Baltic Dry Index. 1077 Fri. Brent Crude 75.64
You go to Paris, or you go to
Portugal, you go to Poland, and you ask, 'Who are you people?' They'll tell
you, we're Portuguese, we're Spanish, we're Polish. Who are the people that are
really European? The people in Brussels, in the E.U. bureaucracy. Europe has
not been able to move to the level of patriotic identification with the
concept.
Zbigniew Brzezinski
This morning we are spoilt for choice of
trouble. Italy and Euroland. Hungary and Euroland. Spain and Euroland plus
Catalonia. Brexit and Euroland. Brazil turning into Argentina. President Trump seriously considering meeting
with a mass murderer who recently murdered his own half brother and murdered US
college student Otto Warmbier. President Trump v the rest of the world. OPEC
and Russia about to break the price of oil?
This morning our
world on the brink, but the brink of what?
While it was an experiment to
bring them together, nothing has divided Europe as much as the euro.
Joseph Stiglitz
May 29, 2018 / 12:51 AM
Shares fall on Italian turmoil, euro near 6-1/2 month lows
SYDNEY
(Reuters) - Asian shares fell on Tuesday and the euro hovered near 6-1/2 month
lows as early elections loomed in Italy, but a revival in diplomatic talks with
North Korea and a retreat in oil prices from recent highs supported sentiment.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dipped 0.5 percent after three consecutive sessions of gains.
Japan's Nikkei .N225 skidded more than 1 percent while South Korean .KS11 shares slipped 0.8 percent. Chinese shares were in the red, too, with the blue-chip .CSI300 down 0.6 percent.
Australia was the only market in the black, thanks to gains in banking stocks. [.AX] But liquidity was relatively thin with public holidays in Singapore, Malaysia, Indonesia and Thailand.
----European shares were hammered overnight after the anti-establishment 5-Star and League parties in Italy abandoned plans to form a government.
Investors feared Italy’s election campaign could focus on the country’s
continued membership of European institutions and strengthen the populist
parties’ hand.
Adding to the uncertainty, Spanish Prime Minister Mariano Rajoy will
face a vote of confidence in his leadership on Friday.
“This
should keep the risk trades pressured to the downside,” Twidale added. “(The)
focus will remain on the on-again, off-again U.S.-North Korean summit and the
U.S.-China trade relationship as we move through the Asian trading session.”
More
Next, another red
flag for stocks. What’s wrong with this?
Leverage Alert Ringing While Cash Drains From Stock Broker Accounts
By Lu Wang
25 May 2018, 11:00 GMT+1
Few things evoke fear in markets like a margin call. Now there are signs that many U.S. stock
investors are ill-prepared to deal with one.The issue is net cash in equity brokerage accounts, seen by some as a proxy for how well-cushioned traders are from forced liquidations if stocks start to plummet. It’s calculated by subtracting the amount of debt used to buy securities from money in an account that’s available to buy more.
And right now, it’s perilously low.
The deficit just reached $317 billion, the widest ever, according to New
York Stock Exchange data compiled by Sundial Capital Research Inc. The previous
record was set in January, right before the S&P 500 Index suffered its
first 10 percent correction in two years.
Cash “seems to provide less of a cushion for any decline in the value of
stock,” Jason Goepfert, president of Sundial Capital Research Inc., wrote in a
note to clients. “That is clearly concerning.”
There are few topics in the market subject as much demagoguery as margin
debt, and a standard critique over the the period of the bull market has been
that it’s at untenable levels -- $652 billion, by the NYSE’s last count. What’s
usually lost in the discussion is that such debt basically always rises with
the value of equities -- the two are virtually synonymous since one
collateralizes by the other.
What’s bad is when the expansion of margin comes untethered from the
slope of equities, signaling people are taking out loans even faster than
stocks are appreciating. That happened in the final year of the last two bull
markets, when margin loan growth outpaced share gains by twofold in 2007 and
almost four times in 2000.
Nothing like that is happening now. At the same time, a similarly dire
picture is evident when cash credits in brokerage accounts are taken into
consideration. Available for investors to withdraw at any time, for any
purpose, they include proceeds from short sales and extra buying power held in
margin accounts. Last month, they fell 3.3 percent to $335 billion, the lowest
level in four years.
Think of the money as assets on a balance sheet and stock loans as
liabilities. As traders withdrew cash while at the same time raising debt,
their financial health, or in Sundial’s term “net wealth,” deteriorates.
More
Elsewhere, the Euro crisis is back with a vengeance.
The Brussels-Berlin axis, is now fighting Brexit, Italy, Poland, Hungary,
Austria, Slovakia, the Czech Republic, and Donald Trump’s America. What could
possibly go wrong? Euros anyone?
A war
between Europeans is a civil war.
Victor Hugo.
May 28, 2018 / 7:47 AM / Updated 4 hours ago
President readies Italy for snap polls to be fought on EU, euro
ROME
(Reuters) - Italy’s president set the country on a path to fresh elections on
Monday, appointing a former International Monetary Fund official as interim
prime minister with the task of planning for snap polls and passing the next
budget.
The decision to appoint Carlo Cottarelli to form a stopgap
administration sets the stage for elections that are likely to be fought over
Italy’s role in the European Union and the euro zone, a prospect that is
rattling global financial markets.
The euro zone’s third-largest economy has been seeking a new government
since inconclusive March elections, with anti-establishment forces abandoning
efforts to form a coalition at the weekend after a standoff with the head of state.
President Sergio Mattarella vetoed the parties’ choice of a eurosceptic
as economy minister, prompting the 5-Star Movement and far-right League party
to accuse him of betraying voters.
Both parties dropped drop their plan to take power, switched to campaign
mode, and 5-Star called for street protests against the president’s rejection
of their nominee, 81-year-old Paolo Savona, who has argued for Italy to quit
the euro zone.
Cottarelli told reporters after his appointment that elections would be
held in the autumn or early next year. He also tried to reassure investors on
the Italian economy.
----The prospect of fresh elections raised fears among investors that the vote could become a de facto referendum on Italy’s euro membership. The euro touched a fresh six-month low and yields on Italian debt climbed, increasing the extra borrowing costs or spread that Italy pays in comparison with Germany.
Already Italian politicians are pondering election tactics.
A 5-Star source said it was considering an election alliance with the
League. In March, 5-Star ran its own campaign while the League campaigned as
part of a right-wing coalition with the party of former prime minister Silvio
Berlusconi.
“This is not a democracy, this doesn’t respect the popular vote,” League
chief Matteo Salvini said after Cottarelli accepted his appointment by the
president.
More
May 28, 2018 / 3:15 PM / Updated
2 hours ago
Germany's Merkel laments fraying of multilateral order
BERLIN
(Reuters) - Germany is worried by signs of weakening in the network of
multilateral organisations and agreements designed to foster international
cooperation, Chancellor Angela Merkel said on Monday.
Merkel blamed the fraying of the multilateral order on a
“double transition” - the gradual fading of the direct memory of searing global
conflict and the sheer pace and scale of technological change.
“The people who experienced World War Two, the last true global
catastrophe, are dying out and are no longer there as eyewitnesses,” she told a
conference in Berlin.
“They learned from that terrible experience not to embed emnity but that
you had to try and build friendships with each other,” said Merkel, Europe’s
longest serving leader.
At the same time, emerging digital technologies are transforming the
global economy in a way comparable only to the invention of the printed book
centuries ago, creating disruption that no individual state could hope to
manage on its own.
“International agreements and institutions are being weakened. This is
worrying, since our multilateral global order comes from the lessons we learned
from the terrible world wars of the last century,” she said.
The same went for global trade, where she warned against protectionist
instincts that might endanger open markets.
Regretting the failure to seal a deal on the trans-Atlantic TTIP trade
partnership, Merkel stressed Europe’s continued willingness to discuss the
trade relationship with the United States, but warned against a confrontational
approach.
More
Austria unveils plan to cut benefits for immigrants
28 May 2018
Austria's coalition government has unveiled plans to cut benefit
payments for immigrants, including refugees, in a move aimed at deterring new
arrivals.
The main benefit payment will be capped at €563 ($655; £492) a month,
rising to match the amount Austrians receive - €863 - if they pass a German
test.
Immigrants will also be barred from claiming such benefits for five
years.
Conservative Chancellor Sebastian Kurz, in government with the far
right, has vowed a hard line on immigration.
Mr Kurz campaigned in last year's parliamentary election with pledges to
cap benefits for refugees and to shut down migrant routes to Europe.
"The fundamental rule we will introduce is that German will become
the key to accessing the full minimum benefit," Mr Kurz told a news
conference on Monday.
"That means that whoever has insufficient language skills will not
be able to claim the full minimum benefit," he added.
However
Monday's announcement brings Austria into conflict with the rest of the
European Union, because EU rules on freedom of establishment require all member
states' citizens to be treated equally.
More
Spain’s Mariano Rajoy to face no confidence vote on Friday
Parliament agrees to debate motion by opposition Socialists
but outcome far from clear
May 28 2018
Spanish
prime minister Mariano Rajoy will face a vote of confidence in his leadership
on Friday, a showdown that threatens to end six years of centre-right
government in Madrid and intensifies the political turmoil in southern Europe.
The
vote, the timing of which was announced on Monday, was originally called by the
opposition Socialist party after a Spanish court handed down a damning ruling
last week in a corruption case involving members of the ruling Popular party.
It will be preceded by a debate on Thursday on whether Mr Rajoy should be
replaced by Pedro Sánchez, the socialist leader. Mr Sánchez said Spain needed
to “recover the dignity of our democracy” with a new government.
Albert
Rivera, head of the liberal Ciudadanos party, which could in theory provide the
motion with the votes necessary for it to pass, said the authority of Mr
Rajoy’s minority government had been “liquidated”.
----“Rajoy may very well survive in
government, at least for the time being, as there is little unity among the
opposition about how to get rid of him,” said Antonio Barroso, analyst at Teneo
Intelligence. Spain’s main stock market index was down 0.5 per cent on Monday,
after falling as much as 2.7 per cent on Friday.
More
Finally Brazil, “where the
nuts come from,” to quote Oscar Wilde. A picture of the future as fiat money
systems break down and anarchy arrives. Unreformable
Euroland next decade?
Brazil, nine days into grinding strike, still a transport hell
Rio de Janeiro (AFP) - South America's economic giant, Brazil, remained
almost in a transport stranglehold on Tuesday despite a pledge from the
president that a nine-day strike will end soon.
Late Sunday, the deeply unpopular President Michel Temer caved in to
intense pressure from strikers, and cut the price of diesel fuel. The truck
strike has been crippling fuel, food and other freight across the
continent-sized industrial and agricultural powerhouse.
Temer said he had "absolute conviction that between today and
tomorrow" the crisis, would finally end. In a tweet, Temer gave a slightly
longer horizon of "one to two days."
Despite the president's confidence, significant numbers of truck drivers
stood firm and some appeared to be radicalized, calling for the government to
step down.
A key Temer minister, Eliseu Padilha, spoke of unidentified groups
"infiltrating the movement with different, essentially political
goals."
Late Sunday, Temer gave in to their main demand for lower diesel costs,
but Monday saw renewed disruption. Brazil is already suffering from the
aftermath of a deep recession and political instability ahead of October
general elections.
More than 550 road blockages by truckers were mounted across 24 of the
country's 27 states, the federal highway police said.
Shortages of aviation fuel shuttered eight airports. Traffic to the huge
Santos seaport near Sao Paulo, which usually receives 10,000 trucks a day,
shrank to a trickle.
Though there has been some improvement since the army was ordered to
intervene Friday, with armed soldiers escorting fuel trucks on priority routes,
enormous lines of cars were still forming at gas stations.
Many supermarkets around the country struggled to source fresh food. Producers
reported having to slaughter stocks of chickens because they had no access to
the feed, while others threw out thousands of liters of spoiled milk.
Hospitals in Rio de Janeiro and Sao Paulo had to cancel non-urgent
surgeries and at least 13 states reported scrapping university classes.
Adding to the disruption in Rio, the key BRT commuter system operated at
only 22 percent capacity, while in Sao Paulo the bus system ran at 70 percent
capacity.
The truckers are angry over the rise in diesel costs from 3.36 reais (92
US cents) a liter in January to 3.6 reais before the strike. On May 26, it hit
3.8 reais per liter.
After urgent negotiations with representatives of the truckers, Temer
agreed to cut the diesel price by 0.46 reais a liter for 60 days.
That concession hammered the value in state-controlled oil major
Petrobras, one of Brazil's most dominant companies, which is due to face a
strike by its own workers on Wednesday.
Shares dropped 14 percent Monday and another 14 percent last Thursday,
while the Ibovespa index in Sao Paulo closed 4.5 percent lower.
More
Remember that you are an Englishman, and have consequently won
first prize in the lottery of life.
Cecil Rhodes.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, Italy's dangerous contagion.
Which Banks Are Most Exposed to Italy’s Sovereign Debt? (Other than the Horribly Exposed Italian Banks)
by Don Quijones • May 27, 2018
Risk. Exposure. Contagion. These are three words we’re likely to hear
more and more in relation to Europe, as the Eurozone’s debt crisis returns.
On Friday, Italy’s 10-year risk premium — the spread between Italian
ten-year bond yields and their German counterparts — surged almost 20 basis
points to 212 basis points. This was the highest level since May 2017, when a
number of Italy’s banks, including third biggest bank Monte dei Pacshi di Siena
(MPS), were on the brink of collapse and were either “resolved” or bailed out.
Now, they’re all beginning to wobble again.
Shares of bailed-out and now majority-state-owned MPS, whose management
the new government says it would like to change, are down 20% in the last two
weeks’ trading. The shares of Unicredit and Intesa, Italy’s two biggest banks,
have respectively shed 10% and 18% during the same period.
One of the big questions investors are asking themselves is
which banks are most exposed to Italian debt.
A recent study by the Bank for International Settlements shows Italian government debt represents nearly 20% of Italian banks’ assets — one of the highest levels in the world. In total there are ten banks with Italian sovereign-debt holdings that represent over 100% of their tier-1 capital (which is used to measure bank solvency), according to research by Eric Dor, the director of Economic Studies at IESEG School of Management.
The list includes Italy’s two largest lenders, Unicredit and Intesa Sanpaolo, whose exposure to Italian government bonds represent the equivalent of 145% of their tier-1 capital. Also listed are Italy’s third largest bank, Banco BPM (327%), Monte dei Paschi di Siena (206%), BPER Banca (176%) and Banca Carige (151%).
In other words, despite years of the ECB’s multi-trillion euro QE program, which is scheduled to come to an end soon, the so-called “Doom Loop” is still very much alive and kicking in Italy. The doom loop is when weakening government bonds threaten to topple the banks that own the bonds, and in turn, the banks start offloading them, which causes these bonds to fall further, thus pushing the government to the brink. The doom loop is a particular problem in the Eurozone since a member state doesn’t control its own currency, and cannot print itself out of trouble, which leaves it exposed to credit risk.
But it’s not just Italian banks that are heavily exposed to Italian debt. So, too, are French lenders, which last year had combined holdings of Italian bonds worth €44 billion, according to data from the European Banking Authority’s 2017 transparency exercise. Spanish banks had €29 billion.
Which three non-Italian lenders of consequence are most exposed, in absolute terms, to Italian debt, based on Dor’s research?
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?
How Solar Power Works. How Much Solar Panels Cost.
May 28th, 2018
Today, solar power is everywhere – from home roofs to IKEA superstores
to the Nevada desert. And thank goodness. It’s a win-win solution to the
climate crisis that creates jobs, saves money, and helps cut the carbon
pollution changing our planet.
Plus, when it comes to energy, solar might be the closest thing to free
money out there – and we haven’t even begun to touch its full potential.
Why? Well consider this fact from the US National Renewable Energy
Laboratory (NREL): More energy from the sun strikes the Earth in an hour
than all of humanity uses in a year.
Not too much, really. Your solar panels themselves can last for decades
on end without much upkeep (maybe just remember to keep them free of debris,
snow, etc.). But you will likely need to replace the inverter a few times
throughout the life of your system.
Like the solar panels themselves, inverters typically come with a
warranty – these can range from 5-15 years (and sometimes even longer). Unlike
your panels, your inverter will not see its efficiency dwindle very slowly;
instead, it may simply stop working and need to be replaced.
However, technological developments on this front are afoot! New
“micro-inverters,” which are installed or included with each solar panel, are
quickly replacing the more-common central inverters that handle the output of
all your panels at once. These micro-inverters can have a much longer lifespan
(all the way up to 25 years) than a central inverter, and if one does fail, it
won’t shut your entire system down cold.
We’ll cut straight to the chase – solar panels work just fine when it’s
cloudy, rainy, and/or cold.
Are clouds and rain ideal for solar panels? Of course not. They are most
effective in direct sunlight. But solar panels can still generate power when
the sun is blocked by clouds – more than enough, in fact, to remain a viable
source of electricity. Take Germany, for example. It’s not particularly warm or
sunny, but is nevertheless a world leader in solar energy.
As for winter, there’s some even better news: Solar panels are powered
by light, not heat, and because of the way the technology works, they’re just
as effective — if not more effective — in cooler temperatures as in hot ones.
“In 2018, most US homeowners are paying between $2.71 and $3.57 per watt
to install solar, and the average gross cost of solar panels before tax credits
is $18,840,” EnergySage estimates.
That may seem quite expensive, but it also doesn’t take into account the
many incentives available to solar customers and the multiple new forms of
solar financing that have emerged in recent years that can allow customers to
put solar on their rooftops at little or no cost up front.
In addition, in the US, a 30 percent federal investment tax credit is
available until 2019 (stepping down in the years beyond) and can offset the
cost of your investment substantially, and many states also offer their own tax
breaks and incentives to encourage home solar panel installation.
And, of course, looking at the straight upfront cost of the system and
its installation is far from the whole story, at least as far as your bank
account is concerned.
More
The monthly Coppock Indicators finished April.
DJIA: 24,163 +255 Down. NASDAQ:
7,066 +282 Down. SP500: 2,648 +188 Down.
All
three slow indicators moved down in March and continued down in April. For some
a new bear signal, for others a take profits and get back to cash signal.
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