Tuesday 2 October 2018

Oil Shock Coming. “Animal Spirits.”


Baltic Dry Index. 1555 +15   Brent Crude 85.05

 "On the whole human beings want to be good, but not too good, and not quite all the time.”

George Orwell

Will rising the crude oil price kill off the stock market rallies? I don’t know either, but to this old dinosaur stock and commodity market watcher and ex-trader, nothing about the current rally, nor international political situation, gives anything but great cause for alarm.

While America tears itself apart smearing a judge over party politics, internationally the rest of the world has never been more incentivised to deal out America.

Politically, elections in Quebec, and next month in the USA, can greatly alter the course of 2019. In Europe, Brexit gets closer by the day, with the EUSSR seemingly hell bent on shooting itself in both feet, Italy seems hell bent on shooting the EUSSR in the head. America seems set on risking a real shooting war with Iran next month, generating a 1973 style oil shock, or worse.

Meanwhile, the emerging market economies are imploding yet again, and any US stock market failure around here, risks triggering a massive classic double top, killing off “animal spirits.”

What could possibly go wrong?  Far too much for this old dinosaur market watcher, who thinks its way past time to get into the bunker.  Let the kids carry on chasing nickels in front of steam rollers, one misstep in the Persian Gulf risks the oil shock of all oil shocks. Strangely I get the feeling I’ve been here before.

“It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those [CDS] transactions.”

Joseph J. Cassano, a former A.I.G. executive, August 2007, on Credit Default Swaps that wiped out A.I.G in 2008.

Asian Shares Fall; Oil Steadies Near a 2014 High: Markets Wrap

By Andreea Papuc
Updated on 2 October 2018, 05:42 GMT+1
Asian stocks declined after a muted U.S. trading session, with Japanese shares paring gains as the yen fluctuated after hitting its weakest against the dollar this year.

The Nikkei 225 Stock Average retreated from an intraday high, after closing Monday at its highest since 1991. Stocks in Hong Kong underperformed as traders returned from a long weekend, and equities also fell in Australia and South Korea. China’s markets are shut throughout the week. Earlier, the S&P 500 Index finished higher, though more stocks fell than rose in the benchmark index. The pound rose following a report the U.K. is planning a compromise on Irish border rules, before pulling back.

Global investor sentiment remains fragile, even after a deal between the U.S. and Canada to revamp the Nafta bloc with Mexico. Sino-American tensions remain in focus after the Chinese navy dispelled an American missile destroyer from waters near South China Sea islands, in China’s account of the incident. Meantime, political drama in Washington still swirls around President Donald Trump’s Supreme Court nominee, which may feed through to November congressional elections and affect the outlook for the administration’s agenda.
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Oil firm near four-year high as Washington's Iran sanctions loom

October 2, 2018 / 2:19 AM
SINGAPORE (Reuters) - Oil markets were firm on Tuesday, with Brent crude prices holding near four-year highs reached the previous day as markets adjust to the prospect of tighter supply once the U.S. sanctions against Iran kick in next month.

International benchmark Brent crude oil futures LCOc1 were at $85.02 per barrel at 0255 GMT, up 4 cents from their last close, and not far off the $85.45 peak reached in the previous session, the highest since November 2014. 

Brent has risen by around 20 percent from the most recent lows in August.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were up 24 cents, or 0.3 percent, at $75.54 a barrel.

WTI is up by about 17 percent since mid-August.

Sentiment was lifted by a last-gasp deal to salvage NAFTA as a trilateral pact between the United States, Mexico and Canada, rescuing a $1.2 trillion a year open-trade zone that had been about to collapse.

More fundamentally, oil markets have been pushed up by looming U.S. sanctions against Iran’s oil industry, which at its most recent peak this year supplied almost 3 percent of the world’s almost 100 million barrels of daily consumption.

Trade data in Refinitiv Eikon showed Iran’s seaborne exports in September were just 1.9 million barrels per day, the lowest level since mid-2016.
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This bull market run has echoes of the late 1920s, Nobel Prize-winning economist Shiller says


Published 13 Hours Ago
The longest bull market in history could be showing worrying echoes of one of the greatest crashes Wall Street has ever seen.

Robert Shiller, professor of economics at Yale University and a Nobel laureate, says the steep run-up in this market rally is similar to the excesses of the 1920s before the October 1929 market crash and Great Depression.

"The 1920s is quite a legend that people are often thinking about," Shiller said Friday on CNBC's "Trading Nation." "I look at 1929 particularly as the end of the roaring '20s and it ended in a bout of speculation. Between May and September of '29 the stock market went up over 30 percent in just a few months."

Rapid stock market rises began even earlier. From the beginning of 1928 to Black Thursday on Oct. 24, 1929, the S&P 500 surged nearly 50 percent. Over the next five days, the index plummeted 23 percent. It had reached an all-time high just a month before the crash.

"At that time it seemed like it was a kind of gambling. The word gambling was used a lot to describe the market at that time so it became vulnerable. We're not exactly in that circumstance but we do have the market that has surged since 2009 so there is something of that spirit today," he said.

The S&P 500 hit its market bottom in March 2009. Since those lows, the S&P 500 has rallied 334 percent in the longest stretch on record since World War II without dipping into a bear market.

While markets briefly fell into a correction earlier this year, stocks quickly recovered to reach new heights as recently as late September. Shiller says this rebound is driven more by the bullish market narrative than hard data.

"It's something about capitalism and the advancement of people willing to take risks. We have a role model in the White House who models that," said Shiller. "Something like that has driven not just the stock market but the whole economy up in the United States and makes the United States the most expensive stock market in the world."

The roaring '20s and dot-com mania of the 1990s share in some of that bullish sentiment, said Shiller.
"It was a similar story that was boosting the market but they don't last forever and eventually the story starts to wilt," he said. "It's animal spirits — people's excitement about the stock market, bitcoin and other things."





By Lorenzo Totaro, Viktoria Dendrinou, Stephanie Bodoni, and Nikos Chrysoloras
Updated on 2 October 2018, 00:00 GMT+1
Italian Finance Minister Giovanni Tria’s effort to promote his government’s new fiscal strategy ended in failure on Monday, with the head of the European Commission warning of a Greek-style crisis and the nation’s bonds closing the day at their weakest level in more than four years.

“Recent announcements by the Italian government have raised concerns about its budgetary course,” Mario Centeno, the Portuguese finance minister, said in Luxembourg after a meeting with his euro-area counterparts, which he heads. Dutch Finance Minister Wopke Hoekstra went further, saying “I’m somewhat less optimistic after having talked to my colleagues than beforehand.”

Tria is attempting to reconcile expensive campaign promises made by his coalition government with euro-area rules that require member states to adhere to certain deficit targets. And while Italy will present its budget to the commission in mid-October for approval, officials in Brussels have already indicated that it may not stand up to the bloc’s rules.

Italian bonds extended Friday’s decline with the yield on 10-year notes closing at 3.3 percent, the highest since April 2014. The spread over German bunds rose by 15 basis points, reaching almost 283 basis points.

During Monday’s unscheduled discussion about Italy, Tria sought to defend his government’s decision to breach EU rules that require highly indebted countries to narrow their structural deficit, telling peers that the budget targets have to be understood in the context of an economic slowdown in the euro zone and in Italy.
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Finally, with all his other trade and other war troubles is this really the best time for President Trump to start a foreign escapade with the Chinese dragon?  To this old dinosaur commodities trader, we seem to be spoiled for choice in flicking matches at open gunpowder barrels.

“If you're not gonna pull the trigger, don't point the gun.”

James Baker. United States Secretary of the Treasury under President Ronald Reagan, and U.S. Secretary of State and White House Chief of Staff under President George H. W. Bush.


China condemns U.S. for South China Sea freedom of navigation operation



October 2, 2018 / 2:16 AM
BEIJING (Reuters) - China expressed anger on Tuesday after a U.S. Navy destroyer sailed near islands claimed by China in the disputed South China Sea, saying it resolutely opposed an operation that it called a threat to its sovereignty.

Beijing and Washington are locked in a trade war in which they have imposed increasingly severe rounds of tariffs on each other’s imports.

A U.S. official, speaking on condition of anonymity, said the destroyer the USS Decatur travelled within 12 nautical miles of Gaven and Johnson Reefs in the Spratly Islands on Sunday.

The operation was the latest attempt to counter what Washington sees as Beijing’s efforts to limit freedom of navigation in the strategic waters, where Chinese, Japanese and some Southeast Asian navies operate.

China’s Defence Ministry said a Chinese naval ship had been sent to warn the U.S. vessel to leave.

The ministry said China has irrefutable sovereignty over the South China Sea islands and the waters around them, and the situation there is progressing well thanks to the hard work of China and countries in Southeast Asia.

“The U.S. side repeatedly sends military ships without permission into seas close to South China Seas islands, seriously threatening China’s sovereignty and security, seriously damaging Sino-U.S. military ties and seriously harming regional peace and stability,” the ministry said.

“China’s military is resolutely opposed to this,” it said.

The Chinese armed forces will continue to take all necessary steps to protect the country’s sovereignty and security, the ministry said.
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Brexit Joke of the Week.

Pythagoras's theorem - 24 words.
The Lord's Prayer - 66 words.
Archimedes's Principle - 67 words.
The 10 Commandments - 179 words.
The Gettysburg address - 286 words.
U.S. Declaration of Independence - 1,300 words.
U.S. Constitution with all 27 Amendments - 7,818 words.
EU regulations on the sale of cabbage - 26,911 words.

Time to leave the EUSSR.

Crooks and Scoundrels Corner

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

Something different today. Today the world map as drawn by population. Enjoy.


on September 19, 2018 at 12:51 pm


To view this map at a higher resolution to see countries and data with detail, click here
It’s likely you’re very familiar with the standard world map.

It’s shown practically everywhere – you’ll see it online, on the news, in books, and even as a part of company logos. In fact, the world map is so ubiquitous that we don’t even really think about it much at all, really.

The economist Max Roser from Our World in Data argues that this familiarity with the world map may lead to complacency in understanding global matters. After all, the typical world map shows us the basic geography of countries and continents, but it doesn’t give any indication of where people actually live!

To get around the challenges of relying on the standard world map, Roser instead has made a population cartogram based on 2018 population figures.

What’s a population cartogram?

A cartogram is a visualization in which statistical information is shown in diagrammatic form. In this case, it’s a population cartogram, where each square in the map represents 500,000 people in a country’s population.

In total there are 15,266 squares, representing all 7.633 billion people on the planet.

Countries like Canada or Russia – which have giant land masses but small relative populations – appear much smaller on this kind of map. Meanwhile, a country like Bangladesh grows much bigger, because it has a large population living within a smaller area.



Let’s zoom in on some continental regions to get a sense of what we can learn from a population cartogram done in this fashion.

Asia and Oceania

Where did Australia go? The continent is completely dwarfed by neighboring Indonesia and the Philippines.
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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?

My electric car drove me to distraction ...instead of Scotland! Nissan Leaf’s range is just 160 miles and as ISABEL HARDMAN discovers, good luck finding a charging point that actually works




----Last weekend, I was on my way to a literary festival to speak about my first book, Why We Get The Wrong Politicians.

As I left my home in south Cumbria and headed for Wigtown, in Dumfries and Galloway, in my little electric car, I was buzzing with excitement. 

I’d prepared my talk, packed a smart outfit and even allowed myself seven hours for the four-hour drive so I’d be sure to arrive in good time.

But in the event I ended up sprinting in at 5.45 pm, 45 minutes late, out of breath and praying that at least a few members of the audience had hung on to hear me.

The cause of this hugely embarrassing delay? My Nissan Leaf, an electric vehicle marketed as an ‘eco-dream’ but which in reality proved rather different.

I bought the car last summer for £25,000 (that’s including the Government’s electric vehicle or EV discount — road tax is ‘free’) and I love driving it. Electric vehicles are a far smoother ride than those with internal combustion engines. Most importantly, they don’t emit toxic fumes.

----What makes less sense, however, is how the power-charging network for electric cars operates in this country. It’s a bit like having an iPhone on wheels: you’re constantly worrying whether the battery is going to run out and so always on the lookout for a socket to plug into.

With a top speed of 90 mph, the range of my car is about 160 miles but this reduces quickly if I’m on a motorway, driving uphill or the weather is cold.

 I’m lucky enough to have an outdoor socket in my back garden, so I can charge up at home. But if I’m on a long journey, I need to stop and top up the battery.

Once on the road, I am then reliant on the charging network, which is often unreliable and sparse or non-existent in rural areas.

A few years ago, presenter Jeremy Clarkson reviewed the Nissan Leaf on BBC’s Top Gear. The car ran out of power while he was driving in Lincolnshire, and he discovered the county had no recharging points at that time.

In any case, the ‘refuelling’ process could take 13 hours, which meant the journey from London to Lincoln would have taken longer than a stagecoach in the 18th century!

It’s true that the technology has improved greatly since then, but for today’s electric car owners needing to top up their charge or recharge, the best hope is either a motorway service station or a local authority car park.

To complicate matters, charging points are run by different companies. I have four apps on my phone and carry a radio-frequency identification (RFID) card that help me find and access power sources in different places, then debit my account (it costs about £8 for a full charge).

That’s fine if, once I’ve logged in, the power supply is actually working. But last weekend it wasn’t. I’d stopped at Todhills Services in Cumbria to top up but found that the charge point was offline.

Fortunately, I had enough power left to reach the next service station, at Gretna — only to find on arrival that neither of its charge points was working.

By this point, the battery was too low for me to drive on and try to find another source of energy, so I phoned Ecotricity, the company that runs these particular charge points. Over the next hour, they tried to reset the Gretna chargers twice — but to no avail.

Thankfully, when I rang the folk at the Wigtown Book Festival to tell them of my predicament, a kind volunteer drove 80 miles to collect me.

When at last I arrived, I found the room still full of people who wanted to hear about my book.

Many saw an irony in its title, considering that politicians — step forward Environment Secretary Michael Gove and Transport Secretary Chris Grayling — are behind an initiative to replace all petrol and diesel cars with electric or hybrid vehicles by 2040. (They actually considered banning the sale of any new petrol or diesel cars but have seen sense and downgraded this to a political target instead.)
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