Baltic Dry Index. 1095 +13 Brent Crude 67.33
John Kenneth Galbraith. The Great Crash: 1929.
A dead cat bounce or
something more? To this old dinosaur trader, my money is on a dead cat bounce.
Once the forced margin call selling ended, short sellers covering and bargain hunters
emerged to provide a level of buying, but in the face of long term interest
rate “normalisation,” stocks at high valuations isn’t the place to be.
Besides, Wall Street’s
“finest,” in their never ending mission in “God’s work” to separate fools from
their money, created a vast ocean of “volatility products,” nearly all of which
blew up over the last few days. We have yet to see the damage and widespread
contagion. While the stock pedlars are
out pushing the story line that the correction is over and healthy, to this old
dinosaur, it’s far from over or healthy.
It’s probably just the beginning of the end game.
In any great organization it is far, far safer to be wrong with the majority than to be right alone.
John Kenneth Galbraith.
February 6, 2018 / 11:51 PM
Asian shares on edge, trim gains as U.S. futures slip
SYDNEY
(Reuters) - Asian share markets took back some of their earlier gains on
Wednesday as investors were unnerved by a drop in U.S. stock futures,
underscoring lingering anxiety following steep losses in global equities over
the past few days.
While most analysts believed distressed selling looked to have run its
course for the moment, allowing volatility to abate a little, the prospect of
monetary tightening across the globe remained a challenge for the long term.
“If we look at some of the drivers of the recent volatility – the
natural correction and the bond sell-off – we don’t foresee any of these
factors contributing to a lengthy period of extreme volatility,” said Tom
Kenny, senior economist at ANZ.
“The correction is probably a healthy development and is not reflective
of a souring of the macroeconomic outlook.”
Investors took their cue from a late rebound on Wall Street, though many
had an anxious eye on E-Mini futures for the S&P 500 which were off 0.3
percent in Asian trading.
MSCI’s broadest index of Asia-Pacific shares outside Japan was last up
0.8 percent after rising as much as 2 percent in early trades.
Japan’s Nikkei eased too but was still up 1.6 percent. Chinese blue
chips fell more than 1 percent while South Korea’s KOSPI index was also in the
red.
----It was also a wild ride for Treasuries, with U.S. 10-year yields diving as deep as 2.65 percent before a fresh sell-off dragged them back up to 2.80 percent - the sort of range seen very rarely.
Bonds had started to see some buying again, a hint that risk appetite
might be returning with the potential to trigger another spasm of selling in
stocks.
More
February 6, 2018 / 11:56 AM
Wall Street roars back, traders eye volatility ahead
NEW YORK (Reuters) - Shaken out of many months of calm, Wall
Street braced for a higher level of volatility in the days ahead, after a
roughly 2 percent rebound in U.S. stocks on Tuesday followed the biggest
one-day selloff in more than six years.
The question that vexed traders: were the wild swings of the past two
days the start of a deeper move down or just clearing the way to the resumption
of the aging bull market, which would turn nine on March 9.
“Today’s market action is a classic of a market that has searched for a
bottom,” said Peter Cardillo, chief market economist at First Standard
Financial In New York, who predicted a rebound back to record levels.
Bulls argue that strong U.S. corporate earnings, including a boost from
the Trump administration’s tax cuts, will ultimately support market valuations.
Bears, including short sellers that bet on the market decline, say that the
market is over-stretched in the context of rising bond yields as central banks
withdraw their easy money policies of recent years.
----Tuesday’s wild trading session saw the Dow swing more than 1,100 points from its low to its high and ended with the benchmark S&P 500 tallying its best day since just before President Donald Trump’s November 2016 election.
“I don’t think the volatility is over,” said JJ Kinahan, chief market
strategist at TD Ameritrade in Chicago. “These types of moves tend to take
about three weeks to get through the system ... and volatility just doesn’t
suddenly settle down.”
More
Inside Wall Street's $8 Billion VIX Time Bomb
By Dakin Campbell,Dani Burger,Donal Griffin, and Carolina Wilson
Updated on 7 February 2018, 03:00 GMT
It was the hot trade on Wall Street, a seemingly sure thing that lulled
everyone from hedge fund managers to small-time investors.
Now newfangled investments linked to volatility in the stock market --
until a few years ago, obscure niche products -- have exploded in spectacular
fashion. The shock waves have only just begun.
How these investments proliferated is a classic story of Wall Street
salesmanship and old-fashioned greed. In a few short years, financial
engineering transformed expectations about the ups and downs of the stock
market into an asset class that could be marketed and sold -- as tradable as
stocks but, it turns out, sometimes far riskier.
Call it the volatility-financial complex. All told, financial players
have created more than $8 billion of products tied to one index alone. In a
low-interest-rate world, investors desperate for returns snapped them up, and
bankers collected fees along the way.
But, as with mortgage investments a decade ago, complacency -- in this
case, over a history-defying period of market calm -- masked potential dangers.
No one is saying the wild swings of late presage a broad collapse like
the one that hit in 2008. But the fallout nonetheless provides a glimpse into
the myriad products, and growing complexity, driving global markets a decade
after the last debacle.
The risks, in hindsight, were clear enough even before the Dow Jones
industrial average plummeted nearly 1,600 points on Monday, snapped back, and
then took a wild bungee jump of nearly 1,200 points Tuesday.
The chief executive officer of Barclays Plc, which pioneered notes linked to U.S. market volatility, warned only last month that investors might be losing their heads.
“If this thing turns, hold on to your hat,” Jes Staley told a panel at the World Economic Forum in Davos, Switzerland.
Now, hats have been blown off by a whirlwind the likes of which Wall Street has never seen. To some, the volatility complex feels like a monster that’s been lurking in the shadows. Even one of the inventors of the VIX, Devesh Shah, is perplexed why these products exist in the first place.
“Everybody knew that this was a huge problem,” said Shah, who was in his 20s when he helped create what’s become the market’s fear barometer. “Everybody knows that Inverse VIX is going to go to zero at some point, and all these inverse and leveraged products, not just in the VIX but elsewhere too, at the end of the day cost people a lot of money.”
Read more: ‘I Don’t Know Why These Products Exist’
Adding to the angst is the sobering fact that neither market strategists nor money managers nor bankers who’ve structured these products are quite sure just how big and pervasive the market is.
“The volatility product industry has in many ways taken over the risk product industry in the equity business,” said Michael Schmanske, founder at Glenshaw Capital Management, who helped oversee the launch of some of the first exchange traded products linked to the VIX, the volatility index at the center of many of these investments. “Volatility has absolutely and positively become an asset class in its own right.”
More
Strategist Who Called Stock Slump Says It Will Be Short-Lived
By Livia Yap
6 February 2018, 01:03 GMT
Peter Garnry said two
weeks ago that global stocks were headed for a correction in the second
half of the first quarter. While the head of equity strategy at Saxo Bank
didn’t get the timing exactly, his alarm bells on the run-up in equity markets
were on point.Now, Garnry says the declines are likely to be short-lived as U.S. 10-year Treasury yields haven’t reached a worrying level.
“We believe this is a healthy correction in equity markets but also likely short-lived as the higher US 10-year yield is still not in the danger zone,” Garnry said in an e-mail. “That area is more likely in the 3.5-4.0 percent range.”
----Still, Garnry says it’s too early to predict a bear market.
“After the correction, equity investors will likely buy into the
inflation story and bid up equities once more, which is a classical late-cycle
behavior which we last time saw in 2007,” he said, adding that the decline in
global equities could extend to about 7 to 10 percent.
Inflation Is About to Appear ‘With a Vengeance,’ Paul Tudor Jones Says
By Saijel Kishan
6 February 2018, 01:30 GMT
Paul Tudor Jones said inflation is about to appear “with a vengeance”
and may force the new Federal Reserve chair to accelerate interest-rate hikes.
The hedge fund manager said policy has focused on a “low inflation
problem” and years of rates near zero amid economic expansion will have
“painful” consequences. Policy makers should have been more aggressive in
tightening policy and “rejecting the fiscal impropriety associated with this
most recent tax cut,” he said.
“We
are replaying an age-old storyline of financial bubbles that has been played
many times before,” Jones, founder of Tudor Investment Corp., wrote in a Feb. 2
letter to clients seen by Bloomberg. “This market’s current temperament feels
so much like either Japan in 1989 or the U.S. in 1999. And the events that have
transpired so far this January make me feel more convinced than ever of this
repeating history.”
----Jones founded Tudor in 1980 and became one of the famed macro managers trading everything from currencies to commodities. In recent years he has posted middling returns and saw clients pull billions of dollars from his hedge fund. Jones was among the macro managers who staged a comeback last month, with his main fund climbing 4.8 percent after losses last year.
In his 10-page letter to investors, Jones said 2018 brings “a new fact set and a field of dreams for macro” and cited the Bible: “To everything there is a season and a time to every purpose.” Jones said the passage was written for his trading style as the days of betting on rising markets may be numbered.
“It is hard for us, without being flippant, to even see a scenario
within any kind of realm of reason that would see us losing one dollar in any
of those [CDS] transactions.”
Joseph J. Cassano, a former A.I.G. executive, August 2007, on Credit
Default Swaps that wiped out A.I.G in 2008.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, how the Unicorn ranchers are under pressure.
Is bitcoin preparing to make The Grand Round Trip?
Bitcoin Miners Face Shakeout as Only Strongest Survive at $6,000
By Justina Lee
6 February 2018, 11:07 GMT
Bitcoin miners face a reckoning as the cryptocurrency’s tumble wipes out
profits for all but the industry’s most efficient operators, according to
Bloomberg New Energy Finance.
Only miners with access to “very cheap” electricity of about 6 cents per
kilowatt hour or less can stay profitable after Bitcoin slumped to $6,000 on
Tuesday, said Sophie Lu, an analyst at Bloomberg New Energy Finance in Beijing.
If Bitcoin stays this low for more than a couple of weeks, miners with high
operating costs will leave the market, she said.
“There are definitely some miners who are already out of the money,” Lu
said, adding that the industry’s most efficient players can keep going until
$3,000.
Bitcoin’s meteoric rise to nearly $20,000 last year prompted hordes of new miners to enter the fray -- everyone from individuals with a single machine plugged into their bedroom wall to companies with giant server farms powered by hydroelectric dams. With prices in the stratosphere, the Bitcoin-denominated rewards that miners received for verifying transactions more than covered the cost of electricity and computing power.
But the economics are much less compelling now that prices have tumbled and the difficulty of mining Bitcoins has increased. The industry’s daily revenue plunged to $16 million on Monday from a record $53 million on Dec. 17, according to Blockchain.info.
Read more: Bloomberg Gadfly’s take on Bitcoin miners
“If you buy mining equipment now, it’s no longer profitable,” said Zhou Shuoji, a founding partner at FBG Capital, a Singapore-based cryptocurrency investment company.
In theory, Bitcoin should find support as its price approaches the cost of mining a new coin, Zhou said.
But the cryptocurrency’s value is also a function of its demand, and right now that’s looking shaky as worries over tighter regulation around the world send investors for the exits.
Bitcoin's Crash Looks Spookily Familiar
There are similarities
between this week's crypto and markets routs.
By Lionel Laurent
6 February 2018, 13:05 GM
Bitcoin has been a plaything for risk-hungry traders and punters rather
than a widely held investment or real-world currency. It's been shunned by
banks and banned by governments.
Yet it's still possible that its slide on Monday made the broader market
selloff worse, as investors sold assets to compensate for crypto-losses.
Marginal as this may be, and you can't be certain of correlation with something
as unstable as digital currencies, it's a link that's at least worth exploring.
The past 24 hours have shown a surprising resemblance between Bitcoin's
behavior and the world's more established financial markets. A chart of
Bitcoin's price plotted against S&P 500 E-Mini futures shows how both moved
in similar formation when the selloff reached a trough and a mini-rebound
began.
The
corrections are similar, with both back to levels last seen in November. A
regression analysis of the past two years shows a correlation of 0.7 between
Bitcoin's price and the S&P 500 Index, where 0 is the weakest correlation
and 1 the strongest. Over a year, the correlation is 0.8.
But we shouldn't ignore its place in investor portfolios and
psychology. It may not be a traditional Wall Street holding, but the digital
currency did become a real-world financial fixture at the end of last year when
futures contracts began trading -- the same time that it hit a record price of
almost $20,000.Institutions were given more options to buy into the bubble, and the Bitcoin Investment Trust vehicle saw its premium to net asset value swell to more than 50 percent. Hedge-fund managers reinvented themselves as crypto-experts. Brokers kept clients updated on Bitcoin as if it were oil, gold or the euro.
So rather than believe that a Bitcoin can fall in the proverbial forest with nobody around to hear it, the crashing sound may well have reverberated elsewhere. Losses in crypto-focused corners of portfolios, as Bitcoin slid from about $12,000 to below $8,000 in the space of a week, probably led to sales of other assets to compensate, reckons one senior trader.
More
Get Ready for Most Cryptocurrencies to Hit Zero, Goldman Says
By Kana Nishizawa
The
tumble in cryptocurrencies that erased nearly $500 billion of market value over
the past month could get a lot worse, according to Goldman Sachs Group Inc.’s
global head of investment research.
Most
digital currencies are unlikely to survive in their current form, and investors
should prepare for coins to lose all their value as they’re replaced by a small
set of future competitors, Goldman’s Steve Strongin said in a report dated Feb.
5. While he didn’t posit a timeframe for losses in existing coins, he said
recent price swings indicated a bubble and that the tendency for different
coins to move in lockstep wasn’t rational.
More
"We finished the year, and we reported that we had $17 billion of cash sitting at the bank's parent company as a liquidity cushion. As the year has gone on, that liquidity cushion has been virtually unchanged."
Alan Schwartz, CEO Bear Stearns,
March 12, 2008. Bust March 16, 2008.
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?
Wireless energy source generates electricity from simple motions such as waves, clapping hands
Date:
February 5, 2018
Source:
Clemson University
Summary:
Researchers have developed a wireless energy source that generates electricity
from simple mechanical motion, such as the waves in the ocean, the tap of a
foot or the clap of a hand.
Researchers from Clemson's Nanomaterials Institute (CNI) are one step closer
to wirelessly powering the world using triboelectricity -- a green energy
source.
In March 2017, a group of physicists at CNI invented the ultra-simple
triboelectric nanogenerator, or U-TENG -- a small device made simply of plastic
and tape that generates electricity from motion and vibrations. When the two
materials are brought together -- through clapping your hands or tapping your
feet, for example -- a voltage is generated that is detected by a wired,
external circuit. Electrical energy, by way of the circuit, is then stored in a
capacitor or a battery until it's needed.
Nine months later, in a paper published in the journal Advanced
Energy Materials, the researchers have uncovered a wireless version of
TENG, called the W-TENG, which greatly expands the applications of the
technology.
The W-TENG was engineered under the same premise as the U-TENG, using
materials that are so opposite in affinity for electrons that they generate a
voltage when brought in contact with each other.
In the W-TENG, plastic was swapped for a multipart fiber made of
graphene -- a single layer of graphite, or pencil lead -- and a biodegradable
polymer known as poly-lactic acid (PLA). PLA, on its own, is great for
separating positive and negative charges, but not so great at conducting
electricity -- which is why the researchers paired it with graphene. Kapton
tape, the electron-grabbing material of the U-TENG -- was replaced with Teflon,
a compound known for coating nonstick cooking pans.
"We use Teflon because it has a lot of fluorine groups that are
highly electronegative, whereas the graphene-PLA is highly electropositive.
That's a good way to juxtapose and create high voltages," said Ramakrishna
Podila, corresponding author of the study and an assistant professor of physics
at Clemson.
To obtain graphene, the researchers exposed its parent compound,
graphite, to a high frequency sound wave. The sound wave then act as a sort of
knife, slicing the "deck of cards" that is graphite into layer after
layer of graphene. This process, called sonication, is how CNI is able to scale
up production of graphene to meet the research and development demands of the
W-TENG and other nanomaterial inventions in development.
After assembling the graphene-PLA fiber, the researchers exploited additive
manufacturing -- otherwise known as 3D printing -- to pull the fiber into a 3D
printer, and the W-TENG was born.
The end result is a device that generates a max voltage of 3000 volts --
enough to power 25 standard electrical outlets, or on a grander scale,
smart-tinted windows or a liquid crystal display (LCD) monitor. Because the
voltage is so high, the W-TENG generates an electric field around itself that
can be sensed wirelessly. Its electrical energy, too, can be stored wirelessly
in capacitors and batteries.
More
"On
the whole human beings want to be good, but not too good, and not quite all the
time.”
George
Orwell.
The monthly Coppock Indicators finished January
DJIA: 26,149 +282 Up. NASDAQ: 7,411 +310 Up. SP500: 2,824 +212 Up.
No comments:
Post a Comment