Saturday 5 January 2019

Weekend Update 05/01/19. Flipping Out and Going Bananas.


Baltic Dry Index 1260 -07       Brent Crude 57.06

"I know but one sure tip from a broker.... your margin call."

Jesse Livermore, stock operator.

Insanity rules for now. In our great gambling casinos, once also known as stock exchanges, irrationality has replaced reason. Gambling has replaced investment. Stampede is the new normal, whether up or down. Don’t stand aside, run with the herd.

Of course, high volatility, destroys wealth on a massive scale, as fear takes hold of both buyers and sellers of stocks, and portfolios get ruthlessly whipsawed. If Apple can go from a market value of over 1.1 trillion dollars to less than 700 billion dollars in roughly 90 days, does any stock have real value anymore? Is the stock exchange still a forward looking, price discovery mechanism of capitalism, or merely the modern equivalent of betting on red or black at roulette?
Below, stocks flipping out and going bananas. Wealth destruction on an epic scale. The next Lehman gets closer by the day.
"I wasn't worth two cents two years ago, and now I owe $2 million dollars."
Mark Twain.

All the Days Are Big Days for Stocks as Bulls, Bears Trade Blows

By Elena Popina,Sarah Ponczek, and Vildana Hajric
Going strictly by the VIX, the U.S. stock market just saw its biggest weekly drop in volatility since March. Go by traders’ nerves and you’d have a hard time framing the past few days as anything but another trial for markets that have known little but upheaval for three months.

Exhausted by December convulsions? You’re getting no respite in January, as Thursday’s 2.5 percent S&P 500 plunge gave way to a 3.4 percent rally, the third biggest since 2012. Investor sentiment that was throttled by Apple’s revenue warning was revived by the best employment report in 10 months and calming words from Federal Reserve Chairman Jerome Powell.

“It’s been dizzying, if anything. We see these directional moves that are quite large and it’s something that I’ve never seen in the market before,” said Delores Rubin, senior equities trader at Deutsche Bank Wealth Management. “The fundamentals looked great and then we started getting into this thought that maybe the fundamentals weren’t so great.”

The swings show how hard it’s been getting clarity on the state of the economy or the future of central bank stimulus. All told, S&P 500 has now swung in an intraday range of greater than 2 percent in 15 of the last 21 days, making it one of the most volatile stretches since 2011.
For the holiday-shortened week, the S&P 500 Index rose 1.7 percent for its first back-to-back advance since November. The Cboe Volatility Index fell 25 percent, the biggest weekly decline in 10 months. Still, tumult persisted. The Nasdaq 100 fell 214 points on Thursday and surged 276 points on Friday, while the Dow Jones Industrial Average swung in an 880-point range over the last two sessions.
Big moves reflected divergent signals on U.S. growth. Economic data on Friday showed a spike in hiring last month that was accompanied by faster wage growth and an increase in workforce participation, tamping down concern a recession is imminent. A day earlier, a gauge of U.S. manufacturing plunged by the most since 2008 and Apple Inc. cut its sales outlook, fueling concern that global growth is cooling. A factory reading in China came in at the lowest since May 2017.

Then there’s the Fed. Powell’s remarks soothed investors who’d grown concerned the Fed was determined to raise rates even as signs of slowing growth emerged. Speaking at the American Economic Association’s annual meeting in Atlanta, Powell said central-bank policy is flexible and officials are “listening carefully” to the financial markets.
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In other news, is anyone in America or China still listening? Have both sides already flipped out, gone bananas, on the “path to disaster?” 

US and China must step off ‘path to disaster’, warns Jeffrey Sachs after storm of criticism over Huawei defence

  • Economist defends comments on tech giant saying the US is targeting it as part of a ‘reckless’ attempt to contain its rival
  • Sachs faced firestorm of criticism on Twitter and says he quit social media network because it was ‘too time-consuming and distracting’
PUBLISHED : Wednesday, 02 January, 2019, 6:05pm UPDATED : Thursday, 03 January, 2019, 12:31pm
Renowned economist Jeffrey Sachs has said diplomacy is needed between the US and China to prevent “utter disaster” as he defended his controversial criticism of Washington’s targeting of Chinese telecoms giant Huawei Technologies.
The Columbia University professor faced a firestorm of criticism on social media after he accused the US of hypocrisy for its targeting of Huawei senior executive Sabrina Meng Wanzhou, who was arrested by the Canadian authorities last month at the behest of the US.
Sachs told the South China Morning Post he had been taking a break from the social media site since deleting his Twitter account late last month. “I found Twitter to be time-consuming and distracting,” he said.
Meng was arrested on suspicion of violating US sanctions against Iran, a move Sachs called “reckless” in a syndicated article he published on December 11 with the headline “The War on Huawei”.
He wrote that, by contrast, no major executives from American financial institutions had been arrested even though their companies had been fined for violating their country’s own sanctions on Iran or other nations.
“The US attacks on Huawei, in my view, are not about Huawei’s actions but about technological competition,” Sachs said on Tuesday.
“I don’t think we should take claims against Huawei by the US at face value.”
“We need diplomacy to stop an IT arms race,” he said. “Right now we are on the path to disastrous cyberwarfare.
“This is reckless and should not be left to the hardliners on both sides. We need global rules, globally supervised, just as in the areas of other armaments.”
He added that the US targeting of Chinese firms should be seen against the background of the Trump administration’s attempt to assert American “exceptionalism” and to fight the perceived challenge of China and Russia to US power.
“It is a very dangerous and utterly false idea that China is ‘attempting to erode American security and prosperity,’” he said, referring to the US national security doctrine issued by the White House a year ago.
Sachs warned that conflicts like the continuing trade war and the targeting of Chinese IT firms “recall an early era of great power confrontation that eventually led to utter disaster”.
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After tuning Paradise into Hell, California’s PG&E considers bankruptcy.

Insurance companies sue PG&E over California wildfire damages

Published: Jan 3, 2019 10:35 p.m. ET
SACRAMENTO, Calif. — Several insurance companies have filed lawsuits blaming Pacific Gas & Electric Co. for a deadly California wildfire that destroyed 14,000 homes and triggered billions of dollars in insurance claims.

The lawsuits filed by Allstate ALL, -1.64%  , State Farm, USAA and their subsidiaries come on top of several other cases filed by victims of the Camp Fire, which devastated the towns of Paradise, Magalia and Concow north of Sacramento after it started Nov. 8.

Investigators have not pinpointed a cause for the fire. But the insurance companies note in their lawsuits that flames ignited near the site of a transmission-line irregularity reported by the utility.
They also note a potential second ignition point involving PG&E distribution lines.

Under California law, PG&E PCG, +0.63%   is held entirely liable if lawyers can prove the fire is linked to the utility’s power lines or other equipment — a fact that sent shares of the company tumbling following the start of the fire.

Following a series of deadly fires in 2017 in Northern California’s wine country, PG&E executives and lobbyists tried to convince state lawmakers to change the legal standard and reduce the company’s liability. Lawmakers declined, but they allowed the company to pass along some of the costs from the 2017 fires to its customers in hopes of sparing it from bankruptcy. The law does not help the company for the 2018 blazes.

---- PG&E, one of the nation’s largest electric utilities with more than 5 million customers in Northern and Central California, is facing legal and regulatory challenges on a number of fronts, including the potential for criminal charges.
The California attorney general told a judge last week that PG&E could face charges as serious as involuntary manslaughter or murder if investigators determine that reckless operation or maintenance of power equipment caused any recent wildfires in the state.
A federal judge overseeing a case that resulted in a criminal conviction for the company following a 2010 pipeline explosion has asked PG&E to explain any role it may have had in the Camp Fire.
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PG&E stock plummets after report it's eyeing bankruptcy filing

Published: Jan 4, 2019 6:28 p.m. ET
PG&E Corp. PCG, +1.88% stock fell 25% in after-hours trading Friday after a report that the company was eyeing bankruptcy filings for some or all of its businesses. Citing anonymous sources, Reuters reported that the company was considering filing for bankruptcy because it could soon face a "significant" charge related to liabilities related to California wildfires in 2017 and 2018. Because of potential legislative aid, PG&E has not yet determined whether it will make a bankruptcy filing, Reuters reported.
PG&E faces potential penalties in the billions from legal action related to 2017 and 2018 California wildfires. California lawmakers have passed a law that would protect the company from the 2017 fire and fires in 2019 and after but not the 2018 fire. Lawmakers were in talks late last year for legislation to protect the company from liabilities related to the 2018 fires. PG&E stock rose 1.9% Friday in regular trading, as the S&P 500 index SPX, +3.43% rose 3.4%.

Finally, the USA joins Europe and stock markets globally, flips out and goes bananas. The inmates have taken over the asylum.

"In politics stupidity is not a handicap."
Napoleon.

Trump threatens years-long government shutdown, emergency powers to build wall

January 4, 2019 / 6:06 AM
WASHINGTON (Reuters) - President Donald Trump threatened to keep the U.S. government partially shut for months or years on Friday after he and Democratic leaders failed to resolve their dispute over Trump’s request for $5.6 billion (4.4 billion pounds) to build a wall on the Mexican border.
After Democratic congressional leaders refused Trump’s requests at a meeting in the White House Situation Room, the Republican president threatened to take the controversial step of declaring a national emergency and building the wall without congressional approval.

Trump is withholding his support for a bill that would fully fund the government until he secures money for the wall. As a result, around 800,000 public workers have been unpaid, with about a quarter of the federal government closed for two weeks.

Senate Democratic Leader Chuck Schumer said Democrats had told Trump during the meeting to end the shutdown. “He resisted,” Schumer said. “In fact, he said he’d keep the government closed for a very long period of time, months or even years.”

Trump confirmed that comment but painted a more positive picture of the meeting, the first since a new era of divided government began when Democrats took control of the House of Representatives on Thursday.

“We had a very, very productive meeting, and we’ve come a long way,” Trump said.

According to a source familiar with the White House discussion, Trump opened the meeting with a speech that lasted at least 15 minutes in which he insisted on the need for billions of dollars to fund a border wall.

The source also said Trump brought up recent impeachment threats during those remarks, arguing that he had notched a strong performance as president and should not be a target for impeachment.

The president later told reporters that Nancy Pelosi, the new Democratic speaker of the House of Representatives, said Democrats were not looking to impeach him.

Raising the stakes in his tussle with the newly emboldened Democrats, Trump threatened extraordinary measures to build the wall, which he says is needed to stem the flow of illegal immigrants and drugs into the United States.

A reporter asked Trump whether he had considered declaring a national emergency to build the wall.
“Yes, I have. And I can do it if I want,” Trump said. “We can call a national emergency because of the security of our country ... I may do it. But we can call a national emergency and build it very quickly. And it’s another way of doing it. But if we can do it through a negotiated process, we’re giving that a shot.”

Emergency powers have been invoked by previous U.S. presidents during times of war.
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Ocasio-Cortez suggests individual tax rates as high as 70%

Published: Jan 4, 2019 12:41 p.m. ET

New member of Congress highlights how U.S. taxed top earners in the 1960s: ‘On your 10-millionth dollar, sometimes you see tax rates as high as 60% or 70%’

Rep. Alexandria Ocasio-Cortez is drawing attention Friday for suggesting that the wealthiest Americans ought to pay a tax rate of as high as 70% in order to fund a “Green New Deal.”

The new Democratic congresswoman from New York noted there is historical precedent for a high tax rate for the super wealthy, as she said the following:
“You look at our tax rates back in the 60s, and when you have a progressive tax rate system, your tax rate, let’s say, from $0 to $75,000 may be 10% or 15%, etc. But once you get to the tippy tops, on your 10-millionth dollar, sometimes you see tax rates as high as 60% or 70%.” Rep. Alexandria Ocasio-Cortez, New York Democrat
Her remarks came in an interview with Anderson Cooper for the CBS show “60 Minutes.” Excerpts for her appearance have been released, ahead of a full broadcast on Sunday.

“That doesn’t mean all $10 million are taxed at an extremely high rate, but it means that as you climb up this ladder, you should be contributing more,” said the lawmaker, who also got attention this week thanks to a dance video from her college years that went viral.

After Cooper said Ocasio-Cortez’s agenda is “radical” compared to how politics is done now, the congresswoman embraced that word.

“It only has ever been radicals that have changed this country,” she said. “Abraham Lincoln made the radical decision to sign the Emancipation Proclamation. Franklin Delano Roosevelt made the radical decision to embark on establishing programs like Social Security.”

“If that’s what radical means, call me a radical,” Ocasio-Cortez added.
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"One half the nation is mad and the other half not very sound."
Tobais Smollett, author. 


Update 11.am
A strange case gets stranger yet. But if he really is a spy, which country was he spying for?

Ex-CIA operative Plame: 'It's not inconceivable' Paul Whelan is a spy

Published 11:13 PM EST Jan 4, 2019
Paul Whelan of Novi, held in a czarist-era Russian prison on spy charges, would attract the notice of any seasoned intelligence team, a former CIA covert operations officer told the Free Press.

"As long as there are nation-states, there will be espionage. It is a very real threat and even more so today," said retired officer Valerie Plame, now an author who was famously outed as a CIA operative during the second Bush administration.

Whelan, 48, an executive with the auto parts manufacturer BorgWarner in Auburn Hills, was picked up by Russian authorities on Dec. 28 on suspicion of spying. His twin brother said the ex-Marine, whose military record included a larceny conviction, was in Russia for a friend's wedding. The Russians indicted Whelan on Thursday.

No one knows what about the Russians' assertion is true except, perhaps, U.S. government officials, who have said little about the case and likely have access to information they have not revealed, Plame suggested. 

Is it possible Whalen could be a spy? "It is not inconceivable," Plame said.

She noted, "There are many Americans that seek to serve their country in various ways. That's probably all I should say."

Other former CIA operatives and scholars of espionage, though, say it's most likely Whelan is being framed by Russian President Vladimir Putin for political reasons, a scenario Plame did not discount. They also agree that Whalen's story has eyebrow-raising and contradictory oddities.

He had traveled regularly to Russia since about 2006 and had a Russian social media account through which he connected with members of the country's military, but lacked strong command of the language, the New York Times reported. On Friday, Ireland’s Department of Foreign Affairs said Whelan had asked for help as an Irish citizen, and officials confirmed he is a U.S., British and Irish citizen.

"There do seem to be real question marks around this story, at least in the public domain," Plame said Thursday. "That he was discharged from the military, from the Marines, dishonorably. That he's got this big interest in Russia; he travels there a lot. Huh? He's an auto parts guy? Really? I don't know. He could be completely innocent. The Kremlin could be trying to be provocative. Or there could be something there."

----Plame, who now lives in Santa Fe, New Mexico, described an unpredictable international landscape where anything is possible and everything must be considered.

"The Cold War was a bipolar world. We had one big enemy. Now, with the rise of nuclear terrorism, rogue nation states and a very active Russia and China," espionage is ubiquitous, she said.

----According to an account published earlier this week in a Russian state media outlet, Whelan met in his hotel room with a Russian citizen who gave him an electronic device with classified Russian intelligence information. "Five minutes after the transfer, FSB officers broke into the room" and detained Whelan, the Russian account states. FSB is the Russian intelligence agency that is a successor of the Soviet-era KGB.

"That sounds like a classic setup," said Ned Price, a former CIA analyst and National Security Council staffer. 
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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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