A Good Time To Exit.

Baltic Dry Index. 1720 -07   Brent Crude 71.33

Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof. 

John Kenneth Galbraith

With China and America set to hold trade war talks again before the end of the month, it was relief rally time in overpriced Asian stocks.  Hope springs eternal and all that.  To this old dinosaur market watcher, covering markets since 1968, I’m with Samuel Johnson’s observation on second marriages. The low level talks are unlikely to produce more than Trump’s empty victory over Juncker’s EU. 

Since that great Trumpian “victory,” the EU grain mafia haven’t bought a single extra US soybean they wouldn’t have bought anyway, and so far no extra USA LNG has yet been landed in Europe. Though I would expect to see a token cargo of USA LNG landed in Spain, Holland and possibly GB, prior to the US mid-term elections in November. Why not, winter's coming in the northern hemisphere and Europe’s got to stock up with some LNG as a precaution against a hard winter or an unlikely natural gas pipeline supply problem.

Below, the rebound relief rally, as global stocks continue to zig zag sideways.

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

John Kenneth Galbraith.

Asian markets shoot higher, as tech stocks rebound

Published: Aug 16, 2018 10:56 p.m. ET

Asian stock indexes jumped to across-the-board gains in early trading Friday, following the previous days roller-coaster trading that left markets in the red. Thursday’s gains in the U.S. and Europe apparently helped brighten sentiment as the week came to an end, as did the prospect of easing trade tensions between the U.S. and China.

Japan’s Nikkei NIK, +0.41%   was up 0.5%, as precision instruments, metals and shipping led the early gainers. Medical-device maker Terumo 4543, +2.97%   was up 2%, as were Sumitomo Metal Mining 5713, +1.84%   and major shipper Mitsui O.S.K. 9104, +2.41%

Chinese stocks were higher, looking to end a rough week on an up note. The Shanghai Composite SHCOMP, -0.36%   was up 0.3% after four straight declines and the Shenzhen Composite 399106, -0.76%   rose 0.4%. Insurers posted gains, with New China Life Insurance 601336, +1.54%  up almost 2%. Tech stocks rebounded and Henan Shuanghui 000895, +0.40%   recovered 1.5% after the meat producer closed a slaughterhouse because of African swine fever, reversing some of Thursday’s slide.

Hong Kong’s Hang Seng Index HSI, +0.59%  , down for five straight days, gained 0.7% as tech stocks recovered. Lenovo 0992, +6.09%   jumped 5.6% and Tencent 0700, +3.44%   was up 3%. Financials were also solid, with insurer Ping An 2318, +0.80%   up 1% following its quarterly results.
Korea’s Kospi SEU, +0.29%   rose 0.4% as Samsung 005930, -0.34%   and HK Hynix 000660, -0.13%   pared the previous day’s losses.

Singapore’s benchmark STI, +0.43%  , which has fallen six days in a row, was up 0.6%, and indexes in Taiwan Y9999, +0.14%   and Malaysia FBMKLCI, +0.37%   rose as well.

New Zealand’s NZX 50 NZ50GR, +0.60%   jumped 0.6% as it neared a fourth straight day of gains and came close to its record closing high, set in July. Australia’s benchmark XJO, +0.06%   posted modest gains as mining companies, such as Fortescue Metals FMG, -2.00%  , fell.
https://www.marketwatch.com/story/asian-markets-shoot-higher-as-tech-stocks-rebound-2018-08-16

But yet more red flags are flying, klaxons blaring, and bells ringing, at what increasingly looks like an old fashioned market top.

Mortgage rates tumble as housing starts to drag down the economy

Published: Aug 16, 2018 10:42 a.m. ET

So far in 2018 the 30-year-fixed has averaged 4.44%, up from 3.99% in 2017

Rates for home loans tumbled in line with the broader bond market, even as the housing market’s woes threatened to become a headwind for the entire U.S. economy.

The 30-year fixed-rate mortgage averaged 4.53% during the Aug. 16 week, down six basis points, according to the weekly data from mortgage provider Freddie Mac. The 15-year fixed-rate mortgage averaged 4.01%, down from 4.05%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.87%, down three basis points.

Those rates don’t include fees associated with obtaining mortgage loans.

Mortgage rates follow the path of the 10-year U.S. Treasury note TMUBMUSD10Y, +0.16%  , which has tumbled over the past week as investors flocked to safe-haven assets in the wake of the Turkey currency crisis. Bond yields decline as prices rise.

Lower rates are a boon for borrowers and should help jump-start housing activity. But there’s been so little to buy for so long that many would-be buyers are simply giving up. And that means the sluggish housing market is no longer just a story unto itself. Analysts now believe housing will drag down overall economic growth in the near term.

In a research note out Thursday, Doug Duncan, chief economist for Fannie Mae, Freddie’s counterpart, explained: “Housing continues to drag on growth due to lackluster home-building activity, home sales, and brokers’ commissions.”

The stagnant housing market may also be impacting the labor market. The percentage of job seekers relocating for new employment was at longtime lows earlier this year, said outplacement consultancy Challenger, Gray & Christmas on Thursday. Just over 10% of job seekers relocated for work in the first six months of 2018, compared with an average of 19% over the previous decade.

More

https://www.marketwatch.com/story/mortgage-rates-tumble-as-housing-starts-to-drag-down-the-economy-2018-08-16?mod=MW_story_top_stories

August 16, 2018 / 2:01 PM

Tide about to turn for markets as easy-money decade ends

LONDON (Reuters) - Swept along by super-easy money, investors have debated for years how world markets will react when this central bank largesse inevitably ends. Now the liquidity tide is about to turn, and they have only a few months to adjust.

The world’s four biggest central banks - the U.S. Federal Reserve, European Central Bank, Bank of Japan and the Bank of England - have pumped around $13 trillion (£10.23 trillion) into the global economy since the crisis year of 2009, sharply expanding their own balance sheets of financial assets:

While markets reached dizzying heights during the easy money era, that flood will dry up by the year-end. For the first time since 2011, the central banks are expected to suck out more cash in 2019 than they pump in.

The ECB will stop additional bond buying at the end of this year, and while the Fed has been shrinking its balance sheet for almost a year, it will step up the pace from October, removing $50 billion a month from markets. Bonds worth $470 billion will roll off its balance sheet next year

After a near decade of money-printing and zero interest rates, the shift for markets will be momentous.

Steve Donze, senior macro strategist at Pictet Asset Management, estimates a net $100 billion will be removed from global liquidity next year.

Central banks will go from generating half a trillion dollars this year on an annualised basis, “to zero by the end of 2018, then negative next year...a definite tipping point”, he said. “That makes 2019 a dangerous year for financial assets.”

Weaning markets off the easy money may be tricky. The central bank liquidity torrent has penetrated every nook and cranny of markets, from fine wine and art, to real estate, junk-rated bonds and emerging markets. It drove bond prices so high in many countries that yields turned negative and has sustained an equity bull run into its 10th year.

Cracks are already appearing in markets, already stressed by a Turkish currency crisis and trade tensions between the United States and China. Emerging equities have plunged 20 percent since January and world stocks are set for the biggest monthly fall since March .MSCIEF .MIWD00000PUS.

More

https://uk.reuters.com/article/uk-global-markets-cbanks-analysis/tide-about-to-turn-for-markets-as-easy-money-decade-ends-idUKKBN1L11HJ

In central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly and results far much less.

John Kenneth Galbraith

Crooks and Scoundrels Corner

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

Today, have commodities already folded? Is shipping next? My take is that commodities are already responding to the global damage that Trump’s trade war is accumulating, and that trade wars, currency wars, and the prospect of rising interest rates, make the global economy a much riskier place to invest.  

Why invest now, if Trump succeeds in humbling China, in turn slowing their economy, and reducing their need for commodity imports. Better to scale back for the next six months, to get a better picture of the future after all the new tariffs. Better to wait too, to see who can handle rising interest rates and who will sink under the malinvestments of the last decade.

Generally, we ignore commodity signals at our peril. Dr. Copper is rarely wrong.

“The price of a commodity will never go to zero. When you invest in commodities futures, you’re not buying a piece of paper that says you own an intangible piece of company that can go bankrupt.”

Jim Rogers

August 16, 2018 / 2:07 PM

Commentary: Is the metals rout signal or noise? The zinc perspective

LONDON (Reuters) - The London Metal Exchange (LME) base metals markets were a scene of carnage on Wednesday.

The LME Index (.LMEX), a basket of the exchange’s six core contracts, slumped by almost four percent in a single day.

The bloodbath is part and parcel of the turmoil playing out across the financial market spectrum.

But industrial metals find themselves at the epicenter of investors’ fears about global, particularly Chinese, growth and escalating trade tensions. A rising dollar and a falling yuan simply reinforce the macro negativity.

If Doctor Copper and his metallic friends are to be believed, global manufacturing is heading for a cliff-edge.

But should we believe them?

Those analysts that track the complex are not convinced.

“There were no metals-specific data or news that could explain the price slump,” according to Commerzbank’s daily commentary.

“We regard the price slide as exaggerated, absurd and unjustified.”

Is the price rout signal, or noise?

Although copper inevitably grabs the headlines at times such as these, a more interesting perspective on the question is offered by zinc.

LME three-month zinc hit an 11-year high of $3,595.50 per tonne in February.

On Wednesday it touched a near two-year low of $2,283 per tonne, representing a 33 percent decline over the space of just six months.

Even by the volatile standards of industrial metals, it has been a brutal fall from grace, with a deteriorating narrative and technical picture creating a negative feedback loop.

The reason zinc got as high as it did earlier this year was because everyone was worried about a supply crunch.

Just as soon as it hit those 11-year peaks, however, the narrative focus switched to all the new mine supply coming in reaction to higher prices.

Events since then have seen that bearish supply narrative encompass the demand side of the equation.

Zinc’s use in galvanised steel leaves it exposed to any slowdown in China’s construction sector, a prospect which was worrying metals traders even before the U.S. fired the first salvoes in the trade war.

Tariffs on U.S. steel imports compounded those fears. Tariffs on Chinese goods have thrown yet another ingredient into the bearish mix.

A darkening outlook for zinc’s fundamental prospects has been accompanied by a steadily deteriorating technical picture.

A key chart support area around the $3,000 per tonne level was breached in June. Another big one at $2,475 was taken out on Wednesday with a noticeable surge in trading volumes as it fell to the bear onslaught.

More

https://uk.reuters.com/article/us-metals-zinc-ahome/commentary-is-the-metals-rout-signal-or-noise-the-zinc-perspective-idUKKBN1L11ID

“The exchangeable value of all commodities rises as the difficulties of their production increase.”

David Ricardo

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 21^st century onwards?

Converting carbon dioxide into methane or ethane selectively

Date: August 13, 2018

Source: DGIST (Daegu Gyeongbuk Institute of Science and Technology)

Summary: Researchers have developed high-efficiency photocatalysts that convert carbon dioxide into methane or ethane with graphene-covered reduced titanium dioxide. The finding is expected to be utilized in the carbon dioxide reduction and recycling industries.

A research team led by Professor Su-Il In from Department of Energy Science and Engineering had succeeded in developing photo catalysts that can convert carbon dioxide into usable energy such as methane or ethane.

As carbon dioxide emissions increase, the Earth's temperature rises and interest in reducing carbon dioxide, the main culprit of global warming, has been increasing. In addition, the shift to reusable fuel for existing resources due to energy depletion is also drawing attention. In order to solve trans-national environmental problems, research on photocatalysts, which are essential in converting carbon dioxide and water into hydrocarbon fuels, is gaining attention.

Although many semiconductor materials with large band gaps are often used in photocatalyst studies, they are limited in absorbing solar energy in various areas. Thus, photocatalyst studies focusing on improving the photocatalyst structure and surface to increase solar energy absorption areas or utilizing two-dimensional materials with excellent electron transmission are under way.

Professor In's research team developed a high-efficiency photocatalyst that can convert carbon dioxide into methane (CH₄) or ethane (C₂H₆) by placing graphene on reduced titanium dioxide in a stable and efficient way.

The photocatalyst developed by the research team can selectively convert carbon dioxide from a gas to methane or ethane. The results showed that its generation volume is 259umol/g and 77umol/g of methane and ethane respectively and its conversion rate is 5.2% and 2.7% higher than conventional reduced titanium dioxide photocatalysts. In terms of ethane generation volume, this result shows the world's highest efficiency under similar experimental conditions.

More

https://www.sciencedaily.com/releases/2018/08/180813100246.htm?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+sciencedaily%2Fmatter_energy%2Fgraphene+%28Graphene+News+--+ScienceDaily%29

Another weekend and a good time to take a vacation. An increasingly erratic, bullying President Trump, is now threatening new tariffs against Turkey, imposing new tariffs next week on China, and threatening economic war on Iran and all who trade with Iran. And those tariffs on Canadian and German autos are only deferred. With the emerging markets and currencies already reeling from Argentina to India, this is no time to be reckless with capital. Have a good weekend everyone.

The global boom in commodities fueled by a debt-financed infrastructure and real-estate bubble in China is over.

Kevin Brady

The monthly Coppock Indicators finished July.

DJIA: 25,415 +213 Down. NASDAQ: 7,672 +259 Down. SP500: 2,816 +166 Down.

All three slow indicators moved down in March and have continued down ever since. For some a new bear signal, for others a take profits and get back to cash signal.