Baltic Dry Index. 664
+06 Brent
Crude 65.28
Trump 25 percent tariffs. Postponed. Brexit 25 days away.
"In
economics, hope and faith coexist with great scientific pretension."
John Kenneth
Galbraith.
We open the week with
Reuters reporting upbeat news on the USA v China trade talks. With growth in
the global economy slowing or stalling, the last thing the global economy needs
is yet more trade war.
Below, more hype or a
real deal?
China says U.S. trade talks progress 'well received'
March 4, 2019 /
4:59 AM
BEIJING (Reuters) - The “substantive progress” China and the United
States have made in their trade talks has been “well-received” in both
countries and around the world, a senior Chinese official said on Monday,
maintaining Beijing’s previous upbeat assessment of discussions.
“History shows cooperation is the best choice for the world’s two
largest economies,” Zhang Yesui, a former Chinese ambassador in Washington and
now spokesman for China’s largely rubber-stamp parliament, told a news
briefing.
China and the United States have imposed tit-for-tat tariffs on hundreds
of billions of dollars worth of each others’ goods, and the talks are aimed at
de-escalating a conflict that has roiled financial markets, disrupted
manufacturing supply chains and shrunk U.S. farm exports.
---- “Economic and trade tries between China and the United States are mutually beneficial, win-win by the nature, and we hope that both sides can continue to step up consultations, to reach a mutually-beneficial, win-win agreement.”
Zhang’s remarks echoed comments made late last month by the Chinese’s
government’s top diplomat.
Zhang noted that aside from the trade dispute, the two countries also
regularly clash over issues like human rights, the disputed South China Sea and
self-ruled Taiwan, which China claims as its own.
While
China will defend its sovereignty, security and development interests, it is
also dedicated to having a relationship with the United States based on mutual
respect and non-confrontation, he said.
More
Asian markets gain on reports that U.S.-China trade agreement is imminent
By Associated Press
and Marketwatch
Published: Mar 3, 2019 11:54 p.m. ET
Asian stocks rose Monday after news reports said Washington
and Beijing are close to reaching an agreement as early as this month to end
their costly tariff war.Benchmarks in Shanghai, Tokyo and Seoul advanced after Bloomberg News and The Wall Street Journal, citing unidentified sources, said China was offering to ease tariffs and other restrictions on U.S. farm, chemical, auto and other products. They said Washington would remove most sanctions on Chinese imports.
A deal might be completed in time to be signed by Presidents Donald Trump and Xi Jinping this month, the reports said. But they cautioned the two sides still were negotiating on the issue that sparked the dispute: Chinese plans for state-led creation of global technology competitors that Washington, Europe and other trading partners say violate Beijing’s market-opening obligations.
The battle between the two biggest global economies has rattled global
financial markets for months. Investors worry it will weigh on global economic
growth that already is showing signs of slowing.
“Speculation that both the U.S. and China are close to signing a deal
will keep market players slightly upbeat,” Nicholas Mapa and Prakash Sakpal of
ING said in a report.
More
But even with a
positive USA – China trade deal, some fear the global economy will still head
into recession.
It may already be too late to avert global recession, with dire consequences for Europe
China has reached debt saturation and is no longer able to crank up
fresh credit booms safely Credit: ALAMY
Global recession risk has suddenly jumped several notches.
The accumulated damage from Donald Trump’s trade wars and worldwide
monetary tightening is taking its toll. We are one shock
away from a contractionary vortex that would be extremely hard to control.
In America the Federal Reserve’s instant tracking gauges of GDP growth
have halved since late January. They are approaching stall speed.
In China it is becoming clearer that the Communist leadership either
cannot or will not engineer another brake-neck credit boom to revive an economy
slipping into structural stagnation. Stimulus is trickling through but it
is a pale image of past reflation cycles.
This is hard to square with the blistering
asset boom over the last two months. The MSCI index of world
equities has risen 15pc. Wall Street’s S&P 500 is up 18pc. Bears
have been mauled.
Big global banks and funds bought into this relief rally on early
evidence of synchronised ‘policy capitulation’ by the G2 economic
superpowers: the Fed’s rhetorical retreat after its ill-judged rate rise and
hawkish message in December; Beijing’s pledge to avert a hard-landing at the
Central Economic Working Conference.
This had echoes of the Fed rescue in early 2016, which bought
another lease of the global expansion and proved to be a bargain-basement
buying moment. Yet the comparison has its limits.
The eurozone was then in the accelerating stage of a V-shaped recovery
driven by quantitative easing a l’outrance and the end of austerity.
Today it is in a deep industrial slump. It has tightened monetary policy into
the downturn by shutting down QE.
---- The danger for the world economy is that the sugar rush from Mr Trump’s $1.5 trillion fiscal package will fade before China comes close to righting the ship. This would push the defenceless eurozone over the edge and back into the ‘sovereign/bank doom-loop’ that it has conspicuously failed to resolve.
The central premise of Trumponomics has turned to dust. Cut in corporate
tax rates from 35pc to 21pc were supposed to set off a virtuous circle of
capital investment by companies. Instead they spent the money on dividends and
share buybacks.
All that remains of this wasted largesse is a budget deficit near 5pc
GDP at the top of the cycle, and a public debt ratio rising from 106pc of GDP
this year to 117pc by 2023 (IMF forecast) assuming nothing goes wrong.
Great expectations now ride on China’s gargantuan $690bn credit surge in
in January. But Chinese double counting distorts the headline figures. Rob
Subbaraman from Nomura said much of the debt is being used to refinance
corporate and household liabilities that have reached 206pc of GDP. China has
reached credit saturation.
His ‘credit impulse’ measure has risen just 2.5 percentage points in the
latest reflation mini-cycle. This compares to 13.9 points in the 2015-6. It was
18.7 points in the cycle before that, and 30.2 points in the post-Lehman blitz
of 2008-2009.
More
We are just over
three weeks away from a no deal Brexit, with the Brussels bureaucrats seemingly
getting ready to shoot Germany (and Ireland,) in the head. Sadly no one seems to care in Europe about
shooting Ireland, but everyone in Euroland loses out if Brussels shoots Germany
in the head.
German auto
manufacturing already has enough problems to struggle with without the EU
sabotaging Brexit. The dirty killer diesel US scandal did in Germany’s
reputation, while new European regulations has virtually killed off demand for
passenger diesel vehicles.
Below, just 25 days
to save Germany, Ireland, and Europe from Juncker and Barnier, and that’s
before President Trump slaps 25 percent tariffs on Europe’s i.e. Germany’s car
exports. But the Baltic Dry Index may be signalling the next global recession
is already underway.
Brexit casts shadow over stands at Geneva car show
March 3, 2019 /
7:05 AM
LONDON (Reuters) -
The usual mix of sports cars, offroaders and family saloons will be on display
at the Geneva motor show this week, but with one big difference from previous
years - they may be about to become harder and costlier to make, and more
expensive to buy.
If Britain leaves the European Union on March 29 without a withdrawal
deal, all bets are off on what will happen to the just-in-time production
system on which the European auto industry relies, or to demand for vehicles
across the continent.
And the situation has just got more complicated. Last week, British
Prime Minister Theresa May raised the prospect of a short delay to Brexit,
potentially disrupting the plans that carmakers have put in place to cope with
a no-deal divorce.
“I’m sure I speak for most of the country when I say, we just want to
get it done. We just want to know where we are and get on with it,” Andy
Palmer, the chief executive of British sports car maker Aston Martin, told
Reuters.
---- The stakes are high. Britain is Europe’s second-biggest buyer of cars and fourth biggest manufacturer, meaning disruption to supplies - and possible tariffs of up to 10 percent on vehicles moving between Britain and the European Union - will have repercussions across the industry.
With less than a month to go, May is trying to renegotiate a withdrawal
deal with the EU that British lawmakers have so far refused to approve.
The timing could hardly be worse for a car industry already struggling
with a slowdown in China, the world’s biggest autos market, a plunge in demand
for diesel vehicles and costly investments in electric as well as self-driving
cars.
---- British supercar maker McLaren will display its Speedtail in Geneva, while fellow British luxury brand Bentley will show off the Bentayga Speed and Aston Martin its Lagonda all-terrain concept vehicle.
Meanwhile, Japan’s Toyota has just begun churning out its new Corolla
car at its English factory.
But others are staying away from Europe’s top car show. These include
Britain’s biggest carmaker Jaguar Land Rover (JLR), which is belt-tightening,
and U.S. manufacturer Ford, which is making cuts to its European operations.
JLR has said it faces a more than 1.2 billion pound hit to its profits
if there is a “bad Brexit deal”, which would involve tariffs on cars of up to
10 percent and between roughly 2 and 4 percent on components and engines.
Ford, which does
not make cars in Britain but builds nearly 1.3 engines there, has said a
no-deal Brexit could cost up to $1 billion.
It fears delays and tariffs before the engines can be fitted into
vehicles in Germany, Turkey, the United States and elsewhere.
Ford also has the most exposed overseas plant, with nearly one in three
cars rolling off the production line in its Cologne plant in Germany destined
for Britain, the company’s third-largest market, according to researchers LMC
Automotive.
Seven of the top 10 factories that export the highest volumes to Britain
are in Germany, which itself is teetering on the edge of recession.
More
Peak Car Poses a Mortal Threat to Germany’s Most Important Industry
The switch to ride-hailing and electric vehicles challenges national champions BMW, Daimler, and Volkswagen.
28 February 2019, 05:01 GMT
Germany is the birthplace of Karl Benz, the inventor of the automobile,
and gave rise to the “People’s Car,” Volkswagen, which has grown into the
world’s biggest auto manufacturer. It’s home to four brands—BMW, Mercedes,
Audi, and Porsche—that account for 80 percent of global sales of luxury
vehicles. And with 835,000 workers, the auto industry is Germany’s biggest
employer, responsible for a fifth of the country’s exports.
But automotive employment will start to decline this year, the powerful
IG Metall union predicts. Germany may have reached peak car, posing a threat to
the most important pillar of the economy.
“We’re preparing for a time when
fewer people will work in the industry in our region,” says Rüdiger
Schneidewind, mayor of Homburg, a western city of 42,000 with four big
factories that account for 30,000 jobs. “More than half of this region’s
prosperity is due to auto manufacturing.”
It’s
hard to overstate the degree to which the automobile permeates German culture.
The country’s no-speed-limit autobahns are the stuff of legend, and the cars
that run on them are technological marvels supporting a vast ecosystem of
suppliers and developers. But as people shift to ride-hailing, car-sharing, and
driverless electric vehicles, many of Germany’s advantages will evaporate. “The
three core features of mobility in the 20th century are dissolving: cars that
need a driver, are privately owned, and are powered by a combustion engine,”
says Stephan Rammler, an auto industry consultant and professor of
transportation design at Braunschweig University of Art. “Germany risks falling
behind new giants being created in China and the U.S.”
The
concern for the Germans is that profits will flow increasingly to arrivistes
such as Waymo, Apple, or Uber Technologies. Battery-powered cars don’t need as
much precision engineering as traditional models, and making them will require
fewer workers. More than a third of Germany’s 210,000 jobs in engine and
transmission production will disappear by 2030, IG Metall says. “Carmakers can
only survive as mobility-service providers, not as auto manufacturers ,” says
Horst Lischka, IG Metall’s Munich head and a member of BMW AG’s supervisory
board.
More
A Storm Is Gathering Over Container Shipping
Sagging global trade, rising fuel costs and stubbornly low freight rates have shipping lines facing new headwinds in an elusive search for stability
March 3, 2019 6:30 a.m. ET
It used to be that you could measure confidence in the container
shipping industry by the ever-increasing scale of the carriers’ vessels and the
size of their ship orders.
These days, the hulking megaships that serve the world’s biggest trade
routes look more than ever like monuments to brash corporate planning and
projections built out of hopes rather than reality.
From slowing global trade to rising fuel prices to capacity increasingly
out of step with demand, container shipping operators are facing new challenges
over the next two years, leaving prospects for a recovery foundering after
nearly a decade of moving in fits and starts toward stability.
Shipping boxes stuffed with clothing, electronics, manufacturing parts
and a broad range of consumer goods across the oceans is the backbone of global
trade. But the cost of moving them could go up sharply as regulations calling
for cleaner—and more expensive—ship fuels kick in next year.
Estimates
are that shipping companies will try to pass on to cargo owners around $10
billion a year in combined additional expenses from the new fuel requirements,
but they will almost certainly have to absorb some of those costs to keep
customers on board.
Container ships move everything from clothes and food to furniture,
electronics and heavy industry parts. In the years before the 2008 financial
crisis, boxships fueled globalization. Demand for ocean trade grew up to 8%
annually and owners spent billions to buy more vessels.
This created loads of excess tonnage which, at the current rate of new
ship deliveries, will take at least two years to absorb. It also means that on
top of higher fuel expenses, freight rates likely will continue to hover way
below break-even levels across some of the biggest ocean trade routes.
With China’s economy slowing and shipments taking a hit from the
evolving trade war between Washington and Beijing, operators are already
cutting their full-year forecasts.
“We see clearly a global economic growth
that is declining,” Soren Skou, chief executive of A.P. Moller-Maersk A/S, the
world’s top container operator by capacity, told an investor conference call
earlier this month. “We see weaknesses, in particular, in China and Europe. We
expect container demand growth to fall to 1% to 3% this year from 3.7% to 3.8%
last year.”
More
Jean-Claude
Juncker. Failed former Luxembourg P.M., serial liar, president of the European
Commission. Scotch
connoisseur.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled
over.
Today, driverless cars again. Are driverless cars using the occupants as
guinea pigs?
U.S. agency probing two fatal Tesla crashes in Florida since last Sunday
March 2, 2019 /
10:21 PM
WASHINGTON
(Reuters) - U.S. authorities are investigating a fatal Tesla Inc Model S crash
in Florida last Sunday that killed the driver and caused a massive fire, the
second fatal Tesla crash in the state this week being probed, the National
Highway Traffic Safety Administration (NHTSA) said on Saturday.
The agency and the National Transportation Safety Board said late on
Friday they were sending teams to investigate the other fatal crash Friday in
Delray Beach, Florida of a 2018 Model 3 that crashed into a semi-trailer.
A NHTSA spokesman confirmed Saturday the agency has an “ongoing
investigation” into the Sunday Tesla crash in Davie, Florida, and “will take
additional actions if appropriate.”
Tesla did not immediately comment Saturday.
The South Florida
Sun Sentinel reported Monday the 2016 Tesla Model S caught fire and burned the
48-year-old driver beyond recognition. The newspaper said the Tesla battery
repeatedly caught fire after being transported to a towing facility.
More
NTSB sending investigators to fatal Tesla-semitrailer crash
The sheriff's report didn't say whether the
Tesla's autopilot or automatic emergency brakes were engaged. Jeremy Beren
Banner, 50, died at the scene.
March
2, 2019, 2:14 AM GMT
MIAMI
— A federal safety agency is sending a three-member team to investigate a fatal
crash involving a Tesla electric car and a semitrailer that is strikingly
similar to a 2016 crash involving another vehicle made by the company.
The
National Transportation Safety Board said late Friday on Twitter that the team would work
in cooperation with the Palm Beach County Sheriff's Office, which is probing
the Friday morning crash in Delray Beach.
A
sheriff's report says the tractor-trailer was making a left turn onto a divided
highway to head north when the southbound 2018 Tesla Model 3 hit the semi's
driver side, tearing off the Tesla's roof as it passed under the trailer. The
Tesla's driver, 50-year-old Jeremy Beren Banner, died at the scene.
The report didn't say whether the Tesla's Autopilot semi-autonomous
driving system or its automatic emergency braking system were working at the
time of the crash. Tesla released a statement Friday expressing sadness and
saying the company is "working to learn more and are reaching out to the
authorities to offer our cooperation."
The circumstances of the crash are much like one that occurred in May
2016 on the opposite side of Florida, near Gainesville. Joshua Brown, 40, of
Canton, Ohio, was traveling in a Tesla Model S on a divided highway and using
the Autopilot system when he was killed.
The NTSB, in a 2017 report, wrote that design limitations of the
Autopilot system played a major role in the fatal crash, the first known one in
which a vehicle operated on a highway under semi-autonomous control systems.
The agency, which makes safety recommendations to the National Highway Safety
Administration and other agencies, said that Tesla told Model S owners that
Autopilot should be used only on limited-access highways, which are primarily
interstates. The report said that despite upgrades to the system, Tesla did not
incorporate such protections.
Tesla has said that Autopilot and automatic emergency braking are
driver-assist systems, and that drivers are told in the owner's manual that
they must continuously monitor the road and be ready to take control if
necessary.
In January of 2017, NHTSA ended an investigation into the
Gainesville-area crash, finding that Tesla's Autopilot system had no safety
defects at the time.
But the agency warned automakers and drivers not to treat the
semi-autonomous driving systems as if they could drive themselves.
Semi-autonomous systems vary in capabilities, and Tesla's system can keep a car
centered in its lane and away from other vehicles. It can also change lanes
when activated by the driver.
The NTSB likely will incorporate the Delray Beach crash into other
investigations from last year involving Tesla vehicles. Investigators are
probing a fatal March 2018 crash involving a Tesla SUV near Mountain View,
California. That vehicle was operating on Autopilot when it struck a freeway
barrier, killing its driver, the agency determined.
In addition, the NTSB is investigating the crash of a Tesla Model S
sedan that may have been using Autopilot when it hit a parked firetruck on
Interstate 405 near Los Angeles. The driver told authorities the Autopilot was
working at the time.
NHTSA also is looking into a May 11 crash involving a Tesla Model S near
Salt Lake City. Autopilot was in use when the car hit a stopped fire department
truck
“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 [CDS] transactions.”
Joseph J. Cassano, a former A.I.G. executive,
August 2007, on Credit Default Swaps that wiped out A.I.G in 2008.
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?
Graphite offers up new quantum surprise
Researchers observe an unusual quantum Hall effect in the old three-dimensional material
Date:
February 28, 2019
Source:
University of Manchester
Summary:
Researchers have discovered the quantum Hall effect in bulk graphite -- a
layered crystal consisting of stacked graphene layers.
Researchers at The University of Manchester in the UK, led by Dr Artem
Mishchenko, Prof Volodya Fal'ko and Prof Andre Geim, have discovered the
quantum Hall effect in bulk graphite -- a layered crystal consisting of stacked
graphene layers. This is an unexpected result because the quantum Hall effect
is possible only in so-called two-dimensional (2D) systems where electrons'
motion is restricted to a plane and must be disallowed in the perpendicular
direction. They have also found that the material behaves differently depending
on whether it contains odd or even number of graphene layers -- even when the number
of layers in the crystal exceeds hundreds. The work is an important step to the
understanding of the fundamental properties of graphite, which have often been
misunderstood, esepcially in recent years.
In their work, published in Nature Physics, Mishchenko and
colleagues studied devices made from cleaved graphite crystals, which
essentially contain no defects. The researchers preserved the high quality of
the material also by encapsulating it in another high-quality layered material
-- hexagonal boron nitride. They shaped their devices in a Hall bar geometry,
which allowed them to measure electron transport in the thin graphite.
"The measurements were quite simple." explains Dr Jun Yin, the
first author of the paper. "We passed a small current along the Hall bar,
applied strong magnetic field perpendicular to the Hall bar plane and then
measured voltages generated along and across the device to extract longitudinal
resistivity and Hall resistance.
More
In central banking as in diplomacy, style, conservative
tailoring, and an easy association with the affluent count greatly and results
far much less.
John Kenneth
Galbraith
The monthly Coppock Indicators finished February
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.
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