Baltic Dry Index. 1373 +17 Brent Crude 79.74
In any great organization it is far, far safer to be wrong with the majority than to be right alone.John Kenneth Galbraith.
Today, more of the
same. Despite trade wars against friend and for alike, currency wars, rising
interest rates, collapsing emerging markets and currencies, a mid east just a
hair trigger away from a clash between Russia, Israel and/or America, buy
stocks. Tomorrow will be just like today which was like yesterday.
Except it won’t. Come
November we face a showdown between Iran and the USA banning Iranian oil from
global trade. A new Congress elected in
the USA to takeover in January. A
rapidly deepening impact from a vastly expanded USA v China trade war, with
much more to come on January 1, when US punitive tariffs on Chinese goods rise
from ten percent to twenty-five percent. At any moment, a misstep by Israel,
Russia or America. Come the end of March, Brexit, GB breaks out of the EUSSR.
Tomorrow, will not be
like today which was like yesterday. Tomorrow is far more likely to be like the
sinking of the unsinkable RMS Titanic. As always, there won’t be enough lifeboats
for all.
Asian shares rise as investors reassess trade war impact
September 20, 2018 / 1:58 AM
SHANGHAI (Reuters) - Asian stocks followed
global indexes higher on Thursday, as investors took a less bearish view on the
impact of the U.S.-China trade war on markets, a sharp contrast to dim
expectations economists had on U.S. growth amid the worsening tensions.
MSCI’s broadest index of Asia-Pacific shares outside Japan took its lead
from gains on Wall Street overnight, rising 0.2 percent.
Japan’s Nikkei stock index was flat, with a recent rally appearing to
lose steam as it entered its fifth day. Australian shares eased 0.2 percent.
But gains in the MSCI index were tempered as a rebound in Chinese shares
faltered, with the Shanghai Composite index dropping 0.1 percent, reversing
early gains.
Shares in Hong Kong also turned lower as the Hang Seng index edged down
0.04 percent. The broad index fell despite encouraging signals about investor
appetite in Hong Kong listings from a strong debut by Chinese online food
delivery-to-ticketing services firm Meituan Dianping.
Rob Carnell, chief economist and head of research, Asia-Pacific at ING,
said he saw more reasons to take a “glass-is-half-full” approach given the
recent emerging market selloff.
“It’s not my natural state of being at all, but I’m always looking for
the bad in things, and there’s plenty out there, and the markets don’t really
seem to be responding all that much,” Carnell said.
U.S. shares had been boosted Wednesday by expectations that the impact
of the Sino-U.S. trade war would be smaller than feared, with the U.S. fiscal
policy package potentially outweighing any negative impact.
The Dow Jones Industrial Average ended 0.61 percent higher on Wednesday
at 26,405.76, its highest close since late January, while the S&P 500
gained 0.13 percent to 2,907.95.
The Nasdaq Composite dropped less than 0.1 percent, to 7,950.04, pulled
down by a fall in Microsoft.
---- The broader market sentiment was at stark odds with a new Reuters poll that showed unanimous agreement that an escalating trade war with China was bad economic policy for the United States and could cause economic growth to slow.
The consensus of the poll for U.S. growth showed a slowdown to 2.0
percent in the final quarter of 2019, less than half the last reported rate of
4.2 percent.
More
Get ready for U.S. stocks to come off their ‘sugar high’: JPM strategists
By MarketWatch
Published: Sept 19, 2018 9:00 a.m. ET
The tariff war rages on, but U.S. stocks keep on trucking.
The Dow managed nearly a 200-point gain on Tuesday, its fifth-highest
close in history, on a bet there is ample time for the U.S. and China continue
to threaten a trade war.
“It is inexplicable, but it is a pattern we’ve seen all year,” Kristina
Hooper, Invesco’s chief global market strategist, told Bloomberg Radio on
Wednesday. And while carefree investors keep brushing those headlines away, she
and others say diversification may be in order.
---- U.S. assets are riding a “sugar high” thanks to the Trump tax cuts and the “delayed positive impact of weak U.S. dollar and low rates from last year, said Kolanovic and the team in a note to clients.
They expect that sweet boost will wear off in coming quarters as
year-over-year comparisons in data and earnings decline, and the impact of a
stronger dollar and higher interest rates kick in. As well, the prospect of big
tariffs on China trade, if they materialize, would cut 2019 S&P 500
earnings per share, the strategists said.
The divergence between U.S. and
international assets has likely “hit extreme levels” and won’t continue,
therefore making for an “attractive entry point for taking contrarian
positions,” they said.
More
VIX - Wall Street 'fear gauge': manipulated or maligned?
September 20, 2018 / 6:09 AM
NEW YORK (Reuters) - Cboe Global
Markets (CBOE.Z) is taking several steps, including
recruiting artificial intelligence, to put to rest concerns that its VIX
volatility index was prone to manipulation and that contributed to a blow-up of
some complex volatility products in February.
The VIX settlement price is calculated using actual opening trade price of a subset of S&P options. If there is no opening traded price for an option included in the calculation, an average of that option’s bid and ask price is used.
Traders in volatility products have long debated whether the settlement calculation can be influenced by someone artificially raising the price of the options going into the calculation.
These suspicions gained credence in May 2017, when John Griffin and Amin Shams of the McCombs School of Business at the University of Texas, Austin, published a paper noting significant spikes in trading volume in S&P 500 index options at the time of the VIX settlement.
Their research showed that just prior to the settlement, there were instances of large option buy or sell orders that did not occur at other times.
While the paper did not rule out all benign explanations, it said: “The
aggregate evidence aligns itself with what one would expect to see in the case
of market manipulation of certain settlements.”
Since the paper was published, more than a dozen lawsuits have been
filed by various traders who say they lost money due to the alleged
manipulation. In general, the lawsuits allege that various parties manipulated
the VIX by placing S&P options orders with the intention to move the VIX
settlement price.
The Cboe says that the jump in trading
volume in S&P 500 index options around settlement does not necessarily
point to manipulation.
---- Some market participants have suggested that merely increasing liquidity or better policing the settlement auction might not be enough. The Cboe may need to change the VIX formula itself, they say.
The VIX’s reliance on a wide range of traded options, rather than just
the ones closest to where the market is trading, leaves the door open to
manipulation, they say.
Some traders can influence the settlement price by simply buying a lot
of certain S&P options that otherwise would not attract any trading and not
be included in the calculation of the VIX price, they argue.
In
other news, US farmers are about to lose the Chinese soybean market
permanently. Trade wars come with unintended consequences.
Inside China's strategy in the soybean trade war
September 19, 2018 / 6:38 AM
BEIJING/CHICAGO (Reuters) - The executive
from one of China’s biggest soybean crushers sat on a panel at a Kansas City agricultural
exports conference, listening to an expert beside him explain why China would
remain dependent on U.S. soybeans to feed its massive hog herds.
When his turn to speak came, Mu Yan Kui told the international audience
of soy traders that everything they just heard was wrong. Then Mu ticked off a
six-part strategy to slash Chinese consumption and tap alternate supplies with
little financial pain.
“Many foreign business people and politicians have underestimated the
determination of Chinese people to support the government in a trade war,” said
Mu, vice chairman of Yihai Kerry, owned by Singapore-based Wilmar
International.
The comments echo a growing confidence within China’s soybean industry
and government that the world’s largest pork-producing nation can wean itself
off U.S. soy exports – a prospect that would decimate U.S. farmers, upend a
36-year-old trading relationship worth $12.7 billion (£9.6 billion) last year,
and radically remap global trade flows.
Just one prong of the strategy Mu detailed - to slash soymeal content in
pig feed - could obliterate Chinese demand for U.S. soybeans if broadly
adopted, according to Reuters calculations.
Cutting the soy ration for hogs from the typical 20 percent to 12
percent would equate to a demand reduction of up to 27 million tonnes of
soybeans per year – an amount equal to 82 percent of Chinese soy imports from
the United States last year. Chinese farmers could cut soymeal rations by
nearly half without harming hogs’ growth, experts and academics said.
Soy meal provides the protein and amino acids that pigs need to thrive,
but reducing their use will be easier in China than elsewhere because farmers
here have long included more soy than needed to keep their hogs healthy,
according to industry experts in China and the United States.
---- Major Chinese agriculture firms have recently started adopting the same tactics, but the nation’s pork sector remains dominated by smaller operations that - until now - didn’t have a strong financial incentive to justify the time and expense required to overhaul feeding systems and formulas, industry experts said.
Now, China’s 25-percent tariff on U.S. soybeans - a retaliation against
levies by U.S. President Donald Trump on a wide range of Chinese imports - is
accelerating the push to slash soymeal rations.
“The Sino-U.S. trade tensions will inevitably promote the wider
application of this know-how,” said Yin Jingdong, professor in animal nutrition
at China Agricultural University.
---- A feed mill owned by Beijing Dabeinong Technology Group Co, for instance, plans to eliminate imported U.S. soybeans from its feed mix by October, said Zhang Wei, a manager at the mill, one of China’s top farmers and feed makers. The firm will replace soy imports with more cornmeal and alternative protein sources, including domestically produced soymeal, which has typically been grown for human consumption.
At the Kansas City conference, held by the U.S. Soybean Export Council,
Mu highlighted reduced soymeal rations as part of a broader strategy, including
seeking alternative protein sources such as rapeseed or cotton seed; tapping
surplus soybean stocks, including a government reserve, and domestically grown
soybeans; and continuing to boost soybean imports from Brazil and Argentina.
More
“It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity. If there must be madness something may be said for having it on a heroic scale."
John Kenneth Galbraith. The Great Crash: 1929.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, Trump’s illogical trade
war on NATO ally Canada. Predictably, it’s generating a buy Canadian backlash. Canadian
snowbirds wintering in Mexico and Costa Rica next?
Is Canada ‘ripping us off’? Or is it the best U.S. trade partner?
The $4 trillion in goods exchanged last year between the two nations was about evenly divided between imports and exports.
Sept. 17, 2018
With President Trump’s repeated vows to punish Canada with auto tariffs,
you might think that the border was a southbound one-way street, running wholly
against the U.S. auto industry.
On a recent campaign trip, Trump said Canada was "ripping us
off" and threatened a tariff on cars from Canada that "would be the
ruination of the country." It would be a massive escalation of the trade
hostilities that began this year with U.S. tariffs on washers, solar cells,
aluminum and steel.
But the auto trade with Canada doesn't look one-sided, if you take into
account where the parts to make the cars came from.
Yes, car imports from Canada far exceed cars shipped the other way. But
those cars assembled in Canada are often made up of engines, bodies and parts
imported from the United States. Add up the trade in all automotive goods with
Canada, and it comes out about even. The United States exports 99 cents’ worth
of automotive goods to Canada for every dollar of imports.
----Overall, Canada could even be called the United States’ best major trade partner. It's the largest export market for U.S. goods, and the $4 trillion trade is by far the most balanced. The United States exports 94 cents’ worth of goods to Canada for each dollar of imports. In trade with the rest of the world, it’s only 62 cents.
Within that trade, there are many differences across U.S. imports and
exports, and the flow of goods often differs depending on direction. Here's a
breakdown:
The pattern within U.S.-Canada trade in part reflects differences between
the two countries. Although both have about the same area of land, Canada has
only one-ninth the U.S. population, less than California’s. So while rich in
natural resources to export as raw material exports, Canada doesn’t necessarily
make the vast array of consumer goods, or the specialized machinery and
equipment used to make many finished products, and those are more often
imported.
----The trade dispute also has fanned public opinion in Canada, especially since the Trump administration used “national security” as a basis for its steel and aluminum tariffs and began threatening the same justification for a 25 percent tariff on Canadian autos. Trump also insulted Canadian Prime Minister Justin Trudeau after a summit in Quebec.
It all prompted 17-year-old Tyler Campbell of Ontario to start a website listing domestic products to buy instead of imports. Since July, he’s done dozens of radio interviews and appeared on TV five times, and his Made in Canada list is up to more than 500 companies and 750,000 views. It aims to steer Canadian coffee drinkers away from Tim Horton’s and into Second Cup, and diners to the ketchup brand Primo instead of Heinz, and shoppers to packages flagged with the red maple leaf from Canada’s flag.
“My
perspective on it is more towards pro-Canadian than anti-Trump," Campbell
said.
----But it's the U.S. workers making machines, not consumer goods, who could suffer the most in the blowback from an auto tariff. The United States last year exported to Canada $79 billion worth of production equipment, including machines for farming, mining and manufacturing, as well as computer and telecom equipment. The trade surplus: $36 billion.
Consider the forklift and other material-moving equipment that is
central to modern just-in-time delivery. That category alone last year
generated a $1.6 billion trade surplus with Canada. “It’s a very important
market for us,” said Brian Freehan, president of the Industrial Truck
Association, which represents forklift manufacturers and their suppliers. He
said that without the North American Free Trade Agreement, U.S. manufacturers
would lose business, probably permanently, to countries outside North America.
More
The U.K. will join Canada in leading a new free-trade alliance: Britain's trade chief
Liam Fox September 18, 2018 8:32 AM EDT
The Atlantic Ocean’s vast distances have never stood in the way of the
friendship between Canada and the U.K. It took John Cabot 34 days to cross that
ocean to Newfoundland — and there are 5,700 kilometres between Toronto and
London. However, this distance is becoming ever more trivial.
Today it takes
fewer than eight hours to fly between them. Whereas once a message had to
travel at the speed of a horse and a sailing ship, the information revolution
means that the equivalent of thousands of books can be pinged between our two
continents in seconds.
The direction of travel is clear. The trade of the future will be much
less defined by geographical barriers — or even the physical exchange of goods.
We live in an emerging-knowledge transfer-based trading world in which an
engineering report, a 3D-printer design, or new advances in machine learning
are as valuable as the contents of a cargo container. The transfer of services
and expertise in such things as product design and software coding — areas that
thrive in both Canada and the U.K. — are becoming ever more important.
This revolution continues to transform our world at a staggering pace,
with the system of free and fair international trade that underpins it lifting
millions out of poverty. But sadly, this is increasingly at risk. Tariffs and
barriers to trade going up between the United States, the EU, China, Canada and
Mexico are a serious threat to global growth. So, as I visit Canada this week,
I want to make it clear that the United Kingdom is, and will remain, an
unequivocal supporter of international free trade, open markets and a
rules-based system focused on WTO.
The U.K. is a firm ally of Canada’s and will work alongside you, both
inside and outside the WTO, to resolve those disputes with third parties that
threaten our mutual prosperity.
More
Nothing is so admirable in politics as a short memory.
John Kenneth Galbraith.
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?
From California to Texas, these are the US states leading the way in solar
September
19 2018
More than 2 gigawatts (GW) of photovoltaic solar capacity was
installed in the U.S. during the second quarter of 2018, according to a recent
report from Wood Mackenzie Power and Renewables and the Solar Energy Industries
Association (SEIA).
While this represents a 9 percent year-on-year decrease, the U.S. is still expected to more than double its photovoltaic capacity over the next five years.
Here, Sustainable Energy looks at the top 10 U.S. states in terms of cumulative solar capacity. The figures come from the latest U.S. Solar Market Insight Report from Wood Mackenzie Power and Renewables and the SEIA. The data for states is current through the second quarter of 2018.
While this represents a 9 percent year-on-year decrease, the U.S. is still expected to more than double its photovoltaic capacity over the next five years.
Here, Sustainable Energy looks at the top 10 U.S. states in terms of cumulative solar capacity. The figures come from the latest U.S. Solar Market Insight Report from Wood Mackenzie Power and Renewables and the SEIA. The data for states is current through the second quarter of 2018.
10. Georgia
With more than 1.5 GW of solar, Georgia places 10th when it comes to cumulative solar capacity, and has enough to supply the equivalent of 174,014 homes with solar energy, according to the SEIA.9. Utah
With 30,500 solar installations, Utah is home to over 1.6 GW of solar capacity according to the SEIA. More than 6,000 people in the state work in the solar power sector, while almost 314,000 homes can be powered by solar energy.8. Florida
Florida has almost 2 GW of solar power, according to the latest figures, enough to power 227,340 homes.7. Massachusetts
Massachusetts has more than 2.2 GW of solar capacity, according to the SEIA. Almost 369,000 homes in the state are powered by solar, while 11,530 jobs there are in the solar industry.
More
The monthly Coppock Indicators finished August.
DJIA: 25,965 +207 Down. NASDAQ:
8,110 +265 Up. SP500: 2,902 +168 Up.
All
three slow indicators moved down in March, but the S&P and NASDAQ have now turned
up. September will be critical for
confirmation of this change.
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