Baltic Dry Index. 1057 -20 Brent Crude 75.18
The euro is going to be a big source of problems, not a source
of help.
Milton Friedman
This morning, all
roads lead to Rome. With Italian bond yields exploding, can Italy remain in the
euro even if it wanted to? We are about
to find out, probably this week or next. It’s magic money tree time for the ECB’s
“whatever it takes” Draghi. But “whatever it takes” means a blank cheque from
Germany, and even that might not be sufficient, assuming that the Germans would
even agree.
Italian bond
contagion threatens the banks in Italy, France and Germany, including Germany’s top bank, the already
struggling Deutsche Bank. Are Europe’s bank depositors now about to get robbed
Greece and Cyprus style? But if Deutsche Bank blows, and Draghi’s magic money
tree is put into action, the Euro becomes just another version of the old
Italian lira, or Greek Drachma.
Below, Euroland’s quickening
train wreck. Even the magic money tree can get trumped by the wrong election
result when Italy votes again, now likely to be in July. Is it to be Quitaly in July at the latest? Euros anyone? Make mine dollars or gold. Yuan?
Brexit now, before Deutsche Bank blows up.
The government solution to a
problem is usually as bad as the problem.
Milton Friedman
May 30, 2018 / 1:07 AM
Stocks take battering as Italian crisis roils financial markets
TOKYO
(Reuters) - Asian stocks extended a global sell-off on Wednesday as Italy’s
political crisis rippled across financial markets, toppling the euro to a
10-month low, pushing up Italian borrowing costs and sending investors rushing
to safe-haven assets such as U.S. Treasuries.
MSCI’s broadest index of Asia-Pacific shares outside Japan tumbled 1.5
percent, while Japan’s Nikkei average sold off as much 1.9 percent to hit a
six-week low. Chinese shares also headed south, with the Shanghai Composite
index down 1.8 percent, South Korea’s KOSPI and Australia’s S&P/ASX 200
slipped 2.0 percent and 0.6 percent, respectively.
The sharp downturn followed from an equally harsh session on Wall Street
on Tuesday, where the Dow Jones Industrial Average fell 1.6 percent, the
S&P 500 lost 1.2 percent and the Nasdaq Composite dropped 0.5 percent. The
financial sector took a hard hit.
Investors fear that repeat elections in the euro zone’s third-largest
economy - which could come as soon as July - may become a de-facto referendum
on Italian membership of the currency bloc and the country’s role in the
European Union.
“The way Italy’s short-term debt yields are spiking makes you think
default risk is on radar in the market. It tells how grave the situation is,”
said Makoto Noji, senior strategist at SMBC Nikko Securities.
“What the markets are starting to factor-in is not a default per se but
an early election leading to a victory of eurosceptics and an exit from the
euro.”
Short-dated
Italian bond yields - a sensitive gauge of political risk - soared 1.5
percentage points from Monday to their highest since 2013 in their biggest move
in nearly 26 years.
More
May 29, 2018 / 10:58 AM
Italy may return to polls in July, sources say, amid market rout
ROME
(Reuters) - Italy may hold repeat elections as early as July after the man
asked to be prime minister failed to secure support from major political
parties for even a stop-gap government, sources said on Tuesday, as markets
tumbled on the growing political turmoil.
Italy has searched for a new government since inconclusive elections in
March, with the president finally designating former International Monetary
Fund official Carlo Cottarelli as interim prime minister until a new vote is
held between September and early 2019.
But sources close to some of Italy’s main parties said there was now a
chance that President Sergio Mattarella could dissolve parliament in the coming
days and send Italians back to the polls as early as July 29.
That prospect emerged immediately after Cottarelli met the president on
Tuesday afternoon and left without making any statement. Cottarelli had been
expected to announce his stopgap government’s cabinet after those talks.
A source close to the president said Cottarelli had made no mention in
the meeting of an intention to give up his mandate and that he was simply
finalising his cabinet lineup.
Major parties, though, sensed Cottarelli’s mission was all but dead and
called for parliament to be dissolved immediately.
“It would be best to go to elections as quickly as possible, as early as
July,” said Andrea Marcucci, senate leader for the centre-left Democratic
Party.
Italy suffered its biggest market selloff in years amid investor fears
the election would deliver an even stronger mandate for anti-establishment,
eurosceptic politicians, casting doubt on Italy’s future in the euro zone.
More
May 29, 2018 / 6:38 PM
Investors ask if ECB has will and means to save euro from Italian turmoil
LONDON
(Reuters) - Investors are again speculating what the European Central Bank
could do to solve the problem of a surge in Italy’s debt yields that is causing
stress for Italian banks and reviving questions about a euro break up.
The stakes will be huge if a repeat election in the euro zone’s
third-largest economy become a de facto referendum on Italy’s membership of the
euro and its role in the European Union.
Italy’s economy is at least 10 times bigger than that of Greece, which
needed 250 billion euros ($289 billion) of euro zone and IMF money to bail it
out. If Italy needed a similar level of support, the numbers involved would be
eyewatering.
Total International Monetary Fund firepower would only add up to around
500 billion euros and even with the 400 billion euros that the European
Stability Mechanism could conceivably get together, it still wouldn’t
completely cover Italy.
Perhaps it’s no wonder then that Italy’s bond markets saw their worst
sell-off in 26 years on Tuesday and investors are starting to look
inquisitively at the ECB.
“If this continues for another couple of sessions, I think you will have
to see some official (European) response,” said Saxo Bank’s head of foreign
exchange strategy John Hardy.
“It becomes a ‘whatever it takes’ kind of moment,” he added, recalling
the promise made in 2012 by ECB President Mario Draghi to keep the euro intact.
----So what can the ECB do? After all it’s almost impossible to imagine it would stand by and allow a domestic political crisis in Italy, Draghi’s homeland, descend into another existential crisis for the euro zone.
It is still buying Italian debt as part of its 30 billion euro-a-month
quantitative easing (QE) program but it doesn’t seem to have limited the
damage.
Italy needs to refinance about 200 billion euros a year, analysts
estimate, and the ECB’s QE plan had been tipped to end in December.
That could be delayed of course, but it looks like it is the tool that
evolved from the 2012 “whatever it takes” pledge - the yet-unused Outright
Monetary Transactions (OMT) program - that is being brandished again.
OMT’s benefit is that it is technically unlimited and can be targeted
directly at the heat in Rome.
The drawback though is that it would be politically toxic.
Italy’s leading 5-Star Movement and the far-right League parties have
shown a dislike for the euro, and in Germany there has long been concerns that
use of OMT would be akin to propping up a government which goes well beyond its
mandate.
“It raises a lot of issues again, but if we get into a situation where
Italy starts to slipping into a crisis this is potentially a very big deal,”
said one European-based monetary official, who requested anonymity due to the
issue’s sensitivity.
“The size of the problem is bigger than anything we have had to deal
with,” he added.
----“Italy knows the rules.” Vitor Constancio, the ECB’s soon-to-retire Vice President said in a Spiegel magazine on Tuesday about the conditionality for the ECB using its OMT tool. “They might want to read them again.”
For nervous financial markets, it looks like another game of euro zone
chicken where they wait to see who swerves first.
The risk of a euro break-up forced the ECB’s hand six years ago and its
OMT and the cheap LTRO funding programs before that shows it can be creative
when the politics gets ugly.
But the difference today is whether Italy wants that help or will
instead choose scrap the euro or quit the European Union, or “Quitaly”, which
is a different proposition for the ECB and euro policymakers entirely.
More
The Euro: Monetary Unity To Political Disunity?
SAN
FRANCISCO - A common currency is an excellent monetary arrangement under some
circumstances, a poor monetary arrangement under others. Whether it is good or
bad depends primarily on the adjustment mechanisms that are available to absorb
the economic shocks and dislocations that impinge on the various entities that
are considering a common currency. Flexible exchange rates are a powerful
adjustment mechanism for shocks that affect the entities differently. It is
worth dispensing with this mechanism to gain the advantage of lower transaction
costs and external discipline only if there are adequate alternative adjustment
mechanisms.
The
United States is an example of a situation that is favorable to a common
currency. Though composed of fifty states, its residents overwhelmingly speak
the same language, listen to the same television programs, see the same movies,
can and do move freely from one part of the country to another; goods and
capital move freely from state to state; wages and prices are moderately
flexible; and the national government raises in taxes and spends roughly twice
as much as state and local governments. Fiscal policies differ from state to
state, but the differences are minor compared to the common national policy.
----By
contrast, Europe’s common market exemplifies a situation that is unfavorable to
a common currency. It is composed of separate nations, whose residents speak
different languages, have different customs, and have far greater loyalty and
attachment to their own country than to the common market or to the idea of
"Europe." Despite being a free trade area, goods move less freely
than in the United States, and so does capital.
More
Only government can take
perfectly good paper, cover it with perfectly good ink and make the combination
worthless.
Milton Friedman
Finally, China. Did
President Trump just wake up China, again? I suspect that China, like
elephants, has a long memory.
“Let her [China] sleep, for when she wakes
she will shake the world.”
Napoleon.
Xi Jinping urges China to go all in on scientific self-reliance after ZTE case exposes hi-tech gaps
Chinese president says innovation is central to the country’s standing on the world stage
PUBLISHED : Monday, 28 May, 2018, 11:01pm UPDATED : Tuesday,
29 May, 2018, 1:43am
China
will double down to make breakthroughs in core technologies, Chinese President
Xi Jinping said on Monday as he urged the country’s top scientists and
engineers to build China into a global hi-tech lead.
Xi
issued the rallying cry amid continued pressure from Washington over Beijing’s
“Made in China 2025” programme, a strategy to advance China up the industrial
technology chain.
“The
situation is pressing. The challenges are pressing. The mission upon us is
pressing,” Xi said in Beijing at the opening of the joint annual conference of
the Chinese Academy of Sciences and Chinese Academy of Engineering.
The
United States has taken aim at Made in China 2025 with threats to impose
tariffs on Chinese imports. Despite an easing in trade tensions, the White
House appears determined to contain China’s ambitions to be a leading power in
various technologies, including aerospace, industrial robots, software,
high-speed trains and semiconductors.
Xi’s address also came after ZTE, China’s second-biggest maker of
telecom network equipment, was offered the option to pay a US$1.3 billion fine
to avoid a US ban on use of American components.
The decision could end a month-long wrangle between the Chinese tech
giant and the US Department of Commerce, which imposed the ban on ZTE over
breaches of trade sanctions on Iran and North Korea.
ZTE is heavily reliant on US chips and the ban exposed China’s broader
dependence on the technology despite claims of advances in recent years.
In his address to China’s scientific and engineering elite, Xi said
technological self-reliance was central to China’s firm standing on the world
stage.
“Self-determination and innovation is the unavoidable path ... to climb
to the world’s top as a leading player in technology,” he said.
“We [should] hold innovative development tightly in our own hands.
“[We have to] put much effort in key areas where we are facing
bottlenecks ... and make breakthroughs as soon as we can.”
More
ZTE sidelines two more senior executives amid US-China negotiations on export ban
Shenzhen-based ZTE had failed to comply with the terms of a 2017 settlement with the US government. The subsequent export ban has threatened ZTE’s survival and become a flashpoint in US-China trade talks
PUBLISHED : Tuesday, 29 May, 2018, 6:03pm UPDATED : Tuesday,
29 May, 2018, 6:40pm
ZTE Corp has sidelined two senior executives amid ongoing
negotiations between the US and China over an export ban that has threatened
the survival of the Chinese telecommunications equipment supplier, according to
people familiar with the matter.
Xu Huijun, an executive vice-president and ZTE’s chief technology
officer, and Huang Dabin, who oversees corporate operations, are no longer
performing their usual duties at the company, said the people, who asked not to
be named as the information is private.
They join Cheng Gang, who was replaced in March as chief compliance and
legal officer, among executives that have been removed or reassigned in the
wake of the US Commerce Department’s seven-year ban on American companies doing
business with ZTE.
The company declined to comment on the executives, who could not be
reached through the main line of the company.
Shenzhen-based ZTE had breached the terms of a 2017 settlement with the
US government by paying full bonuses to employees who engaged in the illegal
sales of equipment to Iran, failing to issue letters of reprimand to those
employees, and then lying about it to US authorities.
The US Commerce Department responded by activating a seven-year ban that
barred ZTE from doing business with American companies, cutting off the firm’s
access to important components that go into everything from smartphones to
network equipment.
The ban plunged ZTE into disarray, forcing Chairman Yin Yimin to admit
that the company was in a “state of shock”. Because almost all parts of the
company’s business had some dealings with the US, compliance with the order has
meant a shutdown of a majority of its operations.
ZTE derived 59 per cent of its revenue last year from its carrier
network business, which includes switching and access systems, optical and data
communications and wireless communication systems, while another 32 per cent
came from its consumer business and 9 per cent from governments and companies.
More
Jean-Claude
Juncker. Failed Luxembourg Prime Minister and ex-president of the Euro Group of
Finance Ministers. Confessed liar. European Commission President. Scotch
connoisseur.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
The EUSSR is falling apart because an elite few
pass diktats on millions of hapless continentals trapped in the German straitjacket
of the euro, and the continetals have started voting the elite out. So
billionaire George Soros, thinks doing more of the same by the elite’s will
solve Europe’s growing problem.
For every
complex problem there is an answer that is clear, simple, and wrong.
H. L. Mencken
Billionaire George Soros: ‘The European Union is in an existential crisis’
By Victor
Reklaitis Published: May 29, 2018
7:35 a.m. ET
‘Everything that could go wrong has gone wrong,’ says storied investor
As worries about Italy and Spain’s governance whack European markets on Tuesday, George Soros is adding to the downbeat mood.The 87-year-old Hungarian-American, known as the investor who broke the Bank of England, has offered the following bleak assessment in a speech in Paris to the European Council on Foreign Relations:
The EU seems to have “lost its way” since the global financial crisis of 2008, he added. Officials in Brussels adopted a program of fiscal retrenchment that led to the euro crisis, and this transformed the eurozone into a relationship between creditors and debtors “that is neither voluntary nor equal,” Soros said, according to his prepared remarks.
The trade bloc also has been buffeted by a 2015 refugee crisis that authorities failed to handle, as well as U.S. President Donald Trump’s recent withdrawal from a nuclear deal with Iran, Soros said. European populist politicians have exploited resentments, and Italy is “now facing elections in the midst of political chaos,” he said.
The controversial billionaire investor, known for his big donations to progressive causes, also offered possible solutions.
“Europe needs to do something drastic to escape it. It needs to reinvent itself,” Soros said, as he expressed some approval for French leader Emmanuel Macron.
“That is what President Macron sought to initiate by proposing what he calls citizens’ consultations. This initiative needs to be a genuinely grassroots effort.”
Soros emphasized that many regular folks are fed up: “Ordinary people feel excluded and ignored.
Now we need a collaborative effort that combines the top-down approach of the European institutions with the bottom-up initiatives that are necessary to engage the electorate.”
U.S. stock futures ESM8, -0.70% pointed to a sizable drop at the open Tuesday, as traders getting back to work after a three-day weekend were greeted by fresh Italian political drama.
More
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?
Self-assembling 3D battery would charge in seconds
Date:
May 17, 2018
Source:
Cornell University
Summary:
The world is a big place, but it's gotten smaller with the advent of
technologies that put people from across the globe in the palm of one's hand.
And as the world has shrunk, it has also demanded that things happen ever
faster -- including the time it takes to charge an electronic device.
A cross-campus collaboration led by Ulrich Wiesner, professor of
engineering in the at Cornell University, addresses this demand with a novel
energy storage device architecture that has the potential for lightning-quick
charges.
The group's idea: Instead of having the batteries' anode and cathode on
either side of a nonconducting separator, intertwine the components in a
self-assembling, 3D gyroidal structure, with thousands of nanoscale pores
filled with the elements necessary for energy storage and delivery.
"This is truly a revolutionary battery architecture," said
Wiesner, whose group's paper, "Block Copolymer Derived 3-D
Interpenetrating Multifunctional Gyroidal Nanohybrid for Electrical Energy
Storage," was published May 16 in Energy and Environmental Science,
a publication of the Royal Society of Chemistry.
"This three-dimensional architecture basically eliminates all
losses from dead volume in your device," Wiesner said. "More
importantly, shrinking the dimensions of these interpenetrated domains down to
the nanoscale, as we did, gives you orders of magnitude higher power density.
In other words, you can access the energy in much shorter times than what's
usually done with conventional battery architectures." How fast is that?
Wiesner said that, due to the dimensions of the battery's elements being shrunk
down to the nanoscale, "by the time you put your cable into the socket, in
seconds, perhaps even faster, the battery would be charged."
The architecture for this concept is based on block copolymer
self-assembly, which the Wiesner group has employed for years in other devices,
including a gyroidal solar cell and a gyroidal superconductor. Joerg Werner,
Ph.D. '15, lead author on this work, had experimented with self-assembling
photonic devices, and wondered if the same principles could be applied to
carbon materials for energy storage.
The gyroidal thin films of carbon -- the battery's anode, generated by
block copolymer self-assembly -- featured thousands of periodic pores on the
order of 40 nanometers wide. These pores were then coated with a 10 nm-thick,
electronically insulating but ion-conducting separator through
electropolymerization, which by the very nature of the process produced a
pinhole-free separation layer.
That's vital, since defects like holes in the separator are what can
lead to catastrophic failure giving rise to fires in mobile devices such as
cellphones and laptops.
More
Insanity is Doing the Same Thing Over and Over Again and Expecting Different Results
Mario Draghi, with apologies
to Albert Einstein.
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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