Baltic Dry Index. 1374
-31 Brent
Crude 62.01
"Let's
make sure that there is certainty during uncertain times in our economy."
President
George W. Bush
Both stock and
commodity markets, and a sagging Baltic Dry Index, are signalling trouble
ahead. Buy more stocks, is the fashionable wisdom of mainstream media and the
stock market shills, but to this old dinosaur, the markets are signalling extreme
caution here.
The outgoing tide of ever lower interest rates since 1981 has
ended, and the slack tide seems to me to have ended too. An incoming tide of
higher interest rates, lagging higher returning inflation, is probably what’s
in store for 2018-2020, even if it all kicks off with tiny baby step rate
increases. Far from continuing to spike the punch-bowl, the Fed seem likely to
take it entirely away in 2018.
But will the world
get a “get out of jail” break, with a commodity price collapse as China cuts
back? To this old dinosaur, the answer
is possibly, but not probably. If the
European economy and the US economy, really are finally reaching escape
velocity, as some of the economists say is happening, any slow down in China is
likely only to be temporary and slight. That “possibly” might just turn out to
be a passing mirage.
Below, as rates rise,
stocks usually fall.
Remember
that there is nothing stable in human affairs; therefore avoid undue elation in
prosperity, or undue depression in adversity.
Socrates
U.S. Inflation, Retail Data Show Economy Ready for Fed Rate Hike
By Sho Chandra
The U.S. economy delivered a double win for the Federal Reserve in
October with an encouraging pickup in inflation and an unexpected gain in
retail sales, further solidifying expectations that policy makers will raise
interest rates next month.
The consumer-price index excluding food and fuel accelerated on an
annual basis for the first time since January, while the overall cost of living
rose in line with forecasts, a Labor Department report showed Wednesday. The
rise in retail sales last month followed a bigger September advance than
previously estimated, according to Commerce Department figures.
Together, the reports are “a reflection on the fairly solid economic environment we’re currently enjoying,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. “Inflation is moving closer to the Fed’s target on the core. A December rate hike seems fairly certain, and justifiable,” and “the outlook for consumer spending looks good.”
Investors on Wednesday saw a 93 percent chance of a Fed interest-rate increase in December, up from 91 percent yesterday. U.S. stocks and yields on 10-year Treasuries were lower as new obstacles emerged on a tax plan.
Higher costs for shelter, medical care, air fares and used vehicles produced a broad-based advance in core CPI, signaling businesses may get more pricing power over time.
While the price gains also helped to boost retail sales -- since those data aren’t adjusted for inflation -- demand looked resilient heading into the holiday shopping season as consumers purchased more furniture, electronics and clothing, and spent at restaurants.
More
November 15, 2017 / 8:06 AM
Fed should signal tolerance for higher U.S. inflation, Evans says
LONDON
(Reuters) - Chicago Federal Reserve Bank President Charles Evans on Wednesday
said he is worried about a drop in U.S. inflation expectations, and called for
the U.S. central bank to respond by flagging the likelihood of higher inflation
ahead.
“When
I look at the downward drift in multiple expectations measures, I find it
tougher to confidently buy into the idea that inflation today is just
temporarily low once again,” Evans said in remarks prepared for delivery to the
UBS European Conference in London.
To prevent low inflation expectations becoming entrenched, he said, “our
public commentary needs to acknowledge a much greater chance of inflation
running at 2-1/2 percent in the coming years than I believe we have
communicated in the past.”
Evans, a voter this year on Fed policy, did not say in his prepared
remarks whether he would support an interest-rate hike in December, as many of
his colleagues have said they would, and as markets overwhelmingly expect.
But his comments suggest he has become increasingly frustrated with
falling inflation, despite an economy he said is headed for “continued solid
growth” in 2018.
Evans warned Wednesday that unless the Fed addresses falling inflation
expectations, “we could be in for the kind of trouble that Bank of Japan has
faced for so long.”
Inflation by the Fed’s preferred measure, core personal consumption
expenditures (PCE), was just 1.3 percent in September, even though the
unemployment rate, at 4.1 percent, suggests the U.S. economy is at full
employment.
More
Stock Market Rings Alarm Bells on Rising Corporate Leverage
Dani Burger and Cormac MullenGlobal stocks with the lowest debt-to-equity ratios, a measure of balance-sheet strength, are outperforming those with the highest ratios, according to Bloomberg calculations. The data exclude financials, where gearing ratios tend to be higher than in other industries.
“Aversion to highly leveraged companies is increasingly visible; over
the last few weeks the beta of bad balance to good balance sheet companies has
been negative,” said strategists at Societe Generale SA including Andrew
Lapthorne in a recent note. “To put it more simply, one group has been going up
whilst the other has been going down.”
In another indication that money managers are showing a clear preference
for cash-rich companies, a global strategy betting on highly leveraged
companies while shorting the least geared, as measured by net debt to equity
ratios, would have lost money for the past 10 months. That’s the longest losing
streak since 2010, data compiled by Bloomberg show.
Another case in point: U.S. stocks with strong balance sheets are outperforming those with the weakest financials, with the ratio between the two near the highest in four years, according to a basket of companies compiled by Goldman Sachs Group Inc.
Meanwhile, a record net 23 percent of equity investors reckon corporate balance sheets are over-leveraged, according to a fund-manager survey this month by Bank of America Merrill Lynch.
More
Stocks Fall, Treasuries Rise as Commodities Slump: Markets Wrap
By Randall Jensen
Updated on November 15, 2017, 9:05 PM GMT
U.S. stocks fell to a three-week low, while the dollar slumped with
Treasury yields as concerns persisted over global growth and the prospects for
tax cuts.
The S&P 500 notched its fourth drop in five days, retreating from
near session highs in the final half hour of trading on a report that a key
Republican opposes the Senate’s latest tax bill. Energy shares led declines as
crude continued its slide toward $55 a barrel. A renewed commodities slump
overshadowed data showing the U.S. consumer remains robust, while inflation
data helped boost bank shares.
The
latest batch of data from the U.S. helped ease concern that the world’s
economic growth engine was starting to sputter after the flattest yield curve
in a decade spooked investors. Stocks still fell partly on the threat that
cracks in the market for high-yield debt could spread and on new obstacles to
the passage of tax reform. At the same time, weak data out of China stirred
anxiety of a slowdown there, sending commodities prices into a tailspin.
----Here are some key events investors are watching this week:
- Bank of England officials address the bank’s future on Thursday, while European Central Bank chief Mario Draghi speaks Friday.
- A string of Fed appearances may further illuminate the FOMC’s commitment to a December hike.
More
Fear of Glut Grips Commodities as Xi Shifts China Economic Focus
By Heesu Lee and Luzi-Ann Javier
November 14, 2017, 8:19 PM GMT Updated
on November 15, 2017, 6:15 AM GMT
A slowdown in the world’s biggest consumer of most commodities is reviving
fears over a glut in raw materials.The Bloomberg Commodity Index extended declines after sliding the most in six months on Tuesday. Futures in China also plunged in overnight trading. Concern is increasing that demand will weaken as the world’s second-biggest economy dials back amid a pledge by President Xi Jinping to focus on the quality of expansion rather than the pace of it. Nickel, iron ore and oil all dropped, and shares of resources companies slipped in Asia.
After
signs of tighter supply and stronger demand drove a rally from late June
through early this month, commodity investors are now weighing whether they
were too optimistic. The Chinese slowdown is seen hurting
metals use. In the oil market, U.S. production is rising and an extension of
OPEC-led output curbs to ease a glut suddenly looks uncertain amid Russian hesitation. World wheat and
soybean inventories are expected to
reach a record.
“China
focusing on the quality of economic expansion signals the pace of its growth
will slow, which is pretty bad for commodities,” said Will Yun, a
commodities analyst at Hyundai Futures Corp.
“Although the market widely
believes the supply cuts led by OPEC will extend until next year and Russia
will eventually follow Saudi Arabia’s lead, U.S. shale producers will continue
to put downward pressure on oil prices.”
---- Latest Chinese data show factory output and fixed-asset investment all expanding at a weaker pace, while home sales fell by the most in nearly three years. Stringent air pollution curbs have also hit factory production and a slowdown in credit may weigh on the economy in the fourth quarter.
China’s Sated Commodity Beast Is Going Into Hibernation: Gadfly
Iron ore for January dropped as much as 4.6 percent on the Dalian Commodity Exchange, the biggest decline in almost three weeks, amid output cuts at steel mills in China to ease pollution during winter.
“Prices of metals tend to adjust around the year-end, while China’s battle against pollution tends to further erode demand over winter,” said Hyundai Futures’ Yun. That means declines driven by seasonal factors may be short-lived, he said. China’s economy is on track for its first full-year acceleration in seven years.
More
"From a strictly economic point of view, buying gold in a major inflation and holding it probably presents the least risk of capital loss of any investment or speculation."
Henry Hazlitt
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, does history repeat?
The
wind of change is blowing through this continent. Whether we like it or not,
this growth of national consciousness is a political fact.
UK
Prime Minister Harold Macmillan to the Parliament of South Africa, on 3
February 1960 in Cape Town.
Mugabe’s Era Comes to an End as Zimbabwe’s Military Seizes Power
By Godfrey Marawanyika, Desmond Kumbuka, and Brian Latham
Updated on November 16, 2017, 4:06 AM GMT
Zimbabwe’s military seized power and detained 93-year-old President
Robert Mugabe in a struggle over the succession of the only leader the African
nation has ever known.
Mugabe was confined at his home, while Zimbabwe Defense Forces spokesman
Major-General
Sibusiso Moyo said in a televised address that the military
action was “targeting criminals around him who are committing crimes.”
Ministers in Mugabe’s administration have been accused of corruption.
Troops took control of the state-owned broadcaster and sealed off
parliament and the central bank’s offices, while armored vehicles were
stationed in the center of the capital, Harare.
The
military intervention followed a week-long political crisis sparked by Mugabe’s
decision to fire his long-time ally Emmerson Mnangagwa as vice president in a
move that paved the way for his wife Grace, 52, and her supporters to gain
effective control over the ruling party. Nicknamed “Gucci Grace” in Zimbabwe
for her extravagant lifestyle, she said on Nov. 5 that she would be prepared to
succeed her husband.
The takeover comes at a delicate moment for Zimbabwe, where an
estimated 95 percent of the workforce is jobless and as many as 3 million
Zimbabweans have gone into exile. With an economy that has halved in size since
2000 and relies mainly on the dollar because it has no currency of its own, a
severe cash shortage is choking businesses and forces some people to sleep in
the streets near banks to ensure they can make withdrawals, which are confined
to as little as $20 a day.
President Jacob Zuma of neighboring South Africa called for calm and
urged the military to maintain the peace. Western governments urged their
citizens in Zimbabwe to remain indoors.
More
Angola’s President Fires Dos Santos’ Daughter as Sonangol Boss
By Candido Mendes and Henrique Almeida
November 15, 2017, 2:20 PM GMT
Angolan President Joao Lourenco dismissed Isabel dos Santos, the daughter of former
President Jose Eduardo dos Santos, as chair of state-owned oil company
Sonangol.Dos Santos, Africa’s richest woman, was relieved of her post along with the entire board of Sonangol,
according to a presidential statement. She will be replaced by Carlos Saturnino, who was fired from Sonangol by Dos Santos last year. Saturnino was recently appointed secretary of state for oil and put in charge of a 30-day review of the sector.
Dos Santos’ dismissal “wasn’t unexpected given the changes that we saw taking place before today,” Gary van Staden, an analyst at NKC African Economics in Paarl, South Africa, said by phone. “I think this is the start of the end of the Dos Santos’ family influence in Angola.”
Since replacing the 75-year-old Dos Santos as president in September, Lourenco has vowed to end monopolies and fight corruption in a country where the former leader’s family and their allies control huge sectors of the economy. Before today’s dismissals, Lourenco fired the governor of the central bank, the head of diamond company Endiama and the boards of all three state-owned media companies.
The firing of Isabel dos Santos marks the first time Lourenco has directly targeted the family of former president Dos Santos, who ruled Africa’s second-biggest oil producer for 38 years and appointed his eldest daughter to the helm of Sonangol last year.
Her younger brother, Jose Filomeno, heads Angola’s $5 billion sovereign wealth fund, and has come under fire following a report by Swiss newspaper Le Matin Dimanche this month claiming the fund’s assets are being mismanaged.
Angola is struggling to recover from a drop in crude prices and the impact of a civil war that ended in 2002. After expanding for 14 consecutive years, the economy posted zero growth last year in a country where more than a third of the population of 27 million lives on less than $2 a day, according to the World Bank.
Apart from her former job at Sonangol, Isabel dos Santos also controls Unitel, Angola’s largest mobile-phone company. She owns Candando, a supermarket chain, and has stakes in Angolan lenders Banco BIC and BFA and several companies in Portugal. Bloomberg estimates her net worth at $2.5 billion.
https://www.bloomberg.com/news/articles/2017-11-15/angola-new-president-fires-dos-santos-daughter-as-sonangol-boss
As a fellow member of the Commonwealth it is our earnest desire to give South Africa our support and encouragement, but I hope you won't mind my saying frankly that there are some aspects of your policies which make it impossible for us to do this without being false to our own deep convictions about the political destinies of free men to which in our own territories we are trying to give effect.
"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."
Henry Hazlitt
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?
TruckWings spread at speed to reduce drag, save fuel
November
15, 2017
XStream Trucking has introduced its TruckWings
active cab-to-trailer aerodynamic system to the North American market. In its
prototype form, called GapGorilla, it won the company first prize in the 2016
First Look West (FloW) competition run by Caltech's Resnick Sustainability
Institute. Now its shape-shifting approach to reducing drag is heading for the
highway with the promise of fuel savings of up to five percent.
With fuel accounting for a significant proportion
of truck running costs these days, the quest for fuel efficiency has been
attracting increasing attention. While engine, transmission and tire
efficiencies continue to improve and yield useful gains, several research
studies have indicated that reducing aerodynamic drag can contribute fuel
savings of as much as 12 percent. Consequently, cab-forward designs on
long-haul trucks have dwindled as flowing lines have been adopted on
engine-forward cabs, and side skirts, under-body fairings, wheel covers and
trailer tails have become mainstream equipment. Alongside those, there have
been several products designed to reduce the substantial drag introduced by the
gap between the cab and the trailer.
Because the rig must be able to turn tightly with the cab rotating at an
angle to the trailer, there has traditionally been a large gap there that
creates a zone of low-pressure turbulence. Attempts to reduce this problem have
included trim tabs installed around the cab periphery to smooth the air flow
across the gap, curved bulkheads that extend forward from the trailer, fixed
skirts mounted around the cab sides and roof, and telescoping fifth-wheel
dollies that automatically reduce the gap at highway speeds. XStream Trucking's
approach is to literally close the gap at highway speeds and, according to the
company, TruckWings can reduce fuel consumption by between three and five
percent.
"TruckWings is the first device which completely solves the
turbulence problem created by the open area between the tractor and trailer
that contributes significantly to a truck's overall aerodynamic drag,"
says Daniel Burrows, XStream Trucking's founder and CEO. "Since two thirds
of a truck's fuel bill is spent overcoming that drag, there is a huge savings
to be had by reducing it."
The patented TruckWings design incorporates folding panels made of
impact-resistant, glass-reinforced composites attached to the rear sides and
roof of the cab that automatically swing out to close the cab-to-trailer gap at
highway speeds, and retract against the rear of the cab at lower speeds to
leave room for turning maneuvers.
XStream Trucking has developed the technology during the last few years,
initially validating the concept using computational fluid dynamics and then
conducting wind tunnel modeling at the Environmental Protection Agency (EPA)
SmartWay-approved Automotive Research Center in Indianapolis. With the wind
tunnel tests suggesting a fuel saving of up to four percent on sleeper cabs,
on-track tests were conducted with independent supervision by Canada's
sustainable transportation organization, the PIT Group, and then real-world
fuel saving tests were run on public highways and witnessed by the North
American Council for Freight Efficiency (NACFE).
More.
It is a fraud to borrow what we are unable to pay.
Publilius Syrus. 1st Century BC, Roman Writer.
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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