Baltic Dry Index. 1503 -27 Brent Crude 84.80
"The market crash of 1987 caught most
economists, scholars, and investment professionals by surprise. Nowhere in the
classical, equilibrium-based view of the market so long considered inviolate
was there anything that would predict or even describe the events of 1987. The
failure of the existing theory left open the potential for competing
theories."
Robert Hagstrom,
Investing, the Last Liberal Art
What does the IMF know
about the global economy that the rest of us don’t? For a second time in as
many days the IMF hit the equivalent of their panic button.
For now, complacency
still rules in global stock markets, but trade wars, currency wars, political
uncertainty, a rising oil price and more to come next month when US sanctions
kick in on Iran, plus 25 percent US tariffs on China’s exports starting on
January 1, make for a time of anything but complacency. The IMF, I suspect, has
an alternate model that’s predicting another 2008 right ahead.
Below, the IMF
attempting to ring a bell at the top?
"What do you expect us to do? Announce
that all the Cabinet members will be buying IBM and General Motors tomorrow?
exasperated Administration official,
New York Times, October 20, 1987
Asian shares subdued as global bond sell-off eases; sterling rises
October 8, 2018 / 2:00 AM
TOKYO
(Reuters) - Asian shares barely moved on Wednesday after world stocks hit
eight-week lows the previous day on worries about global economic growth,
although the British pound stayed firm on hopes for a Brexit deal.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was flat, while Japan's Nikkei average .N225 fell 0.4 percent and the Australian benchmark was up just 0.1 percent.
In China, mainland's benchmark Shanghai Composite .SSEC shed 0.2 percent in choppy trade and Hong Kong's Hang Seng added 0.3 percent.
“As uncertainty continues to prevail in financial markets across the
world, many investors are staying on the sidelines until more clarity emerges
in U.S. Treasury and Chinese markets,” said Yasuo Sakuma, chief investment
officer at Libra Investments.
Benchmark U.S. 10-year Treasury yields US10YT=RR touched a 7-1/2-year
peak of 3.261 percent and those on 30-year bonds US30YT=RR hit their highest in
more than four years, but later fell back.
Some traders say comments on Tuesday by U.S. President Donald Trump
helped cool Treasuries yields. He said the Federal Reserve was going too fast
in raising rates when inflation was minimal and government data pointed to a
strong economy.
Italian government bond yields also fell from multi-year highs after
Economy Minister Giovanni Tria pledged to do whatever is necessary to restore
calm if market turbulence turns into a financial crisis.
More
Global financial stability risks rising with trade tensions, IMF says
October 10, 2018 / 1:08 AM
(Reuters)
- Risks to the global financial system have risen over the past six months and
could increase sharply if pressures in emerging markets escalate or global
trade relations deteriorate further, the International Monetary Fund said on
Wednesday.
The IMF, whose autumn meetings with the World Bank get under way on the
Indonesian resort island of Bali this week, also noted that while the banking
system has been shored up by regulators in the decade since the 2008 global
financial crisis, easy financial conditions are contributing to a buildup of
vulnerabilities such as high debt levels and “stretched” asset valuations.
New bank resolution regimes meant to avoid future bailouts are largely
untested, the Fund said in its biannual global financial stability update.
“Near-term risks to global financial stability have increased somewhat,”
the IMF said. “Overall, market participants appear complacent about the risk of
a sharp tightening in financial conditions.”
IMF capital markets director Tobias Adrian said potential shocks to the
system could come in many forms, such as higher-than expected inflation that
triggers a sharp jump in interest rates or a “disorderly” exit by Britain from
the European Union.
But the severity of the impact from such shocks will be determined by
vulnerabilities including growing non-financial debt levels now exceeding 250
percent of GDP, a decline in underwriting standards outside the traditional
banking sector and elevated asset prices that could drop sharply.
“It’s this interaction between the buildup of vulnerabilities and the
decline in asset prices that can generate adverse implications for
macroeconomic activity,” Tobias told a news conference.
More
Up next America. With the midterm elections now less than a
month away, the Democrats are increasingly certain they can regain the House
and set off on a campaign of revenge against Trump’s America. The IMF is
probably right to be hitting their panic button.
Two dozen races will determine control of House: Republican memo
October 9, 2018 / 9:03 PM
WASHINGTON
(Reuters) - A leading Republican political action committee that has spent
heavily to influence next month’s congressional elections told donors on
Tuesday that fewer than two dozen races will determine which party controls the
U.S. House of Representatives.
The
Congressional Leadership Fund, a super PAC closely linked to retiring House
Speaker Paul Ryan, has already spent $90 million on key House races, but warned
its donors in a memo dated Tuesday and seen by Reuters that more cash is needed
to avert a Democratic takeover of the House.
The
memo, from CLF executive director Corry Bliss, said internal polling had shown
that voter approval of Republican President Donald Trump had risen by 5
percentage points in 20 critical House districts since the bitter Senate fight
over Supreme Court Justice Brett Kavanaugh.
----
“There are 20 races within 4 points that will determine the House majority, and
CLF will keep working to win them,” Bliss wrote in the memo.
Democrats need to gain a net total of 23 seats in the Nov. 6 elections
to assume control of the 435-seat House, which would allow them to would derail
much of Trump’s agenda and open his administration up to greater oversight.
Independent analysts have said widespread discontent with Trump and the
Republican Party could lead to Democrats winning as many as 40 seats.
Republicans argue that the controversy over Kavanaugh has engaged
conservative voters who otherwise have been apathetic to the midterm elections.
Democrats contend the fracas has added to their edge in voter enthusiasm,
particularly among women voters.
The memo warns that Democrats have outspent their rivals by $50 million
in key races.
More
Where’s the outrage over Hillary’s call for a ‘civil’ war?
October 9, 2018 | 10:20pm
----- Which brings me to the second
event of note: Hillary Clinton’s statement Tuesday that Democrats “cannot be
civil” as long as Republicans hold the White House and Congress.“You cannot be civil with a political party that wants to destroy what you stand for, what you care about,” Clinton told CNN. “That’s why I believe, if we are fortunate enough to win back the House and/or the Senate, that’s when civility can start again. But until then, the only thing that the Republicans seem to recognize and respect is strength.”
There you have it — a declaration of war and a license for violence. Where is the media outrage?
Clinton knows we are already in the danger zone when it comes to the political temperature. Her comments, then, are as reckless as bringing a can of gasoline to a bonfire.
She’s stoking trouble to gain a foothold in the 2020 race — and damn the consequences.
Her claim that civility can return when Dems have power is an admission that the ends justify the means.
More
The Next Financial Crisis Is Staring Us in the Face
All it takes to see it is a long look in the mirror.By Barry Ritholtz 8 October 2018, 11:00 GMT+1
The financial crisis ripped through Wall Street 10 years ago, pushing
the global economy to the edge of the abyss. One might think those searing
experiences would have created a learning opportunity — for managing risk
better, understanding structural imbalances in the financial markets, even
learning a bit about how our own cognitive processes malfunction.
Instead, we have little new wisdom or self-awareness to show for that
traumatic event.
That was one of the key takeaways of an extraordinary conference I attended last week called Risk: Retrospective Lessons & Prospective Strategies, co-sponsored by the Santa Fe Institute and Morgan Stanley in New York. It left me excited, brimming with ideas and curious about how we could do better as investors.
I took notes — and I never take notes. Every discussion topic had profound implications for the capital markets.
The opening panel, “Lessons Learned" had legendary stock picker Bill Miller, asset manager Cliff Asness and journalist Bethany McLean 1 recounting their experiences during the financial crisis. It made me sad, angry and hopeful all at the same time.
---- The panel on behavioral finance was similarly thought-provoking. Jessica Flack, of the Santa Fe Institute, discussed research into “collective computation in nature” that has significant ramifications for various machine-human hybrid activities. It was hard not to listen to her discuss her research without thinking there is a warning for artificial-intelligence and algo-driven trading.
More
Finally, mark 2018
down as a stand out year for British wine. Who needs France or Spain for sparkling wine, if global
warming is real. Just remember to add a little sugar to the bottle for demi
sec.
Bumper harvest gives English winemakers extra fizz
October 9, 2018 / 7:24 AM
LONDON (Reuters) - Forget green fields and
clouds. Blazing sunshine and rows of grapevines are now a growing part of the
English countryside, leading to a rise in locally produced sparkling wine -
boosted this year by a bumper harvest.
At the Chapel Down winery in Kent, about 40 miles southeast of London,
dozens of fruit-pickers are busy loading grapes into bins for the harvest,
which is about 60 percent bigger than last year’s.
While Britain’s 2018 summer was the joint-hottest on record — adding to
concerns about global warming — the heat has been a boon for England’s wine
industry, which accounts for about 2 percent of all the wine bought in Britain.
“The conditions have been, frankly, perfect,” said Mark Harvey, managing
director of the wines business at Chapel Down.
“We are seeing huge demand for the limited supply that we’re able to
deliver to the market, so the need to bolster stocks is urgent. To have a
harvest of the scale that we’re having this year is just the best.”
At Chapel Down, which has chalky soil similar to the famous Champagne
region of France and utilises the same “Traditional Method” of winemaking, the
bumper harvest has come at an opportune time.
Trade data from Britain’s customs service show imports of champagne into
Britain have fallen to a 17-year low, in part reflecting the pound’s
post-Brexit fall against the euro.
“Champagne prices have crept up because of the
weakness of the pound. Does that make it a more attractive place to be selling
English sparkling wine? Undoubtedly,” Harvey said.
Other wineries tell a similar story.
Simon Robinson, chair of the Wines of Great Britain (WineGB) trade body
and owner of the Hattingley Valley winery in Hampshire, reckons British
winemakers have also benefited from a growing preference for local produce
among consumers and an improved standing among wine critics.
“That’s what’s changed over the last few years — particularly the larger
producers have been concentrating on quality, with a significant degree of
success,” he said.
More
"The borrowing has to stop. The
market slide was a shot right between the eyes that had better wake us all up
to simple fact that we can't keep romping forever on borrowed money."
Lee Iacocca, Chrysler Corp Chairman,
October 20, 1987
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
In US v China trade war news, everyone is winning
it seems. Did anyone tell Trump the USA has 18,927 ten digit, customs import
codes, plus some seriously bent US import brokers? Happily for all, not too
many US imports actually get inspected.
The nine most terrifying words
in the English language are: I'm from the government and I'm here to help.
Ronald Reagan
18,927 Ways Chinese Exporters Dodge US Tariffs
Mon, 10/08/2018 - 20:25
Always an industrious people when it comes to maximizing profit and cash
flow, especially if it means breaking the law, it didn't take long for Chinese
exporters to find a way to dodge hundreds of billions in US tariffs. Take the
case of David Visse, a wood importers from Oregon, who this past June got a
call from a supplier asking if he would like to get some Chinese plywood
tariff-free. "How would that work", asked importer David Visse. The
products carry an identification code that is checked by U.S. Customs agents.
"Don’t worry about it,” the supplier said. The plywood would be
stripped of its Chinese markings, and “we’ll ship it under some other
code."
That, in a nutshell is the strategy employed by countless Chinese to
slip their products across the US border without paying tariffs. As the WSJ
reports, every product imported into the U.S. carries a 10-digit designation
called an HTS code, of which there are 18,927 in all. And like a taxonomic
version of a universal commercial alphabet, the code provides a common language
to bridge disparate markets and identify products in all their variety.
More importantly, in a world of escalating trade wars and increasing
tariffs, the code has a more important function: evading those tariffs.
----It all started in March, when President Trump ordered 25% levies on steel. Immediately Chinese steel plates started becoming import-coded as turbine parts, Timothy Brightbill, a trade partner at law firm Wiley Rein LLP which often works on misclassification and trade-remedy cases told the WSJ. Not surprisingly, as a result of this newly found dodge, in the first six months of 2018, imports of steel plates fell 11%, year-over-year, while imports of “electric-generating sets,” a turbine classification, soared 121%.
Diamond saw blades imported from China are subject to 82% tariffs
because of a past dumping ruling by the Commerce Department. In July, according
to U.S. Customs, two California importers controlled by a Chinese manufacturer
tried to dodge the tariff by coding diamond saw blades as grindstones.
China's creative tariff evasion would not be possible without a belt of
smaller nations in the freight-heavy seas south of China, which has become the
center of a lively trade supporting alleged Chinese tariff evasion.
----Not helping matters is that there is a component of subjectivity to the entire process: the decision what code to apply to a shipment is often a matter of discussion between a shipper and a U.S. import broker. And since the US importers would rather avoid paying higher prices, they are often complicit in the process. Chinese and other Asian middlemen say they develop code workarounds with U.S. import brokers, who help with the documentation and regulations.
In short, everyone is in on the scam... everyone but the US government.
More
U.S. Concerned About Chinese Yuan’s Recent Drop, Official Says
By Saleha Mohsin
8 October 2018, 15:36 GMT+1 Updated
on 9 October 2018, 05:30 GMT+1
The Trump administration is concerned about the Chinese yuan’s
depreciation as the Treasury Department weighs whether to name China a currency
manipulator in a report due out next week, a senior Treasury official said
Monday.
Treasury Secretary Steven Mnuchin has faced pressure from the White
House to formally designate China a currency manipulator in the report. The
yuan has tumbled 9 percent against the dollar in the last six months in one of
Asia’s worst performances, raising speculation that China has been deliberately
weakening its currency as trade tensions with the U.S. have escalated.
The official was responding to a question during a briefing ahead of a visit Mnuchin will make this week to Bali, Indonesia, for a meeting of finance minsters and central bankers under the auspices of the International Monetary Fund and World Bank. The official briefed reporters under condition of anonymity.
The U.S. accusation was followed by the lowest yuan daily fixing in more than a year on Tuesday, with the central bank setting the reference rate weaker than 6.9 per dollar for the first time since May 2017.
Markets don’t need to worry too much on recent yuan fluctuations, and the yuan is still relatively strong because the dollar has strengthening quickly, PBOC adviser Liu Shijin wrote in an article published on the state-run Economic Daily on Monday.
President Donald Trump accused China and the European Union of manipulating their currencies in a July tweet, saying the move are “taking away our big competitive edge.”
Trump Is Up a China Cold War Without a Plan
He’s making the right complaints, but not doing much about them.By Mark Gongloff
8 October 2018, 21:58 GMT+1
They say no battle plan survives first contact with the enemy. But what if
the genius way around that is to just … have no plan? President Donald
Trump may soon find out in his brewing cold war with China.On trade, he has launched tariffs and threatened more, while also calling for China to stop spying, technology theft and other corporate misdeeds. But the tariffs are dumb weapons that hurt U.S. companies and growth too; and cracking down on corporate espionage is harder than it looks, writes Noah Smith. A much more effective and straightforward approach, Noah writes, would be to convince China to stop keeping its currency so cheap to boost its export. This would make global trade more fair and curb the trade deficit Trump hates so much.
Last week, Vice President Mike Pence laid out Trump’s broader complaints about China, on everything from military aggression to human-rights abuses. Most of this was legitimate and welcome, writes Hal Brands – but Trump doesn’t seem to be really doing much about it. Nor is it clear what his goal is: A new cold war? A quick-and-dirty deal that maintains the status quo, a la Nafta? “The U.S. is finally starting to say the right things when it comes to the China challenge,” Hal writes. “But it is still struggling to do what is necessary to succeed.”
On the plus side for Trump, China’s response hasn’t exactly been brilliant. It has pulled old policy levers, such as cutting bank reserve ratios, to stoke its production-centered economic engine. In the process, it has abandoned efforts to modernize its economy. Mohamed El-Erian writes this will only keep China on a collision course with the U.S.
https://www.bloomberg.com/view/articles/2018-10-08/trump-s-china-cold-war-lacks-planning
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?
Report: $2.4 Trillion Clean Energy Investment Needed To Avoid Climate Catastrophe
October 8, 2018
by Reed Landberg, Chisaki Watanabe and Heesu Lee, Bloomberg
The world must invest $2.4 trillion in clean energy
every year through 2035 and cut the use of coal-fired power to almost nothing
by 2050 to avoid catastrophic damage from climate change, according to
scientists convened by the United Nations.
Their report published Monday adds pressure on policymakers and
businesses to step up their response to global warming, which is boosting sea
levels, making storms more violent and exacerbating poverty. The atmosphere is
already almost 1 degree Celsius (1.8 Fahrenheit) hotter than it was at the
start of the industrial revolution and on track to rise 3 degrees by 2100,
according to the report. That’s double the pace targeted under the 2015 Paris
climate agreements endorsed by almost 200 nations.
“We are already seeing the consequences of 1 degree of global warming
through more extreme weather, rising sea levels and diminishing Arctic sea
ice,” said Panmao Zhai, one of the co-chairs of the UN’s Intergovernmental
Panel on Climate Change, which brought together the work of hundreds of
researchers and thousands of scientific papers.
---- Envoys at the 2015 Paris talks asked the IPCC to study what it would take to limit warming to 1.5 degrees, a more ambitious goal than the previous 2-degree target. The scientists concluded that carbon dioxide emissions should be cut 45 percent by 2030 from 2010 levels then reduced to zero by 2050. That would require “unprecedented changes in all aspects of society,” most especially within the energy industry. The report acknowledged those changes would be difficult and costly, but not impossible.
Deployment Constraints
“These systems transitions are unprecedented in terms of scale, but not necessarily in terms of speed, and imply deep emissions reductions in all sectors,” the IPCC said in the report. “These options are technically proven at various scales, but their large-scale deployment may be limited by economic, financial, human capacity and institutional constraints.’’To limit warming to 1.5 degrees would require a roughly fivefold increase in average annual investment in low-carbon energy technologies by 2050, compared with 2015, according to the report.
The $2.4 trillion needed annually through 2035 is also an almost sevenfold increase from the $333.5 billion Bloomberg NEF estimated was invested in renewable energy last year. The International Energy Agency says about $1.8 trillion was invested in energy systems in 2017, down 2 percent from the year before. About $750 billion went to electricity and $715 billion to oil and gas.
The IPCC report also recommended that by 2050: Coal’s share of
electricity supply should be cut to 2 percent or less. Renewables should supply
70 percent to 85 percent of power generation. Carbon capture and storage
technology should be deployed to absorb remaining fossil-fuel emissions.
Natural gas could maintain an 8 percent share of electricity generation if CCS
reduced total global net emissions to zero by 2050.
Those ambitions would mark a massive upheaval to the energy system, with
coal currently accounting for about 37 percent of power and gas at 24 percent,
according to the International Energy Agency.
More
"The fundamental business of the country, that is production and distribution of commodities, is on a sound and prosperous basis."
Herbert Hoover, after the October 1929 crash
The monthly Coppock Indicators finished September.
DJIA: 26,458 +199 Down. NASDAQ:
8,046 +261 Down. SP500: 2,914 +166 Down.
All
three slow indicators moved down in March, but the S&P and NASDAQ turned up in August. September will be critical for confirmation
of this change. All 3 slow indicators failed to confirm August’s positive
change making October very vulnerable to a sell off.
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