Baltic Dry Index. 1095 -19 Brent Crude 65.08
John Kenneth Galbraith. The Great Crash: 1929.
The US inflation
figures came in about as expected, only slightly higher than the consensus
number. Bonds inched higher, the dollar continued lower in President Trump’s “strong
dollar” currency war, and the algo traders went back to buying high priced
stocks. Much of East Asia took the rest of the week off to celebrate the Lunar
New Year.
Below, shades of 1987
again. Does history repeat?
“Those who don't know history are destined to repeat it.”
Edmund Burke.
Yen Extends Gain as Stocks in Asia Run With Rally: Markets Wrap
By Adam Haigh
Updated on 15 February 2018, 05:22 GMT
- Dollar drop against major peers deepens; S&P 500 futures rise
- 10-year Treasury yield tops 2.9% as CPI beats expectations
The
yen extended an advance and a rally in global stocks continued in Asia as
equity investors showed signs of warming to a world with inflation and a
sustained pace of tightening in U.S. monetary policy following this month’s
slide in risk assets.
Shares in Tokyo maintained a jump after similar early gains faltered in
trading this week. Stocks also advanced in Australia as S&P 500 Index
futures climbed. Hong Kong equities sealed their best three-day run in more
than two years in shortened trading ahead of the Lunar New Year holiday. The
MSCI All-Country World Index of equities climbed the most since April on
Wednesday. The yield on the 10-year Treasury nudged closer to 3 percent,
continuing its steady advance from last year’s low of 2.01 percent in early
September.
Japan’s Finance Minister Taro Aso’s comments that the yen’s strength is
not abrupt enough to intervene supported the Japanese currency’s rally into a
fourth day as the dollar deepened its descent against all major peers.
Bond
traders increased their expectations for the number of Federal Reserve
interest-rate hikes to four by the end of next year
after a report showed U.S. consumer prices rose in January more than projected.
The inflation figures gave little comfort to dollar bulls, who are instead
focusing on the U.S. twin deficits, and also gave rise to debate among
investors and traders on the breakdown in market correlations.
More
Goldman’s Lloyd Blankfein: ‘The odds of a bad outcome have gone up’
Published: Feb 14, 2018 4:59 p.m. ET
CNN’s
Christine Romans, in an interview airing on Wednesday, asked Goldman Sachs CEO
Lloyd Blankfein, “what could possibly go wrong” in this roaring economy? His
answer should send shivers through the investor community:
For one moment, we were all Christine Romans when she replied, “yeah, that’s not what I want to hear.” Needless to say, everybody was feeling pretty good about the economy and the stock market back then, until the wheels fell off and the financial system was pushed to the brink of collapse.
This, obviously, was not lost on Blankfein, as his chuckle made clear. The truth is, the Goldman GS, +2.76% boss does have plenty of concerns, including fears that a spending spree by the Trump administration could overheat the U.S. economy.
“The odds of a bad outcome have gone up,” he said, explaining that the economy was already growing nicely before the $1.5 trillion in tax cuts, $300 billion of additional spending, and now, the proposed a $200 billion infrastructure package.
“Don’t forget, all of these deficits have to be paid for,” and all this stimulus could be “too much of a good thing,” he said.
Blankfein knows all too well what can happen under such conditions.
“If the economy starts to overheat, and the Fed feels that it’s behind” it will need to act, Blankfein said, pointing to the period leading to the dot-com bubble.
“I remember 1994,” he said. “That’s possible, too. That would be quite jarring to the economy.” At that time, the Federal Reserve tried to keep inflation in check with a hefty does of rate hikes that took Wall Street by surprise.
Despite his concerns, Blankfein’s “base case” remains that the economy will remain on track, though he’s urging caution moving forward for retail investors.
“I’d be planning for the contingency that this turns out to be a worse time than people are thinking,” Blankfein told Romans. “With the Fed raising rates, with the withdrawal of QE, with the budget deficit widening out, I wouldn’t say this is the time I would max out on my risk.”
Judging from recent action, risk-on is back. For now. The Dow Jones Industrial Average DJIA, +1.03% closed up 253 points in another volatile session.
February 14, 2018 / 8:37 AM
Trump weighs tariffs, quotas on U.S. steel, aluminium imports
WASHINGTON
(Reuters) - U.S. President Donald Trump said on Tuesday he was considering a
range of options to address steel and aluminium imports that he said were
unfairly hurting U.S. producers, including tariffs and quotas.
Trump’s comments - his strongest signal in months that he will take at
least some action to restrict imports of the two metals - came in a meeting
with a bipartisan group of U.S. senators and representatives at the White
House. Reporters were present for part of the meeting.
Some of the lawmakers urged him to act decisively to save steel and
aluminium plants in their states, but others urged caution because higher
prices would hurt downstream manufacturers that consume steel and aluminium.
Trump is weighing options presented last month by the U.S. Commerce
Department in parallel “Section 232” investigations into whether import
restrictions on steel and aluminium are needed to protect national security.
The probes were authorized under a 1962 trade law that has not been invoked
since 2001.
“What we’re talking about is tariffs and/or quotas,” Trump said to the
group.
“Part of the options would be tariffs coming in. As they dump steel,
they pay tariffs, substantial tariffs, which means the United States would
actually make a lot of money.”
More
February 14, 2018 / 2:50 PM
Any U.S. tariffs could spark trade war, cut growth, Germany says
BERLIN (Reuters) - The German chamber of commerce said on
Wednesday that U.S. import tariffs on steel could trigger a trade war with
major trading partners, which analysts say could cut growth in Europe’s largest
economy by up to 1 percentage point.
U.S. President Donald Trump said on Tuesday he was considering a range
of options to address steel and aluminium imports that he said were unfairly
hurting U.S. producers, including tariffs and quotas.
Trump’s comments were the strongest signal in months that he will take
at least some action to restrict imports of the two metals, delivering on his
election pledge to put America first and protect U.S. workers from increased
foreign competition.
But Martin Wansleben, managing director of Germany’s DIHK Chambers of
Industry and Commerce, said the introduction of tariffs would eventually burden
U.S. consumers through higher prices and could trigger a worldwide trade war.
“With the proposal of new import tariffs, the U.S. government is
undermining the positive investment incentives from its tax reform,” Wansleben
said.
The U.S. is Germany’s most important export destination after the rest
of the European Union, and exports still account for roughly 40 percent of
German economic output.
But any import tariffs will eventually hit all U.S. companies that rely
on intermediaries or capital goods from abroad, Wansleben said.
“As appealing as the tax relief from the recent U.S. tax reform may be,
new import barriers raise prices and disrupt international production chains,”
Wansleben warned.
More
Finally, you couldn’t
make this stuff up. I hope no one in Switzerland is paying this guy for
essentially, “s**t happens, who knew?” Luckily for him, it’s only other
people’s money. Another unintended consequence of the Great Nixonian Error of
Fiat Money, communist money, August 15, 1971.
Credit Suisse CEO defends enabling volatility bets with XIV: ‘It worked well ... until it didn’t’
Published: Feb 14, 2018 8:21 a.m. ET
Credit Suisse CEO Tidjane Thiam on Wednesday defended a controversial
product that let traders bet that markets would stay calm.The Swiss bank’s VelocityShares Daily Inverse VIX Short-Term Exchange-Traded Note XIV, +3.96% has been “a legitimate market instrument that serves a purpose,” he told CNBC as his company posted a quarterly loss.
The ETN — which will soon no longer exist after cratering last week — was launched to give traders an opportunity to bet against a rise in the CBOE Volatility Index VIX, -14.14% , also called the VIX or Wall Street’s “fear gauge.”
While pundits such as Jim Cramer have accused XIV and related products of “blowing up” the broader market SPX, -0.11% , Thiam sounded laissez faire on last week’s fireworks:
XIV’s huge drop last week resulted in palpable pain for a Reddit group that had been trading the ETN. One group member wrote: “I’ve lost $4 million, 3 years of work and other people’s money.”
XIV’s prospectus told its buyers that it’s a daily trading instrument for sophisticated investors, rather than a long-term investment, Thiam said.
“Because the price can vary so brutally, the prospectus also says that if the price goes down by more than 80%, we can basically close it. So that’s what happened on the 5th. Basically when the VIX went from 17 to 38, the value of that instrument went from 100 to 5. Once you’re at 5, given the structure of the note, there is no prospect of recovery,” the CEO said.
“So the product was basically not usable anymore.”
It’s curtains tomorrow for XIV, according to Thiam. The ETN continues trading until Thursday, and then owners will be paid on Feb. 21, he said. Credit Suisse CS, +2.38% CSGN, +2.82% announced last week that it planned to liquidate the product.
Read: ‘Short-volatility Armageddon’ hammers popular funds, could roil market
And see: Warnings for risky volatility bets should be in ‘big, bold 24-point font and in red letters’
Meanwhile, the Securities and Exchange Commission called Credit Suisse last week and questioned the bank about XIV, according to a Wall Street Journal report citing people familiar with the matter.
More
"We
shouldn't pour cold water on everything.
We, the eight or nine players in global investment banking, have a very
good future."
Deutsche
Bank, CEO Josef Ackermann. Davos, January 2007.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Yes, the dying, dysfunctional, EUSSR again. How do you solve a problem
like Europe? It’s a continental European wipe-out if the next downturn hits
before the rump-EUSSR reforms, but there’s little sign of any serious reform.
“When it becomes serious, you have to lie.”
Jean-Claude Juncker. Failed former Luxembourg P.M.,
serial liar, president of the European Commission. Scotch
connoisseur.
Five Charts That Explain How European Banks Are Dealing With Their Bad-Loan Problem
By Nicholas Comfort, Giovanni Salzano, and Sonia Sirletti
14 February 2018, 04:00 GMT
For European banks, it’s a headache that just won’t go away: the 944 billion
euros ($1.17 trillion) of non-performing loans that’s weighing down
their balance sheets.Economists say the pile of past-due and delinquent debt makes it harder for banks to lend more money, hurting their earnings. European authorities are prodding lenders to sell or wind down non-performing credit, but they’re split on how to tackle the issue, and some investors are disappointed by the pace of progress.
Here are five charts that help explain the issue and how banks are tackling it.
---- The problem is
particularly acute in the countries that were hit hardest by the sovereign debt
crisis. Greece, which has yet to exit its bailout program, tops the list of
non-performing loans as a share of total credit, while Italy has the biggest
pile of bad debt in absolute terms.
---- Italian banks
have fixed goals for shrinking their bad credit levels by selling portfolios or
winding down loans. Intesa
Sanpaolo SpA,
the country’s biggest bank by market value, got a head start on its rivals two
years ago and plans to accelerate the reduction of non-performing loans, Chief
Executive Officer Carlo Messina said last month. He says other Italian
banks “are doing the right job” and should make further progress this year.
---- Italy amassed its
pile of non-performing loans during years of little or no economic growth. The
problem is compounded by the country’s legal system, where it takes lenders
longer to liquidate collateral than in many other countries. Italy overhauled
its bankruptcy rules in October to make them
quicker and more efficient.
---- European banks
overall have cut their non-performing loans by more than 280 billion euros
since the end of 2014. The European Central Bank, which supervises most of the
bloc’s big lenders, says bad debt is still “a major problem” which has to be
addressed lenders while the economy performs well.
More
February 14, 2018 / 4:38 PM
Germany's SPD vows to clash with 'down for the count' Merkel
SCHWERTE,
Germany (Reuters) - Germany’s Social Democrats (SPD) will clash over policy
with Angela Merkel in the next government, the main candidate to lead the
centre-left party said on Wednesday, adding that the conservative chancellor
was approaching the end of her career.
Seeking
to rally support for a deal to renew an alliance with Merkel’s conservative
bloc that SPD members have to ratify in a postal ballot, Andrea Nahles said the
party could reinvent itself by fighting for its policies in a coalition
government.
“We will not do a runner in this government. We will make our own policy
proposals. We will consciously stand up to Mrs Merkel,” Nahles said in a fiery
speech in Schwerte, a town in the western state of North Rhine-Westphalia, the
SPD’s traditional heartland.
Her combative speech signalled that the next marriage between the two largest
parties would not be as harmonious as the previous two alliances during
Merkel’s 12 years in power.
“She may be the most powerful woman in the world but the Twilight of the
Gods started a long time ago,” said Nahles, who is likely to be elected as SPD
leader at an extraordinary party congress on April 22. “She has been put down
for the count by her own party. The chance to renew stands before us.”
Jean-Claude
Juncker. Failed Luxembourg Prime Minister and ex-president of the Euro Group of
Finance Ministers. Confessed liar. European Commission President. Scotch
connoisseur.
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?
Stacking on the graphene
Researchers have fabricated 2 types of trilayer graphene with different electrical properties
Date:
February 9, 2018
Source:
Tohoku University
Summary:
Researchers have fabricated two types of trilayer graphene with different
electrical properties.
Researchers in Japan have found a way to form two materials, each made
of three layers of graphene. Each material's graphene is stacked differently
and has unique electrical properties. Their work has implications for the
development of novel electronic devices, such as photo sensors that convert
light into electrical energy.
In 2004, two scientists realized they had isolated a single layer of
carbon atoms on a scotch tape used to clean a graphite crystal. Since then,
graphene has captured the imagination of researchers due to its fascinating properties:
it is 200 times stronger than steel, is very flexible, and it is an excellent
conductor of electricity.
Graphene's carbon atoms are arranged into hexagons, forming a
honeycomb-like lattice. Placing one layer of graphene on top of another leads
to the formation of bilayer graphene. The layers can be arranged in one of two
positions: the centres of the carbon hexagons of each layer can be organized
immediately above one another, called AA-stacking, or they can be displaced
forwards so that a hexagon centre in one layer is above a carbon atom below it,
called AB-stacking. AB-stacking of two layers of graphene leads to the
formation of a material with semiconducting properties by applying an external
electric field.
Deliberately stacking three layers of graphene has proven difficult. But
doing so could help researchers study how the physical properties of
tri-layered materials change based on how the layers are stacked. This could
lead to the development of novel electrical devices.
Researchers at Japan's Tohoku University and Nagoya University have now
fabricated two different types of trilayer graphene with different electrical
properties.
----The researchers then examined the physical properties of each
material and found that their electrons behaved differently.
The ABA graphene was an excellent electrical conductor, similar to
monolayer grapheme. The ABC grapheme, on the other hand, acts more like AB
graphene in that it had semi-conductor properties.
"The present success in selective fabrication of ABA and ABC
trilayer graphene would widen the feasibility of graphene-based nano-electronic
devices with variable layer numbers and stacking sequences," conclude the
researchers in their study published in the journal NPG Asia Materials.
Nothing is so admirable in politics as a short memory.
John Kenneth 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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