Baltic Dry Index. 1657 -31 Brent Crude 72.78
John Kenneth Galbraith. The Great Crash: 1929.
This weekend a
dilemma. Are the stock markets right and boom times are here again, and trade
and currency wars, and an erratic President Trump can safely be ignored? Or are the commodity markets right, with Dr.
Copper leading the way, and a global bust is starting to roll through global
economies?
History suggests
paying close attention to Dr. Copper this summer. When commodities drop, nine
times out of ten, the real economy is under going a sea change. The shipping
indexes seem to be signalling a possible sea change too. Overpriced and all too
often gamed stocks, are usually the last
to notice.
Simply put, as money
tightens, trade wars bite, generating uncertainty and lower capital investment,
past malinvestment fuelled by a decade of central bankster ZIRP and NIRP,
becomes unsustainable. In the commodity markets, there are no central bank
magic money tree bailouts. Getting out early is the only game in town for
survival. As a selloff continues, the selling become self-reinforcing.
“My
dear, here we must run as fast as we can, just to stay in place. And if you
wish to go anywhere you must run twice as fast as that.”
Planet
Earth 2018. With apologies to Lewis Carroll, and
Alice.
Stocks Drop in Asia on Weak Yuan; Dollar Steadies: Markets Wrap
By Adam Haigh
Updated on 20 July 2018, 05:25 GMT+1
China’s offshore yuan drops past 6.8 per U.S. dollar
Traders say a major Chinese bank offering to sell dollars
Stocks in Asia declined after China weakened the yuan’s daily fixing by the most in more than two years, despite signs of intervention from authorities looking to stem the currency’s weakness.Shares in Japan, China and Hong Kong retreated, while stocks in India and Australia outperformed.
The offshore yuan pared some of the slide that pushed it to its weakest in more than a year against the greenback as traders said a major Chinese bank was seen making large offers to sell dollars. Futures on the S&P 500 Index were lower, after U.S. stocks saw moderate losses Thursday. The dollar steadied and Treasury yields ticked higher.
Chinese assets are in focus after the central bank Thursday set its reference rate for the yuan weaker than 6.7 per dollar, a level previously thought by market players to be something of a line in the sand. It was set even weaker on Friday. The suggestion that China’s policy makers are comfortable with depreciation has stoked a debate about the implications for global markets, with the example of the turmoil of 2015 looming in investor memories.
Earlier, the dollar fell, triggered by President Donald Trump saying he wasn’t thrilled at the Federal Reserve increasing interest rates, raising the specter of political interference with the U.S. central bank. Meantime, earnings season is in full swing, with a mixed picture so far doing enough to propel U.S. equities back toward the all-time high reached in January.
More
No End in Sight for Commodity Crash With Charts Sending Bear Signals
By Luzi-Ann Javier
Updated on 20 July 2018, 00:00 GMT+1
What’s next for commodities after a recent price collapse? It looks like
more bad news, if the chart watchers are right.
The Bloomberg Commodity Index has tumbled about 10 percent from a high
in May amid mounting concerns that a trade war could derail global growth,
curbing demand for everything from aluminum to soybeans. Even gold, a
traditional haven asset, failed to catch a bid as the dollar strengthened and
the Federal Reserve signaled more increases in borrowing costs this year,
curbing the investment appeal of the non-interest-bearing metal.
The sell-off in metals helped send the Bloomberg commodity gauge into
oversold territory. While securities typically rebound after reaching those
levels, that may not be the case this time, according to Gary Christie, the
head of North American research at Trading Central in Ottawa.
The losses gathered steam as the index broke below the rising trendline on July 11, fueling the sell-off, Christie said. The lower panel of the chart above shows the gauge’s moving average convergence-divergence indicator, a measure of price momentum known as the MACD, staying below the so-called signal line. That suggests there is “no reversal sign as of yet,” and that the bearish trend is gaining momentum, Christie said.
Pressure Building
Copper, often viewed as a barometer of global economic growth, saw its 14-day relative strength index fall on July 2 below 30, considered by traders who study charts as a sign an asset is poised for a rebound. That hasn’t happened, with the metal losing about 9 percent this month. The so-called RSI reached 19.6 on July 11, the lowest since 2015, and has remained below 30 in each trading day this month.The red metal, used in power grids, pipes, wires, cars and electronic gadgets, has slumped from this year’s high reached in early June as funds started closing their bullish bets and adding new bearish wagers, Oliver Nugent, a commodities strategist at ING Bank NV, said in a report Wednesday.
By July 10, money managers’ bearish wagers outnumbered their bullish bets on Comex copper for the first time since October 2016, according to U.S. Commodity Futures Trading Commission data.
More
Finally, a little
past perspective, not that anyone in the stock markets or banksterism likes to be
reminded of the past. This time it’s always different.
Handicapping Market Crashes
Adam Hamilton
September 20, 2002 2992 Words
As
we plunge ever farther into this amazing supercycle bubble bust, one popular
pastime amongst the bears is to speculate on the timing of crashes in the US
equity markets.
Stock
market crashes are really interesting phenomena and they can wreak great havoc,
so it is not surprising that they have an almost legendary place of prominence
in popular market lore. A speculator who is fortunate enough to
anticipate such an event and go short has the potential of reaping enormous
profits in mere days or weeks, a very alluring prospect.
I
have been pondering stock market crashes lately due to some feedback I received
on two recent essays on using the VIX implied volatility index to time
short-term speculation entry and exit points. After both “Volatility Trading the QQQs” and
“VIX Bounces S&P 500”
were published,
I received dozens of similar e-mails from around the world
dwelling on one issue.
While
the level of 50 marks a normal VIX extreme in recent years, a contrarian
speculation buy signal, there was one stunning event in history where the VIX
actually exploded to almost unthinkable heights. On October 19th, 1987
the VIX rocketed up to close at the breathtaking level of 150! Merely one
trading day earlier it had closed at 36, a normal level. Over the next
five trading days, the VIX closed above the staggering level of 100 three more
times.
From
October 19th to October 30th the VIX closed above 60 for the entire ten trading-day
stretch, an unprecedented development never seen before or since. On a
long-term VIX chart, this huge anomaly sticks out like a central banker at a
rap concert. This mega-VIX spike was an incredible event that will go
down forever in the annals of market legend.
Folks
across the planet, including professional hedge-fund managers, graciously
offered me some wonderful feedback after my two recent essays discussing using
the VIX to time trading in stock indices. The crux of their arguments
swirled around the massive 1987 VIX 150 spike. They reasoned that since
the VIX had witnessed such stratospheric levels before, it could probably
revisit them again and therefore the normal VIX extremes in the 50 range might
not be a valid trading signal in these tough bear-market times.
Did
October 1987’s colossal 150 spike in the VIX invalidate current VIX extremes of
50 as being useful as trading timing indicators? We decided to take a
look at this important question for speculators in this week’s essay.
As
always, it is very important to discuss the VIX 150 mega-spike in its actual
historical context.
In
late 1987, the US equity markets had been galloping in a virtually
uninterrupted bull-market stampede for just over 5 years. From the Dow 30
low of 776.9 on August 12th, 1982, the US equity markets had roared up to
2722.4 on August 25th, 1987. This incredible 250% march to the heavens in
the flagship US equity index was extremely impressive, especially after the
brutal famine years for equity investing in the 1970s and early 1980s.
All
was not well however, as cancerous doubts about the markets’ future prospects
began to metastasize throughout the thundering herd of investors.
Bull
markets never run forever, and 5 uninterrupted years of cutting a straight
swath northwards was starting to make many investors skeptical and
nervous. By August 1987, the general US equity markets were trading at
18.3x earnings, cheap compared to our bubblicious markets today in 2002, but
very expensive compared to the bottom around 7.7x earnings in 1982. Were
the markets hopelessly overvalued as autumn 1987 approached?
More
The true costs of very low interest rates
Artificial distortions can cause
‘clusters of errors’ by businesses
Caitlin Long August 11, 2010
----Interest
rates are the most important prices in the economy, according to Nobel laureate
F.A. Hayek, because they reflect the collective time preference of individuals
to consume either now or later. Accordingly, interest rates co-ordinate
allocation of capital across the economy by signalling to businesses whether
they should invest. Distortions in interest rates can cause “clusters of
errors” in which large swathes of businesses unwittingly miscalculate at the
same time.
Hayek
observed that interest rate stimulus interfered with economic calculations,
causing managers to invest in projects that would not otherwise have appeared
profitable. Losses can subsequently materialise as customer demand fails to
meet forecasts that were, in retrospect, optimistic. Long-term projects are
highly sensitive to interest rates and are therefore more susceptible to such
distortions. Pension obligations and long-term, capital-intensive projects are
at high risk of miscalculation based on artificially low rates.
----If
Hayek were alive he would caution businesses to be alert for the formation of
new bubbles, especially in long-term businesses in which losses may not yet be
fully recognised and price signals may still be distorted. He would agree with
the investment caution that businesses have exhibited in the face of
artificially low interest rates, and advise corporate decision makers to be
alert if a project appeared profitable solely based on interest rate
assumptions.
Where might the costs of the current loose
money show up over time? It is impossible to predict with certainty. But low
interest rates for a longer period increase the likelihood that businesses will
miscalculate. Early signs of an investment recovery are showing up in such
long-term businesses as industrial and transportation equipment and machinery
More
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Don’t look now, but things are about to really heat up in the Great
Global Trump Trade War. If this auto nuke madness actually happens, bet on a
poor Christmas on both sides of the Atlantic. But can Juncker snatch sanity
from insanity next week? Well this is Juncker and Trump, after all.
Jean-Claude
Juncker. Failed former Luxembourg P.M., serial liar, president of the European
Commission. Scotch
connoisseur.
EU Prepares to Retaliate Over Car Tariffs Before Trump Talks
By Viktoria Dendrinou and Alexander Weber
19 July 2018, 09:08 GMT+1
The European Union is preparing a new list of American goods to hit with
protective measures, according to a person familiar with the move, in case a
mission to Washington next week fails to persuade U.S. President Donald Trump
not to raise car tariffs.
The European Commission briefed EU ambassadors Wednesday on trade relations
with the U.S., and said it was working on so-called rebalancing measures that
would be ready immediately if the U.S. imposes levies on European car exports,
said the person, who asked not to be named because the meeting was private.
When Commission President Jean-Claude Juncker meets with Trump on July
25, he’ll bring two main negotiating proposals in an effort to tamp down the
escalating trade tensions: an offer to discuss the reduction of levies on cars
and car parts among all major auto-exporting countries in a so-called
plurilateral deal; and the possibility of broaching a limited free-trade
agreement, according to a separate official familiar with the EU’s thinking.
The
U.S. is in the midst of a probe into whether car imports damage national security,
which could trigger the 20 percent tariff on autos that Trump has threatened.
Washington has already hit the EU with duties on its steel and aluminum exports
using the same national-security justification, which led to European levies on
2.8 billion euros ($3.3 billion) of American goods.
The U.S. expressed optimism that the two sides may come to an agreement,
with White House Economic Adviser Larry Kudlow saying on Wednesday that the
commission president “is bringing a very important free-trade offer.”
The EU isn’t allowed under global rules to reduce its 10 percent tariff
on American cars unless it either does so for all WTO members or reaches a
bilateral accord with the U.S. that covers “substantially all” two-way trade. A
plurilateral deal modeled after the Information Technology Agreement, which
abolished tariffs on some IT products traded between its signatories, is
allowed under WTO rules.
More
Trump threatens EU with ‘tremendous retribution’ via auto tariffs
By Josh
Zumbrun Published: July 19, 2018 5:07 a.m. ET
A Commerce Department hearing on Thursday will consider auto tariffs, ahead of a July 25 White House visit by European Commission President Jean-Claude Juncker.
President Donald Trump stood by his threats to levy sweeping tariffs on
automobile imports as a way to extract concessions from trading partners,
despite opposition from the industry and discontent in Congress with the White
House’s proposal.
Resistance to the tariffs is strong and growing. A coalition of
foreign and domestic auto companies, along with auto dealers and auto-parts
makers, released a letter on Wednesday urging Trump to refrain from the tariffs.
A bipartisan group of 149 House members also urged the president not to
move forward with the tariffs. Auto unions were among the few industry players
offering qualified support for the tariffs.
Still, at a cabinet meeting on Wednesday, Trump threatened
“tremendous retribution” against the European Union, specifically mentioning
auto tariffs, if his meeting with EU officials next week doesn’t yield what he
considers a fair auto trade deal.
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?
China Has 487 Electric-Car Makers, and Local Governments Are Clamoring for More
President Xi Jinping’s Made in China 2025 plan is giving a boost to startups, spurring overcapacity concerns
TONGLING, China—Officials in this old mining town knew almost nothing about electric vehicles when they gave a startup $535 million in land and capital to build an electric-car plant here two years ago.
The startup, Singulato Motors, was founded by a group
of tech professionals led by a former internet-security executive who had never
run a car company before.
Such partnerships are springing up all over China,
spurred by Beijing’s call for the country to become a world power in
electric-vehicle technology and by local governments eager to jump
on the bandwagon. President Xi Jinping’s Made in China 2025 plan, launched
three years ago to promote “domestic dominance and global competitiveness” in
10 sectors, includes electric vehicles.
There are now 487 electric-vehicle makers in China,
according to the latest official tally, and most are brand new. In June, the
National Development and Reform Commission and China Construction Bank
announced a new $47 billion fund for EVs and other high-tech industries.
Regional governments are making similar funding commitments.
Direct government subsidies on electric-vehicle sales have totaled $15 billion
over the last five years.
Singulato Chief Executive Shen Haiyin estimates that
just 10% of today’s EV startups will survive the next five years. Some auto
analysts put the figure nearer to 1%.
“A lot of capital is being invested in this
industry,” said Paul Gong, an analyst at UBS. “A lot of it will be wasted.”
Lured by the prospect of handouts, many companies
have concluded that “simply giving it a shot and receiving government support
can be a reasonable business model, even if they never put an electric car on
the road,” said Scott Kennedy, of the Center for Strategic and International
Studies. “The moment of truth will come when China’s national and local
authorities have to decide whether to let the losers fail or keep them afloat.”
The Ministry of Industry and Information Technology,
which oversees the auto sector, declined to comment.
Even the electric-car startups that succeed in mass-producing electric cars will have to compete against established foreign and domestic auto makers rolling out their own fleets. All auto makers operating in China are required to start building electric vehicles by 2019.
Luxury electric-car maker Tesla Inc. recently signed a deal to build its first
overseas plant in Shanghai, with a 500,000-vehicle annual capacity.
----Some 777,000 electric vehicles were sold in China last year, nearly half of the global total. But with so many EV companies joining the race, excess supply looks inevitable.
“China wants to be a high-tech power and catch up to the technology
frontier, and one of the costs is likely to be overcapacity,” said Dan Wang,
technology analyst at Gavekal Dragonomics in Hong Kong.
Mr. Wang said Made in China 2025 was causing a new wave of overcapacity
problems that China had previously suffered in heavy industries like steel and
shipbuilding.
More
Another weekend, and another weekend of embarrassing corrections,
explanations and reversals for President Trump? It’s fast becoming a joke for
nations and leaders to meet with President Trump and his team. Black means
white until one day later it’s black again. Treaties are broken unilaterally,
with little or no thought for the future of developing further treaties. They can,
after all, be abrogated by the USA at will. Making the World Poor Again.
For most of GB, schools are now closed for summer. The
weekend kicks off the unofficial start of the real summer season. Next week the
“longest running farce in the world,” also closes and goes home for the summer
break. The long suffering voters of GB get a break from new laws and ever
rising taxation. Have a great weekend everyone.
When I use a word," Humpty Trumpty said, in rather a scornful tone, "it means just what I choose it to
mean- neither more nor less." "The question is," said
Putin, Juncker and Xi, "whether you can make words mean so many different
things." "The question is," said Humpty Trumpty, "which is to be master-that's all."
With
apologies to Lewis Carroll.
The monthly Coppock Indicators finished June.
DJIA: 24,271 +221 Down. NASDAQ:
7,510 +267 Down. SP500: 2,718 +169 Down.
All
three slow indicators moved down in March and have continued down in April. May
and June. For some a new bear signal, for others a take profits and get back to
cash signal.
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