Baltic Dry Index. 1318 -60 Brent Crude 54.73
A very happy, healthy,
safe and prosperous Christmas 2018 to all LIR readers. After the weekend update,
the next daily LIR will be on Wednesday December 26th.
Stocks
take the escalator up but the elevator down.
Wall
Street adage.
Stocks indexes are
closing out the year flirting with a bear market. For many stocks, roughly
about half of the S&P500, stocks are already in a bear market, defined as down
20 percent or more from their high.
Sadly, as we near
year-end, other than short covering, there’s little reason to jump back into most
stocks here. A massive political storm is about to hit in America next month,
the outcome of the China – USA trade talks is far from certain, and a massive wave
of stock mutual and hedge fund redemptions is about to hit in the first quarter
of 2019.
If stocks are
entering a bear market, it pays to wait rather than try to catch a falling
sword. Since October, the steam roller has crushed all foolish enough to search
for nickels in front of it. In bear
markets, getting out early always beats getting carried out last. In bear
markets, it generally pays to be late in getting back going long stocks.
Below, a bad end to
the year. Whatever happened to the FANGs?
Asian markets continue to fall on recession and trade-war fears
Asian stocks fell further Friday after Wall Street slid on recession fears, putting markets in Shanghai, Tokyo and Sydney on track to end 2018 down more than 10%.Trade tensions between the U.S. and China also re-emerged as worries. While the world’s largest trading powers have agreed to meet next month for trade talks, on Thursday the U.S. charged two Chinese intelligence officers with state-sponsored hacking attacks and accused China of violating a 2015 accord against economic espionage.
Japan’s Nikkei 225 index NIK, -1.36% fell 1.8%, and is on track to end the year off almost 13%. Sony 6758, -2.78% fell more than 5%, and Nissan 7201, -1.96% slid nearly 2% after former chairman Carlos Ghosn was charged with an additional count of breach of trust by Japanese prosecutors. Takeda Pharmaceutical 4502, +1.61% was one of the largest gainers, up 1.5%.
Hong Kong’s Hang Seng HSI, -0.21% gave up 0.2%, with losses spread around a number of industries. Sunny Optical 2382, -1.12% fell 1.5%, while Ping An Insurance 2318, -1.96% and PetroChina 0857, -1.82% dipped almost 2%. Tencent 0700, +3.85% , though, jumped almost 4%.
In mainland China, the Shanghai Composite Index SHCOMP, -1.01% shed 1% and is on track to end the year down more than 25%. The smaller-cap Shenzhen Composite 399106, -0.96% fell 0.9%. China’s economic work conference was scheduled to end later in the day, with no major announcements expected.
More
https://www.marketwatch.com/story/asian-markets-continue-to-fall-on-recession-and-trade-war-fears-2018-12-20
The stock index that powered the bull rally is on the precipice of a bear market — and that would make history
By Mark
DeCambre Published: Dec 20, 2018
5:29 p.m. ET
Forget the Santa rally, the stock market is fending off one of its worst
Decembers in recent memory, and now the Nasdaq is on the brink of a bear
market. It’s a scenario that may unofficially commence the end of the longest
equity market bull run, by some measures, in history. As of Wednesday’s decline, the Nasdaq Composite Index COMP, -1.63% was 18.2% from its all-time high of 8,109.69 hit on Aug. 29. Wall Street’s widely accepted definition of a bear market is a drop of at least 20% from a recent peak, leaving the technology and internet-laden stock gauge a stone’s throw from bearish territory.
According to Dow Jones Market Data, the last time the Nasdaq entered a bear market was March 3, 2009, with it exiting that phase less than three weeks later.
By some estimates, the index would need to fall to 6,487.75 to slip into a bear market, with other subindexes having already retreated there, including the Russell 2000 index RUT, -1.72% of small-capitalization stocks and the Dow Jones Transportation Average DJT, -1.29% less than 24 hours ago.
On an intraday basis, the Nasdaq briefly fell into a bear market, slipping to a low Thursday of 6,484.04 from its Aug. 30 intraday high of 8,133.30.
Read: The last key death cross has engulfed the stock market
On Wednesday, already-fragile stocks took a notable leg lower after the Federal Reserve lifted short-term interest rates for the fourth time this year (the ninth time since 2015) and delivered forecasts for future hikes that was less supportive to a market rally than investors had hoped.
More
https://www.marketwatch.com/story/the-stock-index-that-powered-the-bull-rally-is-on-the-precipice-of-a-bear-market-and-that-would-make-history-2018-12-20
All the biggest stocks that are now in a bear market, in one chart
A correction is typically defined as a 10% drop for a stock or an index from a recent peak, while a bear market is a 20%-plus decrease.On Thursday, all three stock indexes carved out fresh 52-week closing lows. The Nasdaq briefly entered a bear market on an intraday basis, slipping to a low of 6,484.04 from its Aug. 30 intraday high of 8,133.30. Should the Nasdaq close firmly in bear territory, it would unofficially commence the end of the longest equity market bull run, by some measures, in history.
The Dow has been on the verge of joining the S&P 500 in a so-called death cross, where the 50-day moving average — a short-term trend tracker — crosses below the 200-day moving average. Chart watchers believe that such a cross marks the point where a shorter-term decline graduates to a longer-term downtrend. The S&P 500 formed the death-cross pattern earlier in December, and a slew of other highly watched stocks have done the same over the past few months: Facebook FB, +0.12% back in September, Netflix NFLX, -2.32% and Alphabet GOOG, -1.33% GOOGL, -1.15% in November, Amazon AMZN, -2.29% just last week, and Apple AAPL, -2.52% crossed the threshold for the first time in three years on Thursday.
As of the close on Thursday, the FAANG stocks all make the list of biggest bears — among the top 15 S&P 500 companies that are down 20%-plus from their 52-week highs. Some of the other big names rounding out that list: Citigroup C, -1.04% , IBM IBM, -2.93% , Wells Fargo WFC, +0.81% , Bank of America BAC, -0.29% , AT&T T, -3.92% , Exxon XOM, -3.04% and Walmart WMT, -3.61% , while J.P.Morgan JPM, -0.86% and Mastercard MA, -2.36% are hovering on the precipice. And there are plenty of big names beyond that top 15 that have slipped into bear territory since earlier this week: Intel INTC, -0.07% , Boeing BA, -2.03% , Comcast CMCSA, -1.62% and Salesforce CRM, -2.62% to name a few.
Over all companies on the New York Stock Exchange, this is the first time there have been more than 1,000 new 52-week lows since 2016. It’s only the fifth time this has happened since the beginning of 2009, according to the Dow Jones Market Data Group.
More
https://www.marketwatch.com/story/all-the-biggest-stocks-that-are-now-in-a-bear-market-in-one-chart-2018-12-17
In other US news, some Presidents are lucky, some get lucky events, and some just get trouble with a capital T. Is President Trump about to get trouble with a capital T in 2019? Reuters seems to think so. If so, that’s very bad news for most stocks.
U.S. House passes funds for Trump wall; government shutdown looms
December 20, 2018 / 11:24 AM
WASHINGTON (Reuters) - Republicans in the
U.S. House of Representatives on Thursday added $5 billion (3.95 billion
pounds) to a government spending bill to help President Donald Trump make good
on a pledge to build a border wall, a move that made a partial federal
government shutdown more likely this weekend.
The Senate is highly unlikely to pass the
legislation, which funds agencies responsible for federal law enforcement
activities, airport security screenings, space exploration and farm programs,
by a midnight deadline on Friday.
Trump had said he would not sign a
Senate-passed bill to keep the government running through Feb. 8 because it
lacked funds for the wall, a signature promise of his 2016 run for office, so
Republicans in the House of Representatives scrambled to add money to appease
the president.
Trump demanded $5 billion to put towards a
wall on the U.S. border with Mexico that he argues is needed to keep out
illegal immigrants and drugs, a down payment on a massive project which
Democrats have rejected as ineffective and wasteful.
“The bill that’s on the floor of the House, everyone knows will not pass
the Senate,” Democratic Leader Chuck Schumer told reporters ahead of the vote.
The funding uncertainty weighed on markets on Thursday but it was later
dwarfed by another bombshell from the Trump administration: the resignation of
Defence Secretary Jim Mattis.
More
Syria, Mattis, Afghanistan, shutdown: Trump ends year in chaos
December 21, 2018 / 3:32 AM
WASHINGTON (Reuters) - Trump’s presidency
has lurched from crisis to crisis since he took office less than two years ago,
but Thursday was a landmark day of chaos that appeared to test the resolve of
even senior Republican backers in Washington.
Defence Secretary James Mattis, a widely respected figure seen as a
stabilizing influence inside the administration, handed in his resignation
after arguing with Trump over foreign policy in a White House meeting.
Mattis then released a letter that showed fundamental policy differences
between the two men and implicitly criticized Trump’s disregard for allies
abroad.
Also on Thursday, Trump resisted pressure to stand down from a decision
to withdraw U.S. troops from Syria, made plans to pull American forces out of
Afghanistan and pushed the U.S. government towards a shutdown over funding for
a border wall.
To top it all off, U.S. share prices tumbled as investors worried the
looming shutdown, slower economic growth and the Federal Reserve’s projections
for more interest rate hikes next year.
Even some of Trump’s friends showed deepening worry about where his
administration is heading at the halfway point of his term.
Senator Lindsey Graham, a close ally and frequent golf partner, on
Thursday praised Mattis, publicly urged Trump to reconsider the Syrian pullout
and warned that withdrawing troops from Afghanistan could ultimately lead to
another attack on America similar to the one on Sept. 11, 2001.
---- Trump already faces a difficult 2019, likely to be dominated by a special prosecutor’s investigation into whether his 2016 campaign colluded with Russia and congressional probes into his businesses, his family and some cabinet members.
Democrats will take control of the U.S. House of Representatives in
January and plan to use their power to dig deep into Trump’s past and his
administration.
Those Democrats, eager to soften Trump up for his expected run for
re-election in 2020, leaped to take advantage of the scenes of turmoil on
Thursday.
“It is a shame that this president, who is plunging the nation into
chaos, is throwing another temper tantrum and is going to hurt lots of innocent
people,” said U.S. Senator Chuck Schumer of New York, the top Democrat in the
Senate.
“The Trump temper tantrum will shut down the government, but it will not
get him his wall,” Schumer said.
More
Life Call Commercial "I've fallen and I can't get up!"
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over
banksters and politicians.
Yes, that easy to win trade war again. Trump’s trade war is forcing US
retailers to take a big gamble on inventory, but with U-turn Trump in the White
House will that gamble pay off? What
happens to Bitcoin now that bitcoin mining’s turned unprofitable? Suddenly no
one is buying unicorns anymore so ranching them is no longer profitable. I
suspect we will not wait long to find out what happens next.
Trump tariff war with China sends U.S. retailers on buying binge
December 20, 2018 / 6:13 AM
CHICAGO (Reuters) - In the nearly 40 years she has spent in
trade, Amy Magnus has never seen retailers hoarding so much inventory.
Warehouses throughout the United States are at record capacity with
Chinese imports of all kinds - microwaves, vacuum cleaner filters, swimwear,
furniture - stacked to the ceiling, according to Magnus, who heads the National
Customs Brokers & Forwarders Association of America, whose members work
with over 250,000 importers and exporters.
“My office is right on a land border and I can see the trucks just
coming across non-stop from my window,” Magnus said, referring to her birds-eye
view from Champlain, New York, of trade on the border between Canada and the United
States.
“Even with Christmas, it’s been notably busier this week and last week
than it’s ever been before.”
She is one of over a dozen customs brokers, retailers, vendors, analysts
and supply chain experts who told Reuters that retailers have been stockpiling
inventory from China to avoid higher tariffs that may kick in next year.
The buying binge is also evident in recent data from the National Retail
Federation (NRF) and Hackett Associates, which show imports at major U.S.
retail container ports surged 13.6 percent to a record 2.04 million containers
in October. This helped push the U.S. trade deficit with China to a record
high.
Stores including Walmart Inc, Target Corp, TJX Companies Inc and Macy’s
Inc raced to buy Chinese products in September, the sources said, the same
month the Trump Administration announced 25 percent tariffs would go into
effect on Jan. 1 on $200 billion of Chinese imports.
The U.S. and China have since agreed to a 90-day trade war truce until
March 2, but supply chain firms and vendors said this has not slowed buying or
forward orders because the tariffs could still be hiked.
“We have been tactical and pulled some orders forward,” Walmart
spokeswoman Marilee McInnis told Reuters in an emailed statement. The other
major retailers, including Target, TJX and Macy’s would not comment for this
story on the part tariffs played in their approach to buying inventory this
year.
The strategy could mean heavy discounts for shoppers next year if
retailers are stuck with an overhang of unsold merchandise. Already, it has
driven up transportation and warehousing costs, which is adding pressure to
quarterly results for retailers, according to the sources.
The question is whether stores absorb the added costs or pass them on to
customers.
“More likely than not, the retailer will take them so the consumer
doesn’t have to,” Jonathan Gold, the NRF’s head of Supply Chain and Customs
Policy. Gold said he “definitely” expected higher inventory and logistics costs
to continue into the first quarter as retailers rush to meet the March 2
deadline. The NRF works with about 18,000 member retailers.
“A lot of people are competing for space right now so you’re going to
have some retailers hurt as a result.”
---- Joe Shamie, CEO of furniture vendor Delta Children, is having the same problem. He has had to rent out two extra warehouses and pay “much higher” costs to ship cribs, kids beds, and tables from China. His customers include Walmart, Kohls Corp, Wayfair Inc and Pottery Barn.
Shamie said the extra 150,000 square feet has been necessary because
Delta has had to order about 20 to 25 percent more inventory from China since
September to meet orders.
“The big problem is that there’s no clarity from the government. So we
don’t know if we’re wasting money buying more and spending on warehousing and
transport.”
More
Price of bitcoin falls below cost to mine
By Ed Zwirn December 16, 2018
To add to the misery to bitcoin enthusiasts, the act of finding or
“mining” the cryptocurrency has become unprofitable as the price continues to
crater.
This raises further questions about the viability of the accounting
system supporting the cryptocurrency.
The volatile asset is now fetching under $3,200, off more than 84
percent from the highs seen during its “tulip mania” phase of a year ago.
At that point, in late 2017, accelerating numbers of people were
spending real dollars on computers and electricity to create or uncover the
“coins,” using advanced algorithms.
As they engaged in the then-lucrative business of mining for bitcoin,
these entrepreneurs were conducting the “blockchain“ transactions that in fact
tell you how much is in your “wallet“ and allow trading to happen.
Without mining, this system, which has no Federal Reserve or other
financial institution backing it up, would cease to function.
Bitcoin miner revenues hit $4.7 billion through the end of September, up
$1.4 billion over the first three quarters of 2017, reports Diar, a
cryptocurrency bulletin.
At the same time, miners have been spending more and more money on
sophisticated computer rigs and the electricity they devour.
As of January 2018, a month in which bitcoin opened at over $13,000,
miners paying retail electric rates took home an 86 percent profit on just over
$1 billion; by September, the coins were trading in the $6,000 neighborhood,
mining revenues had fallen in half, and profit margins were close to nil.
“The investment proposition for smaller miners held true throughout most
of this year but has since become questionable on the back of an increase of
computing power competing for the coinbase reward,“ the Diar report states.
Since then, the perilous life of the bitcoin miner has only gotten
worse, with little relief on the cost end even as the price has fallen in half
again in what some are calling a death spiral.
Even some of the big guys are exiting: On Dec. 10, Chinese crypto mining
giant Bitmain closed its development center in Israel, firing all 23 employees
working on the company’s Connect BTC mining pool.
More
"Indeed the temporary breaks in the market which preceded the crash were a serious trial for those who had declined fantasy. Early in 1928, in June, in December, and in February and March of 1929 it seemed that the end had come. On various of these occasions the [New York] Times happily reported the return to reality. And then the market took flight again. Only a durable sense of doom could survive such discouragement. The time was coming when the optimists would reap a rich harvest of discredit. But it has long since been forgotten that for many months those who resisted reassurance were similarly, if less permanently discredited.”
John Kenneth Galbraith. The Great Crash: 1929.
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?
Holey graphene as Holy Grail alternative to silicon chips
Date:
December 19, 2018
Source:
Springer
Summary:
Novel spintronics applications could stem from introducing holes into graphene
to form triangular antidot lattices, granting the material new magnetic
properties.
Graphene, in its
regular form, does not offer an alternative to silicon chips for applications
in nanoelectronics. It is known for its energy band structure, which leaves no
energy gap and no magnetic effects. Graphene antidot lattices, however, are a
new type of graphene device that contain a periodic array of holes -- missing
several atoms in the otherwise regular single layer of carbon atoms.
This
causes an energy band gap to open up around the baseline energy level of the
material, effectively turning graphene into a semiconductor.
In a new study
published in EPJ B, Iranian physicists investigate the effect of
antidot size on the electronic structure and magnetic properties of triangular
antidots in graphene. Zahra Talebi Esfahani from Payame Noor University in
Tehran, Iran, and colleagues have confirmed the existence of a band gap opening
in such antidot graphene lattices, which depends on the electron's spin degree of
freedom, and which could be exploited for applications like spin transistors.
The authors perform simulations using holes that are shaped like right and
equilateral triangles, to explore the effects of both the armchair-shaped and
zigzag-shaped edges of graphene holes on the material's characteristics.
In this study, the values of the energy band gap and the total
magnetisation, the authors find, depend on the size, shape and spacing of the
antidots. These may actually increase with the number of zigzag edges around
the holes. The induced magnetic moments are mainly localised on the edge atoms,
with a maximum value at the centre of each side of the equilateral triangle. By
contrast, armchair edges display no local magnetic moment.
Thanks to the energy band gap created, such periodic arrays of
triangular antidot lattices can be used as magnetic semiconductors. And because
the energy band gap depends on the electron spins in the material, magnetic
antidot lattices are ideal candidates for spintronic applications.
Another weekend and the last before Christmas. Will
the great stock crash cause a car crash in retailing?
“The singular feature of the great crash of
1929 was that the worst continued to worsen. What looked one day like the end
proved on the next day to have been only the beginning. Nothing could have been
more ingeniously designed to maximize the suffering, and also to ensure that as
few as possible escaped the common misfortune. The fortunate speculator who had
funds to answer the first margin call presently got another and equally urgent
one, and if he met that there would still be another. In the end all the money
he had was extracted from him and lost. The man with the smart money, who was
safely out of the market when the first crash came, naturally went back in to
pick up bargains. …..The bargains then suffered a ruinous fall.
Even the man
who waited out all of October and all of November, who saw the volume of
trading return to normal and saw Wall Street become as placid as a produce
market, and who then bought common stocks would see their value drop to a third
or a fourth of the purchase price in the next twenty-four months. The Coolidge
bull market was a remarkable phenomenon. The ruthlessness of its liquidation
was, in its own way, equally remarkable."
John Kenneth Galbraith. The Great Crash: 1929.
Once again, another year draws to a close and it’s
time for my annual appeal. If you are one of the regular LIR readers of this
usually six days a week update, that helps support my efforts with the
occasional donation via the Paypal button, once again I sincerely thank you. A
special thanks this year to the very kind reader that so generously helped me
with my vet bills for the operation on my late border collie Rosie. After 12
years, Christmas won’t be the same without Rosie.
If you are a regular reader who finds the LIR
informative, interesting, occasionally amusing or entertaining, please consider
making a small donation via the Paypal button on the right of the LIR website.
For obvious reasons in our new age of mainstream media fake news, I want to keep
the LIR advertising free. But in any event thank you for reading and sending
along helpful articles and suggestions.
The monthly Coppock Indicators finished November.
DJIA: 25,538 +157 Down. NASDAQ:
7,331 +205 Down. SP500: 2,760 +129 Down.
All three slow indicators are
signalling more correction to come, although not necessarily ahead of the
year-end. However, if a tidal wave of stock fund redemptions hits in December,
2018 could end in a great rising wave of panic selling into a generally thin
markets trading year-end.
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