Baltic Dry Index. 1125 +19 Brent Crude 63.39
"In
economics, hope and faith coexist with great scientific pretension."
John Kenneth
Galbraith.
Is the correction all
over? Is it time to “buy the dip,” like the stock pedlars are promoting? To this old dinosaur market watcher since 1968,
probably not, although in this holiday affected trading week, there’s room for
a short covering extended bounce.
What’s different this
time around is the changed sentiment on interest rates and volatility. Interest
rates will be rising ahead for the next several years, not falling, and risk a
sudden surge higher on any sign of the return of inflation. In the stock market, volatility has returned
with a vengeance. Badly burned by complacency, and a failure of most of the
algo trading systems to adjust for volatilities surge, the algo traders will
now try to front run any sign of the correction resuming or volatility rising
and likely to trigger a renewed correction.
“Is it all over,” likely
applies to the long in the tooth hopium bull market, as it does to last week’s
violent correction. Complacency rules no
more. Fear rules for now.
In any great organization it is far, far safer to be wrong with the majority than to be right alone.
John Kenneth Galbraith.
Asia Stocks Rise With S&P Futures; Dollar Declines: Markets Wrap
By Andreea Papuc
Updated on 12 February 2018, 05:17 GMT
Investors got a reprieve from the recent turmoil with Asian stocks
recovering from their worst weekly rout since 2011 as volatility swept global
markets. The dollar declined against major peers ahead of key U.S. inflation
data.
Shares in Hong Kong and China, which bore the brunt of last week’s
selloff, rose as did South Korean equities after the S&P 500 Index jumped
on Friday and the futures extended gains as the trading week got underway in
Asia. Japan is closed for a holiday. Australian banks weighed on the benchmark
there at the start of a sweeping inquiry into the nation’s financial system.
Oil traded below $60 a barrel.
Even
as U.S. stocks ended the week on a high note fears of interest-rate hikes that
pushed markets into a correction persist. U.S. stocks ended their worst
week in two years with the S&P 500 tumbling 5.2 percent. The Cboe
Volatility Index ended almost three times higher than its level on Jan. 26.
Ten-year Treasury yields finished the week at 2.85 percent, near where they started
and after pushing as high as 2.88 percent.
----
Traders are awaiting U.S. consumer-price data out on Wednesday with some trepidation.
Pressure on equities has been emanating from the Treasury market, where yields
spiked to a four-year high amid concern the Federal Reserve may accelerate its
rate-hike schedule.
More
U.S. Budget Director Warns Interest Rates May ‘Spike’ on Deficit
Arit John and Mark Niquette
The U.S. will post a larger budget deficit this year and could see a
“spike” in interest rates as a result, but lower deficits are possible over
time based on sustained economic growth from Donald Trump’s tax cuts, said
Budget Director Mick Mulvaney.
Mulvaney spoke on “Fox News Sunday,” a day before the White House is
expected to release 2019 spending proposals -- and after weeks in which
financial markets have been spooked by prospects for rising inflation tied to
higher deficits and lower taxes.
“This is not a fiscal stimulus; it’s not a sugar high,” Mulvaney said on
of the president’s economic program, including the $1.5 trillion tax cut passed
in late 2017.
“If we can keep the economy humming and generate more money for you and
me and for everybody else, then government takes in more money and that’s how
we hope to be able to keep the debt under control,” Mulvaney said.
In a separate interview on CBS News’s “Face the Nation,” Mulvaney said
rising budget deficits are “a very dangerous idea, but it’s the world we live
in.”
His comment echoed Trump’s Feb. 9 tweet that Republicans “were forced to
increase spending on things we do not like or want” to secure Democratic votes
for the sharp buildup in military spending wanted by the White House and the
Pentagon.
More
This Tiny Hedge Fund Just Made 8,600% On a Vix Bet
By Dani Burger
Updated on 9 February 2018, 20:33 GMT
Not everyone got crushed when the market collapsed.
For traders at a little-known Denver hedge fund who saw it coming, it
was the score of a lifetime -- a $17.5 million payday on a $200,000 bet.
“People were laughing at us, saying this could never happen, this should never happen,” Justin Borus, the 41-year-old founder and manager at Denver-based Ibex Investors, said in an interview. “We saw people pricing this as a 1-in-5,000 event, but it was more like a one-in-five-year event.”
Borus’s team bet that an exchange-traded fund linked to a calm stock market would go to zero in the event of suddenly volatile trading. The ETF almost did -- it lost 96 percent of its value.
Borus said they always believed in the wager, even when just about no one else did. But the jackpot still caught them by surprise. Two of the group -- Ari Rubin and Cooper Stainbrook -- were taking a long walk around the Colorado capital when the market started to go haywire on Feb. 5.
----What was happening was the biggest plunge for U.S. equities in more than six years. Concern inflation was seeping into the economy triggered a decline in the Dow Jones Industrial Average that reached 6.3 percent at its lowest level. The benchmark index for equity volatility rose to more than twice its level the day before, crushing bettors who’d gotten used to years of very low volatility.
Ibex’s plan was to profit when five years of a record-calm stock market
burst into a spasm of volatility. Exchange-traded volatility notes that rose
when volatility fell looked like a particularly ripe target, given the
potential for a feedback loop that might send the Cboe Volatility Index surging
in the event of market stress.
Other investors may have been lulled by the years of relative serenity
in the stock markets. The average volatility rate for 2017 was lower than every
single trading day from Dec. 22, 1995, to June 20, 2005. The VIX finished below
a level of 10 -- super quiet! -- on only nine days before May 2017 and 68 days
since.
That’s why so few have dared bet against short-vol, which had been
minting money with breathtaking consistency. Even retail traders bought inverse
VIX ETPs, hoping to make a quick and easy buck. That’s what intrigued Ibex
More
In cryptocurrency
news, the sky just keeps on falling it seems. Crypto mania was so last year.
“I
think we agree, the past is over.”
President
George W. Bush.
New raids on Japan cryptocurrency exchanges after Coincheck hack
Published Feb 9, 2018, 12:17 pm
SGT
TOKYO (AFP) - Japan said on Friday (Feb 9) it had carried out raids on a
number of cryptocurrency exchanges following a massive hack that saw thieves
steal US$530 million (S$760 million) in virtual currency.
The hack of Coincheck was one of the largest of its kind, and prompted
authorities to search the firm's offices last week, after slapping it with an
administrative order.
Finance Minister Taro Aso said on Friday those raids were now being
expanded.
"We have started to raid several virtual currency exchanges,"
he told reporters, adding that the raids were intended to "examine their
internal governance structure".
Aso, also the minister in charge of financial services, has admitted
that the government "needs to strengthen our supervision" of virtual
currency exchanges.
Japanese officials have suggested Coincheck lacked proper security
measures, making itself vulnerable to theft.
In the wake of the theft, the country's Financial Services Agency
instructed more than a dozen local exchanges to submit reports on their efforts
to monitor systemic risks.
Thieves syphoned away 523 million units of the cryptocurrency NEM from
Coincheck during the January 26 hack, exceeding the US$480 million in virtually
currency stolen in 2014 from another Japanese exchange, MtGox.
That hack prompted Japan to issue new regulations, requiring exchanges
to obtain a licence from the FSA, but Coincheck was allowed to continue
operating while the agency was reviewing its application.
The firm has said it will reimburse customers who lost money in the
hack, which is still being investigated by local authorities.
Reports in Japan's media in recent days have suggested hackers may have
accessed the firm from abroad.
The Yomiuri Shimbun earlier this week cited unnamed police sources as
saying Coincheck was repeatedly accessed illegally through servers in the
United States, Germany and the Netherlands in the days before it was hit.
And the Asahi Shimbun daily reported Friday that part of the stolen
cryptocurrency was sent to an exchange in New Zealand called Cryptopia.
Cryptopia offers a platform for trading various virtual currencies including
bitcoin, according to its website.
In recent weeks, regulators around the world have discussed or begun
imposing new restrictions on virtual currencies.
Finally, today, does China have the Brexit – EU trade and borders
answer? Even if they do, will a
stubborn, dysfunctional, EUSSR bureaucracy adopt it?
How Alibaba’s Jack Ma Became Theresa May’s New Brexit Guru
By Tim Ross
9 February 2018, 15:34 GMT
Theresa May has found an unlikely source of inspiration for her Brexit
plans: Jack Ma, the charismatic
billionaire founder of Alibaba Group, the Chinese e-commerce giant, and
one of the world’s richest men.The British premier met Ma, whose net worth is valued at $45.5 billion, at the World Economic Forum in Davos in January and again in Shanghai last week, and the pair got on extremely well, according to two senior British officials. May was hugely impressed by Ma’s account of how he navigates strict Chinese customs rules to import and export goods, they said.
The government is now also studying Amazon.com Inc. to learn more about how the world’s biggest online trading platforms navigate the complexities of international rules while providing a smooth service for customers, a third senior official said. A spokesman for May’s office didn’t have an immediate comment and Alibaba declined to comment.
It’s likely that officials will want to study the Cainiao logistics business used by Alibaba, which provides same-day delivery services in China and also out of the country, despite many border clearance requirements. Cainiao itself doesn’t deliver goods directly to customers. The company runs a data platform that tracks goods in real-time and orchestrates deliveries by about 2 million people across more than 600 cities.
Irish Border
May is particularly keen to understand how Alibaba and Amazon serve their customers because Brexit potentially poses a major problem for cross-border trade.It’s not just that burdensome tariffs and rules-of-origin checks may be needed on goods traded across the British border after Brexit. The prospect of a deal could fall apart if May and the EU cannot agree a way to avoid setting up a new “hard” customs border between the U.K. and Ireland after Brexit.
The open flow of traffic across the border is a key symbol of peace on the island of Ireland, which both the EU and U.K. are committed to maintaining.
British and Irish officials are trying to come up with a way to protect trade standards and avoid erecting checkpoints on the border between the Republic of Ireland and Northern Ireland. Despite months of effort, and political will on all sides to find a solution, no way forward has yet been reached.
The British government is attracted to technological solutions, under which clearance forms and checks can be completed away from the border. Another option, proposed by the EU side but rejected by May, would be to keep Northern Ireland within the EU’s customs union.
Speaking on condition of anonymity, because the discussions aren’t public, two officials said May is now convinced that companies like Alibaba and Amazon might help Britain find the answer through the way they use technology to speed the flow of goods across national frontiers. British officials are studying how Amazon helps small U.K. business export to countries with restrictive customs rules.
After meeting Ma, the prime minister commented in private that if it’s possible to trade across the border into China so easily, it must be possible to design a system that will work for Britain after Brexit, according to two officials.
More
“The
world is a place that’s gone from being flat to round to crooked.”
Mad
Magazine.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, all that is wrong with Wall Street.
It is
always the best policy to speak the truth, unless, of course, you are an
exceptionally good liar.
Jerome K. Jerome, Idler Magazine 1892.
What the Headlines about Tesla, Snap, and Twitter “Earnings” Should Have Said
by Wolf Richter • • 113
Comments
How can the media be so gullible – and pliable? I don’t know either.
When Snap reported “earnings” this week – in quotes because it was its biggest loss ever – media headlines were euphoric, from TechCrunch (“Snap shares skyrocket on first earnings beat with revived user growth”) to The Wall Street Journal (“Snap Climbs Back Above IPO Price After ‘Shocker’ Earnings”).The theory was that Snap had reported “better-than-expected earnings.” Thanks to these headlines, over February 7 and 8, Snap shares skyrocketed 48% to $20.75, though they have fallen off somewhat since then.
So here are some modest suggestions as to what the headlines should have been, based on Snap’s “earnings” report:
Snap losses surge 106% to $350 million in Q4, and 570% to $3.4 billion for the year, the most ever.
Snap lost more money than it generates in revenues; what is it doing with all this money?
Snap burned $820 million in cash in 2017, but still sits on $2 billion from investors and can keep going at this cash-burn rate through 2019, so no problem.
Snap Q4 loss soars to $350 million, on $286 million in revenues. Stop and think about that for a moment.
Losses are ballooning faster than revenues, and from a larger base, which is the road to financial perdition, but no problem for analysts.
Twitter also reported earnings this week, and the media headlines showered it with love, from The New York Times (“Twitter Has Good News for Once: Its First Quarterly Profit”) to CNBC (“Twitter rockets more than 20 percent after the company reports first-ever net profit”).
Twitter’s shares jumped 27% on the announcement, after they’d already soared 60% over the past year on takeover hype that never materializes but keeps getting trotted out time and again to pump up shares. Since the spike following the earnings announcement, shares have declined 10%.
So here are some suggestions for headlines to describe Twitter’s situation:
Twitter 2017 revenues shrink 3.4%, Q4 revenues inch up 2%, as company embarks on Cost-Cutting as strategy
Twitter makes $91 million in Q4 profit after gutting R&D and sales and marketing expenses, which might explain revenue stagnation. But still loses $457 million for the year.
Twitter cuts $68 million from R&D and $71 million from sales and marketing expenses in Q4, trying to shrink itself to growth. Good luck.
Even the ceaseless promos from President Trump and the media circus around his Twitter actions fail to boost Twitter’s revenues.
No other company has ever gotten this much constant and free promo from any White House, but Twitter still can’t make it work.
More
It’s morally wrong to let a sucker keep his money.
Ebenezer Squid, with apologies to W. C. Fields.
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?
Solar Panels Do Work On Cloudy Days
February 8th, 2018 by Jake Richardson
Some
critics of solar power say that solar panels don’t produce electricity on
cloudy days. This claim is false. Solar panels can still can produce 10–25%
of their typical output on a cloudy day. Obviously, this amount is much less
than during periods of direct sunlight, but it is not nothing.
We may assume that solar panels thrive in hot, sunny weather, but too much heat can actually reduce solar panel output 10–25%. So, very hot weather isn’t the best condition for them. “The problem is, most solar panels’ power outputs start to degrade if the temperature of the panel goes over about 25°C. This is why, if you look at the specification label on a solar panel, most manufacturers quote the solar power output at a panel temperature of 25degC.”
This is why a solar power system might be more effective in San Francisco than in much hotter Las Vegas, even though Vegas has more sunny days. San Francisco is well known for its foggy days with cool weather, so it might be easy to assume that solar power wouldn’t do well there. However, rooftop solar power systems in San Francisco do function well. The amount of direct sunlight is reduced by fog and clouds, but solar panels function better at cooler temperatures, so the electricity output in San Francisco is still significant. Using a home solar power system there can save approximately $1,500 per year on utility bills, according to an analysis conducted by SolarCity.
You can also save $1,500 with solar power in Boston. Even though this city has such cold winters and cool temperatures in fall, solar power works well there and can considerably cut electricity bills.
One of the American cities with the most cloudy days is Seattle, but solar power is continuing to grow there as well. “Seattle is quickly becoming one of the best cities for solar in America thanks to Washington’s great payback incentive and net-metering policy as well as the city of Seattle’s growing market competition.”
Another one of the cloudiest cities, Portland, is also a leader among American cities in solar power — the 17th best US city in terms of solar capacity.
If you live in an area with cloudy, cool weather, you can still purchase and benefit from a solar power system, and don’t let any naysayers tell you otherwise. Sunshine is just part of the story. One major factor to consider if you are looking into buying a solar power system is the cost of electricity from your utility. If it is high or very high, of course, you may be motivated to find an alternative source of electricity, even if your region has cloudy days.
There are also two trends working in favor of solar power in cloudy places: One is that solar panels have gradually become more efficient, especially in cloudy locations. The other is that solar prices have decreased steadily, so it is more affordable to get a larger system for places with less direct sunlight.
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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