Baltic Dry Index. 1191 -23 Brent Crude 69.02
"If the profit numbers on income statements
are treated with such reverence, it was obviously only a question of time
before some smart fellows would start building companies not around the logical
progression of a business but around what would beef up the numbers."
“Adam Smith” aka George Goodman. The Money Game.
Yesterday was all about dressing up the markets for the
end of month figures. Another down day was managed back to close out positive
for the end of month bonuses. Does
America copy China or China copy America?
Given all the central bankster manipulation does it even matter
anymore? Sadly, deficits didn’t matter
until one day, out of the blue, they did.
We all know how the Great Manipulation ends in disaster, just not when
nor why.
Below, yesterday’s action and Asia’s opening.
Asian Stocks Gain; Investors Adapt to Higher Yield: Markets Wrap
By Adam Haigh
Updated on 1 February 2018, 05:45 GMT
Asian equities kicked off February with a recovery from a three day
sell-off, as investors decided the outlook for growth and corporate earnings
was strong enough to quell concerns about the recent jump up in bond yields.
The MSCI Asia Pacific rose following a late rally in U.S. equities that
saw the S&P 500 Index end January with the best start to a year for the
U.S. benchmark since 1997. Japanese equities outperformed while China’s
domestic stocks tumbled, heading for the worst week since 2016.
Ten-year Treasury yields remained near the highest since 2014 after
Federal Reserve officials set the stage for a March interest-rate increase by
adding emphasis to their plan for more hikes. India’s budget is in focus Thursday
amid concern the government may deepen the country’s budget deficit, eroding
demand for the country’s bonds.
Investors
are weighing the path of U.S. monetary policy at a time of synchronized global
growth and a strong expansion in corporate profits that’s helped push global
equities to record highs this year and sent government bond yields surging. The
changes to the Fed statement acknowledged stronger growth and
more confidence that inflation will rise to the 2 percent target.
More
January 31, 2018 / 6:06 AM
Fed leaves rates unchanged, sees inflation rising this year
WASHINGTON
(Reuters) - The U.S. Federal Reserve kept interest rates unchanged on Wednesday
but said inflation likely would rise this year, bolstering expectations
borrowing costs will continue to climb under incoming central bank chief Jerome
Powell.
Citing solid gains in employment, household spending and capital investment,
the Fed said it expected the economy to expand at a moderate pace and the labor
market to remain strong in 2018.
“Inflation on a 12-month basis is expected to move up this year and to
stabilize” around the Fed’s 2 percent target over the medium term, the central
bank said in a statement following a two-day policy meeting, the last under Fed
Chair Janet Yellen.
It also said its rate-setting committee had unanimously selected Powell
to succeed Yellen, effective Feb. 3. Powell, a Fed governor who has worked
closely with Yellen, was nominated by President Donald Trump and confirmed by
the U.S. Senate.
Powell is expected to hew closely to the policies embraced by Yellen,
who spearheaded the gradual move away from the near-zero interest rates adopted
to nurse the economy back to health and spur job growth after the 2007-2009
recession.
----The Fed, which raised rates three times last year and in December forecast three more hikes for this year, said on Wednesday it expected “further gradual” rate increases will be warranted. The target range for the federal funds rate currently is 1.25 percent to 1.50 percent.
“The use of ‘further’ opens the door to four hikes and likely closes the
door on two,” Michael Gapen, chief U.S. economist for Barclays, wrote in a note
to investors.
More
U.S. Raises Long-Term Debt Sales as Budget Deficit Worsens
By Liz McCormick and Saleha Mohsin
31 January 2018, 13:30 GMT Updated
on 31 January 2018, 13:51 GMT
The U.S. Treasury Department will lift longer-term debt issuance to $66
billion, marking the first boost since 2009 amid expectations of growing
deficits and the Federal Reserve balance-sheet roll-off.Treasury Secretary Steven Mnuchin’s debt management team will sell next week $26 billion of 3-year notes versus $24 billion in November, it said Wednesday in its refunding announcement. The department also lifted to $24 billion the sale of 10-year notes from $23 billion and the 30-year bonds to $16 billion from $15 billion, also to be auctioned next week. Total offering rose to $66 billion from $62 billion in November.
Treasury also said it expects to lift sales of 2- and 3-year note auctions by $2 billion per month over the quarter. It will also boost 5-, 7- and 10-year notes and 30-year bond auction by $1 billion each month starting in February. Sale of 2-year floating-rate notes will also be increased by $2 billion beginning next month. Additional borrowing needs will be addressed by increasing bill sales.
Total adjustment will amount to $42 billion of new issuance for the upcoming quarter. Auctions sizes of Treasury Inflation Protected Securities will remain unchanged over the three-month period.
----Before Wednesday’s refunding announcement, most primary dealers indicated they expect Treasury would boost some coupon-bearing debt auction sizes in what was seen as an inflection point to rising issuance that will ultimately spread to all tenors. Dealers forecast new issuance in 2018 to at least double this year to more than $1 trillion, the most since 2010.
More
One Indicator Says Bond Rout Going Too Fast for Stocks to Escape
By Lu Wang
31 January 2018, 10:00 GMT
It’s not how low you go, it’s how fast you fall.
That, in a nutshell, is the logic behind a bond market signal for stock
investors that shows the deterioration in credit may be happening too fast for
equities to withstand. The indicator, Leuthold Group’s Dow Bond Oscillator,
just flashed a reading that has spelled trouble for equities before, and may
have bitten Tuesday as the S&P 500 slid the most since August.
It’s a different take on how the two markets interact, at odds with
those who point to the absolute altitude of yields -- such as the present 2.7
percent in 10-year Treasuries -- as the main impediment for stocks. To Doug
Ramsey, chief investment officer at Leuthold, the market has been caught off
guard not by how high yields are as bond prices weaken, but how fast they’re
going up.
“Everyone is focused on a rate level, but the rate-of-change is
impacting things at almost a subconscious level,” Ramsey said. “The upward
trend in rates is already sufficient to slow or reverse the market’s ascent.”
Specifics of the measure are complicated, but basically the model looks
at how quickly returns are weakening in corporate credit. Namely, it’s the
10-week exponential moving average of the 26-week percentage change in the Dow
Jones Corporate Bond Index (which measures price, the reciprocal of yields).
The lower it goes, the tighter monetary conditions, and therefore worse for
stocks.
Leuthold’s gauge last week dipped below zero for the first time since
June, triggering a sell signal for shareholders. It’s one reason the firm cut
equity holdings in its core and global funds to 58 percent from 65 percent.
---- Leuthold studied market performance since 1920 and found that the Dow Bond Oscillator has shown a good track record of predicting equity returns. When it stayed below zero, as in the case now, the Dow Jones Industrial Average fell at an average annualized rate of 0.3 percent. Equity returns were more robust, rising 11 percent, when readings were above zero.
“It’s the rate-of-change in bonds, not the bond yield level, that has
the stronger impact on the stock market,” Ramsey said.
Finally, Bloomberg says China doctors its GDP figures. Who knew? Where ever did they get an idea
like that?
China’s 2015 GDP Was Exaggerated By Fake Data, Analysis Shows
By James Mayger 1 February 2018, 03:48 GMT China’s growth rate in 2015 was probably overstated by “a couple of percentage points,” according to new data analysis by Bloomberg Economics.Gross domestic product at the provincial level was consistently overstated between 2011 and 2015, calculations that cross-referenced energy consumption with output data show. But the exaggeration appears to have shrunk in 2016 as a method of inflating fiscal revenues was closed off. The national GDP number was probably overstated in 2015 as well, according to the research by Bloomberg economists Tom Orlik and Qian Wan.
Chinese data has long been dogged by concerns over fudging, with a recent spate of revisions to provincial growth and revenue data reviving questions about the reliability of national statistics. In the past year, the rustbelt province of Liaoning and Inner Mongolia in China’s north have admitted to cooking their data.
Data faking also raises questions about the country’s debt picture,
according to the economists, because if revenue and output growth is lower than
people thought, there is less money to for local governments to make
repayments.
The national GDP reading for 2015 already stood out because growth only
slowed by 0.4 percentage point to 6.9 percent, in a year when China endured a
botched yuan devaluation and severe financial market turbulence.
Though a persistent gap between the sum of provincial data and national
GDP signals that officials have previously corrected for the problem, Orlik and
Wan note that in 2015, the gap between the two data points narrowed.
Furthermore, the economists say that if you use electricity use as a proxy for actual economic growth, provincial GDP ran “between 1.2 percentage points and 3.1 percentage points lower than the official growth rate” between 2011 and 2015.
China is probing fake data at the provincial level, with local government officials incentivized in the past to inflate the numbers as a way of advancing their careers. The provinces of Qinghai, Yunnan, Chongqing, Guizhou, and Shaanxi stood out as having both the most questionable growth data and the highest ratio of debt to GDP, according to the report.
More https://www.bloomberg.com/news/articles/2018-02-01/china-s-2015-gdp-puffed-up-by-fake-economic-data-analysis-shows
A stock is, for all
practical purposes, a piece of paper that sits in a bank vault. Most likely you
will never see it. It may or may not have an Intrinsic Value; what it is worth
on any given day depends on the confluence of buyers and sellers that day. The
most important thing to realize is simplistic: The stock doesn’t know you
own it. All those marvelous things, or those terrible things, that you feel
about a stock, or a list of stocks, or an amount of money represented by a list
of stocks, all of these things are unreciprocated by the stock or the group of
stocks. You can be in love if you want to, but that piece of paper doesn’t love
you, and unreciprocated love can turn into masochism, narcissism, or, even
worse, market losses and unreciprocated hate.
The Money Game 1968. George J. W. Goodman aka “Adam Smith.”
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, more on “What could possibly go wrong?”
“When the music stops,
in terms of liquidity, things will be complicated. But as long as the music is
playing, you’ve got to get up and dance. We’re still dancing.”
Chuck Prince, “Twinkle toes” CEO Citigroup.
Financial Times July 10, 2007
Flying Blind, Part 2: The Destruction Of Honest Price Discovery And Its Consequences
By David Stockman. Posted On Wednesday, January 24th, 2018
In Part 1 we noted that the real evil of Bubble Finance is not
merely that it leads to bubble crashes, of which there is surely
a doozy just around the bend; or that speculators get the painful deserts
they fully deserve, which is coming big time, too; or even that the
retail homegamers are always drawn into the slaughter at the very end, as
is playing out in spades once again. Daily.Given enough time, in fact, markets do bounce back because capitalism has a inherent urge to grow, thereby generating higher output, incomes, profits, wealth and stock indices. That means, in turn, investors eventually do recover from bubble crashes---notwithstanding the tendency of homegamers and professional speculators alike to sell at panic lows and jump back in after most of the profits have been made---or even at panic highs like the present.
Instead, the real economic iniquity of central bank driven Bubble Finance is that it destroys all the pricing signals that are essential to financial discipline on both ends of the Acela Corridor. And as quaint at it may sound, discipline is the sine qua non of long-term stability and sustainable gains in productivity, living standards and real wealth.
The pols of the Imperial City should be petrified, therefore, by the prospect of borrowing $1.2 trillion during the upcoming fiscal year (FY 2019) at a rate of 6.o% of GDP during month #111 through month #123 of the business expansion; and doing so at the very time the central bank is pivoting to an unprecedented spell of QT (quantitative tightening), involving the disgorgement of up to $2 trillion of its elephantine balance sheet back into the bond market.
Even as a matter of economics 101, the forthcoming $1.8 trillion of combined bond supply from the sales of the US Treasury ($1.2 trillion) and the QT-disgorgement of the Fed ($600 billion) is self-evidently enough to monkey-hammer the existing supply/demand balances, and thereby send yields soaring.
But that's barely the half of it. All the laws of economics, which are now being insouciantly ignored by the stock market revilers, are also time and place bound. That is to say, deficit finance in a muscle-bound Welfare State/Warfare State democracy like the US is always a questionable idea.
After all, it is virtually guaranteed based on the budgetary doomsday forces now at work that by 2030 the public debt will approach $40 trillion compared to the $930 billion level where it stood when the Gipper took office in January 1981. In a half century, therefore, the GDP---swollen by inflation notwithstanding---will have grown by 8.5X versus a 43X eruption of the debt.
Even then, that's the long-trend of the thing: The cyclical context is the far more preposterous part. The very idea of running a 6.0% of GDP deficit at the tail end of what would be the longest business expansion in recorded history is just plain insane. Yet as the Donald and his feuding band of Capitol Hill Republicans stumble from one bi-weekly CR (continuing resolution) fix to the next, they exude complete obliviousness to the fiscal time-bomb strapped to their chests.
Admittedly, the Dems are far worse. Even as they appropriately champion the cause of the Dreamers for the wrong reason (i.e. in pursuit of Democrat voters rather than the real economic need for additional workers and Tax Mules), their true agenda at the moment is stasis and parity. That is, no change (stasis) whatsoever in the $2.5 trillion entitlement monster, but a dollar for dollar increase (parity) in domestic appropriations to match the $80 billion per year defense increase demanded by the GOP hawks (which is most of the GOP).
Our point is that prior to the final betrayal of sound money incepting with Greenspan's arrival at the Fed in 1987, politicians of both parties had a healthy fear of deficits because in the absence of massive monetization by the central banks, rising deficits tended to cause "crowding out" and soaring interest rates.
In effect, even the quasi-honest monetary policies of the 1953-1987
period generated counter-vailing constituencies for fiscal
rectitude. Thus, when interest rates rose, the lobbies for small business,
homebuilders, Savings and Loans, farmers and capital goods suppliers
predictability brought their political heft to bear in behalf of fiscal
restraint.
No more. The Fed's massive and relentless suppression of yields has
eliminated the counter-vailing constituencies for fiscal rectitude and, at
length, vaporized the politicians' fear of deficits.
And understandably so. The public debt is up by 220% from
the pre-crisis peak (Q4 2007), while interest expense has risen by only 20%.
With the debt rising 10X faster than its service cost, why would anyone
expect the politicians to do anything but kick-the-can?
And worst still, why would they not lose all historical memory
that might otherwise warn of the extreme dangers posed by radically
expanding the deficit at the tail end of the weakest business cycle in modern
history?
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?
Graphene, 2D Materials and Carbon Nanotubes: $300 Million Markets, Technologies and Opportunities 2017-2027 - ResearchAndMarkets.com
January 31, 2018 06:21 AM Eastern Standard Time
DUBLIN--(BUSINESS
WIRE)--The "Graphene, 2D Materials and Carbon Nanotubes: Markets,
Technologies and Opportunities 2017-2027" report has been added to ResearchAndMarkets.com's
offering.
The graphene market to reach over 3,800 tonnes per year in 2027
Analyst Research projects that the graphene market will grow to over
$300m in 2027.
This forecast is at the material level and does not count the value of
graphene-enabled products. In many instances graphene is only an additive with
low wt% values.
This report provides the most comprehensive and authoritative view of
the topic, giving detailed ten-year market forecasts segmented by application
and material type. The market forecasts are given in tonnage and value at the
material level. Furthermore, this report includes comprehensive interview-based
profiles of all the key players the industry, providing intelligence on the
investment levels, expected future revenues, and the production capacity across
the industry and by supplier. In addition, this report critically reviews all
existing and emerging production process.
This report also gives detailed, fact-based and insightful analysis of
all the existing and emerging target applications. For target applications, the
report provides an assessment and/or forecast of the addressable markets, key
trends and challenges, latest results and prototype/product launches, and the
analysts insight on the market potential.
A continual decline in average sales prices will accompany the revenue
growth, meaning that volume sales will reach over 3.8 k tpa (tonnes per annum)
in 2027. Despite this, forecasts suggest that the industry will remain in a
state of over-capacity until 2021 beyond which time new capacity will need to
be installed. Furthermore, research forecasts that some 90% of the market value
will go to graphene platelets (vs. sheets) in 2027.
The market will be segmented across many applications, reflecting the
diverse properties of graphene. In general, we expect functional inks and
coatings to reach the market earlier. This is a trend that we forecasted
several years ago and is now observed in prototypes and small-volume
applications. Indeed, analyst research projects that the market for functional
inks and coatings will make up 21% of the market by 2018. Ultimately however,
energy storage and composites will grow to be the largest sectors, controlling
25% and 40% of the market in 2027, respectively.
Key Topics Covered:
1. Introduction
2. Market Projections
3. Graphene Production
4. Graphene Materials
5. Graphene Applications And Markets
---- For more information about this report visit https://www.researchandmarkets.com/research/dwjbxp/graphene_2d?w=4
More
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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