Baltic Dry Index. 1584 +05 Brent Crude 81.06
Democracy is the art and
science of running the circus from the monkey cage.
H. L. Mencken
Today it’s all likely
to be about what cover story can be cobbled together over the murder and
disappearance of a dissident Saudi journalist in the Saudi consulate in
Istanbul. If a suitable official lie can be put in place, a major rift between
America and the west, and Saudi Arabia can probably be avoided, with the Saudis
doing their part in pumping more oil to offset President Trump’s new sanctions
on Iranian oil, set to kick in on November 4th.
“Rogue elements,”
seems to be President Trump’s preferred option, although with two official
Saudi planes, two teams comprising a total of 15, and a missing body, would
seem to make that highly improbable. But does President Trump really expect Crown
Prince Mohammad Bin Salman to execute his hit squad of 15?
A botched extraordinary
rendition, seems to be the preferred Saudi line. They were not supposed to
torture and interrogate the now admittedly dead journalist, merely deliver him
to Saudi Arabia, where the torture and interrogation could take place away from
all the Turkish microphones and cameras. There’s still no explanation over what
the Saudi team did with the body.
Whether President
Trump’s preferred option or the Saudi option, will be enough to get the US Senate
and Congress to swallow whole, remains to be seen, but Saudi Arabia just
destroyed its modernising image throughout the west, and tossed a wild card
into the November 6th US midterm elections, though probably one with
little effect unless President Trump misplays it.
For now, the oil
market though nervous, still expects all this to blow over, with America in
particular, a toothless tiger when it comes to Saudi Arabia.
Below, an edgy Asia
awaits more explanation.
Asia stocks edge up but Saudi tensions limit gains
October 16, 2018 / 2:12 AM / Updated an
hour ago
TOKYO
(Reuters) - Asian stocks rose modestly on Tuesday, gaining a firmer footing
after a week of heavy losses, although increasing tensions between Saudi Arabia
and the West have fanned geopolitical concerns and capped gains.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS nudged up 0.25 percent, crawling away from a 19-month trough touched on Thursday.
Japan's Nikkei .N225 bounced 0.6 percent following a decline of nearly 2 percent the previous day.
The disappearance in Turkey earlier this month of a Saudi journalist critical of Riyadh has provoked an international outcry against the oil-rich kingdom, which has rattled its financial markets.
U.S. President Donald Trump has sent Secretary of State Mike Pompeo to Saudi Arabia over the case, potentially straining the relationship between the strategic allies.
“The focus of the markets has turned to the Middle East due to the Saudi incident. And with U.S. stocks still struggling, other equity markets will have a difficult time bouncing convincingly,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.
“The United States has been the epicentre of the recent market tumult, with Wall Street shares being hit by higher Treasury yields. U.S. shares will have to find their feet first.”
Saudi Arabia's riyal currency SAR= retreated overnight to 3.7525 to the dollar - its weakest in two years.
Wall Street shares were dragged down overnight by a retreat in technology shares amid lingering worries over high U.S. bond yields.
The Dow .DJI has
lost 4.5 percent this month, pulled away from record peaks, as long-term
Treasury yields soared to their highest level since 2011. Higher yields are
seen eroding the allure of equities.
----
Data on Tuesday showed China’s factory-gate inflation cooled for a third
straight month in September amid ebbing domestic demand, pointing to more
pressure on the world’s second biggest economy as it remains locked in an
intensifying trade war with the United States.
---- Currency market focus was on the U.S. Treasury’s semiannual currency report due later in the day, with investors waiting to see Washington’s view on China after media reports last week that the department has not labelled Beijing a currency manipulator.
“It is clear that China does not meet the criteria of currency manipulator based on the current assessment, as the country’s current account surplus as a percent of GDP has fallen below 3 percent,” wrote strategists at OCBC Bank.
China's yuan was a shade weaker at 6.924 per dollar CNY=CFXS in onshore trading.
More
Saudis preparing to admit Jamal Khashoggi died during interrogation, sources say
Updated 2226 GMT (0626 HKT) October 15, 2018
Ankara, Turkey (CNN)The Saudis are preparing a report that will
acknowledge that Saudi journalist Jamal Khashoggi's death was the result of an
interrogation that went wrong, one that was intended to lead to his abduction
from Turkey, according to two sources.
One source says the report will likely conclude that the operation was
carried out without clearance and transparency and that those involved will be
held responsible.
One of the sources acknowledged that the report is still being prepared
and cautioned that things could change.
The Washington Post columnist was last seen in public when he entered
the Saudi consulate in Istanbul in Turkey on October 2. Previously, Saudi
authorities had maintained Khashoggi left the consulate the same afternoon of
his visit, but provided no evidence to support the claim.
Khashoggi's fiancée, Hatice Cengiz, who was waiting outside the
consulate, says she did not see him re-emerge.
The disappearance created a diplomatic rift between Saudi Arabia and the
West. Amid the fallout, international firms pulled out of a high-profile
investment summit, the Future Investment Initiative conference, due to take
place later this month in Riyadh.
---- Turkish authorities previously
said they believed that 15 Saudi men who arrived in Istanbul on October 2 were
connected to Khashoggi's disappearance and possible murder. At least some of
them appear to have high-level connections in the Saudi government.
On Friday, a source familiar with the investigation told CNN that
Turkish authorities have audio and visual evidence that shows journalist
Khashoggi was killed inside the consulate.
---- Earlier Monday, President
Donald Trump suggested that "rogue
killers" could be behind Khashoggi's disappearance, after a phone call
with Saudi Arabia's King Salman about the case. Trump said King Salman told him
"in a very firm way that they had no knowledge of it."
Later
Monday, Trump said he had seen the latest media reports. But he said he did not
know if the report is accurate or just "rumor."
The
President said he remains eager to get to the bottom of what happened to
Khashoggi. He noted that Turkey and Saudi Arabia are "working
together" to determine what happened.
More
Saudi Arabia Breaks 45-Year Taboo With Veiled Threat to Use Oil as a Weapon
By Javier Blas
15 October 2018, 07:49 GMT+1 Updated
on 15 October 2018, 12:23 GMT+1
For 45 years, it’s been considered out of bounds for Saudi Arabia. But
all of a sudden, Riyadh made what many read as a veiled threat to use the
kingdom’s oil wealth as a political weapon -- something unheard of since the
1973 Arab embargo that triggered the first oil crisis.
Saudi Arabia, the world’s biggest oil exporter, said on Sunday it would
retaliate against any punitive measures linked to the disappearance of
Washington Post columnist Jamal Khashoggi with even “stronger ones." In an
implicit reference to the kingdom’s petroleum wealth, the statement noted the
Saudi economy “has an influential and vital role in the global economy.”
Roger Diwan, a longstanding OPEC watcher at consultant IHS Markit Ltd.,
said the Saudi comments broke “an essential oil market taboo.”
While
few think that Saudi Arabia is prepared to follow through, even the suggestion
of using oil as a weapon undermines Riyadh’s long-standing effort to project
itself as a force for economic stability. Jeffrey Currie, the head of
commodities research at Goldman Sachs Inc., said Middle East tensions impacting
the oil market have now "broadened to include Saudi Arabia."
The anxieties were exacerbated by an opinion piece penned by Turki Al
Dakhil, who heads the state-owned Arabiya news network and is close to the
Royal Court, in which he openly talked about using oil as a weapon.
“If President Trump was angered by $80 oil, nobody should rule out the
price jumping to $100 and $200 a barrel or maybe double that figure,” he wrote.
The Saudi embassy in Washington later said Al Dakhil didn’t represent
the official position of the kingdom and Saudi officials, speaking privately,
said there wasn’t a change in the long-held policy that oil and politics don’t
mix. On Monday, Khalid Al-Falih, the Saudi energy minister, used a speech in
India to soothe concerns, pledging his country will continue to be a
responsible actor and keep oil markets stable.
More
In other news, the trade war is starting to bite,
suggest a Reuters poll among economists. The USA buries itself deeper in debt.
Don’t worry, it’s only fiat money and there’s plenty more where that comes
from. Shame about despoiling the planet.
John Kenneth Galbraith.
Trade war cost: China's third quarter GDP growth seen hitting lowest since 2009 - Reuters poll
October 16, 2018 / 5:42 AM / Updated an
hour ago
BEIJING
(Reuters) - At week’s end, global investors and policy makers will likely be
given a stark reminder of the costs of a bitter Sino-U.S. trade war, with a
Reuters poll predicting that China’s third-quarter growth will slow to its
weakest pace since the global financial crisis.
Domestic demand has been faltering in recent months as U.S. President
Donald Trump’s campaign to force China to make sweeping changes to intellectual
property, industrial subsidy and trade policies start to depress export
earnings.
Beijing has been trying to ward off a sharper slowdown in the world’s
second-largest economy by stepping up policy support and softening its stance
on a de-risking campaign, as the full impact of higher U.S. trade tariffs has
still to be felt.
And analysts said more support measures will be needed as risks to
China’s growth outlook have increased since the second half of the year.
A poll of 68 economists showed gross domestic product likely grew 6.6
percent in July-September from a year earlier, slowing from the previous
quarter’s 6.7 percent and hitting the weakest pace since the first quarter of
2009.
More
U.S. government posts widest deficit since 2012
October 15, 2018 / 11:34 PM
WASHINGTON (Reuters) - The U.S. government closed
the 2018 fiscal year $779 billion (£592 billion) in the red, its highest
deficit in six years, as Republican-led tax cuts pinched revenues and expenses
rose on a growing national debt, according to data released on Monday by the
Treasury Department.
New government spending also expanded the federal deficit for the 12
months through September, the first full annual budget on the watch of U.S.
President Donald Trump. It was the largest deficit since 2012.
The data also showed a $119 billion budget surplus in September, which
was larger than expected and a record for the month. A senior Treasury official
said the monthly surplus was smaller when adjusted for calendar shifts.
Economists generally view the corporate and individual tax cuts passed
by the Republican-controlled U.S. Congress late last year and an increase in
government spending agreed in early February as likely to balloon the nation’s
deficit.
Trump and his fellow Republicans have touted the tax cuts as a boost to
growth and jobs.
“America’s booming economy will create increased government revenues –
an important step toward long-term fiscal sustainability,” Office of Management
and Budget Director Mick Mulvaney said in a statement accompanying the data.
The deficit in the 12 months through September was $113 billion - or 17
percent - bigger than in the same period a year earlier. Adjusting for calendar
effects, the gap was even larger, the Treasury official said.
The Bipartisan Policy Center called the report “a wake up call” for
policymakers to turn things around. “The fact that our government is closing in
on trillion-dollar deficits in the midst of an economic expansion should be a
serious issue for voters and candidates,” William Hoagland, its senior vice
president, said of next month’s U.S. congressional elections.
Much of the widening of the deficit came from more spending on interest
payments on the national debt. Borrowing has increased over the past year,
partially to make up for slower growth in tax revenues because of the tax cuts,
while military spending has also risen.
More
If economists could
manage to get themselves thought of as humble, competent people on a level with
dentists, that would be splendid.
John Maynard Keynes
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, Brexit. How Brexit is modernising GB
industry. Where there’s a will, there’s usually a way.
UK automation picks up as flow of European workers slows ahead of Brexit
October 14, 2018 / 11:33 AM
REDDITCH, England (Reuters) - At Muller
Precision Engineering’s plant in Redditch, south of Birmingham, James Gibbs is
in charge of three clattering pieces of machinery older than he is.
His two co-workers - one Polish, the other Hungarian - place
semi-finished metal parts on plastic spindles every 20 seconds and hold them
between grinders for another 15 seconds, then check their dimensions before
dropping them into a tray.
“It’s a very repetitive job,” said Gibbs, 27. “You’ve got to keep your
concentration for however many hours you’re on there, so that you don’t misload
it.”
By the middle of next year, the work of two of the staff will be done by
sensors and robotic arms.
British manufacturers have long lagged behind their developed country
peers on automation, thanks in part to a seemingly inexhaustible pool of
workers from Europe.
The flow of low-cost labour has become less reliable since Britain voted
to leave the European Union in June 2016, however. Net migration from eastern
Europe hit an eight-year low in the 12 months to March, official data shows,
and industry groups fear the situation will only get worse.
Unlocking automation investment could have big implications for the
economy. If companies tilt away from labour, economists say, it could boost
productivity and take the lid off wage increases that have languished at around
2 percent in recent years.
Muller is already heavily automated, with
covered conveyors feeding parts to computer-controlled lathes. The 150,000-pound
($196,000) investment in Redditch will automate processes to make components
for Volvo truck brakes.
Manual work at the site can be boring and dangerous, which can make it
hard to find staff, said Adam Cunningham, managing director at the plant, which
employs around 130 people.
“That, along with a Brexit that reduces the amount of labour coming into
the country, made us say we need to look at automation in that particular
area,” he said. “Basically, we’re going to be replacing humans with robots.”
The International Federation of Robotics (IFR) says British factories
are less likely to use industrial robots than any other leading economy and
even some countries in eastern Europe.
Bank of England (BoE) officials and industry experts say they may finally
be catching up.
“Firms are increasingly investing in
automation, substituting capital for labour, as workers become more scarce and
costly,” central bank officials Will Holman and Tim Pike wrote in July on a BoE
economic research blog.
More
Lloyd Blankfein, “Mr. Goldman Sacks,” CEO of Goldman Sachs
unintentionally backs Brexit in a US speech to graduates, mid 2016.
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?
Britain's Battery Market Will Grow by $7.9 Billion by 2030
October 12, 2018
Britain’s power market will need investment of 6 billion pounds ($7.9
billion) between now and 2030 in flexible generation and storage such as
batteries to support the transition toward an economy that emits less carbon, a
study showed.There will be a need for 13 gigawatts of flexible generation and storage assets to help balance the grid and integrate increasing flows of intermittent renewable power, according to a report by Aurora Energy Research Ltd. published Thursday. Investors should look to spread their investments across small gas engines, renewables and batteries to protect themselves against market uncertainties.
Investment in renewable energy is expected to grow as European nations move towards a 27 percent target for green power in electricity demand by 2030. Grid operators will need access to more flexible, quick-start generation as well as storage to harness excess green power.
“There has been a visible shift in the way such technologies are being regarded and what may once have been seen as a high-risk investment, is now considered a strategic long-term investment, that has benefits across many levels,” said Steve Shine, executive chairman of battery operator Anesco Ltd.
Despite this message, prices have been in decline as batteries flood areas of the 600 million-pound ancillary services market. They’re especially prevalent in serving fast-frequency response, where the requirement is to start up in less than a second. Investors that once counted on frequency response as a revenue stream are now looking for earnings in other areas such as the balancing market.
Aurora expects the value of National Grid Plc’s balancing and ancillary services market to double in size to about 2 billion pounds by 2030.
Opportunities are emerging for batteries to earn additional revenue through off-grid bilateral agreements, alongside renewables or electric vehicle charging, or for developers to trade directly in the balancing and wholesale markets, according to Aurora.
Profit margins from gas engines and battery storage vary from year to
year, depending on factors such renewables output, plant outages and commodity
prices. Investors can protect their returns by adopting a mixed portfiolio
approach, according to Felix Chow-Kambitsch, head of flexibility and battery
storage at Aurora.
“Gas engines and renewables provide a natural hedge to one-another --
lowering the volatility of investor returns on a year to year basis,” he said.
The whole aim of practical
politics is to keep the populace alarmed (and hence clamorous to be led to
safety) by menacing it with an endless series of hobgoblins, all of them
imaginary.
H. L. Mencken
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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