Trade Wars – Is Trump Folding?

Baltic Dry Index. 1439 -43   Brent Crude 79.34

 “The nature of the game as it is played is such that the public should realize that the truth cannot be told by the few who know.”

Jesse Livermore, Reminiscences of a Stock Operator

Today while we await Hurricane Florence developments and the next shoe to fall in Trump’s trade war on NAFTA, NATO, Canada and China, we wonder if Trade War Team Trump have gotten cold feet? Is U-turn Trump in the process of folding?

As unlikely as that might seem to most, Trump is under intense lobbying pressure from most of US industry, and from rising distress in Trumps heartland farm states.  Might the arrival of Hurricane Flo, provide an opportunity to declare victory, and invite interested parties to negotiate a new world trade trading order?

While I think it’s already gone past that point, others still see a more favourable outcome.

We open below with the case for hope.

September 12, 2018 / 5:28 AM

Trump's rhetoric may lead to fairer global trade: Allianz's El-Erian

(Reuters) - The trade battles being pursued by U.S. President Donald Trump’s administration are likely to lead to fairer but still free global trade, said Mohamed El-Erian, chief economic advisor at the Allianz Group, Europe’s largest insurer.

However, there was still a 1-in-4 chance of a full blown global trade war that could lead to a hard landing in China and a global recession, El-Erian told the Reuters Global Markets Forum in an exclusive interview on Wednesday.

There is significant scope for more volatility in emerging markets due to potential forced selling on the back of stop-losses, El-Erian said. Contagion risks, though limited for now, could increase “if bad technicals become bad economics and finance,” with the least liquid markets being in the greatest danger, he added.

Following are edited excerpts from the conversation:

Q: How much worse can it get for emerging markets (EM) - the Indonesian rupiah/Indian rupee/Mexican peso - and those economies and how much more can central banks spend from their reserves?

A: While markets have been calmer recently, or at least less turbulent, there is still significant scope for further volatility. And this is because some key market technical are still off-sides. The longer this persists, the greater the risk that bad technicals contaminate the economics. Currency and interest rate moves become the transmission mechanism, amplifying the challenges rather than acting as shock absorbers.

More

https://uk.reuters.com/article/uk-gmf-markets-el-erian/trumps-rhetoric-may-lead-to-fairer-global-trade-allianzs-el-erian-idUKKCN1LS0E3?il=0

5 things about a U.S.-China trade war that might surprise investors

By Anneken Tappe  Published: Sept 11, 2018 3:11 p.m. ET

China and the U.S., the world’s two largest economies, have been quarreling over trade for months, engaging in a tit-for-tat tariff battle and intermittently frightening investors with the prospect of a full-blown trade war. But the macroeconomic fallout from a worsening of trade relations might not be as severe as feared, according to Capital Economics.

----And while investors are worrying about the possible fallout that could hit companies, whole sectors, such as electronics or agriculture, and other countries caught in the crossfire, the macroeconomic implications for the U.S. and China appear limited, according to chief global economist Andrew Kenningham.

He offers five reasons why.

First, as long as “fiscal policy is not tightened, tariffs do not necessarily reduce aggregate demand,” wrote Kenningham, adding that it might redirect trade flows to other countries in response to the tariffs rather than eliminate the demand.

Second, global trade volumes would likely not just drop off either.

“The elasticity of demand for most Chinese exports is quite low, and many U.S. exports to China could be redirected,” Kenningham said. On top of that, a sizable chunk of U.S. sanctions on Chinese imports have been offset, at least in part, by a weaker Chinese yuan USDCNY, -0.0116% USDCNH, +0.1411%  against the U.S. dollar DXY, +0.08% Indeed the dollar-yuan pair is up more than 5.5% in 2018 so far, and about 7.5% over the past 12 months, according to FactSet.

More

https://www.marketwatch.com/story/5-things-about-a-us-china-trade-war-that-might-surprise-investors-2018-09-11

September 11, 2018 / 9:42 AM

China markets regulator says trade war does not benefit U.S. or China

BEIJING (Reuters) - The head of China’s market regulator said on Tuesday a trade war does not benefit China or the United States and tensions can only be resolved through dialogue and negotiation.

Zhang Mao, head of China’s State Administration for Market Regulation, made the remarks during a meeting with Procter & Gamble President and Chief Executive Officer David Taylor in Beijing.

Zhang also said China would treat all companies equally, including foreign firms.

Taylor said Procter & Gamble would continue to increase investment to provide better products to Chinese consumers.

https://uk.reuters.com/article/us-usa-trade-china-regulator/china-markets-regulator-says-trade-war-does-not-benefit-u-s-or-china-idUKKCN1LR0Q9

But in other developments, mutual assured destruction is still in play. While I hope for the best outcome to our reckless Trump world trade war, I suspect that what come next is a recession with plenty of blame on America, followed by recrimination.

September 11, 2018 / 11:20 AM

China seeks WTO backing for sanctions on U.S. over dumping duties

GENEVA (Reuters) - China will ask the World Trade Organization (WTO) next week for permission to impose sanctions on the United States, for Washington’s non-compliance with a ruling in a dispute over U.S. dumping duties, a meeting agenda showed on Tuesday.

The request is likely to lead to years of legal wrangling over the case for sanctions and the amount.

China initiated the dispute in 2013, complaining about U.S. dumping duties on several industries including machinery and electronics, light industry, metals and minerals, with an annual export value of up to $8.4 billion (6.44 billion pounds).

It won a WTO ruling in 2016, which was confirmed by an appeal last year.

The case concerned the U.S. Commerce Department’s way of calculating the amount of “dumping” - Chinese exports that are priced to undercut American-made goods on the U.S. market.

The U.S. calculation method, known as “zeroing”, tended to increase the level of U.S. anti-dumping duties on foreign producers and was repeatedly ruled to be illegal in a series of trade disputes brought to the WTO.

The string of U.S. defeats fuelled U.S. President Donald Trump’s campaign to reform the WTO. Trump said last month the United States could withdraw from the WTO if “they don’t shape up”.

China told the WTO last month that the deadline for the United States to comply with the ruling expired on Aug. 22.

The WTO published an agenda on Tuesday for a meeting of its dispute settlement body on Sept. 21, showing China planned to take the legal step of asking for authorisation for sanctions.

https://uk.reuters.com/article/uk-usa-trade-china-sanctions/china-seeks-wto-backing-for-sanctions-on-u-s-over-dumping-duties-idUKKCN1LR115

Asian markets extend slump as Hong Kong stocks sink toward new 14-month low

By Dow Jones Newswire  Published: Sept 11, 2018 10:55 p.m. ET

Asian stock markets slumped in early trading Wednesday as trade tensions rose following a report that China is seeking permission from the World Trade Organization to impose sanctions against the U.S., separate from the tariff battle between the world’s largest economic powers.

The declines continued for Hong Kong stocks, which hit 14-month lows Tuesday and saw the Hang Seng Index HSI, -0.31%   enter bear-market territory. It was off a further 0.5% Wednesday, headed toward its sixth straight decline. Chinese bank stocks were lower, as were Macau casino names. Sino Biopharma 2922, -11.42%   and knitwear maker Shenzhou 2313, -1.24%  , which joined the Hang Seng on Monday, were on an early pace for a third day of declines. Tech giant Tencent 0700, +0.06%   gave up early gains after fresh stock-buyback activity Tuesday.

More

https://www.marketwatch.com/story/asian-markets-extend-slump-as-hong-kong-stocks-sink-toward-new-14-month-low-2018-09-11

The next financial crisis ‘will be more severe’ socially and politically, says billionaire investor Dalio

By William Watts

Published: Sept 11, 2018 4:21 p.m. ET

‘I think it will be more severe in terms of the social, political problems. And I think it will be more difficult to handle ... It won’t be the same in the terms of the big-bang debt crisis. It’ll be a slower growing, more constricting sort of debt crisis that I think will have bigger social implications and bigger international implications.’

Ray Dalio, founder and co-CIO, Bridgewater Associates 

That’s billionaire Ray Dalio, the founder of the world’s largest hedge fund, Bridgewater Associates, expounding on what the next financial crisis, which he sees as inevitable, will look like.

See: Here’s what J.P. Morgan says could cause the next financial crisis

In an interview with CNBC, Dalio said he believes the current economic cycle is in the seventh inning, which he extrapolated to mean it probably has another two years or so to run.

It’s now time, however, to start thinking about what the next downturn will be like, he said. To that effect, Dalio on Monday published a book, “A Template for Understanding Debt Crises,” that’s available as a free PDF.

In the interview, Dalio likened the current environment to 1935-1940, while the 2008-2009 crisis period echoed the start of the Great Depression in 1929-1932. Like the start of the Depression, the financial crisis left monetary policy makers no choice but to print money and buy financial assets, pushing the prices of those assets up and exacerbating the wealth gap.

That’s helped stoke the populist sentiment around the globe, which has implications for any fiscal policy response to future crises, while quantitative easing and ultralow rates have already been largely maximized. That underscores the need for the formulation of a monetary policy 3.0 that’s aimed at getting individuals to purchase assets.

More

https://www.marketwatch.com/story/the-next-financial-crisis-will-be-more-difficult-to-handle-says-billionaire-investor-dalio-2018-09-11

In more polite circles, John Jerk and his brother are called “the little fellows” or “the odd-lotters” or “the small investors.” I wish I knew Mr. Jerk and his brother. They live in some place called the Hinterlands, and everything they do is wrong. They buy when the smart people sell, they sell when the smart people buy, and they panic at exactly the wrong time. There are services that make a very good living out of charting the activity of Mr. J. and his poor brother. If I knew them I would give them room and board and consult them…. I would push the pheasant and champagne through the little hatch of his cell and ask Mr. J. what he was going to do that morning, and if he said, “buy,” I would know to sell, and so on.

 “The Day They Red-Dogged Motorola,” The New York World Journal Tribune, Oct. 30, 1966

Crooks and Scoundrels Corner

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

Today, MAGA, more winners in Trump’s trade wars. Strangely they’re showing up in Asia. Making Asia Great Again?

September 11, 2018 / 7:22 AM

U.S. oil exports to Japan, South Korea soar as refiners reap steep discounts

SINGAPORE/HOUSTON (Reuters) - U.S. oil exports to Japan and South Korea will rise to record highs this month as Asian refiners take advantage of the steep discounts American sellers are offering after losing Chinese customers amid the trade dispute between Washington and Beijing.

Ship tracking data in Thomson Reuters Eikon showed that oil exports from the United States to South Korea in September will rise to a record average of at least 230,000 barrels per day (bpd). U.S. shipments to Japan will also rise to a record average of at least 134,000 bpd, the data showed.

Two traders and a brokerage source said South Korean and Japanese refiners have been taking advantage of steep discounts of up to $10 per barrel between the U.S. crude benchmark West Texas Intermediate (WTI) CLc1 that American producers base their crude sales on and the international Brent crude LCOc1 benchmark.

“They (South Koreans and Japanese refiners) need to find replacements for their drop in Iran imports and a fair amount of that is coming from the States. The steep discount of WTI to Brent is hard to resist,” said a Singapore-based ship broker.

---- “Our U.S. crude oil purchase is purely because of its price advantage,” said Kim Woo-kyung, a spokeswoman at SK Innovation (096770.KS), the owner of South Korea’s top refiner SK Energy.

A spokesman for Japan’s biggest refiner JXTG Nippon Oil & Energy Corp (5020.T) said his firm had not received government orders to halt Iranian oil imports.

He would not comment on commercial operations beyond saying “we will determine optimum crude in our own procurement plan.”

---- With Middle East crude markets tightening because of the start of U.S. sanctions against Iran in November, many Asian refiners have been seeking to make up the shortfall with American supply.

Greg McKenna, chief market strategist at futures brokerage AxiTrader said there has been “a divergence between Brent and WTI.”

U.S. prices, including benchmark WTI, are under pressure amid rising production and a decline in Chinese buying interest because of the trade dispute which is forcing U.S. sellers to find new buyers for their crude.

Meanwhile, the Brent benchmark is supported by several supply disruptions including the Iranian sanctions, tumbling exports from Venezuela, and lingering concerns about Libyan production amid clashes between internal groups.

More

https://uk.reuters.com/article/us-usa-trade-asia-oil/u-s-oil-exports-to-japan-south-korea-soar-as-refiners-reap-steep-discounts-idUKKCN1LR0FD

"If the profit numbers on income statements are treated with such reverence, it was obviously only a question of time before some smart fellows would start building companies not around the logical progression of a business but around what would beef up the numbers."

“Adam Smith” aka George Goodman. The Money Game.

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?

Graphene enables clock rates in the terahertz range

Researchers pave the way for graphene-based nanoelectronics of the future

Date: September 10, 2018

Source: Helmholtz-Zentrum Dresden-Rossendorf

Summary: Graphene is considered a promising candidate for the nanoelectronics of the future. In theory, it should allow clock rates up to a thousand times faster than today's silicon-based electronics. Scientists have now shown that graphene can actually convert electronic signals with frequencies in the gigahertz range extremely efficiently into signals with several times higher frequency.

Graphene -- an ultrathin material consisting of a single layer of interlinked carbon atoms -- is considered a promising candidate for the nanoelectronics of the future. In theory, it should allow clock rates up to a thousand times faster than today's silicon-based electronics. Scientists from the Helmholtz Zentrum Dresden-Rossendorf (HZDR) and the University of Duisburg-Essen (UDE), in cooperation with the Max Planck Institute for Polymer Research (MPI-P), have now shown for the first time that graphene can actually convert electronic signals with frequencies in the gigahertz range -- which correspond to today's clock rates -- extremely efficiently into signals with several times higher frequency. The researchers present their results in the scientific journal Nature.

Today's silicon-based electronic components operate at clock rates of several hundred gigahertz (GHz), that is, they are switching several billion times per second. The electronics industry is currently trying to access the terahertz (THz) range, i.e., up to thousand times faster clock rates. A promising material and potential successor to silicon could be graphene, which has a high electrical conductivity and is compatible with all existing electronic technologies. In particular, theory has long predicted that graphene could be a very efficient "nonlinear" electronic material, i.e., a material that can very efficiently convert an applied oscillating electromagnetic field into fields with a much higher frequency. However, all experimental efforts to prove this effect in graphene over the past ten years have not been successful.

"We have now been able to provide the first direct proof of frequency multiplication from gigahertz to terahertz in a graphene monolayer and to generate electronic signals in the terahertz range with remarkable efficiency," explains Dr. Michael Gensch, whose group conducts research on ultrafast physics and operates the novel TELBE terahertz radiation source at the HZDR. And not only that -- their cooperation partners led by Prof. Dmitry Turchinovich, experimental physicist at the University of Duisburg-Essen (UDE), have succeeded in describing the measurements quantitatively well using a simple model based on fundamental physical principles of thermodynamics.

With this breakthrough, the researchers are paving the way for ultrafast graphene-based nanoelectronics: "We were not only able to experimentally demonstrate a long-predicted effect in graphene for the first time, but also to understand it quantitatively well at the same time," emphasizes Prof. Dmitry Turchinovich. "In my laboratory we have been investigating the basic physical mechanisms of the electronic nonlinearity of graphene already for several years. However, our light sources were not sufficient to actually detect and quantify the frequency multiplication clean and clear. For this, we needed experimental capabilities which are currently only available at the TELBE facility."

The long-awaited experimental proof of extremely efficient terahertz high harmonics generation in graphene has succeeded with the help of a trick: The researchers used graphene that contains many free electrons, which come from the interaction of graphene with the substrate onto which it is deposited, as well as with the ambient air. If these mobile electrons are excited by an oscillating electric field, they share their energy very quickly with the other electrons in graphene, which then react much like a heated fluid: From an electronic "liquid," figuratively speaking, an electronic "vapor" forms within the graphene. The change from the "liquid" to the "vapor" phase occurs within trillionths of a second and causes particularly rapid and strong changes in the conductivity of graphene. This is the key effect leading to efficient frequency multiplication.

More

https://www.sciencedaily.com/releases/2018/09/180910111258.htm?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+sciencedaily%2Fmatter_energy%2Fgraphene+%28Graphene+News+--+ScienceDaily%29

  

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.