Baltic Dry Index. 1296 +59 Brent Crude 61.03
If all
else fails, immortality can always be assured by spectacular error.
John Kenneth
Galbraith.
On the very same day
President Trump was having dinner with President Xi, allegedly trying to solve
the US trade war against China, his operatives were going nuclear in Canada and
having Canada arrest the CFO of Huawei and extradite her to the USA, allegedly
for breaking US sanctions laws against Iran.
It is unlikely such
an action was taken without the approval of President Trump, so what kind of
message is President Trump and America sending out in its trade war with China
and the rest of the world?
I suspect that we
will not be kept waiting long for China’s response, but it won’t come in the
form of China buying US soybeans or oil, or probably much of anything else American. A Chinese boycott of US goods and companies will likely follow in
China.
From London, the USA now seems to be a highly undesirable entity to buy supplies from or to corporate partner with. Perfidious Albion had been replaced with Perfidious Trump. President Xi was duped and now made to look a complete fool.
Below today’s top news
story. The US trade war just went nuclear. We have probably just ensured the
next recession hits in 2019.
China Outraged at Arrest of Huawei CFO in Canada After U.S. Request
By Josh Wingrove, Natalie Obiko Pearson, and Mark Gurman
Updated on 6 December 2018, 05:31 GMT
Huawei
Technologies Co.’s chief financial officer was arrested in Canada over
potential violations of U.S. sanctions on Iran, provoking outrage from China
and complicating thorny trade negotiations just as they enter a critical
juncture.Wanzhou Meng — also deputy chairwoman and the daughter of Huawei’s founder — faces extradition to the U.S., said Ian McLeod, a Canada Justice Department spokesman. She was arrested Dec. 1 after the U.S. Department of Justice in April opened an investigation into whether the leading telecommunications-equipment maker sold gear to Iran despite sanctions on exports to the region.
News
of Meng’s arrest provoked strong protest
from the Chinese embassy in Canada, which called it a violation of its
citizens’ rights while demanding the U.S. and its neighbor “rectify
wrongdoings” and free Meng. Her arrest is sure to heighten tensions between
Washington and Beijing days after the world’s two largest economies agreed on a
truce in their growing trade conflict. Meng’s father Ren Zhengfei, a former
army engineer who’s regularly named among China’s top business executives, has
won acclaim at home for toppling Apple Inc. in smartphones and
turning an electronics reseller into a producer of networking gear with revenue
surpassing Boeing Co.
The CFO’s arrest -- the same day Donald Trump and Xi Jinping dined in Buenos Aires --- is likely to be regarded back home as an attack on one of China’s foremost corporate champions. While Alibaba Group Holding Ltd. and Tencent Holdings Ltd. dominate headlines thanks to flashy growth and high-profile billionaire founders, Ren’s company is by far China’s most global technology company, with operations spanning Africa, Europe and Asia. U.S. equity futures and Asian stocks slid as Meng’s arrest re-ignited concerns about U.S.-Chinese tensions.
----“Tencent
and Alibaba may be domestic champions and huge platforms in of their own
rights, but Huawei has become a global powerhouse,” said Neil Campling, an
analyst at Mirabaud Securities Ltd. It is “5G standards that are at the heart
of the wider IP debate and why the U.S. and her allies are now doing everything
they can to cut to the heart of the Chinese technology IP revolution.”
More
Huawei founder's daughter arrested on U.S. request, puts trade war truce in doubt
December 5, 2018 / 10:23 PM
The shock arrest of Meng Wanzhou, who is also Huawei Technologies Co
Ltd’s [HWT.UL] chief financial officer, is riling authorities in Beijing and
raises fresh doubts over a 90-day truce on trade struck between Presidents
Donald Trump and Xi Jinping on the day she was detained.
The arrest is related to violations of U.S. sanctions, a person familiar
with the matter said. Reuters was unable to determine the precise nature of the
violations.
The arrest and any potential sanctions on the world’s second biggest
smartphone maker could have major repercussions on the global technology supply
chain. Shares in Asian suppliers to Huawei, which also counts Qualcomm Inc and
Intel among its major suppliers, tumbled on Thursday.
Meng, one of the vice chairs on the company’s board and the daughter of
company founder Ren Zhengfei, was arrested on Dec. 1 at the request of U.S.
authorities and a court hearing has been set for Friday, a Canadian Justice
Department spokesman said. Trump and Xi had dined in Argentina on Dec. 1 at the
G20 summit.
---- Huawei confirmed the arrest in a statement and said that it has been provided little information of the charges, adding that it was “not aware of any wrongdoing by Ms. Meng”.
She was detained when she was transferring flights in Canada, it added.
China’s embassy in Canada said it resolutely opposed the arrest and
called for Meng’s immediate release.
---- The arrest drew a sharp response from Chinese media and on the mainland’s social media.
“I am shocked. The U.S. can’t beat Huawei in the market. Don’t act like
a despicable rogue,” Tweeted Hu Xijin, editor of the Global Times, a
nationalistic tabloid run by the ruling Communist Party’s People’s Daily.
----
A user of China’s Twitter-like Weibo platform said Chinese should boycott
products made by U.S. tech giant Apple Inc and instead buy Huawei products to
show support for one of China’s national champions.
More
In other news, the
bad news just keeps on coming.
U.S. stock futures slip, Asia follows after Canada arrests Huawei CFO
December 6, 2018 / 12:04 AM
TOKYO (Reuters) - U.S. stock
futures and Asian shares tumbled on Thursday after Canadian authorities
arrested a top executive of Chinese tech giant Huawei for extradition to the
United States, feeding fears of a fresh flare-up in tensions between the two
superpowers.
The news came as Washington and Beijing begin three months of
negotiations aimed at de-escalating their bruising trade war, which is adding
to lingering investor jitters over higher U.S. interest rates and other risks
to global economic growth.
S&P500 e-mini futures ESc1 fell almost 2 percent at one point in
thin Asian morning trade and were last were down 1.3 percent.
The losses in the first few minutes of trading might have been even
steeper, but CME Group’s Chicago Mercantile Exchange implemented a series of
10-second trading halts that helped limit the initial drop.
Japan's Nikkei .N225 slumped 1.8 percent by the midday break, with semi-conductor related shares leading the losses. Huawei is one of the world's largest makers of smartphones and telecommunications network equipment.
MSCI's ex-Japan Asia-Pacific index fell 1.7 percent .MIAPJ0000PUS. Hong Kong's Hang Seng .HSI dropped 2.7 percent while Shanghai shares .SSEC dipped 1.2 percent.
----- “The U.S. has been telling its allies not to use Huawei products for security reasons and is likely to continue to put pressure on its allies,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
“So while there was a brief moment of optimism after the weekend U.S.-China talks but the reality is, it won’t be that easy,” he said.
Hong Kong-listed shares of Chinasoft International Ltd (0354.HK) shed as much as 13 percent in response to news of the arrest. Huawei is a key client of Chinasoft.
More
Opinion: The ‘earnings recovery’ for stocks remains an accounting mirage
By David
Trainer and Sam
McBride Published: Dec 5, 2018 5:05 a.m. ET
Economic earnings vs GAAP earnings
On
Jan. 11, we showed that the “earnings recovery” is an illusion. After third-quarter earnings reports,
we can say that earnings growth continues to be an accounting mirage. U.S.
equities may have rebounded from 2015 lows, but economic earnings — which reverse accounting distortions and account for the weighted
average cost of capital (WACC) — remain in a persistent downturn. Figure 1
shows this trend.
This disconnect between accounting earnings and economic earnings is not just due to a handful of companies. When we look at our entire coverage universe of over 2,700 stocks, six out of 11 sectors have misleading earnings (GAAP rising and economic earnings falling) in the last fiscal year. Over the last 12 months, six sectors have negative economic earnings, and just two sectors — technology and health care — have positive and rising economic earnings.
The breadth of this decline in economic earnings suggests that the majority of U.S. public companies are unable to earn a return on invested capital (ROIC) greater than their WACC on new investments. In other words, the majority of U.S. companies are struggling to find profitable ways to allocate capital.
As Figure 2 shows, the tech sector is one of only two sectors with rising and positive economic earnings. But, the economic earnings picture is not as rosy as GAAP earnings would suggest. While GAAP net income has risen 9% over the past five years, economic earnings are only up 7%. Tech companies also have the most excess cash of any sector, at $1.1 trillion, a sign that they are also struggling to find profitable growth opportunities.
Figure 2 explains why tech has “taken over the market.” It’s been the only option for investors that want real earnings growth.
For example, Microsoft MSFT, -3.18% has more than tripled the return on the S&P 500 SPX, -3.24% over the past five years. Its economic earnings have grown by 32% compounded annually since 2016 compared to a flatlining net income.
However, many investors are quick to buy into the illusory earnings growth in the rest of the market, which we see as a result of the meteoric increase in the number of noise traders.
The disconnect between accounting and economic earnings in the market stems from two primary issues:
1. Income statement manipulation: Managers exploit accounting loopholes to overstate accounting profits. GAAP net income has grown 6% over the past five years for the companies in Figure 1, but net operating profit after tax (NOPAT) is up only 4% over that time frame.
2. GAAP earnings overlook balance sheets and the cost of equity capital. Over the past five years, the companies in Figure 1 have increased their balance sheets, i.e. invested capital, by 32%. Their weighted average cost of capital (WACC) is up from 5.7% to 6.9% over the same time. Economic earnings decline when the cost and amount of capital rise faster than NOPAT.
Economic earnings equal NOPAT - (WACC*Invested Capital). When NOPAT grows slower than net income while invested capital and WACC grow faster, economic earnings decline. Figure 3 details the adjustments we make to calculate the current NOPAT and invested capital values for the whole market.
-----The breadth of the decline in economic earnings should give investors pause. Almost every sector is experiencing this decline, and even for the technology sector, GAAP earnings overstate the profit growth.
Now more than ever investors need unconflicted and comprehensive fundamental research. Only by analyzing the footnotes and MD&A can one find companies that buck the trend of rising GAAP earnings and falling economic earnings. These are the stocks that will hold up when this bull market finally does come to an end.
David Trainer is the CEO of New Constructs, an independent equity research firm that uses machine learning and natural language processing to parse corporate filings and model economic earnings. Sam McBride is an investment analyst at New Constructs. They receive no compensation to write about any specific stock, style or theme. New Constructs doesn’t perform any investment-banking functions and doesn’t operate a trading desk. Follow them on Twitter @NewConstructs.
Finally, add India to
the growing list of slowing Asian economies. Still, another drag on 2019.
India interest rates on hold as growth slows
Date created : 05/12/2018 - 11:09
India's central bank kept interest rates unchanged on Wednesday after
Asia's third-largest economy slowed ahead of elections next year.
The Reserve Bank of India (RBI) said the benchmark repo rate -- the
level at which it lends to commercial banks -- would remain at 6.50 percent.
It was the second meeting in a row that the bank has kept borrowing
rates stable following two rises this year.
The decision was "consistent with the stance of calibrated
tightening of monetary policy in consonance with the objective of achieving the
medium-term target for consumer price index (CPI) inflation of 4 percent",
the bank said.
India last week reported slowing economic growth, expanding 7.1 percent
in the July-to-September quarter, down from 8.2 percent in the previous period.
Analysts say India needs to regularly record growth of at least eight
percent to generate employment for the millions entering the workforce each
year.
Inflation remains tame however, easing to 3.31 percent in October, below
the RBI's 4-percent target band.
The slowdown in growth was on the back of a liquidity crunch in the
banking system, linked to problems in the shadow banking sector, hitting
investment.
Another hike in interest rates could have exacerbated the crunch ahead
of general elections expected in April or May next year.
For now, I prefer
gold over stocks and the fiat currencies. Bunker time. Nuclear bunker time!
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
In Saudi Khashoggi murder mystery
news, it’s a mystery no more to the CIA and the US Senate. But it’s still a
mystery to US President Trump, currying favours for new arms deals from Saudi
Crown Prince Mohammad.
Senators: Khashoggi intelligence points to Saudi Arabia
Dec. 4, 2018 / 3:05 PM
Dec. 4 (UPI) -- Senators briefed by CIA Director
Gina Haspel on Tuesday said intelligence about the death of journalist Jamal Khashoggi in Turkey indicates Saudi
Crown Prince
Mohammed bin Salman is to blame.The closed-door meeting came one week after Republican and Democratic senators expressed outrage that they didn't receive an intelligence briefing on The Washington Post journalist's slaying on Oct. 2.
Though President Donald Trump gave the Saudi government the benefit of the doubt, the briefed lawmakers appeared more convinced of suggestions the crown prince ordered the killing.
"There's not a smoking gun, there's a smoking saw," Sen. Lindsey Graham, R-S.C., told reporters.
“You have to be willfully blind not to come to the conclusion that this
was orchestrated and organized by people under the command of MBS and that he
was intricately involved in the demise of Mr. Khashoggi," he added, using
a nickname for Prince Mohammed.
Graham said that though Saudi Arabia is a "strategic ally,"
the relationship with Riyadh should not be saved "at all costs."
"I cannot see him being a reliable partner to the United
States," he said of the crown prince, calling him "dangerous."
Sen. Bob Corker, R-Tenn., chairman of the Senate Foreign Relations Committee, agreed.
"I have zero question in my mind that the crown prince directed the murder and was kept apprised of the situation all the way through, I have zero question in my mind," he said.
Corker said the Trump administration should strongly condemn Saudi Arabia for the slaying.
Senators received an earlier briefing on Khashoggi's death with Defense Secretary James Mattis and Secretary of State Mike Pompeo.
Pompeo, speaking to reporters after the briefing, said "there is no direct reporting connecting the crown prince to the order of the murder of Jamal Khashoggi."
President Trump said in a statement that "our intelligence agencies continue to assess all information, but it could very well be that the Crown Prince had knowledge of this tragic event -- maybe he did and maybe he didn't!"
But the CIA said Prince Mohammed likely ordered Khashoggi's death after listening to intercepted communications from Mohammed.
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?
Borophene advances as 2D materials platform
Atom-thin sheets of boron containing large single crystals could provide foundation for fabricating next-generation electronics
Date:
December 3, 2018
Source:
DOE/Brookhaven National Laboratory
Summary:
Physicists synthesized 2D atom-thin sheets of boron with large crystal domains,
which are needed to make next-gen electronics.
Borophene -- two-dimensional (2-D) atom-thin-sheets of boron, a chemical
element traditionally found in fiberglass insulation -- is anything but boring.
Though boron is a nonmetallic semiconductor in its bulk (3-D) form, it becomes
a metallic conductor in 2-D. Borophene is extremely flexible, strong, and
lightweight -- even more so than its carbon-based analogue, graphene. These
unique electronic and mechanical properties make borophene a promising material
platform for next-generation electronic devices such as wearables, biomolecule
sensors, light detectors, and quantum computers.
Now, physicists from the U.S. Department of Energy's (DOE) Brookhaven
National Laboratory and Yale University have synthesized borophene on copper
substrates with large-area (ranging in size from 10 to 100 micrometers)
single-crystal domains (for reference, a strand of human hair is about 100
micrometers wide). Previously, only nanometer-size single-crystal flakes of
borophene had been produced. The advance, reported on Dec. 3 in Nature Nanotechnology,
represents an important step in making practical borophene-based devices
possible.
For electronic applications, high-quality single crystals -- periodic
arrangements of atoms that continue throughout the entire crystal lattice
without boundaries or defects -- must be distributed over large areas of the
surface material (substrate) on which they are grown. For example, today's
microchips use single crystals of silicon and other semiconductors. Device
fabrication also requires an understanding of how different substrates and
growth conditions impact a material's crystal structure, which determines its
properties.
"We increased the size of the single-crystal domains by a factor of
a million," said co-author and project lead Ivan Bozovic, senior scientist
and Molecular Beam Epitaxy Group Leader in Brookhaven Lab's Condensed Matter
Physics and Materials Science (CMPMS) Department and adjunct professor of
applied physics at Yale University. "Large domains are required to
fabricate next-generation electronic devices with high electron mobility.
Electrons that can easily and quickly move through a crystal structure are key
to improving device performance."
Finally, an online treat from the
British Library and its French counterpart. Who needs the wealth and jobs
destroying EUSSR?
Medieval England and France, 700–1200
Explore illuminated manuscripts from the
national libraries of the UK and France
This curated selection explores medieval manuscripts that were digitised as
part of The Polonsky Foundation England and France Project: Manuscripts
from the British Library and the Bibliothèque nationale de France, 700–1200.
Discover stunning highlights of illuminated manuscripts set in their cultural
and historical context and explored in a range of articles.All of the 800 manuscripts digitised in the project are included in full on the website France et Angleterre: manuscrits médiévaux entre 700 et 1200 where you can view manuscripts side by side, and find manuscripts by date, language, place of origin, author or subject.
More
The monthly Coppock Indicators finished November.
DJIA: 25,538 +157 Down. NASDAQ:
7,331 +205 Down. SP500: 2,760 +129 Down.
Though a strong attempt was made of Friday to dress
up the month-end figures to prevent November becoming a second down month in a
row, the Coppock Indicators still moved down suggesting that there’s still more
of the correction to come. But was the month-end dress up enough to prevent a
massive wave of year-end stock fund redemptions? Probably, after Presidents
Trump and Xi found a way to defer by 90 days the January 1st increase in US
tariffs. But beware the end of March 2019 redemptions if the US v China trade
talks fail.
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