Monday 12 March 2018

Don’t Worry, Buy More.



Baltic Dry Index. 1201 +04    Brent Crude 65.55

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.

Trade Wars? Forget about it. Currency wars? Forget about it. Rising interest rates? Forget about it.  North Korea? Forget about it. Rising scandal in Japan? Forget about it.  A crisis in Chinese banks? Forget about it. Trouble in the dying EU? Forget about it. All news is now good news again. Party on like its 2007 again.  Buy more!  What could possibly go wrong?

Well Asia, for one, if scandal brings down Japanese Prime Minister Shinzo Abe.

“Why, sometimes I've believed as many as six impossible things before breakfast.”

Lewis Carroll, Alice in Wonderland

Stocks in Asia Rally After U.S. Jobs; Yen in Focus: Markets Wrap

By Adam Haigh
Updated on 12 March 2018, 05:18 GMT
Asian stocks gained as trade-war concerns took a backseat to economic optimism following a U.S. jobs report Friday that showed the American economy continued to strengthen without the prior month’s rapid wage gains that stoked inflation fears.

The MSCI Asia Pacific Index of stocks climbed, with markets from Tokyo to Sydney higher. The S&P 500 Index rose Friday and the Nasdaq Composite Index soared to a fresh record high after U.S. non-farm payrolls data topped forecasts. The yen was in focus thanks to political concerns surrounding Japan’s Finance Ministry, run by a stalwart ally of Prime Minister Shinzo Abe, whose administration has endorsed a weak currency. The yen came off its highs when the minister, Taro Aso, said he’s not resigning.

Strong economic indicators have bolstered the Federal Reserve’s case for higher interest rates and given fresh impetus to the bull market in global equities that’s now nine years old. A slew of data out of China this week and readings on U.S. inflation and retail sales could provide more insight into the strength of global growth. Appetite for risk assets was boosted at the end of last week as U.S. President Donald Trump accepted an invitation to meet North Korean leader Kim Jong Un and the narrower-than-expected tariff plan from the White House eased speculation of a trade war.
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March 12, 2018 / 12:54 AM / Updated 25 minutes ago

Japan PM wife's name removed from documents in suspected cronyism scandal - media

TOKYO (Reuters) - The name of Japanese Prime Minister Shinzo Abe’s wife was removed from documents regarding a suspected cronyism scandal, media said on Monday, as pressure mounted on the premier and his ally Finance Minister Taro Aso over a possible cover-up.

Abe, now in his sixth year in office, had tried to put behind him questions over the sale of state-owned land at a huge discount to a school operator with ties to his wife, Akie.

The issue last year sharply eroded Abe’s popularity. His ratings rebounded thereafter, but doubts over Abe and his cabinet have been revived with a series of fresh revelations.

Abe has repeatedly denied he or his wife did favours for school operator Moritomo Gakuen, which bought the land, and has said he would resign if evidence were found that they had.

Former Moritomo Gakeun head Yasunori Kagoike and his wife were arrested in July on suspicion of illegally receiving subsidies.

Suspicions of a cover-up could slash Abe’s ratings and dash his hopes of a third term as leader of the ruling Liberal Democratic Party (LDP). Victory in the LDP September leadership vote would put him on track to become Japan’s longest-serving premier.

“The involvement of Mrs. Abe has deepened. This has entered the stage where the responsibility of the prime minister himself will be called into question,” opposition Democratic Party leader Yuichiro Tamaki, was quoted saying by Kyodo news agency.

The doubts have also sparked calls for Aso to quit, but the finance minister said on Friday that he will not step down.

Aso plans to hold a news conference later on Monday.

China Banking Crisis Warning Signal Still Flashing, BIS Says

By John Glover
Updated on 12 March 2018, 02:03 GMT
China, Canada and Hong Kong are among the economies most at risk of a banking crisis, according to early-warning indicators compiled by the Bank for International Settlements.

Canada -- whose economy grew last year at the fastest pace since 2011 -- was flagged thanks to its households’ maxed-out credit cards and high debt levels in the wider economy. Household borrowing is also seen as a risk factor for China and Hong Kong, according to the study.

“The indicators currently point to the build-up of risks in several economies,” analysts Inaki Aldasoro, Claudio Borio and Mathias Drehmann wrote in the BIS’s latest Quarterly Review published on Sunday.

The study offered some surprising results: for example, Italy wasn’t shown as being at risk, despite its struggles with a slow-growing economy and banks that are mired in bad debts.

While China was flagged, a key warning indicator known as the credit-to-gross domestic product “gap” showed an improvement, said the BIS, known as the central bank for central banks. This may suggest the government is making progress in its push to reduce financial-sector risk.

----China is getting serious about dangers in its financial system. While derisking has been the government’s mantra since 2015, the country’s most powerful politicians have been ramping up directives on everything from shadow banking to stock-market speculation. Since April last year, financial regulators have targeted curbing the growth of wealth management products and interbank borrowings, with a more recent focus on reining in household debt.

Read this QuickTake Q&A on how China is tackling financial risk

The Basel, Switzerland-based BIS routinely collects and analyzes data to monitor vulnerabilities in the global financial system. These figures typically include the amount of credit in an economy and house prices, as well as borrowers’ ability to service their debts.

For this study, the analysts assessed household borrowings and cross-border or foreign-currency liabilities as potential sources of vulnerability by back-testing them against earlier crises. They then scored the indicators by the amount they currently deviate from long-term trends.
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March 11, 2018 / 5:09 PM

Chinese banks sixth-largest global creditor group - BIS

LONDON (Reuters) - Chinese banks have significantly stepped up their lending activities in recent years to rank now as the sixth-largest international creditor group, the Bank for International Settlements (BIS) said on Sunday.

The BIS, an umbrella body for global central banks, said in its latest report that Chinese banks had cross-border financial assets worth about $2 trillion as of the third quarter of 2017.

As Chinese banks lend abroad largely in U.S. dollars, in absolute terms this makes them the third-largest provider of U.S. dollars to the international banking system, the BIS added.

“Their global footprint encompasses not just emerging market economies, but also advanced economies and offshore centres worldwide,” the BIS said.

But while highlighting the role of Chinese banks as an important source of credit globally, the BIS paper also warned on borrowers’ reliance on a “common lender”, noting this had exacerbated past Asian financial crises.

This refers to a situation in which several countries borrow from just a few big international banks, raising the risk that losses in one country encourage the banks to withdraw from other borrower countries as well.

“Contagious spillovers can thereby spread the turmoil around the globe,” the report said.

For example, at the time of the Asian financial crisis of 1997-98, Japanese banks dominated lending to emerging Asia - namely Indonesia, South Korea, Malaysia, the Philippines and Thailand - holding 42 percent of international consolidated claims on the five countries.

While Japanese banks subsequently cut exposure, European banks took over as leading lenders to the region, with euro area banks holding 35 percent of claims by mid-2008. Japanese lenders had 15 percent.

But when the global financial crisis of 2007-09 hit, followed by the European sovereign debt crisis of 2010-12, euro zone banks cut their lending to Asian borrowers.
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Kim Jong Un Wants a Peace Treaty From Trump, Report Says

By Kanga Kong
Updated on 12 March 2018, 03:29 GMT
Kim Jong Un wants to sign a peace treaty after meeting with U.S. President Donald Trump, South Korean media reported, reviving a long-held goal of the North Korean regime.

Kim is likely to raise the possibility of a peace treaty, along with establishing diplomatic relations and nuclear disarmament, during a meeting with the U.S. leader, the Dong-A Ilbo newspaper said Monday, citing an unidentified senior official in South Korea’s presidential office. Trump last week agreed to meet Kim, although key details of the summit have yet to be decided.

Koh Yu-hwan, who teaches North Korean studies at Dongguk University in Seoul, said the regime has long sought a peace treaty to end the more than 60-year-old ceasefire between the two sides and help guarantee its safety.

“There were agreements between the U.S. and North Korea to open up discussion on a peace treaty, but they never materialized,” Koh said, saying the conditions were key. “The U.S. wants a peace treaty at the end of the denuclearization process, while for the North, it’s the precondition for its denuclearization.”

Signing a peace treaty would require addressing issues regarding the U.S. military’s presence in South Korea and its transfer of wartime operational control to South Korea and United Nations forces in South Korea, Koh said.

---- The meeting -- tentatively scheduled for May -- will require a flurry of diplomacy as participants try to agree what will be discussed and where it will happen. South Korean President Moon Jae-in also accepted Kim’s offer to meet near their shared border later next month, a meeting in which Kim was expected to suggested resuming cultural exchanges and family reunions.

The U.S. and the South Korea are also discussing how to conduct upcoming mass military drills in a way that won’t provoke Kim, whose regime views the exercises as a rehearsal for war. The allies had agreed to delay the drills until after the Winter Paralympics end later this month.

The U.S. was unlikely to deploy an aircraft carrier, which is considered a “strategic asset,” during the drills, the Yonhap News Agency reported Monday. The South Korean Defense Ministry declined to comment on the planned drills.

In any great organization it is far, far safer to be wrong with the majority than to be right alone.

John Kenneth Galbraith.

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.

Today, more downside to the Great Global Trump Trade War.

“Curiouser and curiouser!”

Lewis Carroll, Alice in Wonderland

Trump’s Steel, Aluminum Tariffs Create ‘Another Headache’ for Renewables

Higher commodity prices could increase the levelized cost of energy for U.S. renewable power plants by potentially up to 5 percent.
Julia Pyper

President Trump dealt a blow to the U.S. renewable energy industry Thursday in approving new tariffs on imported steel and aluminum.

Aggressive foreign trade practices are an "assault on our country," the president said, before signing a Section 232 proclamation that slaps a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum.

Factories have been left to rust, communities have turned into ghost towns, and U.S. national security has been undermined, said Trump. "Now we're finally taking action to correct this long-overdue problem."

While steel company CEOs say tariffs will bring back American jobs, numerous trade experts, industry groups, politicians and even members of the aluminum industry argue tariffs won't revitalize U.S. manufacturing and could harm other segments of the economy in the process. The clean energy industry is one of those segments.

“Steel and aluminum are important commodities for critical wind, solar and storage components, with few bankable substitute materials available," state Wood Mackenzie Power and Renewables analysts in a forthcoming research note.

GTM Research, MAKE Consulting and Wood Mackenzie collectively calculate the resulting price increase in commodities could potentially result in a 3 percent to 5 percent increase in the levelized cost of energy for U.S. renewable power plants, leading to slightly lowered forecasts for project deployments or slightly lowered project returns.

"While the broader impacts are unknowable, the tariffs will have a direct impact on renewable component costs, both in the form of increases in general electrical products (e.g., wiring, transformers) and in critical components, including: wind turbine towers, solar ground-mount posts and tracker torque tubes, and battery system housing containers," the note states.

Given that the new tariffs are coupled with already-pressured margins, an existing Section 201 tariff on solar modules, the planned step-down of the federal solar Investment Tax Credit and the wind Production Tax Credit, and the potential withdrawal of tax equity as the result of tax reform, analysts write that "the Section 232 tariffs represent yet another headache to mitigate or absorb for renewables."
"We can also do stupid."

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?

A new class of two-dimensional materials

New kinds of 'superlattices' could lead to improvements in electronics, from transistors to LEDs

Date: March 8, 2018

Source: UCLA Henry Samueli School of Engineering of Applied Science

Summary: Scientists and engineers have developed a method to make new kinds of artificial "superlattices" -- materials composed of alternating layers of ultra-thin "two-dimensional" sheets, which are only one or a few atoms thick. Unlike current state-of-the art superlattices, in which alternating layers have similar atomic structures, and thus similar electronic properties, these alternating layers can have radically different structures, properties and functions, something not previously available.

For example, while one layer of this new kind of superlattice can allow a fast flow of electrons through it, the other type of layer can act as an insulator. This design confines the electronic and optical properties to single active layers, and prevents them from interfering with other insulating layers.

Such superlattices can form the basis for improved and new classes of electronic and optoelectronic devices. Applications include superfast and ultra-efficient semiconductors for transistors in computers and smart devices, and advanced LEDs and lasers.

Compared with the conventional layer-by-layer assembly or growth approach currently used to create 2D superlattices, the new UCLA-led process to manufacture superlattices from 2D materials is much faster and more efficient. Most importantly, the new method easily yields superlattices with tens, hundreds or even thousands of alternating layers, which is not yet possible with other approaches.
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The monthly Coppock Indicators finished February

DJIA: 25,029 +283 Up 01. NASDAQ:  7,273 +313 Up 03. SP500: 2,714 +212 Flat.

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