Baltic Dry Index. 1743 +16 Brent Crude 63.86
“Adam Smith” aka George Goodman
The big news today
will be what the Fed does with its key interest rate later today, and what it
signals for interest rates in 2018. But that news is likely to be swamped by
political news in America and what it might mean for US political instability
in 2018. Neither event seems likely to
disturb the current manias underway in stocks, bitcoin and crypto-currencies.
We are living in our own 21st century version of 1929.
But will the ending
be different this time round, in our fiat currency, new arriving age of crypto-currencies,
rising interest rates, robotics, and artificial intelligence? We can also add to that list, Brexit, and
soaring political instability on both sides of the Atlantic. Plus there’s still
the Great Ponzi Scheme also known as China. 2018 has all the right boxes ticked
for TROUBLE. What happens if inflation returns?
Below this morning’s instalment
of Wall Street Trouble.
"a company for carrying out an undertaking of great advantage, but nobody to know what it is".
The South Sea Bubble 1720
Dow, S&P 500 finish at records as Fed meets; Nasdaq bucks trend
Published: Dec 12, 2017 5:02 p.m. ET
The S&P 500 and the Dow closed at records for a fourth session in a row
Tuesday as the Federal Reserve kicks off its two-day meeting, but the Nasdaq
bucked the trend to head south.The central bank’s Federal Open Market Committee is widely expected to announce its third and final interest-rate hike of 2017 on Wednesday, but investors want to see what the policy-making body signals about 2018.
How did the main benchmarks fare?
The S&P 500 SPX, +0.15% rose 4.12 points, or 0.2%, to 2,664.11. Telecoms and financials led the gains, while utilities and energy shares lagged behind.
The Dow Jones Industrial Average DJIA, +0.49% advanced 118.77 points, or 0.5%, to 24,504.80.
The Nasdaq Composite COMP, -0.19% slid 12.76 points, or 0.2%, to 6,862.32 as semiconductor stocks posted losses. The Philly Semiconductor Index SOX, -1.00% fell 1% to 1233.18.
The three equity gauges have scored strong gains in 2017, helped by factors such as an expanding U.S. economy, rising corporate profits, anemic expected returns for other assets and bets that the Trump administration will deliver tax cuts and other business-friendly policies.
----The Fed’s policy makers started their meeting Tuesday and
will announce their interest-rate decision at 2 p.m. Eastern time on Wednesday.
The announcement will be followed by departing Fed chief Janet Yellen’s last
news conference in that role.
----A November reading on small-business confidence rose to its second-highest level on record.
U.S. producer-price index jumped 0.4% in November and is up 3.1% over the past 12 months.
More
Bitcoin futures settle slightly lower, while ‘altcoins’ surged in investing mania
Published: Dec 12, 2017 6:00 p.m. ET
U.S. bitcoin futures settled slightly lower on Tuesday in the second full
day of trading for the No.1 digital currency, while the price of rival
cryptocurrencies soared to records amid a fervor for virtual assets. Bitcoin futures expiring in January XBTF8, -2.33% settled at $18,020, down 2.8% from the prior day’s settlement at $18,545, according to Cboe Global Market Inc.’s exchange.
Spot prices of bitcoin BTCUSD, -2.57% late Tuesday were trading at $17,426, representing a gain for the day of about 4.4%, according to CoinDesk. Many investors have noted the disparity in values between the spot price of bitcoin on various exchanges and its futures premium, with expectations that that gap will narrow as futures trading matures.
“A wave of short sellers hasn’t hit the market, and we see firmer bitcoin futures and a new all-time high in the bitcoin price,” said Chris Weston, chief market strategist at IG, in a note.
Cboe rival CME Group Inc. CME, +0.21% is slated to launch a bitcoin futures on Dec. 18.
“One suspects this coming Monday’s CME futures launch will attract a touch more liquidity, and that is exactly what the futures market needs right now,” Weston said.
On Monday, bitcoin futures surged as high as $18,850, after exchange operator Cboe launched trading of the contracts on Sunday at 6 p.m. Eastern Time, at a debut level of $15,000. The sharp move higher set off trading halts on Sunday.
Bitcoin climbed to a new all-time high on Monday of just below $17,400 before easing. It first topped the $17,000 mark last week.
Opinion: Yes, the rise of bitcoin has all the hallmarks of a disaster waiting to happen
Published: Dec 12, 2017 9:10 p.m. ET
----For the record, I’m not calling a
top in the cryptocurrency space. Market timing in general is a fool’s errand,
and particularly troublesome with a phenomenon like bitcoin BTCUSD, -3.03% that has surged
17-fold in the last year while the S&P 500 SPX, +0.15% is up about 18%.I am actually quite impressed with the value of blockchain as part of the global economy. The technology behind bitcoin has real utility, even if I think the valuation of the digital currency itself is a bit crazy right now.
But when you take a hard look at the last few years, it’s hard to deny that the run-up is starting to look shaky. And compared with past events, the rise of cryptocurrencies has all the hallmarks of a disaster waiting to happen.
Here’s what a bitcoin bubble looks like:
It starts as a phenomenon that’s enjoyed by a small group of speculators who see huge success. But eventually the investment transcends normal investing barriers. Fans of hard assets like gold see bitcoin as a similar bet against financial disaster. On the other end of the spectrum, aggressive growth investors draw correlations between bitcoin’s rapid growth and high-tech utility just like Amazon.com. AMZN, -0.33%
After the phenomenon gains broader appeal in the investing world, general interest publications jump in. It starts innocuously with profiles and explainatory pieces meant to demystify a fashionable trend. But eventually, it becomes a feeding frenzy. Media outlets go out of their way to cover a given investment theme just to prey on that interest — like comparing Republican tax cuts in some weird way to bitcoin on the Huffington Post.
And why shouldn’t we be captivated, considering stories like the Winklevoss twins becoming bitcoin billionaires — or better yet, the “crypto castle” where a bunch of San Francisco millennials living in the same house have become bitcoin millionaires overnight. The stories are simply too much to pass over, and help fuel hope as well as interest in the investment.
Meanwhile, predictions go from simply credulous forecasts of success to outlandish targets seemingly derived only for shock value. Like a prediction that one bitcoin will be worth $1 million by 2020.
At the same time, the early warnings or downside predictions are thrown back in the face of the media and Wall Street fat cats who were foolish enough to doubt the trend. They are “panic sellers” for jumping out too soon, or declaring bitcoin is a bubble is just “sour grapes” where “they missed the boat but are too proud to admit they didn’t grasp the significance.” The bulls are right and the bears are wrong, forevermore.
More
Tesla stock extends surge to defy bearish ‘death cross’ chart pattern
Published: Dec 12, 2017 4:09 p.m. ET
Tesla Inc.’s stock extended gains Tuesday above two widely followed moving
averages for the first time in weeks, in apparent defiance of an impending
bearish technical event known as a “death cross.”The electric car maker’s shares TSLA, +3.68% jumped 3.7% to close at the highest level since Oct. 20. That followed a 4.4% surge on Monday, to close above its 200-day moving average for the first time since Nov. 1, and above its 50-day moving average for the first time since Oct. 18.
The 200-day moving average is seen by many chart watchers as a dividing line between longer-term uptrends and downtrends. The 50-day moving average is viewed by many as a short-term trend tracker.
The stock’s rally comes just as the 50-day moving average crosses below the 200-day moving average, referred to many as a “death cross.” The idea is, the “cross” marks the spot that a shorter-term decline morphs into a longer-term downtrend.
The
50-day moving average fell to $325.61 Tuesday, from $325.62 on Monday, while
the 200-day rose to $325.82 from $325.37, according to FactSet.
More
Dollar Drops After Alabama Vote; Asia Stocks Mixed: Markets Wrap
By Adam Haigh
12
December 2017, 22:02 GMT Updated on 13 December 2017, 06:20 GMT
The
dollar dropped after a special election for a U.S. Senate seat that saw the
Republican majority diminished, while stocks in Asia outside of Japan gained as
investors await central bank decisions in Europe and America for clues on the
policy path for next year.
Shares
in Tokyo fell as the yen firmed, while Hong Kong stocks rallied. S&P 500
Index futures declined and the Bloomberg dollar index dropped as the greenback
fell against its peers after news that the Democratic candidate won in
Alabama’s Senate race. This will potentially make it harder for President
Donald Trump to pass his priorities next year, though it may have little
implication for the tax-cut legislation currently being debated in Congress.
----Investors
were closely watching the result in Alabama’s Senate race. The Associated
Press projected Democrat Doug Jones as the winner over Republican Roy Moore,
who faced sexual misconduct allegations. Republicans currently hold 52 of the
100 seats in the chamber. The winner probably won’t be certified until late
December, after the expected vote on business-friendly tax cuts.
More
"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise. The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."
Hans F. Sennholz. Some mistake? Surely he meant bitcoin.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Presented, sadly
without need for comment.
Bitscam And Other Extraordinary Insanities
2017-12-06 11:59 by Karl Denninger
If you're too short in attention span to listen
to my interview from Monday I guess I can lay it out in text for you.Not that anyone will read more than the first two sentences that's in the first category.....
Any scheme that shares the following single essential element is a ponzi scheme whether recognized formally in the law at any given moment or not.
That is, the first people who perform some action get a given reward. The scheme is designed, intentionally, so that the amount of effort for that same unit of reward rises, usually exponentially. In addition it is usually the case (but not required) that the original effort's starting point is extremely small relative to the reward.
Let me remind you of the mathematical facts surrounding two exponential curves where one exponent is larger than the other. I will use an extreme example; a "spend" in effort that starts at $1 and goes up at 5% for each iteration and a fixed reward of $100.
If you're one of the first to participate this sounds great! You spend $1 worth of effort and get $100 in reward. This scheme is an illegal Ponzi scheme because by the time the 100th iteration takes place each further iteration must produce an inevitable -- and ever-larger from that point forward -- loss.
Note that it does not matter what the compound growth
rate of the "spend" portion is nor how far apart the
"spend" and "reward" are at the beginning, so
long as the "spend" growth exceeds the growth in "reward"
value.
The only difference is how long it takes before you get
screwed, not whether you get screwed.
Every scheme that has this
characteristic is a Ponzi scheme because it is inevitable
that the two lines will cross and that later people who participate
will inevitably lose money to the founders (and early adopters.)
It is a mathematical certainty that this outcome will occur.
If you have read Leverage (look to the right) you know
that I made quite a big deal out of this mathematical relationship early on in
the book, because it features in what our politicians have done since roughly
1980 when it comes to revenue, spending and the trajectory of deficits. The
reason governments undertake this, and people design schemes like this, lies
in this graph; a very similar graph appears in the book:
This represents a "spend" of $1.00, a "reward" of
$10.00, and a growth in "spend" of 5% while
"reward" growth (e.g. GDP and thus taxable funds, etc) is 2%.
Notice the "belly" in the early periods. That is, while
cost and reward both go up it looks like you're getting a free
lunch. That is, the "gap" (reward less spend) starts
at $9.00 and starts to expand immediately; the second
period it's $9.15, then $9.30, etc. In the 9th period it costs
$10.00 which exceeds the original reward entirely, so
the idiots in the public (that's you, by the way) believe
all the talking heads on TeeVee that tell you "the tax cuts paid for
themselves", "the economy will grow its way out of this"
and similar.
Unfortunately on the 52'd period, just after you proclaim that these
people have achieved the state of Godhood the reward ratio starts to
fall. You still feel good; after all, $15 is MUCH more than the original
$9, right?
Alas, by the 73rd period the spread is now under
$9 and falling rapidly; in just nine more periods it goes negative
and is continuing to accelerate. About this time you realize that while
the "spread" is still close to the original level your cost
has gone from $1 to $32; in other words your expenses have
expanded by thirty-two times!
By the 100th period the reward is a full $49.64
cents less than the cost and will continue to
accelerate until it bankrupts you and everyone else.
Every scheme that has these features is a fraud.
More
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?
Batteries Keep On Getting Cheaper
December 11th, 2017 by Nicolas Zart
Here’s another good news item that will certainly
bother electric vehicle (EV) critics. Something readers on CleanTechnica know
is that EV battery prices are continuing to get cheaper. This not only spells
good news for the industry but challenges other alternative energy drivetrains.
It might sound obvious to say batteries are
getting cheaper, but we’re always amazed to see how many people aren’t aware of
it. But battery price have indeed steadily come down for the past 20 years,
especially for lithium-ion batteries.
The average price of a lithium-ion battery pack
is down to $209/kilowatt-hour and the prices are set to fall below $100/kWh by
2025, according to a Bloomberg New Energy Finance (BNEF) survey.
In a story covered here in 2016, Zachary
highlighted how much the
price of batteries has come down over the past decade. A year and a half
ago, we wrote that the upfront price of EVs and plug-in hybrids (PHEV) was
higher than that of similarly sized gasoline-powered cars. This is due to
expensive batteries. Although, it’s close to impossible to estimate the price
of batteries for carmakers since they don’t generally tell us — what they
expect to pay in 1 year, 2 years, 3 years, etc. is what interests us.
Tesla’s battery price hovered
around $400/kWh a few years ago, got down below
$190/kWh in early 2016 if not earlier, and may be around $150/kWh today.
Elon Musk said that the cost of EV batteries would drop below $200 per kWh
in the “not-too-distant future” in 2012. Today, GM’s LG Chem battery cells
are estimated at $145/kWh. This means a pack may cost around $190/kWh.
According to BNEF analyst James Frith, the
average battery pack price is set to fall below $100/kWh by 2025 — hopefully
sooner. According to Frith, $100/kWh is widely seen as “a tipping point in the
adoption of EVs.”
The price
estimated by BNEF comes from a survey of more than 50 companies. The price
decline is due to a growing battery manufacturing industry with significant
economies of scale starting to really bring the costs down.
Remove from
this developers of stationary storage systems, rooftop solar panels, EV
chargers and networks, and we would individually pay at least 51% more. With
carmakers buying batteries and renewable energy companies adding stationary
storage, the prices drop to lower and lower levels much more quickly.
More
"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
F. A. von Hayek
Once again another year draws
to a close. If you are one of the regular reader of this six days a week update
that helps support my efforts with the occasional donation via the Paypal button,
once again I sincerely thank you. If you are a regular reader who finds the LIR
informative, interesting, occasionally amusing or entertaining, please consider
making a small donation via the Paypal button on the LIR website. For obvious
reasons in our new age of almost rampant fake news, I want to keep the LIR
advertising free. But in any event thank you for reading and sending in helpful
suggestions.
21st
century adage: Is that true or did you hear it on the BBC?
The monthly Coppock Indicators finished November
DJIA: 24,272 +243 Up. NASDAQ: 6,874 +289 Up. SP500: 2,648 +189 Up.
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