Baltic Dry Index. 1106 +09 Brent Crude 64.39
"In
economics, hope and faith coexist with great scientific pretension."
John Kenneth
Galbraith.
Will today turn into
yet another Black Friday for stocks? The answer is probably, if not almost
certainly, for stocks were in the stratosphere, flying on hopium and a wing and
a prayer. Now sentiment has crashed, fear stalks the markets, and the
realisation spreads that the last few weeks of optimism was merely a self-delusion
mania in stocks.
Adding to the pain,
the collapse of the cryptocurrency mania, and the vaporisation of most of the
exotic volatility scams. There’s a sucker born every minute in the markets it
seems. There is nothing new under the sun.
Below, how reality
came back into our central bankster rigged stock markets. Now we must wait to
see just how bad our potential Black Friday becomes. How far contagion spreads.
“There
may be a recession in stock prices, but not anything in the nature of a crash.”
Irving
Fisher, leading U.S. economist, New York
Times, Sept. 5, 1929
February 9, 2018 / 12:26 AM
Asia hit by fresh Wall St. falls, China stocks reach multi-month lows
TOKYO
(Reuters) - Asian stocks fell on Friday, with Chinese shares slipping to multi-month
lows after Wall Street shares dropped again in the face of rapidly-rising bond
yields, while perceived havens such as the yen and Swiss franc were in demand.
In addition to pressure from the drop in global shares, Chinese equities were weighed by factors such as investors attempting to stay liquid ahead of the Lunar New Year holidays and pressure to meet rising margin calls.
The Shanghai Composite Index retreated 4.1 percent after slipping to its lowest since May 2017 and the blue chip CSI300 index was down 4.6 percent, after plumbing a six month low.The slide resulted in Chinese stocks following their U.S. counterparts into correction territory - a fall of 10 percent or more.
China’s central bank said on Friday it released temporary liquidity of almost 2 trillion yuan ($316.11 billion) to meet cash demand before the long Lunar New Year holidays.
Japan’s Nikkei sagged 3.2 percent, en route for a weekly loss of 8.9 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 2.3 percent to a two-month low.
The index, which hit a record high on Jan. 29, was on track for its sixth straight day of losses and stood to lose about 7.7 percent on the week.
Australian shares lost 1.2 percent and South Korea’s KOSPI fell 1.9 percent.
Hong Kong's Hang Seng .HSI shed 3.8 percent.
More
Stocks Enter Correction as Rate-Hike Fears Return: Markets Wrap
By Sarah Ponczek and Jeremy Herron
Updated on 8 February 2018, 21:59 GMT
The dread that gripped equity markets earlier in the week re-emerged Thursday
as U.S. stocks plunged into a correction on concern that rising interest rates
will drag down economic growth.
Selling accelerated in the final hour of trading as major indexes
breached round-number milestones they blew past just weeks ago. The S&P 500
tumbled through 2,600 and the Dow failed to hold 24,000. Both are headed toward
their average price for the past 200 days, a level that technical analysts say
may act as a magnet and a floor.
In the end, the S&P 500 sank 3.8 percent, taking its rout since a
Jan. 26 record past 10 percent to meet the accepted definition of a correction.
The negative superlatives are piling up quickly: the index erased its gain for
the year to close at a two-month low and is on track for its worst week since
the height of the financial crisis. The Dow plunged more than 1,000 points for
the second time in four days.
Pressure again came from the Treasury market, where another weak auction
put gave bond bears ammunition, sending the 10-year yield to the highest in
four years. Equity investors took bond signal to mean interest rates will push
higher, denting earnings and consumer-spending power.
For
a market that hadn’t fallen 3 percent from any high in more than a year, the
week’s action was enough to rattle even the biggest equity bulls. Accustomed to
buying the dip, that wisdom is now in question when more selling by speculators
may be imminent.
----Volatility
spread across assets. The Cboe Volatility Index was more than double its level
a week ago. Ten-year Treasury yields fluctuated near their four-year
highs, while the yen found traction as a haven from the stock turmoil. The
VIX’s bond-market cousin reached its highest since April. A measure of currency
volatility spiked to levels last seen almost a year ago, with a plunge in the
yuan and a rise in the pound adding to turbulence. European equities weren’t
spared, with the Euro Stoxx 50 volatility gauge spiking toward the highest
since June 2016.
More
Volatility shock wave has wiped $5.2 trillion from global markets, sent five sectors into correction territory
Published: Feb 8, 2018 9:14 p.m. ET
Thursday’s late market downturn added to extreme volatility in equities,
extending to a global loss of more than $5 trillion and an official correction
for nearly half of the S&P 500's sectors. S&P Dow Jones Indices senior index analyst Howard Silverblatt summed up the winter chill in the market Thursday evening, after the S&P 500 index SPX, -3.75% officially entered correction territory. In the past two weeks — since the close on Jan. 26 — the S&P 500 alone has lost $2.49 trillion, and global markets $5.2 trillion, he wrote.
For more: Was that a stock-market crash? Do the math, and check the yield curve
Five sectors of the S&P 500 have entered correction territory along with the index itself, which is off 10.2%, Silverblatt wrote in a note to clients late Thursday. The index closed down 100.66 points, or 3.8%, to 2,581 on Thursday.
Many on Wall Street define a correction as a decline of 10% to 20% on a closing basis from a significant peak. A bear market usually means drops of more than 20%.
Here is how each sector has contributed to the overall drop in the S&P 500:
More
February 8, 2018 / 6:53 AM
China conglomerates aim for reset in tighter credit environment
BEIJING (Reuters) - More than a year ago, China abruptly shifted from a
policy of providing its private conglomerates with cheap cash to push them to
become global champions, and tightened capital controls and bank credit.
That seismic shift is still being felt today, as the non-state companies
dump property and company stakes, and grapple with developing coherent
strategies.
On Monday, Dalian Wanda Group announced it would sell a $1.24 billion
(£889 million) stake in Wanda Film Holdings Co to Alibaba Group Holding Ltd and
Cultural Investment Holdings Ltd, a Beijing government-backed company.
That followed Wanda’s announcement last week that it was shifting a $5.4
billion stake in its property unit to outside investors, led by Tencent
Holdings.
For HNA Group, the aviation company that has extended its reach into
logistics, tourism and financial services after splashing out $50 billion on
dealmaking, the process of deleveraging has just started.
In recent weeks, the company has announced moves to raise billions in
funding, including offloading property in Australia and hiring bankers to sell
its leading stake in the Spanish hotels company NH Hotel Group SA.
Last month, at an extraordinary meeting with its major bank creditors,
HNA said the company faced a potential cash shortfall of at least $2.4 billion
in the first quarter of the year.
Its liquidity problems have extended from overdue aircraft lease
payments to a missed early repayment of a 1.7 billion yuan (£192.7 million)
trust product.
Other private conglomerates like Fosun International and Anbang
Insurance Group are either reshaping their businesses and reducing debt, or
halting fresh buyouts and searching for new shareholders under strict
supervision of regulators.
More
Everything's a Sell in China After $660 Billion Equity Wipeout
By Sofia Horta E Costa
8 February 2018, 08:44 GMT
Investors got a stark reminder of how fast their bets can turn in China,
where the most bullish trades are falling apart.The country’s currency was their latest favorite to succumb to a rout that has roiled financial markets around the world this week, losing as much as 1.2 percent on Thursday for the biggest decline since the aftermath of its 2015 shock devaluation. That follows a selloff in large caps and banks that has wiped out about $660 billion from the value of Chinese equities.
Traders are running out of places to hide in a nation where market declines have a habit of snowballing. Government bonds are offering little in the way of comfort, and even commodities are feeling the squeeze. Making matters worse is the prospect of seasonally tighter liquidity ahead of the Lunar New Year holiday, according Oanda Corp.’s Stephen Innes.
“People are aggressively taking profit,” said Innes, Asia Pacific head of trading at Oanda in Singapore. “They just want to unwind risk and take cash. The slide of Chinese equities in the past few days has definitely had an impact on the currency.”
China’s markets started off the year strong, with the onshore yuan gaining more than any other currency in Asia, and the Shanghai Composite Index rising almost every session in January. Signs of overheating quickly popped up everywhere, as gauges tracking the country’s energy stocks, financial firms and consumer staples all hit overbought levels last month. They’ve been among the hardest hit in the past three days.
Investors are continuing to flee risk around the world despite calls to buy the dip. The selloff is testing the resolve of China’s “national team,” as state-backed funds are called, to step in to keep markets stable. But signs of buying have been few and far between, with the Shanghai index nearing its first so-called correction in 742 days, the longest such streak in history.
More
https://www.bloomberg.com/news/articles/2018-02-08/everything-s-a-sell-in-china-after-660-billion-equity-wipeout
U.S. Jobless Claims Decline, Approach an Almost 45-Year Low
By Sho Chandra
8 February 2018, 13:30 GMT
U.S. filings for unemployment benefits unexpectedly declined last week,
hovering close to an almost 45-year low and signaling a tight job market, Labor
Department figures showed Thursday.Highlights of Jobless Claims (Week ended Feb. 3)
- Jobless claims decreased by 9k to 221k (est. 232k)
- Four-week average of initial claims, a less-volatile measure than the weekly figure, fell to 224,500 -- lowest since 1973
- Continuing claims declined by 33k to 1.92m in week ended Jan. 27 (data reported with one-week lag)
Key Takeaways
The historically low level of jobless claims is a reminder that employers are holding on to existing staff given the difficulty finding experienced and qualified workers. Applications for jobless benefits below the 300,000 mark are considered consistent with a healthy labor market.The latest monthly jobs report showed hiring remained vibrant entering 2018, with payrolls rising 200,000 in January and the unemployment rate holding near an almost 17-year low, which helped push up wage growth. The solid job market is one reason behind ongoing gains in consumer spending, the biggest part of the economy.
More
https://www.bloomberg.com/news/articles/2018-02-08/u-s-jobless-claims-decline-approach-an-almost-45-year-low
Bank of England Set to Hike Rates Earlier Than Expected
By Jill Ward and David Goodman
8 February 2018, 12:00 GMT Updated
on 8 February 2018, 13:00 GMT
Mark Carney said U.K. interest rates may need to rise at a steeper pace
than previously thought to prevent the Brexit-weakened economy from
overheating.
The Bank of England lifted its forecasts for economic growth Thursday
and said that inflation is projected to remain above the 2 percent target under
the current yield curve, which prices in about three quarter-point hikes over
the next three years. The governor noted that a key challenge is sluggish
output.
“It will be likely to be necessary to raise interest rates to a limited
degree in a gradual process but somewhat earlier and to a somewhat greater
extent than what we had thought in November,” Carney said in a press
conference. “Demand growth is expected to exceed the diminished supply growth.”
The BOE’s outlook meshes with signs that synchronized global growth will
lead to the end of the loose monetary policies pursued by central banks since
the financial crisis a decade ago. Concerns that investors might have
underpriced the likelihood of higher borrowing costs to keep inflation under
control helped spark a global stock selloff in recent days.
The comments boosted market expectations of a U.K. rate hike as soon as May.
Investors are now pricing a 75 percent chance of such a move by then, up from
55 percent before the decision. A hike by August is fully priced in, with
another increase seen in May 2019. The pound also jumped after the announcement
and was up 0.7 percent at $1.3978 as of 12:13 p.m. London time.
The Monetary Policy Committee sees the U.K.
growing quicker than its sustainable pace through 2020, meaning there’s a
greater risk of overheating, according to the minutes of its latest meeting
published on Thursday.
Morehttps://www.bloomberg.com/news/articles/2018-02-08/boe-sees-need-for-earlier-rate-hikes-as-growth-outlook-raised
There can be few fields of human endeavour in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.
J. K. Galbraith.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, haven’t we been here before.
The Market Time Bomb That's Bigger Than the VIX
Loan funds pose a
potential liquidity problem, which could have a destabilizing effect.
7 February 2018, 18:21 GMT
As bad as the stock market turbulence has been from
volatility-linked products, it could be even worse some day because of
exchange-traded loan funds.
Stock tumbles have a way of pointing out investments that seemed like safe
bets but turned out to be unstable, propped up solely by rising markets. And
when these bets unwind they tend to take down the wider market with them. In
the recent market drop, volatility-linked investment funds, which in retrospect are being called an $8 billion
ticking time bomb, emerged as the culprit. A number of the
exchange-traded products were wiped out, and it appears the unraveling hastened
the stock market's fall.Exchange-traded loan funds bear a lot of similarity to the volatility funds that average investors have flocked to for safety, except that they are much bigger. Volatility-linked ETFs grew to include about $8 billion in investments. The PowerShares Senior Loan ETF has nearly that much in it alone. Last month, LCD, a unit within S&P Global Market Intelligence, said that assets under management in loan funds had grown to more than $156 billion, up from around $110 billion two years ago.
Critics have grumbled about bond funds for years but have been mostly ignored by investors who have piled into loan funds thinking that the floating-rate debt will protect them from losses when interest rates rise. Top bond fund manager Thomas Atteberry of FPA New Income has recently warned in investor presentations that leveraged loans may not offer the interest rate protection that investors are counting on.
But the big, potentially market-destabilizing problem hidden in bond funds has to do with liquidity. ETFs, like stocks, can be bought and sold in milliseconds. But bank loans cannot. Loans trade in over-the-counter markets with much less volume and settlement times that can stretch out a month.
The worry is that investors will stampede out of loan ETFs, which account for about $10 billion of the $156 billion in loan fund investments, faster than the ETF managers can sell the underlying loans in their portfolio. This would cause a gap in the value of the ETF and the value of the loans in it, or worse, the possibility the funds may not be able to immediately come up with money for investors looking to cash out. Fear of not being able to get your money back is what causes bank runs and financial mayhem in general. The problem could be compounded by loan mutual funds, which make up a much larger share of that $156 billion and could also encounter a liquidity mismatch problem, though not as extreme as ETFs. Four years ago, Larry Fink, the CEO of BlackRock Inc., one of the largest providers of ETFs, warned that he thought loan ETFs, along with leveraged ETFs, were too risky for individual investors and not something his company would offer. BlackRock repeated a warning about certain ETFs on Tuesday, though it didn't identify loan ETFs directly.
And that's not the only source of potential destabilization in the loan market. The other big buyer of loans has been collateralized loan obligations, which buy and sell loans like funds but raise money like bonds. CLO offerings raised $118 billion last year, up from $72 billion the year before. CLOs don't have the liquidity problem that ETFs have, but they may have a structural problem. CLOs, to maintain their relatively high yields, typically buy loans with an average credit rating of B, which tend to have default rates in the double digits during downturns. However, most BBB bonds tied to CLO deals would start to default if just 9 percent of the loans in the CLO were to default. Recently, the loan default rate has been much lower than that, around 2 percent, and CLOs have performed well. Loan ETF providers have also combated criticism by saying theoretical liquidity problems have yet to materialize, even during the financial crisis.
More
“Those who don't know history are destined to repeat it.”
Edmund Burke.
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?
GE and Arenko to Build One of the World’s Largest Energy Storage Facilities in the UK
GE and Arenko Group have announced a strategic alliance to build grid
scale energy storage systems in the UK.
The companies will leverage GE’s battery technology solution, power
electronics and advanced controls with Arenko’s leadership in operating
batteries in the UK market and proprietary energy trading software platform.
Arenko has invested in a 41MW battery energy storage system supplied by
GE, who is providing a fully integrated battery storage solution. The project
is one of the largest in the UK and globally with the ability to provide
affordable, on-demand power to the equivalent of approximately 100,000 UK
homes.
This battery storage system is sited at a key strategic location in the
Midlands and will commence operations in 2018. Once operational it will
integrate GE and Arenko’s advanced control technologies and will be
commercially operated though Arenko’s software to digitally deploy energy and
access multiple services and system needs. The battery system’s reliability and
performance will be underpinned and protected by GE’s long-term support.
The project will relieve pressure on the UK energy system and provide
flexibility at times when it is most needed to deliver a more balanced, secure
energy system and contribute to reducing the cost of energy to the UK consumer.
The focus is on building long-term commercial sustainable battery storage
systems, which are not reliant on subsidies and incentives.
Changing consumer demands, increasing adoption of renewable energy and
security of supply are driving the need for innovative energy networks to
deliver a more efficient power system. As traditional centralized generation
comes under increasing pressure, energy storage projects will be crucial to
maximize generation capacity, ensure efficient energy utilization and improve
the operational efficiency of the grid.
Mirko Molinari, Global Commercial & Marketing Executive, Energy Storage
at GE Power commented: “Energy storage will help balance supply and demand
close to real time, avoiding frequency drifts and supporting the mid-term
response to grid imbalances. The flexibility it offers smooths the fluctuating
nature of renewable energy, provides quick reserves when needed, stores excess
energy generation and much more. Energy storage will enable a more efficient
system for a more reliable supply of electricity to consumers.
“Arenko are pioneers in the commercialization of energy storage systems:
this collaboration cements two years of working together towards the shared
vision of creating a battery storage solution which addresses the ever-changing
needs of a modern energy system.”
Rupert Newland, Chief Executive, Arenko Group commented: “Arenko’s new
battery system will provide much-needed flexibility to the UK grid, reducing
waste and helping to make energy bills cheaper for households and businesses.
This project is very significant in addressing the UK’s long-term energy
security concerns, enabling the transition to a low carbon energy future.
GE has invested in Grid Scale Battery Storage technology since 2010.
Arenko was established in 2014 to provide large-scale energy storage solutions
and selected GE, who has a strong reputation of reliability from a repeatable
and well referenced design. This first project with Arenko will be GE’s 19th
and largest grid scale commercial Battery Energy Storage Solution worldwide.
Another weekend and
bunker time it seems. Depending on what
happens in the markets later today, it might be bunker time all next week. Have
a great weekend everyone.
Jamie Dimon, US CEO of JP Morgan Chase
The monthly Coppock Indicators finished January
DJIA: 26,149 +282 Up. NASDAQ: 7,411 +310 Up. SP500: 2,824 +212 Up.
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