Baltic
Dry Index 608 +10
Brent Crude 64.08
Trump
25 percent tariffs 14 days away. Brexit 44
days away.
This great Nation will endure as it
has endured, will revive and will prosper. So, first of all, let me assert my
firm belief that the only thing we have to fear is fear itself—nameless,
unreasoning, unjustified terror which paralyzes needed efforts to convert
retreat into advance.
Franklin
Delano Roosevelt 1932.
GB Brexit 2019.
GB Brexit 2019.
Despite
the global stock markets growing complacency that a benign trade deal will be
reached this week with China, at least sufficient for Donald Trump to climb
down from imposing 25 percent punitive tariffs on China at the end of the
month, the reality is that nothing is yet settled, and President Trump, according
to Bloomberg, is still in deep political trouble in Washington over his trade
deal with Canada and Mexico, whether to accept the new budget compromise or to
try to shut down the Federal government again.
According
to Bloomberg, a weakened President Trump has only poor options.
“If you're not gonna pull the trigger, don't point the gun.”
James Baker. United States Secretary of the Treasury under
President Ronald Reagan, and U.S. Secretary of State and White House Chief of
Staff under President George H. W. Bush.
Trump Has Lost on the Wall. Now He Can’t Win on Trade
His threat to unilaterally pull out of Nafta unless he gets his way is no more likely to get results than the December shutdown.By Jonathan Bernstein 13 February 2019, 18:00 GMT President Donald Trump says he’s unenthusiastic about the spending package Congress has settled on to fund the government for the rest of the fiscal year. That’s no surprise. Although the details of the deal aren’t entirely clear, it certainly looks as if he’s wound up worse off than he would have if he had backed down in December and avoided the 39-day government shutdown. The new plan contains less money for fewer miles of new border barriers. Even if the administration gets more flexibility about where to spend the funds (also uncertain so far), the $1.375 billion in the package is nothing like full the $5.7 billion he had asked for. Or, as Greg Sargent puts it, this is basically a surrender.
The episode brings the truth about Republican members of Congress into the open: Although they have little interest in dragging down the Republican president, they also aren’t willing to give him anything on policy. The border wall has been a good test case. Unlike the tax cut or repealing Obamacare or confirming conservative judges, the wall was basically a Trump project rather than a regular Republican idea. And he couldn’t manage to get it funded, either in the Republican-majority 115th Congress or the new, Democrat-controlled 116th. And even on taxes and health care, Republicans in Congress basically ignored the long list of unorthodox preferences Trump has pushed over time. Instead, they moved ahead with what they would have done if Marco Rubio or Scott Walker or an autosigning machine had been president.
But the wall is far less of a big deal than the new trade deal with Canada and Mexico, which needs to be ratified by both chambers of Congress.
Here’s the problem. Trade policy tends to split the parties because winners and losers don’t line up very well with party divisions. So, for example, Republican Senator Pat Toomey from Pennsylvania is already saying that the North American Free Trade Agreement has benefited his state and that its replacement, the U.S.-Canada-Mexico Agreement, wouldn’t be as good. Meanwhile, Democrats have a partisan incentive to avoid giving Trump a big win. And Republicans, even with the president backing this deal, have to overcome their constituents’ mistrust of trade pacts, which Trump has fueled for the last three-plus years. It doesn’t help that the USMCA isn’t all that different from Nafta, which means that a lot of members from both parties will worry that they’ll be vulnerable to anti-trade rhetoric if they support it.
In other words, there’s a lot of opposition to
the new treaty, and good reason to think it’s in a lot of trouble.
As with his wall, Trump seems to think he has a winning move to play: If Congress doesn’t give him what he wants, he’s threatening to unilaterally take the U.S. out of Nafta, leaving lawmakers with a choice of the new deal or nothing. That’s basically a variation on the only negotiating move Trump has used in his time in the White House: Walk away from the table and threaten to ruin the nation in hopes that all the reasonable people will give him what he wants.
In fact, there’s still talk that Trump may veto the current spending deal after failing to get involved in any of the negotiations. Perhaps he hopes Congress will override him so he can avoid taking responsibility for failing to get his border wall. Another plausible outcome is that if he vetoes, enough Republicans would back him, and the attempt to override would fail, leading to a government shutdown at the end of the week.
---- The threat to pull out of Nafta probably isn’t any more likely to get results than the December shutdown. Republican senators are already lining up against Trump on it. If he ignores them and moves forward anyway, Congress probably won’t give in to his bullying and ratify his treaty. That’s even more likely now that Trump demonstrated during the shutdown showdown how easy it is to roll him and how bad he is at playing this game. And once again, as was the case during the shutdown, the blame will fall squarely on the president.
More
Asia shares cautious, seeking Sino-U.S. clarity
February 14, 2019 / 12:29 AM
SYDNEY (Reuters) - Asian stock markets were in a
cautious mood on Thursday as investors hung on for any hint of progress in the
latest Sino-U.S. tariff talks amid reports the White House could extend the
deadline for a deal.
Bloomberg reported President Donald Trump was
considering pushing back the deadline by 60 days, citing people familiar with
the matter.
Trump, on Wednesday, had said the talks were “going
along very well” as they try to resolve the dispute ahead of the initial March
1 deadline.
With Treasury Secretary Steven Mnuchin and Trade
Representative Robert Lighthizer in China for high level talks, investors had
been daring to hope for good news.
As there have been disappointment before, the
reaction in share markets was guarded. Shanghai blue chips were down 0.2
percent, having jumped 2 percent on Wednesday to levels last seen in late
September.
MSCI’s broadest index of Asia-Pacific shares
outside Japan eased 0.2 percent, though that was off a peak last seen in early
October.
Japan’s Nikkei edged up 0.1 percent to its highest
for the year as a weakening yen boosted export stocks. E-Mini futures for the
S&P 500 added 0.15 percent.
The Australian dollar, often used as a liquid proxy
for China risks, gained 0.4 percent to $0.7114.
The Aussie had already got a small lift when
Chinese trade data handily beat expectations in a welcome relief for the global
economy.
Beijing reported exports rose 9.1 percent in
January from a year earlier, confounding forecasts of a fall, while imports
dipped by a surprisingly slight 1.5 percent.
More
Trade spats could dampen shipping growth in 2019-Hapag Lloyd CEO
February 13, 2019 / 10:25 AM
FRANKFURT (Reuters) - An escalation of tariff wars
between China and the United States could dampen growth in international
container shipping as operators pre-emptively brought forward business in the
second half of last year, Germany’s Hapag Lloyd said.
“Many customers tried to get their goods through to
the U.S. ahead of time in second half 2018, creating additional growth,” Rolf
Habben Jansen, chief executive of the company that is the world’s fifth biggest
shipping liner, told reporters in Hamburg on Tuesday.
“That points to some business having been brought
forward,” he added.
In
other news, Europe suffers yet another setback. Is it already too late to avoid
a new recession? The EU ordered a thoroughbred, the committee of EU politicians,
as usual, came up with a camel. Ineos boss highlights much of what’s wrong in
the wealth and jobs destroying EUSSR.
Airbus A380 - from European dream to white elephant
February 14, 2019 / 6:13 AM
TOULOUSE, France (Reuters) - Loved by passengers,
feared by accountants, the world’s largest airliner has run out of runway after
Airbus decided to close A380 production after 12 years in service due to weak
sales.
The decision to halt production of the A380
superjumbo is the final act in one of Europe’s greatest industrial adventures
and reflects a dearth of orders by airline bosses unwilling to back Airbus’s
vision of huge jets to combat airport congestion.
Air traffic is growing at a near-record pace but
this has mainly generated demand for twin-engined jets nimble enough to fly
directly to where people want to travel, rather than bulky four-engined jets
forcing passengers to change at hub airports.
And while loyal supporters like top customer
Emirates say the popular 544-seat jet makes money when full, each unsold seat
potentially burns a hole in airline finances because of the fuel needed to keep
the huge double-decker structure aloft.
“It’s an aircraft that frightens airline CFOs; the
risk of failing to sell so many seats is just too high,” said a senior
aerospace industry source familiar with the programme.
Once hailed as the industrial counterpart to
Europe’s single currency, the demise of a globally recognised European symbol
coincides with growing political strains between Britain, France, Germany and
Spain where the plane is built.
That’s in stark contrast to the display of European
unity and optimism when the engineering behemoth was unveiled in front of
European leaders under a spectacular light show in 2005.
---- Airlines had initially rushed to place orders, expecting it to lower operating costs and boost profits as the industry crawled out of a slowdown in tourism since September 2001.
Airbus boasted it would sell 700-750 A380s, which
nowadays cost $446 million at list prices, and render the 747 obsolete.
In fact, A380 orders barely crossed the 300 threshold
and the 747 has outlived its rival, after reaching the age of 50 this week.
More
Ineos boss slams EU green taxes for “uncompetitive” chemicals industry
13 February 2019 Updated 13/2/2019
Ineos founder and chairman Jim Ratcliffe has
written an open letter to European Commission president, Jean-Claude
Juncker, expressing his concerns about the future of the European
chemicals industry.
The letter particularly criticised the EU for its
green taxes and regulations, saying they should be reduced to sustain a
competitive chemical industry.
"Europe is no longer competitive. It has the
world’s most expensive energy and labour laws that are uninviting for
employers,” wrote Ratcliffe. Green taxes can at best be described as
'foolish, at worst as simply stupid,' he declared, as well as having the
'opposite effect to how they were intended'.
“Nobody in my business seriously invests in
Europe…. Everyone in my business does however invest in the US, Middle East or
China or indeed all three,” he added.
According to Ratcliffe, the US is currently 'in the
middle of a $200-billion spending spree' on 333 new chemical plants.
China has also spent a similar amount on its
chemicals business in recent years, he added.
Pointing out that the $4trn chemicals industry was
considerably bigger than the automotive sector, Ratcliffe said the sector
directly employs over 1 million in Europe.
“But the industry is uncompetitive. In the past
decade Europe’s share of the world chemical market has halved from 30%-15%,” he
stated.
Ratcliffe identified the EU’s strict
labour laws as another factor making employers reluctant to operate in the
region.
“On top of this, green taxes have pushed investors
to the US and China, where taxes are lower,” he
continued.
“America’s new investments have meant new jobs, and
it [the US] has improved environmental emissions – but Europe can’t seem to do
the same,” he added.
Ineos announced in January that it was building an
major ethane gas cracker and PDH unit in Antwerp, Belgium.
However, the letter explained that the investment
was only possible due to the company’s access to its own “low priced, cost
effective” shale gas from the US.
More
Jean-Claude Juncker. Failed Luxembourg Prime Minister and
ex-president of the Euro Group of Finance Ministers. Confessed liar. European Commission
President. Scotch connoisseur.
In
better economic news for the world, even with OPEC and friends oil production
cuts, oil demand will struggle in 2019 to absorb supply, says the International
Energy Agency. Add in a slowing global economy, the drag from all the trade
wars, an EUSSR punitive Brexit, and a political civil war just starting in
Washington, and I suspect oil demand will struggle to sustain the IEA’s
predicted 1.4 million barrels per day.
Global oil supply to swamp demand in 2019 despite output cuts - IEA
February 13, 2019 / 9:09 AM
LONDON (Reuters) - The global oil market will struggle
this year to absorb fast-growing crude supply from outside OPEC, even with the
group’s production cuts and U.S. sanctions on Venezuela and Iran, the
International Energy Agency said in a report on Wednesday.
The IEA left its demand growth forecast for 2019
unchanged from its last report in January at 1.4 million barrels per day.
“It is supported by lower prices and the start-up
of petrochemical projects in China and the U.S. Slowing economic growth will,
however, limit any upside,” the agency said.
The IEA raised its estimate of growth in crude
supply from outside the Organization of the Petroleum Exporting Countries to
1.8 million bpd in 2019, from 1.6 million bpd previously.
The agency also lowered its forecast for demand for
OPEC crude, production of which the group has pledged to cut by 800,000 bpd
this year as part of an agreement with Russia and other non-OPEC producers such
as Oman and Kazakhstan.
The “call” on OPEC crude is now forecast at 30.7
million bpd in 2019, down from the IEA’s last estimate of 31.6 million bpd in
January.
U.S. sanctions on Iran and Venezuela have choked
off supply of the heavier, more sour crude that tends to yield larger volumes
of higher-value distillates, as opposed to gasoline. The move has created
disruption for some refiners, but has not led to a dramatic increase in the oil
price in 2019.
“In terms of crude oil quantity, markets may be
able to adjust after initial logistical dislocations (from Venezuela
sanctions)”, the Paris-based IEA said.
“Stocks in most markets are currently ample and ...
there is more spare production capacity available.”
Venezuela’s production has almost halved in two
years to 1.17 million bpd, as an economic crisis decimated its energy industry
and U.S. sanctions have now crippled its exports.
More
Finally,
Marketwatch asks “Who owns London.” Rumours to the contrary, it’s not me!
Below, more unintended consequences from Great Nixonian Error of fiat money,
August 15, 1971. Paper money to the moon.
Who owns the City?
Commercial property has become the capital’s latest real estate sector to be swamped by overseas investors taking advantage of the weak pound. Can it last?
By Tim Burke February 11, 2019 Updated: February 13, 2019
7:10 a.m. GMT
In 2001, when Chris Harvey joined the legal profession, he called himself a property solicitor. But for the past decade or so, he has been leaning towards the more Americanised title of real estate lawyer.
Harvey, the head of UK real estate at law firm Mayer Brown, said this is to reflect a business that is increasingly done with buyers from overseas. “We have become more and more international,” he said, “and so we’ve adopted these more international phrases.”
Londoners have known for decades that luxury residential property is a target for foreign money. Now its commercial property market has followed suit. In 2000 foreign buyers accounted for just 30% of transactions in the market in central London, said Zachary Gauge, an analyst covering European real estate at UBS Global Asset Management. In 2018, a year in which London attracted more property investment than any other city in the world, that figure stood at 75%.
Big deals last year saw buildings such as the offices of investment banks Goldman Sachs and UBS change hands for £1bn-plus. In both of those cases, the acquirer was an institutional buyer based in Asia, from where an increasing amount of investment is keeping advisers busy.
Analysts at property agency Savills calculate that
Asian buyers accounted for 52% of investment value in the Square Mile in 2018,
for example. That compares with 19% from UK buyers, 11% from the
US, 11% from Europe and 5% from the Middle East.
“When I was growing up and you looked at the front
page of [trade publications] Property Week or Estates Gazette, it
was always very much [UK institutions such as] Legal & General, Prudential,
Standard Life, British Land doing the big deals and making the headlines,”
Mayer Brown’s Harvey said.
“These days, Property Week lands on your
desk and it can be somebody you’ve never, ever heard of who has just bought
something for a billion quid. That just shows you the market has completely
moved.”
Getting an idea of who owns what in London is not
always easy, analysts say. Last summer the government published a draft bill to
create a public register of the ultimate owners of all foreign entities holding
UK real estate.
The register would help to crack down on money
laundering, the government said, but it would also increase transparency
more broadly. For now, ownership chains can be opaque and data unreliable.
Joint ventures and special purpose vehicles muddy the waters, even for those
willing to trawl through the government’s Land Registry and Companies House
databases.
More
Jean-Claude Juncker. Failed Luxembourg Prime Minister and
ex-president of the Euro Group of Finance Ministers. Confessed liar. European Commission
President. Scotch connoisseur.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over banksters and politicians.
Today, what’s wrong with this? After the
trillions come the quadrillions and probably slavery.
U.S. national debt tops $22 trillion for the first time
By Jeffry
Bartash Published: Feb 12,
2019 5:00 p.m. ET
U.S. financial picture getting worse in wake of Trump tax cuts
The U.S. national debt topped a record $22 trillion this week, less than a year after it crossed the $21 trillion mark, indicating a further deterioration in the nation’s finances.The Peterson Foundation said the U.S. national debt has risen by $1 trillion in the past 11 months, calling it “the latest sign that our fiscal situation is not only unsustainable, but accelerating.”
The foundation drew its estimate from the Treasury Department’s daily statement on the government financial assets and liabilities. The group has long called for reducing the national debt to ensure the nation’s long-term financial health.
“We already pay an average of $1 billion every day in interest on the debt, and will spend a staggering $7 trillion in interest costs over the next decade,” asserted Michael Peterson, CEO of the foundation. “In order to build the strong and stable future that we want for America, we must put our fiscal house in order and begin to manage our national debt.”
Economists agree the U.S. will suffer in the long run if the government fails to rein in the debt, but that day may still be a long way off.
The standard method of judging a nation’s fiscal health is to look at the level of debt relative to GDP — or the size of the economy. The ratio of publicly held debt-to-GDP is seen rising from about 78% in 2019 to 106% by 2029 and to as high as 193% by 2049 under current tax and spending policies, the Brookings Institution calculates in a new report.
While the interest payments on such a large debt would siphon off a lots of money the government could use for other things, it’s by no means clear how much the economy would suffer.
Japan has run huge debt-to-GDP ratios for years and it still has one of the strongest economies in the world. The country’s debt is around 236% of GDP.
The U.S. national debt soared in the aftermath of the 2007-2009 recession, accelerated again after the Trump tax cuts in 2017 and an increase in federal spending.
“The Dollar is our currency, but it is your problem“
John Connolly, US Secretary to the Treasury – 1971
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?
New welding process opens up uses for formerly un-weldable lightweight alloy
Ben Coxworth 12
February 2019
Developed in the 1940s, AA7075 is an aluminum alloy
that's almost as strong as steel, yet it weighs just one third as much.
Unfortunately its use has been limited, due to the fact that pieces of it
couldn't be securely welded together. That's recently changed, however, thanks
to the use of titanium carbide nanoparticles.
The problem with welding 7075 lies in the fact that
when the metal is heated, the aluminum, zinc, magnesium and copper of which
it's composed flow unevenly. The phenomenon is known as phase segregation, and
as a result of it, cracks form along the length of the weld.
Led by Prof. Xiaochun Li, a team at the UCLA
Samueli School of Engineering set about addressing that problem. In the course
of doing so, they fabricated thin rods made of 7075 infused with minuscule
particles of titanium carbide. These rods were then placed between larger
pieces of the aluminum alloy which were about to be joined, acting as a filler.
When the rods and adjacent material were subsequently melted in an arc welding
process, the nanoparticles eliminated the uneven flow issue.
"Nanoparticles make the elements in the liquid
metal solidify together more uniformly, thus preventing phase
segregation," Li tells us. "Phase segregation normally will block the
liquid metal flow during cooling, thus inducing shrinkage and cracks without
liquid filling. Since the metal solidifies more uniformly after adding nanoparticles,
the liquid metal flows better during solidification, thus no cracking due to
segregation."
The resulting welded joints have a tensile strength
of up to 392 megapascals – by contrast, the commonly-used 6061 aluminum alloy
has a weld strength of 186 megapascals. What's more, it is believed that
post-welding heat treatments could boost the strength of the 7075 welds up to
551 megapascals, which is on par with the weld strength of steel.
Although the alloy is already used in items such as
airplane wings and fuselages, sheets of it typically have to be riveted
together. The scientists now hope that the ability to weld it will increase its
applications.
"The new technique is just a simple twist, but
it could allow widespread use of this high-strength aluminum alloy in
mass-produced products like cars or bicycles, where parts are often assembled
together," says Li. "Companies could use the same processes and
equipment they already have to incorporate this super-strong aluminum alloy
into their manufacturing processes, and their products could be lighter and
more energy efficient, while still retaining their strength."
More
“It is
hard for us, without being flippant, to even see a scenario within any kind of
realm of reason that would see us losing one dollar in any of those [Credit Default
Swap] transactions.”
Joseph J.
Cassano, the former A.I.G. executive in charge of CDS, August 2007, on Credit
Default Swaps that wiped out A.I.G in 2008.
The monthly Coppock Indicators finished January.
DJIA: 24,999 +76 Down. NASDAQ: 7,282 +124 Down.
SP500: 2,704 +71
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.
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