Baltic Dry Index. 1477 +04 Brent Crude 63.35
“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.
The big news today, is President
Trump’s speech in South Korea on North Korea, and the response in North Korea,
China and Russia to it. At first glance
it seems to be a variant on Teddy Roosevelt’s “speak softly but carry a big stick” approach.
Since President Trump doesn’t do “softly,” this variant was shout loudly and
carry a very big stick, an improvement over President Trump’s previous
bellicose utterings on North Korea in recent months. We won’t really know China’s
reaction until President Trump reaches China later on his Asian victory tour.
In market news, I still suspect
that the Dow in the 23,000s will turn out to be the top for this long in the
tooth stock bubble. Virtually all of the good news is already in the market and
fully priced in, along with a whole lot of hopium, and aspirational tax
gibberish in Washington. Our global bubbly
stock markets markets, are perched atop a global mountain of unrepayable debt.
But with global interest rates rising, albeit in tiny baby steps at first, the
piper’s now coming round for his pay. It will be interesting to see if Uncle
Scam will pay or default, in the months ahead in 2018.
Asian Stocks Mixed as Dollar Slips on Tax News: Markets Wrap
By Andreea Papuc
Updated on November 8, 2017, 6:10 AM GMT
Asian stocks were mixed as a rally that lifted regional equities to the
highest levels in at least a decade stalled. The dollar came under pressure
after advancing against G10 peers amid concern about the progress of U.S. tax
reforms.
Japan’s Topix index closed at the highest level since 1991, while the
Nikkei 225 Stock Average fell to end just below its strongest level since
January 1992 reached on Tuesday. Stocks fluctuated in Hong Kong, where e-book
publisher China Literature Ltd. jumped as much as 81 percent above its IPO
price in its debut. S&P 500 Index futures declined. The dollar slipped
after a Washington Post report that Senate Republican leaders are considering a
delay in the implementation of a corporate-tax cut. Oil declined after recent
rallies.
Geopolitics remain a focus as U.S. President Donald Trump continues his
tour of Asia. Addressing South Korea’s National Assembly on Wednesday, he
called on all nations to deny aid and assistance to North Korea as a way to
choke off the rogue regime. He said he’s ready to offer North Korea “a path to
a much better future” if it puts an end to its nuclear ambitions. The U.S.
president aborted plans for a surprise visit to the demilitarized zone dividing
South Korea and North Korea earlier due to heavy fog.
Next stop for Trump: Beijing. The U.S. president is expected to tackle
issues such as North Korea and trade with his Chinese counterpart, Xi Jinping.
Trump then attends the Asia-Pacific Economic Cooperation summit in Vietnam
later this week, where he will be among 21 leaders including Xi and Russia’s
Vladimir Putin. North Korea and Saudi Arabia are like to be among the dominant
topics.
----Here are key events to watch out for this week:
- U.S. consumer sentiment probably cooled in early November from a more than 13-year high; the University of Michigan’s report is out on Friday.
- OPEC releases its World Oil Outlook.
- Thailand is expected to leave interest rates unchanged on Wednesday.
- Argentina’s central bank unexpectedly raised borrowing costs. Mexico, New Zealand and Malaysia are also holding monetary-policy meetings this week.
- The European Commission’s chief Brexit negotiator Michel Barnier and U.K. Brexit Secretary David Davis resume talks.
- Earnings season continues with announcements from Walt Disney Co., Adidas AG, and Siemens AG. European financial companies set to report include Banca Monte dei Paschi di Siena SpA, Credit Agricole SA, Allianz SE and Zurich Insurance Group AG.
More
In other news, all eyes are on
the rising terror in Saudi Arabia, and what it might eventually mean in the
markets. At this point no one knows, or even if it will have any impact at all.
Yet there’s a rising foreboding that the Saudi crackdown will be negative. No
more easy sourced finance. A much more tricky Aramco IPO. A payments bottleneck
building in the Saudi economy. A new war in the Middle East. A President Trump
that seems to have kicked it all off, but is now badly out of the loop. And
then there’s the Qatar boycott still festering away, and now Bahrain seems to
have run out of cash. Definitely time for risk off.
Saudi Arabia Says Only Private Accounts Suspended in Crackdown
By Matthew Martin, Vivian Nereim, Archana Narayanan, and Glen Carey
Updated on November 8, 2017, 4:47 AM GMT
Saudi Arabia said it has only frozen the bank accounts of individuals and
not those of the companies they own or manage, as the kingdom seeks to ease
tension among global investors over a crackdown that’s seen princes and
billionaires arrested.The action, described by Saudi authorities as an anti-corruption drive, applies only to individual accounts held by “persons of interest,” and not to corporate ones, Saudi Arabian Monetary Authority Governor Ahmed Abdulkarim Alkholifey said in a statement on Tuesday. “It is business as usual for both banks and corporates,” he said, adding that there are no restrictions on money transfers “through proper banking channels.”
The arrests, which included Prince Alwaleed bin Talal, one of the world’s richest men and a shareholder in such global companies as Citigroup Inc. and Apple Inc., have reverberated across board rooms and financial institutions in the biggest Arab economy and globally.
Earlier, three people with knowledge of the matter said the central bank ordered banks in the kingdom to freeze the accounts of dozens of individuals who aren’t under arrest. Already, as much as $33 billion in personal wealth belonging to the richest detainees has been put at risk.
More may be on the way: The regulator sent a list of hundreds of names to lenders, telling them to freeze any accounts linked to them, two of the people said. They asked not to be identified because the information is private. The Saudi attorney general said in a statement released Monday that weekend arrests of princes, businessmen and officials were only “phase one” of the anti-corruption drive.
More
Saudi Crackdown Widens as More Bank Accounts Said Frozen
By Matthew Martin, Vivian Nereim, and Archana Narayanan
November 7, 2017, 10:58 AM GMT Updated
on November 7, 2017, 1:05 PM GMT
Saudi Arabia’s surprise crackdown, which led to the arrests of princes,
billionaires and officials over the weekend, is expanding beyond those
previously detained in what authorities described as an anti-corruption drive.The central bank ordered banks in the kingdom to freeze the accounts of dozens of individuals who aren’t under arrest, according to three people with knowledge of the matter. Already, as much as $33 billion in personal wealth belonging to the richest detainees has been put at risk.
More may be on the way: The Saudi Arabian Monetary Authority sent a list of hundreds of names to lenders, telling them to freeze any accounts linked to them, two of the people said. They asked not to be identified because the information is private. No reason has been given for the actions and central bank officials didn’t immediately respond to a request seeking comment.
The weekend arrests of princes, officials and billionaires, included Prince Alwaleed bin Talal, one of the world’s richest men and a shareholder in such global companies as Citigroup Inc. and Apple Inc., reverberated across board rooms and financial institutions in the biggest Arab economy and globally. Saudi stocks fell.
Trump’s Backing
The move drew support from President Donald Trump but also raised concern among analysts that a power grab was underway. In all, 11 princes, four ministers and dozens of former ministers and well-known businessmen were taken into custody, according to Saudi media and a senior official who spoke on condition of anonymity.The arrests were under the auspices of an anti-corruption commission that King Salman set up on Saturday, headed by his son and heir, Prince Mohammed bin Salman. The king also dismissed Prince Miteb bin Abdullah from his post as head of the powerful National Guard, taking out one of the last princes who had survived a series of cabinet reshuffles promoting allies of the crown prince.
The detentions ordered by King Salman reinforced speculation that he was clearing any remaining obstacles to his son’s accession to the throne. But they were also lauded by many Saudis bearing the brunt of low oil prices who have long complained that the kingdom’s elite was above the law.
The Saudi attorney general said in a statement released Monday that weekend arrests of princes, businessmen and officials were only “phase one” of the anti-corruption drive.
----“It’s almost the equivalent of arresting Bill Gates to have Prince Alwaleed bin Talal under arrest,” Robert Jordan, former U.S. ambassador to Saudi Arabia, told Bloomberg TV on Monday. A genuine push against corruption would add to the credibility of Prince Mohammed’s push to prepare the economy for the post-oil era, including selling a stake in Saudi Aramco and bolstering non-oil revenue, he said.
“If it turns out to simply be a power grab, then I think it’s going to hurt the Saudis in the long run, and certainly hurt this crown prince,” Jordan said.
The crackdown has coincided with an escalation in tensions between Saudi Arabia and Shiite-ruled
Iran, its chief regional rival.
More
November 7, 2017 / 8:07 PM
Saudi mass arrests jolt markets but many see overdue swoop on corruption
RIYADH
(Reuters) - All major Gulf stock markets slid on Tuesday on jitters about Saudi
Arabia’s sweeping anti-graft purge, a campaign seen by critics as a populist
power grab but by ordinary Saudis as an overdue attack on the sleaze of a
moneyed ultra-elite.
U.S. President Donald Trump endorsed the crackdown, saying some of those
arrested have been “milking” Saudi Arabia for years, but some Western officials
expressed unease about the possible reaction in Riyadh’s opaque tribal and
royal politics.
Authorities detained dozens of top Saudis including billionaire Prince
Alwaleed bin Talal in a move widely seen as an attempt by Crown Prince Mohammed
bin Salman to neuter any opposition to his lightening ascent to the pinnacle of
power.
Admirers see it as an assault on the endemic theft of public funds in
the world’s top oil exporter, an absolute monarchy where the state and the
ruling family are intertwined.
“Corruption should have been fought a long time ago, because it’s
corruption that delays society’s development,” Riyadh resident Hussein
al-Dosari told Reuters.
“God willing, everything that happened ... is only the beginning of what
is planned,” said Faisal bin Ali, adding he wanted to see “correcting mistakes,
correcting ministries and correcting any injustices against the general
population.”
But some analysts see the arrests as the latest in a string of moves
shifting power from a consensus-based system dispersing authority among the
ruling Al Saud to a governing structure centred around 32-year-old Prince
Mohammed himself.
Investors worry that his campaign against corruption - involving the
arrests of the kingdom’s most internationally known businessmen - could see the
ownership of businesses and assets become vulnerable to unpredictable policy
shifts.
Saudi banks have frozen more than 1,200 accounts belonging to
individuals and companies in the kingdom and the number keeps rising, bankers
and lawyers said.
More
November 7, 2017 / 5:32 AM +
Saudi economy vulnerable as corruption probe hits business old guard
RIYADH (Reuters) - Two weeks ago the glitzy Ritz Carlton
hotel in Riyadh was the site of an international conference promoting
Saudi Arabia as an investment destination, with over 3,000 officials and
business leaders attending.
Now the hotel is temporarily serving as a luxury prison where some of
the kingdom’s political and business elite are being held in a widening
crackdown on corruption that may change the way the economy works.
By detaining dozens of officials and tycoons, a new anti-corruption body
headed by Crown Prince Mohammed bin Salman is seeking to dismantle systems of
patronage and kick-backs that have distorted the economy for decades.
But it is a risky process, because the crackdown is hurting some of the
kingdom’s top private businessmen - leaders of family conglomerates who have
built much of the non-oil economy over the past few decades.
Many industries could suffer if investment by these families dries up in
coming months, at a time when the economy has already fallen into recession
because of low oil prices and austerity policies.
Meanwhile, a new breed of state-backed companies is rising to compete
with the old guard; many of the new enterprises are linked to the Public
Investment Fund (PIF), the kingdom’s top sovereign wealth fund. But it is not
clear how smoothly the transition to these firms will happen.
“The rules of the game are changing. But they’re changing indiscriminately,”
said one financial analyst in the region, declining to be named because of
political sensitivities.
“Even people who thought they were within the rules don’t know if they
will still be within those rules tomorrow. There’s just uncertainty.”
Some private businessmen in Saudi Arabia are now trying to move their money out of the country “while they still can”, the analyst said.
More
“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.
November 7, 2017 / 12:12 PM
SocGen investigated over possible French anti-corruption law breach
Earlier
this year Societe Generale agreed to pay nearly 1 billion euros ($1.1 billion)
to settle a long-running dispute with the Libyan Investment Authority (LIA),
avoiding a costly and potentially embarrassing court case.
LIA, Libya’s sovereign wealth fund, had presented allegations that
trades were secured as part of a “fraudulent and corrupt scheme” involving the
payment of $58.5 million by SocGen to a Panama-registered company.
The bank said in an update to its 2016 annual report published on
Monday, that in September and October 2017 it had received judicial requests
from the French financial prosecutor.
“Societe Generale also received two judicial requests to produce
documents regarding its relations with the LIA in the scope of a preliminary
investigation opened by the French National Financial Prosecutor’s office
regarding possible violations of French anticorruption laws,” it said.
A spokesman for SocGen declined to comment further on Tuesday.
SocGen is also currently in discussions with U.S. authorities in order
to reach an agreement to resolve an investigation into potential violations of
the U.S. Foreign Corrupt Practices Act, in connection with certain transactions
involving Libyan counterparties, including the Libyan Investment Authority.
“Any such agreement would include a requirement that Societe Generale
pay a monetary fine and may in addition impose other sanctions,” the bank said
in the update, adding that it was impossible to determine with certainty the
amount of the fine.
“It is possible, without it being certain, that the pending discussions
lead to an agreement in the next weeks or months”.
The bank had 2.2 billion euros in litigation provisions as of
end-September.
November 7, 2017 / 9:41 AM
ECB looking at case-by-case solutions for soured bank credit
FRANKFURT
(Reuters) - The European Central Bank will look for case-by-case solutions to
resolve nearly 900 billion euros (£791.8 billion) worth of soured debt weighing
down the bloc’s banking sector, ECB supervisory chief Daniele Nouy said on
Tuesday.
The ECB has come under fire recently for proposing blanket provisioning
rules on new non performing loans and some critics, particularly in Italy, have
warned the ECB against setting similar rules for soured debt already on the
books.
“For the legacy (NPLs), well, the situation is very diverse, so it has
to be only case by case assessment and solutions,” Nouy told a conference. “We
are working with all the banks that have too high levels of non performing
exposures.”
“They have submitted their own plans to address the issue,” she said.
“We challenge those plans to make sure they are ambitious enough and they are
credible enough. To be credible, they have to be realistic; they can’t promise
us miracles.”
As Milton Friedman once
put it, if you’re spending your own money on yourself, you care about price and
quality. If you’re spending someone else’s money on yourself, you only care
about quality. If you’re spending your own money on someone else, you care only
about price. And if you’re spending someone else’s money on someone else, you
don’t care about either.
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?
Cost of wind keeps dropping, and there’s little coal, nuclear can do to stop it
An annual look at the costs of generating power.
Megan
Geuss - 11/6/2017, 6:08 PM
Though a lot has changed since 2016, not much has changed for energy
economics in the US. The cost of wind generation continues to fall, solar costs
are falling, too, and the cost of coal-power energy has seen no movement, while
the cost of building and maintaining nuclear plants has gone up. And none of
those conclusions reflect subsidies and tax credits applied by the federal
government.The conclusions come from Lazard (PDF), an asset management company that publishes cost estimates for various types of electricity-generation assets each year. Lazard’s numbers reflect the Levelized Cost of Energy (LCOE), which averages the estimated costs of construction, maintenance, and fuel for electricity-generating assets over the number of megawatt-hours that each asset is expected to produce over its lifetime. In other words, the LCOE is the lifetime cost of a turbine divided by the amount of energy that turbine will produce over its lifetime. LCOE is a good way of comparing electricity generation sources that vary dramatically in cost to build and cost to maintain.
The result, tracked over years, is one way of gauging how the US energy mix is changing and could change in the coming year. Though the new presidential administration was expected (and still is expected) to be a boon to coal and nuclear energy, those efforts are still mired in the political process. And even if they succeed, thwarting the cost advantages of wind and solar energy while propping up coal and nuclear power will require not-inconsiderable amounts of intervention from the US government.
According to Lazard, in the last year, the cost of onshore wind has fallen six percent and the cost of utility-scale solar has fallen six percent, too. Those cost reductions are slower than reductions in previous years, but the cost of coal-fired generation remained stagnant in 2017.
For coal, the cost of building and maintaining plants has hardly changed at all. Combined with the plummet in wind and solar panel prices, this can mean that in some scenarios, the operating costs of coal plants are more than the cost of building and operating renewables projects. “This is expected to lead to ongoing and significant deployment of alternative energy capacity,” a press release from Lazard says. The implication is that for some energy companies, the choice isn’t: “is it cheaper to build new coal or to build new renewables?" Instead the choice is: “is it cheaper to continue operating an existing coal plant or to build new renewables?”
The cost of building and maintaining nuclear plants has actually increased in the last six years as well. Lazar wrote that “the estimated levelized cost of energy for nuclear generation increased [approximately] 35 percent versus prior estimates, reflecting increased capital costs at various nuclear facilities currently in development." Facilities like the incomplete Vogtle and Summer nuclear plants made headlines this year due to their financial troubles in the wake of the bankruptcy of nuclear reactor designer Westinghouse.
Still, the cost of energy storage
hasn’t fallen quite as quickly as renewables advocates might have hoped. That
means that for now, individual renewable energy sources can’t always compete
with dispatchable energy on price alone. This has created a sticking point
politically. US Department of Energy Secretary Rick Perry has contrived
an argument that reliably meeting US energy demand means artificially propping
up coal and nuclear energy, while most grid
operators contend (PDF) that diverse renewable energy sources and
natural gas can meet demand with dwindling (but still considerable) support
from coal and nuclear.
But some encouraging numbers can be found in the energy storage analysis, too. Lithium-ion battery cost has declined a lot in recent years. In fact, Lazard says that lithium-ion batteries are generally the most economical to deploy, with a few application-specific advantages for zinc and vanadium flow batteries. Those numbers are just for utility-scale storage though. Commercial and residential storage is still incredibly expensive (and, currently, residential energy storage makes little economic sense for most US utility customers).
Storage is still nascent though. “Industry participants expect costs to decrease significantly over the next five years, driven by scale and related cost savings, improved standardization, and technological improvements,” Lazard writes, adding that increased demand could also spur some of that decrease in costs. Still, “the majority of future cost declines are expected to occur as a result of manufacturing and engineering improvements in batteries,” Lazard asserts. Those improvements may be significant, too, as Lazard reports that capital costs associated with installing lithium-ion batteries “are expected to decline as much as 36 percent over the next five years,” according to industry watchers that the firm spoke to.
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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