Baltic Dry Index. 1282 +11 Brent Crude 54.23
“The
key insight of Adam Smith's Wealth of Nations is misleadingly simple: if an
exchange between two parties is voluntary, it will not take place unless both
believe they will benefit from it. Most economic fallacies derive from the
neglect of this simple insight, from the tendency to assume that there is a
fixed pie, that one party can gain only at the expense of another.”
With the American
Government attacking ZTE and Huawei, including getting Canada to lock up Huawei’s
CFO, now out on bail unlike Carlos Ghosn in Tokyo, Chinese consumers are
hitting back by shunning Apple products. I suspect it will not be long before a
host of other US (and other nations) companies relying on sales to China are
joining Apple in the sick bay.
Generally, the longer
trade wars go on, the more distortion and disruption to global trade, the more
past investment assumptions turn out to be wrong. Early “winners” shift over to
the loser column, but rarely does that work in reverse.
If a trade war goes
on long enough to affect a significant amount of global trade, a new recession
is likely. If global protectionism becomes the order of the day, a repeat of
the 1930s is an all to real risk in our “recovery” built on the sands of
mountains of unrepayable debt.
So where do we stand
in the present trade war? No one really knows.
So far we are less than a year in, with only a modest amount of global
trade affected. The biggest affects so far has been a surge in US imports to
front run the tariffs, and mountains of unsold US soybeans piled up North
Dakota. Hardly the 1930s.
But time is running
out on reaching an early trade war ending. Global slowing is already appearing
in Asia and in Europe. In America later today, the Democrats take over the
House and declare open hunting season on President Trump, his family,
businesses and associates. If a trade war victory isn’t declared by March one,
the US is about to start carpet bombing China. At that point, I suspect, we can
move all the remaining “winners” into the loser’s column.
Below, Apple gets a
bad case of rot.
“When a
country (USA) is losing many billions of dollars on trade with virtually every
country it does business with, trade wars are good, and easy to win”
President
Trump. March 2018.
Apple warning, China worries hit Asian shares; 'flash crash' jolts currencies
January 3, 2019 / 12:55 AM
SHANGHAI (Reuters) - U.S. stock futures fell and Asian shares wobbled on
Thursday after a rare revenue warning from Apple Inc added to worries about
slowing global growth and weaker earnings.
The California-based tech giant blamed fewer iPhone upgrades and slowing sales in China in warning about revenues in its most recent quarter, its first such warning since 2007. Its shares (AAPL.O) tumbled 8 percent in after-hours trade.
The news sparked a ‘flash crash’ in holiday-thinned currency markets as investors rushed to less risky assets, with the Japanese yen soaring against most major currencies in a matter of seconds.[FRX/]
U.S. stock futures pointed to another rough start on Wall Street, with Nasdaq E-mini futures NQc1 down 2.2 percent and S&P 500 E-mini futures ESc1 off 1.3 percent.
MSCI’s broadest gauge of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.4 percent after an early attempt at a bounce. Japanese markets were closed for holidays but Nikkei futures NKc1 dropped 1.9 percent.
More
Apple Isn’t the Only Casualty of China's Slowdown
By Angus Whitley
Updated on 3 January 2019, 05:00 GMT
Apple
Inc. has become the latest and biggest corporate casualty from the pullback
of the Chinese consumer
The smartphone maker, which pinned its reduced revenue outlook on a slowdown in the country, joins a growing list of companies struggling as a trade war with the U.S. and an equity selloff weigh on the world’s second-largest economy.
Here are other prominent companies now finding it harder to sell everything from cars to takeaway coffee in China:
FedEx
The U.S. delivery giant slashed its profit forecast in late December -- just three months after raising it. While FedEx Corp.’s woes weren’t limited to China, the company cited trade tensions, especially between the U.S. and China, among its troubles. FedEx Chief Executive Officer Fred Smith said most of the problems he faced were due to “bad political choices.”Starbucks
The coffee behemoth opens a new store in China every few hours and expects it to become the company’s largest market. But last month, Starbucks Corp. said sales growth in China could be as low as 1 percent in the long term. That’s slower than the 3 percent to 4 percent growth seen for the U.S. and the rest of the world. It’s not clear how much China’s economy or trade tensions are to blame -- or if China is just losing its taste for caffeine.Tiffany’s
China’s economic woes are more of a headache for the jeweler outside the country than inside. In November, Tiffany & Co. reported weaker-than-expected sales and highlighted a “clear pattern” of Chinese shoppers cutting back on spending when they’re overseas. It’s a trend first highlighted by Louis Vuitton owner LVMH in October as Chinese officials cracked down on travelers returning home with undeclared goods in a bid to encourage local consumption instead.
More
German manufacturing growth slows again in December - PMI
January 2, 2019 / 9:09 AM
BERLIN (Reuters) - Growth in Germany’s manufacturing sector slowed again
in December as new orders fell at the fastest rate in four years, a survey
showed on Wednesday.
Markit’s Purchasing Managers’ Index (PMI) for manufacturing, which
accounts for about a fifth of the economy, fell to a 33-month low of 51.5 from
51.8 in November, edging closer to the 50.0 mark that separates growth from
contraction.
It was the 11th time in 2018 that the manufacturing index fell,
reflecting a sustained cooling of growth in Europe’s largest economy, which
shrank in the third quarter partly on one-off effects such as fewer car
registrations as makers adapt to new pollution standards.
Germany is also facing headwinds from trade frictions between the United
States and China and weaker demand from the euro zone.
“With things having got a little too hot at the end of 2017 a correction
was inevitable, but the extent of the slowdown has been somewhat a surprise,”
said Phil Smith, principal economist at IHS Markit.
“The darkening global economic picture has had ramifications for
Germany’s outwardly focussed manufacturing sector over the course of 2018,
while the sequence of headwinds in the car industry in the latter stages of the
year has been a further restricting factor,” said Smith.
He added that manufacturers were able to sustain output growth thanks to
back orders.
Euro zone factories ended 2018 on a low note: PMI
January 2, 2019 / 9:24 AM
LONDON, (Reuters) - Euro zone
manufacturing activity barely expanded at the end of 2018 in a broad-based
slowdown, according to a survey which showed scant signs for optimism as the
new year begins.
The disappointing survey comes just after the European Central Bank
ended its 2.6 trillion euro asset purchasing scheme and is likely to make
uncomfortable reading for policymakers.
IHS Markit’s December final manufacturing Purchasing Managers’ Index
fell for a fifth month, coming in at 51.4 from November’s 51.8, matching a
flash reading but barely above the 50 level separating growth from contraction.
That was its lowest reading since February 2016 but an index measuring
output, which feeds into a composite PMI that is seen as a good gauge of
economic health, nudged up to 51.0 from 50.7.
“A disappointing December rounds off a year in which a manufacturing
boom faded away to near-stagnation,” said Chris Williamson, chief business
economist at IHS Markit.
“The weakness of the recent survey data in fact raises the possibility
that the goods producing sector could even act as a drag on the overall economy
in the fourth quarter, representing a marked contrast to the growth surge seen
this time last year.”
More
Oil drops as volatile markets, supply surge unsettle investors
January 3, 2019 / 2:11 AM
SINGAPORE (Reuters) - Oil prices
slipped on Thursday amid volatile currency and stock markets, and as analysts
warned of an economic slowdown for 2019 just as crude supplies are rising
globally.
U.S. West Texas Intermediate (WTI) crude oil futures CLc1 dropped by 1.7
percent, or 79 cents, from their last settlement to $45.75 by 0453 GMT.
International Brent crude futures LCOc1 were down 0.8 percent, or 46
cents, at $54.45 a barrel.
In physical oil markets, top exporter Saudi Arabia is expected to cut
February prices for heavier crude grades sold to Asia by up to 50 cents a
barrel due to weaker fuel oil margins, respondents to a Reuters survey said on
Thursday.
Markets were roiled by a more than 3 percent slump of the U.S. dollar against the Japanese yen overnight JPY=D3, and after tech giant Apple (AAPL.O) cut its sales forecast.
“We did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Apple chief executive Tim Cook said.
The slowdown in China and turmoil in stock and currency markets is making investors nervous, including in oil markets.
The chief executive and president of Jefferies Financial Group, Rich Handler and Brian Friedman, wrote in a joint note to clients and employees that the start of the year was a period of “extreme disarray” and that “the future doesn’t feel as certain and optimistic, and the path forward does not seem as clear.”
More
Markets do very weird things
because it reacts to how people behave, and sometimes people are a little
screwy.
Alan Greenspan
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over
banksters and politicians.
Today, the bent, seriously
bent and totally doubled over EUSSR, taken apart by an Aussie Professor
economist. And this after a “whatever it takes” bailout by the ECB, negative
interest rates, and bailing-in bank depositors. Thankfully, Brexit is now less
than 90 days away.
Steve Keen Exposes The Delusional 'Leaders' Of The Eurozone
Wed, 01/02/2019 - 05:00
----I had forgotten
that this was the 20th anniversary of the start of the Euro. But the
Eurocrats in Brussels hadn't. Some hours before the New Year commenced, Juncker
and friends put out a press release
extoling the virtues of the Euro. Virtues such as "unity, sovereignty,
and stability … prosperity".
Well so much for New Year cheer. With this one tweet, the EU put 2019 on
track to be even worse than 2018. Using any of those words to describe
the Euro—apart perhaps from "unity", since the same currency
is used across most of continental Europe now—is a travesty of fact that even
Donald Trump might baulk at.
Sovereignty? Tell that to
the Greeks, Italians or French, who have had their national economic policies
overridden by Brussels. Stability? Economic growth has been far more
unstable under the Euro than before it, and Europe today is riven with
political instability which can be directly traced to the straitjacket the Euro
and the Maastricht Treaty imposed. Prosperity? Let's bring some facts into
Juncker's fact-free guff.
I'll start with Phil's point about Greece. Greece's GDP has fallen at
Great Depression rates since the Eurozone imposed its austerity policies on it,
and nominal GDP today is more than 25% below its peak.
Now of course that could be blamed on the Greeks themselves, so let's
look compare economic growth in the entire Eurozone to the USA (minus Ireland
and Luxembourg, since in the former case their data is massively distorted by
data revisions, and the latter has highly volatile data as well, and is so
small—under 600,000 people—that it can safely be ignored).
Figure 2: Real economic growth rates
----Before the Euro, economic growth averaged 2.5% per year, versus 2.4% in the USA. After the Euro but before the Global Financial Crisis, growth in the Eurozone averaged 2.6%--a 0.1% improvement over pre-Euro levels; but the USA's growth rate rose to 2.7%, so in comparative terms, the Eurozone fell compared to the USA. So Europe's tiny improvement over it's pre-Euro growth rate may be due to factors other than the Euro itself, and its improvement was substantially smaller than the USA's.
This raw comparison still flatters the Eurozone, since most of the high growth between the start of the Euro and the crisis reflects the bubble-growth of Spain and Greece. Population-weighted figures would look even worse.
But the real comparison is with growth since the crisis. The USA's average post-crisis growth rate has been anaemic at 1.4%, but this is positively dynamic in comparison to the entire Eurozone's average post-crisis growth rate of 0.2%. Europe has basically been stagnant for a decade, thanks to the Euro and the austerity policies that are inseparable from it, courtesy of the Maastricht Treaty that Juncker is so proud to have signed.
In reality, the Euro has brought low growth, economic instability, and political discord to Europe. Yet Europe's unaccountable leaders spin it as an unbridled positive, at a time when ordinary citizens of Europe are donning Yellow Vests and bemoaning their plight.
As Wynne Godley argued so eloquently when the Maastricht Treaty was signed in 1992, the strictures that it and the Euro would impose on Europe would lead to its impoverishment, not its prosperity.
----Godley presciently concluded that:
If a country or region has no power to devalue, and if it is not the
beneficiary of a system of fiscal equalisation, then there is nothing to stop
it suffering a process of cumulative and terminal decline leading, in the end,
to emigration as the only alternative to poverty or starvation. (Wynne
Godley, 1992)
If this coordinated spin from the Eurozone's bosses—I refuse to call
them "leaders", because that implies they can be removed—is the best
they can do, then 2019 will be every bit as politically unstable as 2018.
There are winners and there
are losers. And as much as we would like to help the losers, if we do it in the
way that directs the limited capital of the society to support the
low-productivity parts of the economy, it means that the rest of the economy -
our overall standard of living - will not rise as much as it could.
Alan Greenspan
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?
Physicists record “lifetime” of graphene qubits
First measurement of its kind could provide stepping stone to practical quantum computing.Rob Matheson | MIT News Office December 31, 2018
Researchers from MIT and elsewhere have recorded, for the first time,
the “temporal coherence” of a graphene qubit — meaning how long it can maintain
a special state that allows it to represent two logical states simultaneously.
The demonstration, which used a new kind of graphene-based qubit, represents a
critical step forward for practical quantum computing, the researchers say.
Superconducting quantum bits (simply, qubits) are artificial atoms that
use various methods to produce bits of quantum information, the fundamental
component of quantum computers. Similar to traditional binary circuits in
computers, qubits can maintain one of two states corresponding to the classic
binary bits, a 0 or 1. But these qubits can also be a superposition of both
states simultaneously, which could allow quantum computers to solve complex
problems that are practically impossible for traditional computers.
The amount of time that these qubits stay in this superposition state is
referred to as their “coherence time.” The longer the coherence time, the
greater the ability for the qubit to compute complex problems.
Recently, researchers have been incorporating graphene-based materials
into superconducting quantum computing devices, which promise faster, more
efficient computing, among other perks. Until now, however, there’s been no
recorded coherence for these advanced qubits, so there’s no knowing if they’re
feasible for practical quantum computing.
In a paper published today in Nature Nanotechnology, the
researchers demonstrate, for the first time, a coherent qubit made from
graphene and exotic materials. These materials enable the qubit to change
states through voltage, much like transistors in today’s traditional computer
chips — and unlike most other types of superconducting qubits. Moreover, the
researchers put a number to that coherence, clocking it at 55 nanoseconds,
before the qubit returns to its ground state.
The work combined expertise from co-authors William D. Oliver, a physics
professor of the practice and Lincoln Laboratory Fellow whose work focuses on
quantum computing systems, and Pablo Jarillo-Herrero, the Cecil and Ida Green
Professor of Physics at MIT who researches innovations in graphene.
“Our
motivation is to use the unique properties of graphene to improve the
performance of superconducting qubits,” says first author Joel I-Jan Wang, a postdoc
in Oliver’s group in the Research Laboratory of Electronics (RLE) at MIT. “In
this work, we show for the first time that a superconducting qubit made from
graphene is temporally quantum coherent, a key requisite for building more
sophisticated quantum circuits. Ours is the first device to show a measurable
coherence time — a primary metric of a qubit — that’s long enough for humans to
control.”
More
“For example, the
supporters of tariffs treat it as self-evident that the creation of jobs is a
desirable end, in and of itself, regardless of what the persons employed do.
That is clearly wrong. If all we want are jobs, we can create any number--for
example, have people dig holes and then fill them up again, or perform other
useless tasks. Work is sometimes its own reward. Mostly, however, it is the
price we pay to get the things we want. Our real objective is not just jobs but
productive jobs--jobs that will mean more goods and services to consume.”
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? 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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