Thursday 28 February 2019

Good Luck Lucky. Stalled.

Baltic Dry Index. 651 +02    Brent Crude 66.13

Trump 25 percent tariffs. Postponed.  Brexit 30 days away.

Economically considered, war and revolution are always bad business.

Ludwig von Mises

Note, there will be no update on Friday due to taking Lucky, a young Romanian rescue dog in for his first operation on one of his front paws.  The surgery is far away, and Lucky is needed at 9 am. The next update is on Saturday. Good luck Lucky, my Great Niece’s crowd stopper of almost a month, easily settling in to life in England. The next update is on Saturday.

Later today the USA 4th quarter GDP figures, which should show if the US economy is seriously slowing or merely suffering from “noise” in the figures. For now, the Trump-Powell stock bubble since Christmas eve, seems to have stalled out. 

Nothing of much substance seems to have come out of the never-ending round of US v China trade talks, and nothing much seems to be coming out of the Trump v Kim summit in Hanoi, though we await the final declaration later today.

Below, Asian markets join Europe stalled out.

Stocks Decline as China PMI Data Dents Sentiment: Markets Wrap

By Adam Haigh
Updated on 28 February 2019, 05:08 GMT

China factory downturn deepens in February, PMI data show
India, Pakistan tensions and Trump-Kim summit being watched

Stocks in Asia were largely lower Thursday as disappointing manufacturing activity in China showcased continuing concerns about the global economic slowdown. Treasury yields dipped.

Equities saw modest losses in Japan, Korea and China, while shares were flat in Hong Kong. After a stellar two-month rally for global shares, the bar for further gains may be high. U.S. Trade

Representative Robert Lighthizer gave investors no incentive to bid up prices further on Wednesday, when he dialed back expectations for a sweeping trade deal with China. Nor did the latest monthly China manufacturing PMI, which indicated another contraction. The Australian dollar pared gains and the yen ticked higher.

“We still need more expansionary credit and fiscal policy to be implemented to stabilize growth” in China, Betty Wang, senior China economist at ANZ, told Bloomberg TV. “The economy is still not in a good shape.”

The dollar was little changed after Federal Reserve Chair Jerome Powell told lawmakers Wednesday that he’ll soon announce a plan to stop shrinking the central bank’s balance sheet, now around $4 trillion balance.

The recent escalation in tensions between India and Pakistan adds to a list of concerns from trade talks to global growth. Pakistan Prime Minister Imran Khan sounded ready to back away from the brink, using a televised address to call for talks with India so that “better sense should prevail.” Also in focus is the U.S.-North Korea summit in Hanoi featuring President Donald Trump and Kim Jong Un.

U.S. trade chief sees long-term China challenges, continued tariff threat

February 27, 2019 / 3:23 PM
WASHINGTON (Reuters) - The United States will need to maintain the threat of tariffs on Chinese goods for years even if Washington and Beijing strike a deal to end a costly tariff war, President Donald Trump’s chief trade negotiator told lawmakers on Wednesday.
U.S. Trade Representative Robert Lighthizer cautioned that much work was still needed to nail down a U.S.-China trade agreement, including working out how it will be enforced. 

“If we can complete this effort - and again I say if ... we might be able to have an agreement that helps us turn the corner in our economic relationship with China,” Lighthizer said in testimony to the U.S. House Ways and Means Committee.

The two countries have imposed tit-for-tat tariffs on hundreds of billions of dollars worth of each others’ goods, roiling financial markets, disrupting manufacturing supply chains and shrinking U.S. farm exports.

Lighthizer said USTR was taking legal steps to implement Trump’s decision on Sunday to delay a tariff increase on more than $200 billion (£153 billion) worth of Chinese goods that had been scheduled for Friday.

But USTR later clarified in a statement that it was not abandoning the threat of increasing the tariffs to 25 percent from 10 percent. It said a Federal Register notice would be published this week that would suspend the increase “until further notice.”

Lighthizer detailed a long road ahead to resolve U.S. China trade issues, and said that tariffs would remain an important tool to push China to make structural policy changes sought by Trump and lawmakers.

“The reality is this is a challenge that will go on for a long, long time,” Lighthizer said. He earlier said he “is not foolish enough” to believe that a single negotiation will change the increasingly sour bilateral trade relationship.

After earlier in the month giving India a “blank cheque” to attack Pakistan,  the chaotic Trump administration yesterday was frantically rowing back after India and Pakistan clashed in the air and later on the ground.

World powers call for calm as India and Pakistan trade fire in Kashmir

February 28, 2019 / 4:59 AM
NEW DELHI/SRINAGAR (Reuters) - Indian and Pakistani troops traded fire briefly along the contested border in Kashmir on Thursday morning, a day after the two nuclear powers both downed enemy jets, with Pakistan capturing an Indian pilot.

The United States, China and other world powers have urged restraint from the two nations as tensions escalate following tit-for-tat airstrikes in the wake of a suicide car bombing that killed at least 40 Indian paramilitary police in Indian-controlled Kashmir on Feb. 14. 

Pakistan Prime Minister Imran Khan has called for talks.

“History tells us that wars are full of miscalculation. My question is that, given the weapons we have, can we afford miscalculation,” Khan said during a brief televised broadcast to the nation. “We should sit down and talk.”

Pakistan and India have fought three wars since independence from British colonial rule in 1947, two over Kashmir, and went to the brink of a fourth in 2002 after a Pakistani militant attack on India’s parliament.

Pakistan has shut its airspace, forcing commercial airlines to reroute. Thai Airways International announced on Thursday that it had cancelled flights to Pakistan and Europe, which left thousands of passengers stranded in Bangkok.

On Thursday morning troops from India and Pakistan briefly exchanged fire in Poonch, a district in Indian-occupied Kashmir, according to a statement from the Indian army.

The firing, that India claims was initiated by Pakistan and lasted for a little over an hour beginning at 0600 local time (0030 GMT), was significantly less elevated than the artillery fire exchanged by the two sides on Wednesday.

---- The White House urged “both sides to take immediate steps to de-escalate the situation.”

U.S. Secretary of State Mike Pompeo said in a statement he had spoken separately with the foreign ministers of India and Pakistan and urged them to “prioritise direct communication and avoid further military activity”.

Pakistan’s envoy to the United States, Asad Majeed Khan, said Islamabad would like to see the Trump administration play a more active role in easing the crisis.

At the same time, he said the lack of U.S. condemnation of India’s strike on Pakistan was “construed and understood as an endorsement of the Indian position, and that is what emboldened them even more”.

China, the European Union and other countries also called for restraint. Japan’s foreign mininster said on Thursday the country was concerned about the “deteriorating situation”.

The Chinese government’s top diplomat, State Councillor Wang Yi, spoke by telephone with Pakistan Foreign Minister Shah Mahmood Qureshi and expressed “deep concern”, China’s foreign ministry said in a statement on Thursday.

Next, in the words of the extreme left wing, Project Fear BBC, “despite Brexit” GB is still an attractive place to invest. So what if a handful of foreign leveraged gambling banksters slither off to high tax,  Frankfurt and Amsterdam, or dangerous Dublin and Paris, or even boring Luxembourg.

London’s exorbitant housing prices might actually come down if enough of the  gambling banksters leave. Anyway, when they go bust next time it’ll be the ECB having to bail them out rather than the UK taxpayer.

Good riddance, GB need to reduce its exposure to financial crime and leveraged gambling. To rebuild the real economy that supports real jobs.

Ineos announces £1bn UK investment, new vinyl acetate plant

27 February 2019 Updated 27/2/2019

UK energy company Ineos has announced a decision to invest £1bn (€1.16bn) in its UK operations, of which £150m (€175m) will be allocated to a new vinyl acetate monomer (VAM) plant. 

The company is planning to build a 300 kilotonne-per-annum VAM plant in Hull, eastern England, to “bring production of an important raw material back to the UK”. 

VAM is a key component in a wide range of important high-end products including laminated windscreens, toughened glass, adhesives, coatings, films, textiles and carbon fibre.

“We are proud to be bringing production of this important material back to the UK. This will not only strengthen UK manufacturing but boost exports from the UK to Europe and the rest of the world,” said Graham Beesley CEO of INEOS Oxide. 

The company is also earmarking £500m (€584m) for upgrading the Forties Pipeline System, a major network that carries 30% of UK’s oil from the North Sea to shore. 

Furthermore, Ineos is pumping £350m (€408m) into its Grangemouth facility to develop a new steam and power plant which would significantly improve energy efficiency and long-term reliability of the site.

“Ineos is a supporter of British manufacturing and this £1bn investment underlines our confidence in our business in the UK. These investments will ensure that our UK assets continue to be world class for many years to come,” said Sir Jim Ratcliffe, Ineos founder and chairman.

Up next, does Germany really want to abandon Nord Stream 2 and cheap Russian natural gas, and rely instead on expensive shipped in LNG from far away Qatar, Iran and the USA?

Russia’s share of European gas market surges to almost 37%, dwarfing LNG imports

Published time: 26 Feb, 2019 10:06 Edited time: 26 Feb, 2019 15:16

Russia’s state-run energy major Gazprom said its share of sales of natural gas in the European Union has increased to 36.7 percent last year, rising over two percent against 34.2 percent in 2017.

“In 2018, according to preliminary data, the share of gas supplies to the EU countries and Turkey has reached an all-time high and totaled 36.7 percent,” the director general of Gazprom Export 
Elena Burmistrova said at Gazprom’s Investor Day event, taking place in Singapore.

Burmistrova added that Gazprom’s gas exports to Europe last year amounted to record 201.8 billion cubic meters, and is expected to significantly grow by 2035 due to the increasing demand.

According to a member of Gazprom's management committee, Oleg Aksyutin, the company saw no threat to Gazprom’s business in the European market from global producers of liquefied natural gas (LNG), including the US.

The company’s gas exports to Europe are reportedly three times more than the amount of LNG shipped to Europe by all global producers combined.

Though the share of LNG shipments have been growing, it still makes up only 13 percent of the entire gas market, according to Burmistrova. The executive added that prices for natural gas saw a significant surge.

“In 2018, in accordance with linked fuel prices, the average price of Gazprom gas increased by 24.6 percent to $245.5 for 1,000 cubic meters,” she said, stressing that in 2016 it stood at $167.

When it comes to China, one of the world’s biggest energy consumers, Gazprom is planning to become the country’s biggest supplier as soon as 2035, with the company’s share expected to reach 13 percent of Chinese overall consumption by the same year.

Gazprom’s annual exports to China via the Power of Siberia pipeline, which is currently 99 percent complete, are projected to reach 38 billion cubic meters by 2025.

The corporation pledged to invest 1.2 trillion rubles into new energy projects this year with 320 billion rubles set to be spent on the construction of the Amur Gas Processing Plant.

Gazprom expects gas production in Russia to increase by up to 20 percent by 2035 and reach 875 billion cubic meters a year. Last year, gas output in Russia reached 725 billion cubic meters.

Finally, is the US real estate bubble in for a nasty multi-year shock? Yes says the Marketwatch article below.

The current bubble could take 2 paths on this chart — one’s nastier than the other

By Shawn Langlois Published: Feb 26, 2019 2:57 p.m. ET
So, when’s the Fed going to start buying up millions of homes?

Assuming the answer is “it’s not,” Charles Hugh Smith of the Of Two Minds blog says prices are going to get hit hard across the country.

The latest data would hardly derail his gloomy outlook.

The S&P CoreLogic Case-Shiller 20-city index shows home price growth is screeching to a halt. The gauge rose 0.2% in December vs. November and 4.2% from year ago — the slowest pace of annual growth since 2014.

Read: Why bubble-era mortgages are a disaster waiting to happen

Smith said that bursting bubbles tend to follow a symmetrical reversal in terms of time durations and magnitudes of their initial rise.

“If the bubble took four years to inflate and rose by X, the retrace tends to take about the same length of time and tends to retrace much or all of X,” he wrote.

Smith explained that the Fed, by dropping interest rates to near-zero and buying mortgage-backed securities, didn’t allow the first bubble on the chart to run its course. This time around, however, there are “no more saves in the Fed’s locker,” he warned, adding that this decline will start this year and end around 2025.

But which path will it take?

Smith said the more realistic analysts out there would at least agree that some declines in prices is a possibility, and that it would look like the milder scenario.

That’s now how he sees it though.

“There is a good case for Scenario 2, in which price plummets below the 2012 lows and keeps on going, ultimately retracing the entire housing bubble gains from 2003,” he said, laying out several factors, such as massive student debt, insufficient income to support nosebleed prices, the exit of Chinese buyers, etc.

“The economy has changed, and the sacrifices required to buy a house in hot markets at today’s prices make no sense,” Smith concluded. “The only question of any real interest is how low prices will drop by 2025. We’re so accustomed to being surprised on the upside that we’ve forgotten we can surprised on the downside as well.”

The state can be and has often been in the course of history the main source of mischief and disaster.

Ludwig von Mises

Crooks and Scoundrels Corner 

The bent, the seriously bent, and the totally doubled over.

Today, who really benefits from the euro. Who loses.  Germany gets fingered by Germany’s Center for European Politics. News you won’t find on the extreme left wing, Europhile BBC.

BBC: "the propaganda arm of the EU."
Martin Durkin. Brexit Filmmaker.

Euro Drag: Germany, Holland The Only Real Euro Winners, New Study Finds

The eurozone’s single currency, the euro, has been a serious drag on the economic growth of almost every member of the bloc, according to a study by German think tank, the Centre for European Politics (CEP).

RT reports that Germany and the Netherlands, however, have benefited enormously from the euro over the 20 years since its launch, the study showed. The currency triggered credit and investment booms by extending the benefits of Germany’s low interest-rate environment across the bloc’s periphery. However, those debts became hard to sustain after the 2008 financial crisis, with Greece, Ireland, Spain, Portugal and Cyprus forced to seek financial aid as growth slowed and financing became scarce.

According to CEP, over the entire period since 1999, Germans were on average estimated to be cumulatively richer by €23,000 ($26,120) than they would otherwise have been, while the Dutch were €21,000 ($23,850) wealthier. To compare, Italians and French were each €74,000 ($84,000) and €56,000 ($63,600) poorer, respectively.

The survey did not include one of Europe’s fastest-growing economies, Ireland, due to a lack of appropriate data.

Study authors Alessandro Gasparotti and Matthias Kullas said most eurozone members had enjoyed periods during which the currency union had been net positive, but these were far outweighed by the periods when it dragged on growth. Greece was a partial exception, they added.

“In the first few years after its introduction, Greece gained hugely from the euro but since 2011 has suffered enormous losses,” the authors wrote, explaining that over the whole period, Greeks were each €190 ($216) richer than they would have been.

The study concluded that since the loser countries could no longer restore their competitiveness by devaluing their currencies, they had to double down on structural reforms. Spain was highlighted as a country that was on track to erase the growth deficit it had built up since the euro’s introduction.

Decisions can only be reached in Europe if France and Germany agree.

Jean-Claude Juncker. Failed Luxembourg Prime Minister and ex-president of the Euro Group of Finance Ministers. Confessed liar. European Commission President. Scotch connoisseur.

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?

Researchers Develop Direct Borohydride Fuel Cell at Low Cost for Use in Ships, Planes, and Submarines

In the United States, transportation industry consumes more energy due to increasing demands to make it cleaner and more efficient. Although many people are using electric cars, developing electric-powered ships, planes, and submarines is very difficult due to energy and power requirements.

A research team from the McKelvey School of Engineering at Washington University in St. Louis has created a high-power fuel cell that offers technology advances in this area. The team led by Vijay Ramani, the Roma B. and Raymond H. Wittcoff Distinguished University Professor, has designed a direct borohydride fuel cell that works at a voltage twice that of the existing commercial fuel cells.
This development, which involves employing a specialized pH-gradient-enabled microscale bipolar interface (PMBI), has the ability to power a range of transportation modes—such as drones, electric aircraft, and unmanned underwater vehicles—at a notably lower cost. The study has been published in Nature Energy.

 The pH-gradient-enabled microscale bipolar interface is at the heart of this technology. It allows us to run this fuel cell with liquid reactants and products in submersibles, in which neutral buoyancy is critical, while also letting us apply it in higher-power applications such as drone flight.
Vijay Ramani, Roma B. and Raymond H. Wittcoff Distinguished University Professor, Washington University in St. Louis

An acidic electrolyte is used at one electrode and an alkaline electrolyte at the other electrode in the newly developed fuel cell. Usually, both the acid and the alkali react rapidly as they approach each other. According to Ramani, PMBI is the major breakthrough, which is very thin when compared to a strand of human hair. The PMBI has the potential to prevent the mixing of the acid and the alkali using the membrane technology developed at the McKelvey Engineering School, thereby forming a sharp pH gradient and facilitating efficient working of this system.

Manufacturing and commercial monopolies owe their origin not to a tendency imminent in a capitalist economy but to governmental interventionist policy directed against free trade and laissez faire.

Ludwig von Mises

The monthly Coppock Indicators finished February  Update

DJIA: 25,916 +68 Down. NASDAQ: 7,533 +109 Down. SP500: 2,784 +62 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 the Fed’s Plunge Protection Team now officially part of President Trump’s re-election team, probably the safest action here is fully paid up synthetic double options on most of the major indexes.