, where he was sold as a slave to John Wedderburn of Ballendean. Wedderburn educated Knight and employed him as a domestic servant. In 1769 Wedderburn returned to Scotland, taking Knight with him.

Three years later a 1772 ruling in England known as Somersett's Case cast doubt on the legality of slavery under the common law.[1]

Knight v. Wedderburn

In 1777, assuming that the ruling in the Sommersett case applied to the rest of Britain, Knight demanded wages from his owner. He ran away when Wedderburn refused. Wedderburn was indignant, feeling that he had bestowed considerable gifts on Knight by educating him and taking care of him, and had the fugitive slave arrested. Knight brought a claim before the justices of the peace court in Perth, a case that would be known as Knight v Wedderburn.[2]

Appeal to the sheriff

When the justices of the peace found in favour of Wedderburn, Knight appealed to the Sheriff of Perth, John Swinton. He found that "the state of slavery is not recognised by the laws of this kingdom, and is inconsistent with the principles thereof: That the regulations in Jamaica, concerning slaves, do not extend to this kingdom."[2][3]

Appeal to the Court of Session

In 1777 Wedderburn in turn appealed to the Court of Session in Edinburgh, Scotland's supreme civil court, arguing that Knight still owed perpetual service, in the same manner as an indentured servant or an apprenticed artisan. The case was considered important enough to be given a full panel of judges, including Lord Kames, a prominent legal and social historian.

The case for Knight was helped in preparation by James Boswell and Samuel Johnson. Their argument was that 'no man is by nature the property of another'. They said that since there was no proof that Knight had given up his natural freedom, he should be set free. Conversely, Wedderburn's counsel argued that commercial interests, which underpinned Scotland's prosperity, should prevail.

In an unexpected decision, Lord Kames stated that 'we sit here to enforce right not to enforce wrong' and the court emphatically rejected Wedderburn's appeal. It ruled that

‘the dominion assumed over this Negro, under the law of Jamaica, being unjust, could not be supported in this country to any extent: That, therefore, the defender had no right to the Negro’s service for any space of time, nor to send him out of the country against his consent: That the Negro was likewise protected under the act 1701, c.6. from being sent out of the country against his consent.’[2]

In effect, slavery was not recognised by Scots law. Fugitive slaves (or 'perpetual servants') could be protected by the courts, if they wished to leave domestic service or were resisting attempts to return them to slavery in the colonies.[4]
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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?

Someone ‘Accidentally’ Locked Away $300M Worth of Other People's Ethereum Funds

And a hard fork is on the table.

On Tuesday, a single user permanently locked down dozens of digital wallets containing nearly $300 million dollars worth of ether, the unit of exchange on the Ethereum platform, allegedly by accident.
Now, some in the Ethereum community are considering the possibility of a risky network split, known as a "hard fork," to fix it.

The affected wallets—known as "multisignature" wallets because they require multiple people to sign off before funds are moved, making them popular with companies—were all created with Parity, a popular program for digital wallets. Parity multisignature wallets experienced a bug in July that allowed a hacker to steal $32 million in funds before the Ethereum community scrambled to band together to hack back and secure the rest of the vulnerable ether.

According to a blog post released by Parity on Tuesday, the code that fixed the July bug contained another vulnerability. That vulnerability allowed a user known as "devops199" on GitHub, a site for developers to collaborate on open source code, to allegedly accidentally trigger a function that turned the contract governing Parity multisignature wallets into a regular wallet address and made him or her the owner. Devops199 then killed this wallet contract, or, as Parity put it, "suicided" it. This made all multisignature wallets tied to that contract instantly useless, their funds locked away with no way to access them.

If the story is true, it seems like Devops199 was jiggling door handles and when one door opened, they tried to close it and the whole house exploded.

"We are asking for everyone to be patient until the full extent of the issue has been identified and we will communicate any necessary instructions or advice," a Parity spokesperson wrote me in an email. "We are advising users not to deploy any further multi-sig wallets until the issue has been resolved and to not send any Ether to wallets that have been deployed and are in use already."
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The monthly Coppock Indicators finished October

DJIA: 23,277 +233 Up. NASDAQ:  6,728 +284 Up. SP500: 2,575 +183 Up.

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