Baltic Dry Index. 1688 -33 Brent Crude 72.77
J. K. Galbraith
Is the US President cracking up? I don’t know either, I’ve never met the man, but if he’s not, he masters a pretty good impression. So what happens now if he triggers a war with Iran? I don’t know either, but it’ll blow all trade war concerns far away.
We open with business
as usual in stocks. This time it’s different, right? Don’t bet on it, except
with this presidency, though only time will tell in the markets. In the
markets, history doesn’t matter right? (Sorry for the length of today’s update.)
In any great organization it is far, far safer to be wrong with the majority than to be right alone.
John Kenneth Galbraith.
Most Asian stocks rise with Nikkei on track for five-day winning streak
Published: July 18, 2018 11:48 p.m. ET
Chinese shares buck trend to trade lower
Most Asian stocks rose moderately Thursday, taking their cue from the U.S. markets where stocks got a boost from a Federal Reserve report that painted a rosy picture of the U.S. economy.The Beige Book, a collection of anecdotal account of business conditions, showed that 11 of the 12 districts surveyed were expanding at a “modest” or faster pace with only the region around St. Louis reporting “slight” growth.
Shanghai Composite SHCOMP, -0.54% bucked the trend in the region to slide 0.3% while Hong Kong’s Hang Seng HSI, +0.02% edged up 0.1%.
Japan’s Nikkei NIK, -0.09% rose 0.3%, on track for a fifth straight session of gains, the longest winning spree since April.
The country’s trade surplus soared 67% to 721.4 billion yen ($6.4 billion) in June thanks to strong demand for semiconductor chips and chip-making equipment from China offset a drop in car sales to the U.S., Dow Jones Newswires reported.
“Today’s trade data show a renewed plunge in imports in June and suggest that net trade continued to support gross domestic product growth in the second quarter,” said Marcel Thieliant, senior Japan economist at Capital Economics, in a note.
More
Next, what’s wrong
with this? Are algo programs in effect rigging the tech market? If we all
program the same way to buy the same five stocks, and allow them to become in
effect the NASDAQ market, NASDAQ must move from high to high. But what if someone has to sell? To whom? When
selling hits the algos all disappear.
To this old dinosaur
market watcher, we’ve been here as recently as February 2001 when the dot con
market bust. This stinks of yet another massive rig. Buyer beware.
To this old
commodities trader, “Mr Copper,” and the 1995 Sumitomo copper scandal come to
mind, or the collapse of the International Tin Council in 1985. Or if you
prefer stock scandals, the Panic of 1907, aka the Knickerbocker Crisis.
As they
say in poker, “If you’ve been in the game 30 minutes and you don’t know who the
patsy is, you’re the patsy.”
Warren
Buffett.
One chart puts mega tech’s trillions of market value into eye-popping perspective
Published: July 19, 2018 12:01 a.m.
ET
Big 5 tech companies together are worth more than 282 other companies
A picture is worth a thousand words but a pie chart may be more eloquent, especially when it comes to sizing up the giants of the tech industry.Michael Batnick, director of research at Ritholtz Wealth Management, on Wednesday tweeted out a chart that underscored how absolutely dominant tech companies have become in a world where size seems to increasingly matter. (See an enlarged version of the chart here.)
Batnick, in his tweet, noted that the top five S&P 500 companies — Apple Inc. AAPL, -0.55% Amazon.com Inc. AMZN, -0.05% Alphabet Inc. GOOGL, -0.01% GOOG, -0.24% Microsoft Corp. MSFT, -0.78% and Facebook Inc. FB, -0.30% — combined are worth $4.095 trillion versus $4.092 trillion for the bottom 282 companies.
As mind-boggling as that may be, Batnick told MarketWatch that this sort of concentration is normal, pointing out that AT&T Inc. T, -0.16% and General Motors Co. GM, -0.40% represented 14.5% of the S&P 500 during their heyday in 1965.
What is different today, however, is that all the big players are uniformly tech names.
“The gains have been extraordinary over the past five years, with Facebook, Apple, Amazon, Microsoft and Google growing from $1.2 trillion to near $4 trillion,” wrote Batnick in a recent blog entry.
In the two weeks since he posted that, the fabulous five have crossed over the $4 trillion mark. The stupendous growth of the tech giants over the past few years has sparked concerns that the stock market will see a repeat of the dot-com bust from the late 1990s.
But Batnick dismissed those fears.
The main difference between then and now is that today’s tech rally can be justified by valuations.
“These five have earned nearly half a trillion dollars over the last five years and are currently trading at 37 times earnings and 5.5 times sales,” he said.
More
Who is Mr. Copper?
A:
A sense of mystery still surrounds Yasuo
Hamanaka, a.k.a. Mr.
Copper, and the magnitude of his losses. From his perch at the head of
Sumitomo's metal trading division, Hamanaka controlled 5% of the world's copper
supply. This may sound like a small percentage, given that 95% of the world's
copper supply remained in other hands. However, copper is an illiquid commodity,
which means it cannot easily be transferred around the world to meet shortages.
For example, a rise in copper prices due to a shortage in the U.S. will not
immediately be canceled out by shipments from countries with an excess of
copper. Moving copper from storage to delivery to storage again costs enough to
cancel out any price differences. The challenges in shuffling copper around the
world and the fact that even the biggest players hold only a small percentage
of the market made Hamanaka's 5% quite significant.
Sumitomo owned large amounts of copper that was warehoused and stored at factories as well as numerous futures contracts. Hamanaka used Sumitomo's size and large cash reserves to both corner and squeeze the market via the London Metal Exchange (LME). As the world's biggest metal exchange, the LME sets the world copper price. Hamanaka kept this price artificially high for nearly the entire decade leading up to 1995 and, as a result, garnished premium profits on the sale of Sumitomo's physical assets.
More
The Tin Market Crash of 1985
By Updated January 11, 2018 In October of 1985, the International Tin Council (ITC) announced that it was insolvent, unable to pay its debts that consisted of physical tin and tin futures purchases.International court cases that played out over the next three years, as metal brokers and banks attempted to recoup their losses, would show that the ITC had accumulated liabilities of nearly £900 million (US$ 1.4 billion), far more than anyone had imagined.
While creditors were left on the hook for the vast majority of these losses, the tin market as a whole effectively collapsed, resulting in mine closures and tens of thousands of job losses around the world.
More
Panic of 1907
The Panic of 1907 – also known as
the 1907 Bankers' Panic or Knickerbocker Crisis[1] –
was a United States financial crisis that took place over a three-week
period starting in mid-October, when the New York Stock Exchange fell almost 50%
from its peak the previous year. Panic occurred, as this was during a time of
economic recession,
and there were numerous runs on banks and trust
companies. The 1907 panic eventually spread throughout the nation when many
state and local banks and businesses entered bankruptcy.
Primary causes of the run included a retraction of market
liquidity by a number of New York City banks and a loss of confidence among
depositors,
exacerbated by unregulated side bets at bucket shops.[2]
The panic was triggered by the failed attempt in October 1907 to corner the market on stock of the United
Copper Company. When this bid failed, banks that had lent money to the
cornering scheme suffered runs that later spread to affiliated banks and
trusts, leading a week later to the downfall of the Knickerbocker Trust Company—New York
City's third-largest trust. The collapse of the Knickerbocker spread fear
throughout the city's trusts as regional
banks withdrew reserves from New York City banks. Panic extended
across the nation as vast numbers of people withdrew deposits from their
regional banks.
More
A China Borrower's $11 Billion Debt Pile Comes Crashing Down
Bloomberg News
Updated on 19 July 2018, 02:35 GMT+1
China this month recorded one of its biggest corporate-debt defaults yet,
with the downfall of a coal miner that had ridden the country’s wave of credit
until policy makers changed the game with their deleveraging campaign.For investors in Wintime Energy Co., it’s been far from a winning time now that the company from northern Shanxi province is proving incapable of rolling over debt that quadrupled in less than five years. How the borrower ran up a 72.2 billion yuan ($10.8 billion) tab that it now can’t make good on illustrates why this year will be China’s worst yet for corporate defaults. And with a potential lifeline from state-owned banks unveiled Wednesday, it could also emerge as an example of China’s unwillingness to allow unbridled corporate failures.
Wintime’s original plan was to borrow to fund acquisitions and expand into areas including finance and logistics. As borrowing costs tumbled from 2014, funding was easy to get and the miner took full advantage of creditors’ largesse. Things started changing in 2016, when President Xi Jinping began putting emphasis on reining in financial risks.
Environment Changed
Now, Wintime has the unfortunate distinction of being the largest defaulter in China so far in 2018, delinquent on 11.4 billion yuan of securities after it failed to pay a local bond this month.
More
In other news, the dying EUSSR is still luring in suckers, if now
more reluctantly.
Eastern European Nations Face a Tougher Route to the Euro
By Slav Okov
18 July 2018, 05:00 GMT+1 Updated
on 18 July 2018, 11:23 GMT+1
For eastern European nations eyeing the euro, the goalposts just moved.Bulgaria is the latest ex-communist country to set its sights on the single currency, getting the nod from the European Union last week to proceed with its bid. But it was forced to accept stricter conditions than past entrants. Euro-area finance ministers have indicated the new terms will still apply when the likes of Croatia and Romania follow suit.
Bulgaria meets the formal criteria for euro adoption and was hoping to apply to enter the common currency’s waiting room -- known as ERM-2 -- this summer. But, after the turmoil of Greece’s debt struggles and money-laundering scandals in recent euro entrants such as Latvia, the EU is taking no chances. To the irritation of Bulgaria’s government, additional demands included cooperation with the bloc’s banking union and steps to curb corruption.
“In previous application bids, the euro zone turned a blind eye to institutional quality and governance, which in part caused the European debt crisis,” Lorenz Unger, an analyst at BMI Research, said by email. “By tightening the accession criteria, issues related to bank supervision, institutional and real convergence have gained importance in a country’s membership bid.”
The new entry terms are almost certain to apply to Croatia, which reiterated last week that it’s aiming to join ERM-2 by 2020. Speaking the day after the EU’s announcement on Bulgaria, central bank Governor Boris Vujcic was unperturbed, calling euro membership the “natural next step” for Croatia.
Romania
isn’t as
far along in its plans. And there are similar concerns there over
graft, an issue that’s keeping the two neighbors out of Europe’s passport-free
Schengen zone. Another worry for all three is the wealth gap with richer EU
nations. The bloc is urging Bulgaria, its poorest member, to ensure sustainable
economic convergence, a condition the Baltic states didn’t explicitly face when
they applied to join ERM-2.
More
If economists could
manage to get themselves thought of as humble, competent people on a level with
dentists, that would be splendid.
John Maynard Keynes
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
In trade war new, more of the same – rising nervousness. Which will be the
first country to crack?
18 July 2018 - 06H40
S. Korea minister warns of fallout of US-China trade war
SEOUL (AFP) -
South Korea's finance minister warned that an all-out trade war between
the US and China would have grim implications for the country, as he lowered
this year's growth outlook Wednesday.
The world's 11th largest economy is expected to grow 2.9 percent this
year, lower than an earlier estimate of three percent, Kim Dong-yeon said,
citing slowing demand at home and abroad as well as rising unemployment.
The latest estimate is also lower than last year's figures, when the
export-reliant economy expanded 3.1 percent, and comes as the South's top two
trading partners China and the US engage in a bitter spat that has seen them
impose hefty tariffs on billions of dollars in goods.
"The economic situation down the road does not seem to be
bright," Kim told reporters.
"The situation may get worse if anxiety in the international
financial markets spreads due to the US-China trade dispute... and market and
corporate sentiment does not improve," he said.
Overseas shipments account for more than half of the South's economy,
with more than a quarter of exports shipped to China and about 12 percent to
the US.
Kim vowed to "closely monitor international trade situations
including the US-China trade row" and announced measures to encourage job
creation and spur domestic spending.
---- The International
Monetary Fund said this week the growing trade confrontation is the
"greatest near-term threat to global growth" and in the worst case
could cut a half point off world GDP.
Feature: U.S. pecan farmers suffer massive loss amid trade dispute
Source: Xinhua| 2018-07-17 15:06:18
OCILLA, United States, July 16 (Xinhua) -- On average, a third of all
pecans grown in the United States are sold in China, while for Randy Hudson, a
U.S. pecan farmer in the leading producing state of Georgia, the amount is much
more: practically all of his crop goes across the Pacific.
"I can tell you this, 99 percent of our production goes to China
... We've had a great working relationship with China over the years,"
Hudson said. However, the U.S.-led hike in tariffs is threatening to undo all
that, leaving farmers like Hudson counting the cost.
On July 6, the United States added a 25-percent tariff on 34 billion
U.S. dollars' worth of Chinese imports, claiming that an additional tariff on
200 billion dollars worth of goods is in the pipeline. Beijing responded in
kind, hitting U.S. products, including pecans.
"I've just began a project to expand my storage room and pecan
processing power three-fold last year," Hudson told Xinhua. Like most U.S.
farmers expanding their business, Hudson is heavily in debt, with the almost
10-million-dollar project financed by loans.
Hudson said he was aware of Trump's campaign slogans in 2016, which
called for tougher action against other countries who were "treating the
United States unfairly," but "we never thought we would reach this
level of intensity," said Hudson, whose family has raised pecan for over
150 years.
Pressured by sluggish domestic demand for pecan in the late 1990s,
Hudson set out to seek for new fortunes in the Middle East, India and China.
Unexpectedly, China responded enthusiastically to the product, which was
completely new to the market.
Over the following decades, pecan sales grew "exponentially"
in China, which allowed Hudson to gradually expand his pecan farm acreage from
a few hundred to 2,500.
Pointing to a sizable collection of Chinese souvenirs and gifts in his
office, Hudson said he has traveled to China more than 100 times, and had
managed to forge strong ties with his Chinese partners.
Now, Hudson sells over 20 million dollars worth of pecan to China every
year, yet the newly imposed tariffs will not only put his farm under severe
financial strain, but also threaten to halt a booming pecan trade enjoyed by
both U.S. farmers and Chinese consumers.
Hudson was not the only one worrying about the impacts of the tariffs. A
drive around Ocilla, where pecans are most densely grown, expect to be
bewildered by acres of newly planted seedlings, he said.
Hudson said the new trees are popular varieties in China, either
producing large nuts or giving early harvests that can enter the market just in
time for the Chinese New Year.
With the unexpected tariff, all of the efforts are put into
jeopardy.Georgia Pecan, a bi-monthly magazine run by a local association, noted
in a recent article that U.S. pecans are facing strong competition from other
major growers, such as Mexico and South Africa.
"It is obvious in the near future U.S. growers will have serious
competition for a limited Chinese market, with the worldwide production of
export quality pecans exceeding the current demands of the China market,"
the article warned.
Hudson estimated that 30-40 percent of his sales will evaporate,
registering a loss of 5-8 million dollars, significantly higher than his profit
margin. In addition, imported parts that are crucial to the farming may also
become more costly, further squeezing Hudson's margin.
"We're the collateral damage for a much bigger fight," Hudson
lamented, saying that repeated appeals to lawmakers were not responded with
concrete moves to steer the White House away from imposing tariffs.
"Only those of us who are most directly affected, the hog farmers,
the wheat growers, the cotton and peanut growers... All of us are just now
beginning to realize that this thing is real and that it's going to impact us
directly," he said.
"The trickle down effects to others in the community is something
that they have not seen, they have not felt and they did not realize what that
impact is going to be, but it's going to happen," Hudson added.
Drawing on his years of experience dealing with the Chinese market,
Hudson said, "Mr. Trump understands the art of deal in North America...
but I'm not sure he understands the art of deal in Asia and our good friends in
China."
China files additional complaint with WTO against U.S. planned tariffs
Source: Xinhua| 2018-07-16 18:12:24
BEIJING,
July 16 (Xinhua) -- China on Monday filed an additional complaint with the
World Trade Organization against the U.S. plan to impose tariffs on 200 billion
U.S. dollars worth of Chinese goods under the Section 301 investigation,
according to the Ministry of Commerce website.
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?
Farnborough Airshow: Aston Martin unveils sports car for the skies
18 July 2018
Luxury carmaker Aston Martin has unveiled plans for a personal aircraft
dubbed a "sports car for the skies".
The company has teamed up with jet engine maker Rolls-Royce and engineering
boffins at Cranfield University on the futuristic project.
A concept aircraft was unveiled at the Farnborough Airshow, but the
consortium hopes to have a flying version ready for the next show in two years.
The three-seat hybrid-electric vehicle will be vertical take-off and
landing.
Aston Martin, so associated with James Bond, dismissed suggestions it
was a gimmick more likely to appear in 007 films than be seen flying
commercially.
"Personalised and electric air transport is a fast-developing area
and we need to start getting into it," said James Stephens, the company's
director of global government.
A number of aviation and technology firms are hoping to make
electric-powered small aircraft and air-taxis a reality, including Airbus,
ride-sharing firm Uber, and a Google-backed firm called Kitty Hawk. Earlier
this week, Rolls-Royce announced plans to develop a flying taxi engine,
although the project with Aston Martin is separate.
Mr Stephens said Aston Martin wants to corner the market in
next-generation luxury flying vehicles for the rich and famous. The aircraft
would, he said, "be a sports car for the skies".
But it won't come cheap. The working price guide for the vehicle is put
at between £3-5m
"We, in the UK, have the ability to develop this," Mr Stephens
said. "The challenge is time, money and regulation. But the market will be
there eventually."
More
Well maybe, but I
think it’s likely to be another Tesla.
And finally, something
different, how does this genius breathe as he plays Vivaldi?
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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