Baltic Dry Index. 1396 +11 Brent Crude 63.08
“We
must all hang together, or assuredly we shall all hang separately.”
Benjamin Franklin
As Americans trek off
to celebrate Thanksgiving with family and friends, food for thought.
But first this,
bubble on and then some. For those interested in how the American fowl called
turkey got its name turkey, scroll down to Crooks Corner. Blame it on those
daft Brits again.
“I am
hard-pressed to recall when any sort of bubble was accurately identified in
real time on the cover of a major media publication. If anything, the opposite
is true.”
Barry Ritholtz
November 22, 2017 / 4:33 AM /
Updated 2 hours ago
Hong Kong's Hang Seng breaks through 30,000 points, hits decade high
SHANGHAI, Nov 22 (Reuters) - Hong Kong’s benchmark Hang Seng Index broke
through the 30,000 point-mark on Wednesday for the first time in 10 years, amid
signs Chinese investors are stepping up buying Hong Kong blue chips such as
Tencent. China stocks also rose.
** The Hang Seng Index rose 0.9 percent to 30,087.73 points. Chinese
H-shares listed in Hong Kong rose 1.21 percent to 12,018.56.
** At 0409 GMT, the Shanghai Composite index was up 17.17 points or 0.5
percent at 3,427.66. ** China’s blue-chip CSI300 index was up 0.37 percent,
with its financial sector sub-index higher by 1.12 percent, the consumer
staples sector down 1.35 percent, the real estate index up 1.33 percent and
healthcare sub-index down 0.23 percent. ** The smaller Shenzhen index was down
0.16 percent and the start-up board ChiNext Composite index was weaker by 0.18
percent. ** Around the region, MSCI’s Asia ex-Japan stock index was firmer by
0.70 percent while Japan’s Nikkei index was up 0.76 percent. ** The yuan was
quoted at 6.6235 per U.S. dollar, 0.11 percent firmer than the previous close
of 6.6305. ** The largest percentage gainers in the main Shanghai Composite
index were SJEC Corp up 10 percent, followed by Zhonghang Heibao Co Ltd gaining
9.87 percent and Tianjin Hi-Tech Development Co Ltd up by 8.1 percent. **
More
November 22, 2017 / 2:27 AM /
Updated 4 hours ago
Nikkei buoyed by large-cap stocks on global rally
TOKYO, Nov 22 (Reuters) - Japan’s Nikkei share average rose on Wednesday
morning, buoyed by gains in large-cap stocks such as SoftBank, Fanuc and
financial companies as global growth hopes lifted the mood across world
markets.
The Nikkei gained 0.8 percent to 22,596.84 in midmorning trade.
Index-heavy large cap stocks such as SoftBank Group Corp gained 1
percent and Fanuc Corp added 0.9 percent.
Banks and insurers soared, with Sumitomo Mitsui Financial Group gaining
1.0 percent and Dai-ichi Life Holdings advancing 1.3 percent.
Meanwhile, the Tokyo Stock Exchange suspended trading in Nippon Paint
Holdings, after two people familiar with the matter said that the company made
an all cash offer on Tuesday to acquire U.S. coatings company Axalta Coating
Systems Ltd, a move which prompted the latter to end merger talks with peer
Akzo Nobel.
The broader Topix gained 0.6 percent to 1,780.82.
BlackRock Says Asian Stocks Can Extend Rally, Boosted by China
Bloomberg NewsThat’s according to Andrew Swan, BlackRock’s head of Asian and global emerging markets equities, who sees reforms in China and India as providing the impetus for growth.
Asian stocks will extend their rally, driven by global reflation from dynamics such as wage growth and strong earnings momentum, and higher commodity prices that support exports, Swan said. China focusing on structural reforms and India pushing for more economic growth before a national election in 2019 will underpin further increases in equities, he said in a statement.
More
Goldman Sees 14% Returns for Asia Ex-Japan Stocks Next Year
By Kana Nishizawa and Toshiro Hasegawa
Strong corporate earnings and favorable stock valuations will help one
of the world’s top-performing regions extend its runaway success in 2018,
according to Goldman Sachs Group Inc.
The U.S. bank says stocks in Asia excluding Japan will outperform next
year after staging a 33 percent rally in 2017 -- twice the gain achieved by the
S&P 500 Index. Goldman raised its 12-month target for the MSCI Asia Pacific
ex-Japan Index by 9.7 percent to 620 in a report released Wednesday, and favors
China, India and South Korea stocks.
Both corporate profits and the total return on the index will surge 14
percent next year, with earnings growth especially strong in the technology,
materials and insurance sectors, analysts led by Timothy Moe wrote in the
report. Markets can advance further if earnings growth is good and starting
valuations are moderate, they added.
The forward price-earnings ratio looks relatively inexpensive. Even
after this year’s surge, the Asian index trades at 14 times estimated earnings
-- 23 percent less than the record-breaking S&P 500 Index, according to
data compiled by Bloomberg.
More
Now back to planet Earth
and food for thought. Two recent articles that deflate all the hype and fake
news supporting the US stock market bubbles. If and when it all goes wrong, 2008-2009 might look like
a stroll in the park.
Why the Next US Recession Could Be Worse Than the Last
By Jacob Shapiro November 20, 2017
----- For all the optimism surrounding low unemployment rates and
record-high real median income, there are some signs that something is rotten
in the US economy. This isn’t wholly surprising – economic health tends to be
cyclical, and the US is due for a recession. But when the next recession comes,
there’s reason to believe it won’t be business as usual. The structural
problems that led to the 2008 financial crisis haven’t been fixed. If anything,
they’ve gotten worse.In January, we forecast that the signs of just such a recession would emerge by the end of the year. And emerge they have. The yield curve between short-term and long-term US Treasuries is the flattest it has been at any point in the past 10 years. One of my colleagues, Xander Snyder, wrote an excellent piece last week on this very subject, and I encourage you to familiarize yourselves with it if you have not already done so.
A flattening yield curve, as he points out, is a problem in its own right, as is a declining prime-age labor force unable to secure adequate wages. But there are other longer-term forces at work that threaten to make what should be a minor cyclical recession a much more painful and prolonged affair. The two most consequential of these forces are increases in total household debt and the continued growth of wealth inequality within the US economy.
Household debt in the United States is now almost $13 trillion. That figure exceeds total household debt at any point during or in the recovery period after the 2008 financial crisis. Housing debt has creeped back to pre-2008 levels. Credit card debt has reached pre-2008 levels too. Student loan debt has skyrocketed by 134 percent since the first quarter of 2008 (about 9 percent on average per year).
Increased
household debt, though, doesn’t mean the end is nigh; it just means people are
borrowing more money. Still, problems arise when people default on credit card
and consumer loans. In the second quarter of 2017, the delinquency rate on
credit card loans was 2.47 percent and on consumer loans was 2.21 percent. Low
though these rates may be, they are trending upward. Last month, shares of
JPMorgan Chase and Citigroup fell on the news that both banks had increased
their reserves for consumer loan losses – just under $300 million for JPMorgan
Chase and just under $500 million for Citigroup. Put simply, American consumers
are beginning to spend beyond their means.
More
serious than higher household debt, though, is increased income and wealth
inequality in the United States since the 1970s. In 2015, the top 10 percent of
all US earners accounted for just under 49 percent of total income – a share
greater than at any time during the Great Depression. The top 1 percent
accounted for 20 percent of total income. This kind of disparity is a refrain
in US economic history. It characterized the Gilded Age of the late 19th century
as well as the decade or so before the Great Depression. Both were eras of
immense wealth generation that benefited only the top, and both were rampant
with speculation – the railroads and oil in the Gilded Age, the stock market in
the Roaring Twenties. Today’s inequality is statistically more pronounced than
during both of those times in history.
Wealth
inequality was already increasing before the 2008 financial crisis, but what
happened in 2008 has exacerbated the problem. According to the Pew Research
Center, only upper income families have recouped the wealth they lost during
the financial crisis. Median wealth was roughly 40 percent lower for
lower-income families in 2016 than it was in 2007. It was roughly 33 percent
lower for middle-income families. The median wealth for upper-income families,
however, grew by 10 percent. The US economy may have recovered in terms of
top-line figures, but middle- and lower-income families have not. For those
hardest hit, the tales of recovery ring hollow.
-----
For the past 40 years in the US, the rich have been getting richer, the poor
have been getting poorer, and the middle class has been disappearing. The
crisis of 2008 was a global phenomenon, but in the US, it was also an episode
in an era of increasing inequality that began in the 1970s. The American dream
was never about just making ends meet – it was about social mobility and giving
your children a better life than you had growing up. That is beyond the means
of an increasing number of US households. When the next recession comes, it
will come as inequality reaches new heights, and if US history is any
indication, that will translate into massive political change.
A US Recession: Will Economic Change Mean Political Change?
Nov. 15, 2017 A recession that makes life more difficult for the poor but not for the
elite is inherently political.
By Xander Snyder
Economic duress can be the harbinger of political change – and sometimes geopolitical change. Think about the United States in the 1930s, or the Soviet Union in the 1980s, or the European Union any time in the past decade. In these instances and many others, leaders’ options for righting the economy were only as palatable as the political consequences they would incur.A case in point is the United States today. Like so many other countries, the U.S. is still coping with the social and economic fallout wrought by the 2008 financial crisis. The crisis may not have created Washington’s economic problems, but neither did it resolve them. And as those wounds continue to fester, it appears as though the U.S. is headed for recession.
Evidence to that effect is the flattening of the yield curve for U.S. Treasuries – a curve that is the flattest it’s been in 10 years. Usually, long-term debt has a higher interest rate to compensate investors for tying their capital up for longer. Declining interest rates on long-term debt, or higher rates on short-term debt, result in a narrower spread in the yield curve. (Visually, this looks like it is becoming flat.) The rare occurrence of an inverted yield curve – when short-term rates are higher than long-term rates – has on several occasions heralded a recession.
Yield vs. Security
A yield curve can flatten or become inverted in two ways: through higher short-term interest rates and through lower long-term ones. Both are now occurring at the same time. Since the 2008 recession, the Federal Reserve has maintained low interest rates, prompting investors to “search for yield.” In other words, they searched for higher returns in riskier investments.
Investors are now flocking to long-term treasuries to reduce risk, a sign that they believe the economy will fare poorly in the future. After 2008, when the Fed lowered interest rates, stocks and “junk bonds” – bonds with a low credit rating and higher interest rates – were purchased in greater numbers. Investors have since begun to sell stocks and junk bonds in exchange for more secure assets. CalPERS, the United States’ largest pension fund, which manages nearly $350 billion in assets, is reducing its exposure to stocks and overweighting high-rated debt. Similarly, capital from debt investment funds has begun to flow out of those in the high-risk category and into more secure ones.
The other way that a yield curve can flatten – higher short-term interest rates – is driven by monetary policy. The Fed has begun to raise rates, thanks in part to low unemployment, though inflation has remained below its target of 2 percent. The Fed typically adjusts its rates based on employment and inflation metrics. Too much inflation is dangerous because it lowers the value of money, but too little inflation is also dangerous because it can create unsustainably high levels of debt. Otherwise it can send an economy into a deflationary spiral, whereby prices constantly decrease and therefore discourage consumer spending. Rising interest rates in a low-inflation environment increase the risk of such a spiral.
Investors and the Fed are concerned that low inflation will play its part to suppress economic growth. The causes of this peculiar brand of low inflation, however, tell us something deeper about the U.S. demography.
Adequate Wages
Inflation is simply a measurement of price increases. The Consumer Price Index is frequently cited to determine inflation. It stands to reason, then, that if inflation is low, consumer spending is also low. This is in fact the case. Since the end of the 2008 recession, consumption expenditure growth – which tends to be a leading indicator of inflation, albeit a slight one – has generally stayed within a range of -1.5 percent to 2 percent. Consumer spending growth since 1980, on the other hand, rarely dipped below 0 percent and generally stayed between 2 percent and 4 percent.
Why is consumer spending – and therefore inflation – so low if the U.S. unemployment rate is likewise so low at roughly 4 percent? Shouldn’t employed people be spending money, and therefore driving higher inflation? The answer to that question lies both in the size of the labor force and the quality of the jobs that people are finding.
The unemployment rate, generically understood as the percentage of people without jobs, is a useful but sometimes misleading metric. It only calculates employed people as a percent of the labor force. It excludes people not actively searching for jobs (as determined by a number of criteria). This means that the unemployment rate can fall even as people leave the labor force. Participation in the labor force declined over the past decade, from 66 percent to 62.7 percent, which some have attributed to the retirement of baby boomers. This is only partly true. The labor force participation rate for workers in their “prime” years – 25 to 54 years – declined from 83.3 percent in 2008 to 81.6 percent today. In fact, the participation rate for workers of all ages declined over the past decade except for those over 55 years of age.
While the increase in the participation rate for those over 55 may seem counterintuitive – given that they are the retiring baby boomers – participation rates for those over 55 and 65 are much lower than for younger workers. Further, retiring baby boomers make up a larger portion of the population than they did a decade ago, so you can actually have an increasing participation rate in older categories with fewer actual workers in the market. The result is a shrinking labor force, and slow growth in consumption expenditure.
The second factor has to do with the quality of employment. The U.S. personal savings rate, declining since 2012, is at a near-record low of 3.1 percent. Despite low and relatively steady consumer expenditure growth, people are still not able to save as much as they did before 2012. (In fairness, the lowest savings rate in the past 50 years came just before the 2008 crisis.)
Taken together, these two metrics suggest that people have jobs – just perhaps not ones that can cover their living expenses.
More
Elsewhere, more red
flags.
China Is Stepping Up the Fight Against Its Mountain of Debt
Bloomberg News
November 21, 2017, 10:30 AM GMT
China’s drive to reduce its debt burden has shifted into a higher gear
following the Communist Party’s twice-a-decade congress in October.Regulators have set their sights on a key pressure point -- shadow banking -- with rules around asset-management products tightened last week as they seek to bring the market under control.
But these popular, high-yielding products are just one slice of China’s sizable banking leverage pie, characterized by state media as the “original sin” of the financial system.
Even if credit growth eases, China’s debt is on track to be more than three times the size of the economy by 2022, Bloomberg Economics estimates. To understand why Beijing is taking on this challenge, you need to break it down.
While the drive to reduce the debt load has been having an impact, China still has a ways to go -- as these charts show.
Leverage has been swelling over the past decade, partly because policy makers were trying to cushion a slowdown in growth from the old normal of 10 percent plus. What’s fueled the debt machine has been a rapid expansion in household and corporate wealth looking for higher returns in a system where bank interest rates have been held down.
The equivalent of trillions of dollars are held in all manner of assets in China, from the high-return wealth management products to so-called entrusted investments.
Taking the heftiest piece of the leverage pile first, wealth management products have had a precipitous rise over the past few years, but now seem to be feeling the heat of deleveraging. This is the asset class that is coming under renewed scrutiny from regulators.
More
“Speculative
bubbles do not end like a short story, novel, or play. There is no final
denouement that brings all the strands of a narrative into an impressive final
conclusion. In the real world, we never know when the story is over.”
Robert Shiller
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today for Americans, a trip down Forgotten Memory Lane.
Why A Turkey Is Called A Turkey
November 27, 200812:03 AM ET
Here's the puzzle:
The bird we eat on Thanksgiving is an exclusively North American animal.
It is found in the wild on no other continent but ours. It evolved here. So why
is this American bird named for a Eurasian country?
To find out, I went back to an interview I did almost 30 years ago on
NPR's Morning Edition with Mario Pei, a Columbia University professor of
Romance languages, who died shortly after our conversation.
I return to his answer because it is still the best one available.
Professor Pei had two theories.
First, in the 1500s when the American bird first arrived in Great Britain, it
was shipped in by merchants in the East, mostly from Constantinople (who'd
brought the bird over from America).
Since it wholesaled out of Turkey, the British referred to it as a
"Turkey coq." In fact, the British weren't particularly precise about
products arriving from the East. Persian carpets were called "Turkey
rugs." Indian flour was called "Turkey flour." Hungarian carpet
bags were called "Turkey bags."
If a product came to London from the far side of the Danube, Londoners
labeled it "Turkey" and that's what happened to the American bird.
Thus, an American bird got the name Turkey-coq, which was then shortened to
"Turkey."
Or…Theory No. 2 (and maybe both theories are correct): Long
before Christopher Columbus went to America, Europeans already had a wild fowl
they liked to eat. It came from Guinea, in Western Africa. It was a guinea
fowl, imported to Europe by, yes, Turkish merchants. It was eaten in London. So
it got the nickname Turkey coq, because it came from Constantinople.
When British settlers got off the Mayflower in Massachusetts Bay Colony
and saw their first American woodland fowl, even though it is larger than the
African Guinea fowl, they decided to call it by the name they already used for
the African bird. Wild forest birds like that were called "turkeys"
at home.
Why not use the same name in Plymouth? And Boston? And Rhode Island? So
a name attached to an African bird got reattached to an American one.
The point is for 500 years now, this proud (if not exactly brilliant)
American animal has never had a truly American name.
And just to keep this ball rolling…all over the world, people now can
eat American Turkeys, but they don't call them Turkeys.
Across Arabia, they call our bird "diiq Hindi," or the
"Indian rooster."
In Russia, it's "Indjushka," bird of India.
In Poland, "Inyczka"— again "bird from India."
And what, we wondered, do the Turks call our turkey?
Well, they call it "Hindi," again, short for India.
So in 1492, because Columbus wanted to be in the "Indies," our
North American bird got robbed of its American-ness, which is why tonight, when
you look down at your turkey, don't call it "sahib."
The First Thanksgiving Parades Were Riots
The Fantastics parades were occasions of sometimes-violent revelry
By Kat Eschner November 20, 2017 9:59AM
Turkey, cranberry sauce, stuffing, family… Thanksgiving is a cluster of
family traditions. But once upon a time, for some Americans, it was more
like a carnival.
Modern Thanksgiving celebrations date back to around the Civil War, when
Abraham Lincoln issued a proclamation setting a specific day for Thanksgiving
in November. However, Thanksgiving celebrations stretch back much farther than
that in American history. One of the things modern Thanksgiving erased, writes historian Elizabeth Pleck, was its previous rowdy
associations, which were pretty much the opposite of what the holiday is now.For poor people, she writes, the holiday was “a masculine escape from family, a day of rule breaking and spontaneous mirth.” It wasn’t all fun and games, either: “Drunken men and boys, often masked, paraded from house to house and demanded to be treated,” she writes. “Boys misbehaved and men committed physical assaults on Thanksgiving as well as on Christmas.”
From this culture of “misrule” came the Fantastics. This group of pranksters, often dressed as women, paraded through the streets. “The Fantastics paraded in rural and urban areas of eastern and central Pennsylvania and New York City on Thanksgiving, New Year’s Eve and Day, Battalion Day, Washington’s Birthday and the fourth of July,” she writes. And unlike the loose groups of boys and men who middle and upper-class people feared, “Fantastical” parades were regarded as good fun.
“These were real processions, with some men on horseback and men in carts and men in drag,” Pleck told The Washington Post’s Peter Carlson. “They would march through New York and they would end up in the park, where there would be a rowdy, drunken picnic.”
Slowly, though, middle- and upper-class people, who had influence with the police and the press, became afraid of any kind of street rowdiness and the subsequent crackdown stopped the parades. But the legacy of the Fantastics lived on, in the tamed treat-or-treat spirit of Halloween and in occasional parades in some places. Today, we think of the Thanksgiving parade as an orderly affair, but in the 19th century, historian Josh Brown told Carlson, “the notion of a parade was to participate.”
Bob Newhart on Sir Walter Raliegh.
“They
tell us, sir, that we are weak; unable to cope with so formidable an adversary.
But when shall we be stronger? Will it be the next week, or the next year? Will
it be when we are totally disarmed, and when a British guard shall be stationed
in every house? Shall we gather strength by irresolution and inaction? Shall we
acquire the means of effectual resistance by lying supinely on our backs and
hugging the delusive phantom of hope, until our enemies shall have bound us
hand and foot? Sir, we are not weak if we make a proper use of those means
which the God of nature hath placed in our power.”
Patrick Henry
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?
China on Pace for Record Solar-Power Installations
Bloomberg News
November 20, 2017, 8:57 AM GMT Updated
on November 20, 2017, 4:01 PM GMT
China, the world’s biggest carbon emitter, is poised to install a record
amount of solar-power capacity this year, prompting researchers to boost
forecasts as much as 80 percent.About 54 gigawatts will be put in place this year, Bloomberg New Energy Finance said Monday, raising a forecast of more than 30 gigawatts made in July. That amount of additional capacity would likely surpass all the solar energy generated in Japan in 2017.
“The amount of rooftop solar plants and projects aimed at easing poverty were more than expected and developers rushed to build some ground-mounted solar projects before they have been allocated subsidies,” said Yvonne Liu, a BNEF analyst in Beijing.
The growth of the market has benefited top panel producers, including JinkoSolar Holding Co. and Trina Solar Ltd. China installed 43 gigawatts of solar power in the first nine months of 2017, already above the 34.5 gigawatts for all of last year.
China has been the world’s biggest solar market since 2013. It surpassed Germany as the country with the most installed photovoltaic power capacity two years ago.
CCB International Securities Ltd. raised its forecast for China’s solar power capacity to 55 gigawatts from 40 gigawatts for 2018, according to a Nov. 17 note.
“We have a bright outlook for the entire supply chain of China’s solar sector as new policies are introduced to liberalize direct power sales for distributed power generation and based on our assumption of tariff hikes and a higher renewable surcharge in 2018,” CCB said.
Half of all additions to China’s electricity generating capacity since 2013 have been renewables or nuclear, according to the International Energy Agency. By 2040, the IEA sees renewables accounting for 40 percent of total power generation. Coal, which contributes about 67 percent of generation now, will fall to 40 percent over that period.
“Our
properties within our own territories [should not] be taxed or regulated by any
power on earth but our own.”
Thomas Jefferson
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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