Baltic Dry Index. 1077 +22 Brent Crude 61.86
Trump 25 percent
tariffs 42 days away. Brexit 71 days
away.
The very nature of finance is
that it cannot be profitable unless it is significantly leveraged... and as
long as there is debt, there can be failure and contagion.
Alan Greenspan
It’s Friday and time
to goose the markets again with renewed talk of US v China trade talk progress.
President Trump has asked to be judged by what happens in the US stock markets.
For now, the President’s Fed is happy to oblige.
The Wall Street
Journal is happy to oblige too, although their reported trade-talk love-in by
US Treasury Secretary Mnuchin was quickly denied by the Treasury and U.S. Trade
Representative Robert Lighthizer. Someone somewhere was probably long stock
index call options.
Below, hopium lives on
in Asia for now, but big trouble is hitting now the Chinese real estate sector.
China’s slowdown has further to run.
Asia stocks advance on U.S.-China trade relief
January 18, 2019 / 12:33 AM
TOKYO
(Reuters) - Asian stocks advanced on Friday as a report of progress in
U.S.-China trade talks stirred hopes of a deal in their tariff dispute and
supported risk sentiment.
The Wall Street Journal reported on Thursday that U.S. Treasury
Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on
Chinese imports and suggested offering a tariff rollback during trade
discussions scheduled for Jan. 30.
U.S. stocks rallied following the report, but pared some of those gains
after a Treasury spokesperson told CNBC that Mnuchin had not made any such
recommendations. WSJ also reported that U.S. Trade Representative Robert
Lighthizer has resisted Mnuchin’s idea. For the day, all three major U.S.
indexes were up, led by a surge in industrial stocks. [.N]
Even the whiff of progress in the months-long Sino-U.S. trade war helped
boost risk sentiment. MSCI’s broadest index of Asia-Pacific shares outside
Japan .MIAPJ0000PUS added 0.7 percent. The index has gained 1.4 percent this week.
The Shanghai Composite Index .SSEC was up 0.8 percent.
Australian stocks rose 0.5 percent, as did South Korea's KOSPI .KS11 while Japan's Nikkei .N225 gained more than 1 percent to a one-month high.
“As with 2018, the U.S.-China trade row remains a key market theme in 2019. A slight difference is that there are some signs that the two sides are seeking some sort of a resolution,” said Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo.
“China seems to be running low on options, while the United States would also want to avoid a prolonged conflict given the negative consequences on its markets and the economy,” Monji said.
Chinese Vice Premier Liu He will visit the United States on Jan. 30 and 31 for the latest round of trade talks aimed at resolving the dispute between the world’s two largest economies.
More
55 Billion Reasons Why Chinese Property Developers Just Flash Crashed
Thu, 01/17/2019 - 23:42
---- But repeating a now familiar warning
that the party is over, Beijing has once again expressed concern that some
cities, looking for rapid expansion, have grown their property markets too
quickly and at the expense of new industry development, adding potential froth
to real estate prices.
Two weeks later, our concern that something is not quite well with
China's housing sector was validated by the market overnight when shares in
Jiayuan International, a prominent Chinese property developer, imploded in late
trading in Hong Kong on Thursday, its stock collapsing 81% due to investor
unease over a sector that is staggering under vast debts just as the world’s
second-biggest economy slows.
According to analysts, all of whom were dumbfounded by
today's move, said that the stock, which flash crashed after a chaotic day’s
trading that wiped more than $3 billion from its market capitalisation with the
selling promptly spilling over to many of its peers..
... was engulfed by concern that Jiayuan would default on a $350 million
bond that matures this week.
As we reported earlier this morning, the panic liquidation over Jiayuan
also ensnared rival property company Sunshine 100 China Holdings, whose shares
plunged 65% moments after Jiayuan's collapse when traders realized that the two
companies share a director.
"Some of these companies might have cross-shareholdings in each
other and when one of those starts to tumble, it brings down other related
stocks," said Bocom strategist Hao Hong. "It’s likely more similar
stock crashes could happen this year. A lot of share pledges in Hong Kong
are underwater, and as soon as the positions are liquidated it triggers an
avalanche."
The property development sector has become especially vulnerable to
sharp selloffs as it has accumulated large amounts of dollar debt, while the
flagging Chinese economy has boosted fears about future prospects for China's
housing sector in what may end up being the country's first hard landing in
decades.
But the biggest problem is the upcoming debt cliff, which will force the
sector to refinance at the worst possible time: according to the Financial
Times, Chinese developers have about $55 billion of maturing onshore debt in
2019, which as discussed this morning accentuates concern over potential
defaults.
The
sector is under pressure because of "potential concern over bond defaults,
as [the companies] have offshore funding coming due," said Morningstar
analyst Phillip Zhong. As a result "the cost of refinancing is quite
expensive.”
More
In European news, a
harsh Brexit reality has set-in in Germany and France. A no deal Brexit probably tips
Germany into recession. But when EUSSR paymaster Germany crashes into the
buffers, all the rest of the rump-EU comes flying out of the gravy train. Did
someone in Germany forget to tell Juncker and Barnier?
As usual in the
EUSSR, everything is left to the last minute. Great Leaders Covens are often
forced to stop the clock on the last day, while their flunkies work through the
night desperate to get something, anything done.
Germany - We'll do all we can to ensure Britain quits EU with a deal
January 17, 2019 / 12:24 PM
BERLIN (Reuters) - Germany will do all it can in the coming days to
ensure that a deal is in place for when Britain leaves the European Union,
Foreign Minister Heiko Maas said on Thursday.
But Maas also stressed that, given the continued parliamentary deadlock
in Britain over the terms of Brexit less than three months before its planned
March 29 withdrawal, Germany would step up preparations for a disorderly
Brexit.
British lawmakers rejected Prime Minister Theresa May’s Brexit deal by a
large majority on Tuesday.
“In the coming days and weeks, we will do everything we can so that
Britain exits with and not without an agreement,” Maas told the Bundestag
(German lower house of parliament).
“We’re prepared for all scenarios - we are continuing to plan for a
disorderly Brexit scenario and we will step up this planning - it’s about
preventing any negative impact for citizens and our companies to the extent
possible.”
Maas said Britain needed to say how it intended to proceed if it wanted
to get an extension of the Article 50 exit negotiation period, and the EU would
keep in mind the approaching European Parliament elections in May.
---- The EU is prepared to look closely at
any new suggestion from Britain on Monday but it is hard to imagine the
withdrawal agreement with the EU being reworked, Maas said, adding that he
urged Britain to show pragmatism.
Germany's BDI on Huawei - No vendor should be excluded from 5G without evidence
January 17, 2019 / 9:55 AM / Updated
2 hours ago
BERLIN (Reuters) - No vendors should be excluded from Germany’s
fifth-generation mobile networks if there is no evidence against them, the BDI
industry association said, responding to calls to bar China’s Huawei
Technologies on national security grounds.
The Handelsblatt daily reported earlier that the German government was
actively considering stricter security requirements and other ways to exclude
Huawei from the buildout of 5G mobile networks.
U.S. officials warned that Huawei’s network equipment may contain “back
doors” that could open them up to cyber espionage. The BDI said accusations
that Huawei was jeopardising security needed to be proved.
https://uk.reuters.com/article/uk-germany-china-huawei/germanys-bdi-on-huawei-no-vendor-should-be-excluded-from-5g-without-evidence-idUKKCN1PB0WL?il=0France triggers 'hard Brexit' plan, to invest in ports and airports
January 17, 2019 / 9:57 AM
PARIS (Reuters) - France has put in motion a contingency plan to deal
with an eventual “hard Brexit,” Prime Minister Edouard Philippe said on
Thursday, including 50 million euros (£44.28 million) of investments to help
ports and airports cope.
“What’s certain is that the scenario of a no-deal Brexit is less and
less unlikely. That’s why... I have decided to trigger the plan for a no-deal
Brexit,” Philippe told reporters.
Prime Minister Theresa May’s two-year attempt to forge an amicable
divorce was crushed by the British parliament on Tuesday in the biggest defeat
for a British leader in modern history.
We really can't forecast all
that well, and yet we pretend that we can, but we really can't.
Alan Greenspan
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over
banksters and politicians.
Despite all the mass media Brexit disaster hype, sensible business goes
on as usual in GB and Europe. If a
business thinks it makes sense and can turn in a profit, investment continues
no matter what Project Fear hype pours from the Bank of England and its echo chamber
in the Europhile BBC.
Finance is wholly different
from the rest the economy.
Alan Greenspan
U.K.’s richest man shrugs off Brexit with €3 billion petrochemical investment
By Rupert
Steiner Published: Jan 15,
2019 11:09 p.m. ET
Brexit uncertainty? What Brexit uncertainty?Britain’s richest man, billionaire Sir Jim Ratcliffe, has shrugged off fears of a paralysis of U.K. business by spending €3 billion to build a petrochemical plant in Antwerp, Belgium.
Ineos, his privately owned chemical firm, and one of Britain’s biggest companies, announced the investment this afternoon (U.K. time) just hours before parliament overwhelmingly voted to reject the terms of Britain’s divorce from the EU. After historic Brexit deal fails, what’s next?
The company had previously said it was picking a country in Europe for the location of its multibillion-euro project for an ethane gas cracker but had not identified which one.
The €3 billion investment is the largest investment in the European chemicals sector in 20 years and could be a game changer for the Belgium economy.
Ratcliffe’s latest investment comes despite warnings that uncertainty
around Brexit have paralyzed British firms and caused them to stop expanding,
making investments and hiring staff.
The new petrochemical complex will be co-located with Ineos’ existing
sites in Europe making polymers and will be connected by pipeline to a number
of Inoes ethylene and propylene units.
Ratcliffe said: “Our investment in a gas cracker . . . is the largest of
its kind in Europe for more than a generation and is an important development
for the European petrochemical industry.
“We believe this investment will reverse years of decline in the
sector.”
Ratcliffe built the firm from nothing having bought up unwanted chemical
divisions from firms such as ICI, BP and BASF and used these operations to
process byproducts that oil and gas giants couldn't use.
When oil and gas comes out of the ground 90% of it is used to power
homes and fuel cars, but the remainder is unsuitable.
But Ratcliffe takes this 10% to make plastics such as polyester, PVC and
polystyrene which can be used for drinking bottles, car bumpers, suitcases and
clothing.
He has created a virtual pipeline using ships to transport cheap gas
from America to Europe.
Ethane from the North Sea is expensive because it is scarce. It is so
cheap in America it is cost effective for Ineos to buy the ethane there and
build an actual pipeline linking it to a processing plant by the U.S. coast and
then spend $1 billion on eight ships made in China.
More
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: Solar EPC Market to Exceed $14 Billion by 2025
he solar engineering, procurement and construction (EPC) market across the U.S. is projected to exceed $14 billion by 2025, according to a new report by Global Market Insights, Inc.Regulatory measures to decrease the dependence on conventional fuels, favored by financial funding to boost renewable energy integration will stimulate the product penetration. Growing fund allocation to replace the existing power plants with sustainable technologies will further augment the industry portfolio. In 2017, the U.S. government proposed decrease in their tax reforms by reducing their corporate taxes with a target to reinforce the clean energy business potential.
The report notes that the solar EPC market across Asia Pacific has gained impetus on account of growing renewable investments and favorable government initiatives across the region. Positive regulatory programs, investment subsidies, self-consumption scheme, renewable integration targets and similar government reforms have strengthened the industrial peripheral. Ongoing economic escalation across emerging regions coupled with increasing demand for electricity across developing energy markets have further instituted a favorable business outlook.
Looking Ahead
According to the report, PV deployments owing to rapid expansion and restructuring across the solar industry is anticipated to witness substantial growth over the forecast timeline. Positive regulatory mandates including FiT, subsidies, leveraging schemes, tax rebates, and investment tax credits have integrated a positive business scenario. Moreover, the revamping of investment flow and trade policies across emerging nations will further complement the global solar EPC market outlook.Growing environmental concerns coupled with stringent government mandates to curtail carbon emissions have shifted industrial focus towards the adoption of efficient energy conservation initiatives which in turn will boost the overall solar EPC market. Furthermore, momentous upgrades and variations along with rising cost-competitiveness will drive the industry potential. United Nations in 2017, launched the “Mission 2020” initiative with an aim to introduce “new urgency” through implying decrease in greenhouse gas emissions by 2020.
https://www.energymanagertoday.com/report-solar-epc-market-to-exceed-14-billion-by-2025-0181083/
Another weekend and our
next global recession seems to get closer with each passing week. Just don’t
let on to anyone peddling over priced stocks.
With politics getting nastier in Washington once again, will either side
blink over the weekend? Davos next week, although without many of the start
acts. Have a great weekend everyone.
Markets do very weird things
because it reacts to how people behave, and sometimes people are a little
screwy.
Alan Greenspan
The monthly Coppock Indicators finished December.
DJIA: 23,327 +115 Down. NASDAQ:
6,635 +152 Down. SP500: 2,507 +90 Down.
Normally this would suggest more
correction still to come, but with President Trump wanting to be judged by the
performance of the stock market and his Treasury Secretary activating the
Plunge Protection Team after the Christmas Eve Crash, will a politicised PPT
cover the President’s back? [Yes] Probably the safest action here is fully paid
up synthetic double options on most of the major indexes.
Hopefully a USA – China trade deal
reinvigorates the markets, but failure and 25 percent tariffs, is a market killer.
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