Baltic Dry Index. 1152 -39 Brent Crude 69.84
“At the
end of the day, the bond market bubble will eventually be the critical issue,
but for the short term it’s not too bad. But we’re working, obviously, toward a
major increase in long-term interest rates, and that has a very important
impact, as you know, on the whole structure of the economy.”
Alan
Greenspan. Wednesday, January 31, 2018.
Is the bloom off the
rose? The cryptocurrency scam blew up in December 2017, did stocks just peak
out in January 2018? Is the US bond “normalisation,”
the end of the mania for stocks? Old discredited “Bubbles” Greenspan clearly
thinks that it is, but will he be right for once? After “dress up Wednesday” is it “fall out
February” for stocks?
Since getting out
early, trumps getting carried out last in stock market gambling, the punters
are all now nervously awaiting the US employment numbers due out later in the
day. What if they signal that the Fed is already too far behind the yield
curve? A baby step rate increase is already built in to the Fed’s March
meeting. What if that step becomes a stride?
Below, all news isn’t
good news anymore. Look out below?
Don’t
fight the Fed.
Wall
Street adage.
Asia Stocks Slide; Rising Yields Spur BOJ to Act: Markets Wrap
By Cormac Mullen
Updated on 2 February 2018, 06:03 GMT
Asian shares dipped, with technology stocks leading declines after some
disappointment with U.S. corporate earnings. Rising pressure on bond yields
round the world stirred the Bank of Japan into action to keep rates from
getting out of whack with policy targets.The MSCI Asia Pacific Index dropped, set for the worst weekly performance since September 2016, after Google parent Alphabet Inc. missed earnings estimates and Apple Inc. forecast lower-than-expected revenue. Futures on the U.S. Nasdaq 100 climbed though, as investors turned more optimistic on sales of Apple’s iPhone X model, and the company’s stock gained in after-hours trading. The dollar recovered and Treasuries steadied.
Even Japan hasn’t been immune to the sell-off in global bonds that’s sent 10-year Treasury yields to the highest in four years. After 10-year Japanese government bond yields threatened to breach 0.1 percent -- versus a policy target of around zero -- the BOJ announced it’s prepared to buy an unlimited amount of five-to-10 year notes at a fixed rate. Japanese yields retreated, and the yen declined.
Equities are being tested by the surge in bond yields. Some fund managers have said 3 percent U.S. 10-year rates would signal a bond bear market, and the level is seen by many stock-watchers as a potential trigger for a correction in equities.
“It’s going to depend on the pace of the move," Geoff Lewis, Hong Kong-based senior strategist for Asia at Manulife Asset Management, said on Bloomberg Television. "If we see a sharp move up that would be a negative shock for the equity markets. With such low volatility -- complacency perhaps -- its possible that that could be quite a sharp correction."
More
February 2, 2018 / 12:38 AM
Blowout in bond yields rattles Asian stocks, buoys euro
SYDNEY
(Reuters) - The euro neared multi-year peaks on Friday as talk of policy
tightening in Europe and expectations that inflation is set to gear higher
drove up borrowing costs globally, a move that sparked a sell-off in Asian
equities.
Yields on 10-year U.S. Treasuries jumped to a near four-year peak,
markedly steepening the curve and squeezing out investors who had feverishly
bet on a tighter spread between longer-dated and short-dated yields.
Global central banks have recently struck a more hawkish tone with
impressive economic data and buoyant oil prices driving up long-term inflation
expectations.
The European Central Bank, for one, is widely expected to end its
asset-purchase program as early as September. That has pushed five-year German
Bund yields above zero for the first time since 2015. UK gilt prices also cheapened
significantly.
Investors reacted by bidding the euro broadly higher from a 2-1/2 year
top on the yen and a three-year peak on the dollar at $1.2509.
Yet rising U.S. yields have failed to prop up the dollar index, which
paused around a three-year trough.
“The trade weighted dollar continued to weaken very broadly in 2018 with
the two key pillars being growth strengthening elsewhere in the world,
supporting emerging market forex... and central bank divergence narrowing,
supporting euro, yen and British pound,” JP Morgan analyst Charles Perrin wrote
in a note to clients.
----Investors now await the U.S. nonfarm payrolls report for January, for clues on the strength of the labor market.
Nonfarm payrolls probably rose by 180,000 jobs in January after increasing
148,000 in December, according to a Reuters survey of economists. The
unemployment rate is forecast to be unchanged at a 17-year low of 4.1 percent.
Bitcoin, the world’s biggest cryptocurrency, continued to tumble after
hitting a record high $19,666 in December on the Bitstamp exchange. It was last
down 3.4 percent at a more than two-month trough of $8,690.
More
Apple Forecast Falls Short After iPhone Sales Miss Estimates
By Mark Gurman
Updated on 1 February 2018, 21:46 GMT
Apple Inc. forecast
lower-than-expected revenue for the current quarter and reported iPhone sales
from the crucial holiday period that missed analysts’ forecasts, suggesting
waning demand for its most-important product.The Cupertino, California-based company said revenue in the three months ending in March will be $60 billion to $62 billion. Analysts were looking for $65.9 billion on average, according to data compiled by Bloomberg.
For
the final quarter of 2017, Apple said it sold 77.3 million iPhones, down 1
percent from a year earlier and below analysts’ projections of 80.2 million
units. The average selling price was $796 -- ahead of expectations --
suggesting its flagship iPhone X handset sold relatively well, while cheaper
versions weren’t as popular.
The
numbers, which would be extraordinary for virtually any other company in the
world, underscore the elevated expectations that investors have for Apple. They
also highlight concern about lackluster demand for iPhones, sparked by recent
reports of Apple cutting orders to suppliers and lower analyst estimates. Fewer
new handsets means Apple has to work harder to sell related services,
accessories and other devices.
More
Former Fed Chair Alan Greenspan Sees Bubbles in Stocks and Bonds
By Jeanna Smialek“There are two bubbles: We have a stock market bubble, and we have a bond market bubble,” Alan Greenspan, 91, said Wednesday on Bloomberg Television with Tom Keene and Scarlet Fu. Greenspan, who led the Federal Reserve from 1987 until 2006, memorably used the phrase to describe asset values during the 1990’s dot-com bubble.
Greenspan’s comments come as stock indexes remain near record highs, despite selling off in recent days, and as the yields on government notes and bonds hover not far from historic lows. Interest rates are expected to move up in coming years as the Fed continues with a campaign to gradually tighten monetary policy.
----Greenspan
sounded an alarm on forecasts that the U.S. government deficit will continue to
climb as a share of gross domestic product. He said he was “surprised” that
President Donald Trump didn’t specify how he would fund new government
initiatives in Tuesday’s State of the Union speech. The president last month
signed into law about $1.5 trillion in tax cuts that critics say will further
balloon the budget gap.
Greenspan blamed the growing fiscal shortfall for his bond call.
“What’s behind the bubble? Well the fact, that, essentially, we’re
beginning to run an ever-larger government deficit,” Greenspan said. As a share
of GDP, “debt has been rising very significantly” and “we’re just not paying
enough attention to that.”
February 2, 2018 / 6:41 AM /
Updated 15 minutes ago
Deutsche Bank posts third consecutive annual loss in 2017
FRANKFURT
(Reuters) - Deutsche Bank (DBKGn.DE) on Friday posted its third
consecutive annual loss in 2017, taking a hit from challenging markets, a drop
in investment bank revenue and a U.S. tax reform.
The
loss of 497 million euros (435.25 million pounds) at Germany’s flagship lender
fell short of expectations of analysts, who had forecast a loss of 290 million
euros, according to a Reuters poll of nine banks and brokerages.
----The
bank ended 2017 on a rough note. Revenue dropped 19 percent to 5.7 billion
euros in the fourth quarter, while the net loss widened to 2.19 billion euros
from 1.89 billion in the year-earlier period.
More
“Another lesson I learned early is that
there is nothing new in Wall Street. There can’t be because speculation is as
old as the hills. Whatever happens in the stock market today has happened
before and will happen again. I’ve never forgotten that.”
Jesse
Livermore.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, more on the Great Nixonian Error of Fiat
Money. “What could possibly go wrong?” Plenty.
True, governments can reduce the rate of interest in the short
run, issue additional paper currency, open the way to credit expansion by the
banks. They can thus create an artificial boom and the appearance of
prosperity. But such a boom is bound to collapse soon or late and to bring
about a depression.
Ludwig
von Mises.
Flying Blind, Part 3: Why Now Is Not The Time And Place For Nosebleed PE Multiples
By David Stockman. Posted On Thursday, January 25th, 2018
As we indicated in Part 2, the very idea that you would pay 26X EPS
for the S&P 500 at the tail end of a 103 month long recovery cycle is truly
ludicrous. That is, there is a time to anticipate a strong profits rebound
during the early years of a recovery, thereby meriting a robust PE multiple.But there is also the obvious point that expansions eventually become long in the tooth and end in recession. Even by the lights of the central bank money printers, the business cycle has not yet been outlawed.
After all, that's why the Eccles Building is now motoring head-down and straight into an epochal pivot which it is pleased to call interest rate "normalization" and balance sheet shrinkage (QT). In plain english, however, that is just central banker-speak for bond dumping on an unprecedented and epic scale. And it is being done out of deathly fear that the next recession will make its appointed rounds with the Fed out of dry powder and impotent.
Folks, these people aren't totally stupid. They have amassed extraordinary power and plenary dominance over the nation's $19 trillion capitalist economy only by assiduously cultivating the mother of all Big Lies. Namely, the myth that private capitalism is dangerously unstable and possessed of an economic death wish for periodic cyclical collapses, which can be forestalled only by the deft interventions of the central bank.
That's self-serving malarkey, of course. Every recession of the modern Keynesian era has been caused by the Federal Reserve, and most especially the calamity of 2008-2009. And the "recovery" from that one, as well as those stretching back to the 1950s, was owing to the inherent regenerative powers of the free market, not the interest rate and credit supply machinations of the Fed.
So what we really have is a case of the monetary Wizard of Oz. There is nothing behind the Eccles Building curtain except a posse of essentially incompetent economic kibitzers who spend 90% of the time slamming the same old "buy" key on the Fed's digital printing press, while falsely claiming credit for the inherent growth propensity of private capitalism.
Yet let the next recession/recovery cycle occur while the FOMC is sucking its thumb for want of capacity to slash interest rates, such as the 550 basis point cutting spree after both the 2000-o1 and 2008-09 recessions, and its curtains time for modern central banking. That's because the US economy would recover just as well with no artificial money market rate compression as it has done twice already this century after 550 basis points of the same.
---- So the real implication of QT and the Fed's upcoming $600 billion bond dumping campaign is not merely a drastic reset of the ultra-low interest rates that are now "priced-in" at 2850 on the S&P 500. The real message is that even the Keynesian central bankers are gathering acorns with extreme urgency in order to prepare for the next economic winter.
Needless to say, that's why the sell-side's ex-items hockey sticks
pointing to 33% profits growth over the next two years are
completely irrelevant at best, and a monumental con job, in fact. That's
because all of history proves there is not a snowball's chance in the
hot place that such "peak" cycle earnings levels can be
sustained on a long term basis.
For example, after the 119-month business cycle expansion of the
1990s, so-called "operating earnings"(or profits adjusted for
the bad stuff) peaked at $56.79 per share in the LTM period for
September 2000. But this peak level was not remotely sustainable.
In fact, earnings slumped by 32% to a low of $38.85
per S&P 500 share by the December 2001 reporting period. Not
surprisingly, of course, the S&P 500 index also dropped by more than 35%
during the period.
Likewise, during the 70-month expansion from early 2001, S&P
500 operating earnings reached a peak of $91.47 per share
for the LTM period ending in June 2007. Thereafter, they plunged by 57%,
bottoming eight quarters later at just $39.61 per share in
September 2009. Similarly, the S&P index also plunged by 55%
during that interval.
At that point, of course, corporate profits incepted still another
climb out of the recessionary hole. But the starting point could not be more
dispositive.
To wit, LTM "operating profits" at the September
2009 bottom were no higher than they had been nine-years
earlier in September 2000. As if it were needed, that is proof beyond a
shadow of doubt that Wall Street hockey sticks at the tail end of the business
cycle are pointless: Real world profits are slaves to the cycle of recovery and
recession; they are not financial beanstalks which grow to the sky.
In the current instance, it is still early in the
reporting season, but already estimated GAAP earnings for 2017 have
slid to just $110 per share. That compares to projected 2017
earnings of $122 per share as of January 2017 and $115 per
share as of September.
To be sure, the latter is evidence of the same old, same old earnings
revision scam which has been going on for decades, but also
underscores something far more crucial.
To wit, the earnings ball game for this
cycle is already over. It doesn't matter how high the hockey sticks
point for 2018 or 2019: The next big earnings move is smack dab into the
recessionary dumpster---down 30% to 60% or even more.
More
“The
U.S. government has a technology, called a printing press (or, today, its
electronic equivalent), that allows it to produce as many U.S. dollars as it
wishes at essentially no cost…We conclude that under a paper-money system, a
determined government can always generate higher spending and hence positive
inflation.”
Dr. Ben
Bernanke. 2002
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?
Skin-inspired coating that's as hard as teeth and can heal itself
Date:
January 31, 2018
Source:
American Chemical Society
Summary:
Self-healing smart coatings could someday make scratches on cell phones a thing
of the past. But researchers often have to compromise between strength and the
ability to self-repair when developing these materials. Now, one group reports
the development of a smart coating that is as hard as tooth enamel on the
outside but can heal itself like skin can.
Self-healing smart coatings could someday make scratches on cell phones
a thing of the past. But researchers often have to compromise between strength
and the ability to self-repair when developing these materials. Now, one group
reports in ACS Nano the development of a smart coating that is as hard
as tooth enamel on the outside but can heal itself like skin can.
The smart coating market is a booming industry and is only expected to
grow in upcoming years. The most common smart coatings that can heal themselves
are based on soft polymers that can wear out quickly. But hard coatings can be
too rigid to come back together to fix a tear or scratch. In previous research,
Ming Yang and colleagues produced a stiffer, more healable coating, but its performance
still needs to be optimized. In the current paper, the researchers developed a
different way to make a soft, yet hard, self-healing material.
Mimicking the structure of human skin, the researchers used a
layer-by-layer technique to form a soft, dynamic under layer containing
polyvinyl alcohol and tannic acid. The hard outer layer contained these
compounds plus a layer of graphene oxide. When fabricated at a certain
thickness, the material successfully healed itself when cut, and it also could
kill bacteria. The material could someday serve as an electronic skin or even
as a scratch-proof coating on buildings or phones.
Another weekend and what awaits our wobbly stock markets
next week? Have a good weekend everyone.
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.
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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