Saturday 23 March 2019

Weekend Update 23/03/2019 Trade War Cooks Goose!


Baltic Dry Index. 690 -05    Brent Crude 67.03

Brexit 20 days away (maybe.) Never-ending China trade war talks, day 113.

"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. When we are down $100 billion with a certain country and they get cute, don't trade anymore – we win big. It's easy!"

President Trump.

The sugar high from the Trump tax cuts and deregulation fading, and a rapidly slowing China and European economies, together with dire political realities on both sides of the Atlantic, spooked bond investors yesterday back into the harsh reality. As per the Fedster’s earlier in the week, a new global recession seems to be at hand.

For global stock markets flying on a wing and a prayer in a struggling Boeing 737 Max, it was unsettling news for stock pedlars and stock buyers everywhere. Suppose the Feds are right about a new recession? To whom do I sell out my overpriced stocks.

Below, trouble as the world suddenly runs short of “greater fool buyers.” I suspect as the next three months unfold, that we haven’t seen anything yet. As a short supply of greater fool buyers turns into a dearth. Irump’s trade wars have already cooked the goose that used to lay the golden eggs.

As a new global recession slowly unfolds, a massive 10 year debt bubble of mis and mal-investment is about to blow up. 2008-2009 will eventually come to look like a walk in the park.

“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”

“Adam Smith” aka George Goodman. The Money Game.

Stocks End Week Lower Amid Hints of Slowing Growth: Markets Wrap

By Vildana Hajric and Sarah Ponczek
Updated on 22 March 2019, 20:03 GMT
U.S. equities ended the week lower and Treasuries rose amid more signals that global growth is slowing. The dollar advanced against most major currencies, while the three-month/10-year yield curve inverted for the first time since 2007.

Despite a dovish turn by the Fed Wednesday, the S&P 500 Index on Friday saw its biggest drop since January -- and lost 0.8 percent for the week -- with materials and financials leading the benchmark down as the yield on 10-year Treasuries, already at a 14-month low, extended its decline. Growth fears also took a toll on crude, and energy shares tumbled. Investors sought refuge in utilities, while gold headed for its best week since early February. 

“The inversion historically has not been a good sign for the economy going ahead,” according to Ed Keon, chief investment strategist and portfolio manager at QMA. “But there’s deeper issues which we don’t fully understand and which the markets are grappling with. It’s not just cyclical signs that a flatter yield curve tends to be a sign of weaker economic growth ahead, but that the secular change where rates around the world in all the developed countries have been remarkably low.”

Banks and industrial shares led the Stoxx Europe 600 lower after German purchasing manager data badly missed forecasts. Sovereign bonds in Europe quickly reversed earlier losses and the euro erased a modest gain. The yield on Germany’s 10-year bonds -- Europe’s benchmark -- tumbled below zero

The surprise to stock and bond markets pulled the MSCI index of global equities down from its highest level since October, eroding some of the optimism that the Federal Reserve’s dovish tilt could prolong the bull market for stocks. Bonds, however, were already signaling investor worries that momentum in growth and inflation remains too subdued.

Hours before the 10-year yield tumbled in Germany, its counterpart in Japan fell to the lowest since 2016, New Zealand’s dropped below 2 percent for the first time and Australia’s was approaching an all-time low, as the world’s major central banks wound up another week showing they can’t yet tighten policy. Trade talks between the U.S. and China are scheduled to continue next week.
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S&P 500 could fall 40% as yield curve inverts, says analyst of one of 2018’s best hedge-fund returns

By Sunny Oh  Published: Mar 22, 2019 3:17 p.m. ET
Stock investors should heed the warning emanating from the bond market, says at least one hedge-fund manager, as the yield curve staged a stunning inversion Friday. 

“I think people are going to be surprised where the S&P 500 is trading at the end of the year. We’re going at least for a 40% decline from the S&P’s top,” Otavio Costa, a macro analyst at Crescat Capital, a hedge fund that oversees $52 million, told MarketWatch in an interview.

The analyst of the investment firm, says the inversion of the yield curve, where short-dated yields rise above their longer-dated peers, signals an ignominious end to a 10-year bull run for the S&P 500 index, which bottomed in March of 2009 but has mounted a record-long rally, by some measures, since that point.

In particular, Costa said the growing number of inversions in yield spreads across Treasury maturities suggested a bear-market for equities was at hand, in the face of a darkening global growth picture.

Costa’s comments come as the 10-year Treasury note yield TMUBMUSD10Y, +0.00% tumbled 10 basis points to 2.439%, while the 3-month T-bill TMUBMUSD03M, +0.00%  was down a single basis point to 2.462%, leaving the spread between the two maturities at around negative 3 basis points.

An inversion of this spread — the most closely watched by economists — has preceded every recession since 1960, though the timing between the two events can vary, according to the New York Fed. Bond prices move inversely to yields.

The inversion is the first such since 2007, just before the financial crisis that unfolded, reaching a crescendo in the fall of 2008. Yield curves invert because investors worry about future economic growth, which can stoke demand for safe, long-term Treasurys, while pushing down long-term rates. Up until January, the Federal Reserve had been lifting interest rates, nine times since December of 2015, which can have the effect of pushing down shorter-term rates, which are the most sensitive to central-bank rate increases, higher.
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Stocks took a big hit Friday, and these shares fell the most

By Philip van Doorn  Published: Mar 22, 2019 4:47 p.m. ET
Only one day after crystal-clear dovish signals by the Federal Reserve helped push stocks higher, fear of a recession sent bond prices soaring and stock prices tumbling.

The Dow Jones Industrial Average DJIA, -1.77%  sank 460 points, or 1.8%, to close at 25,502.32 Friday, while the S&P 500 SPX, -1.90%  slumped 1.9% and the Nasdaq Composite Index COMP, -2.50%  fared even worse, sliding 2.5%.

While it can never say it expects a recession, the Federal Open Market Committee’s two policy announcements on Wednesday — to leave the federal-funds rate unchanged while planning to stop the shrinkage of the Federal Reserve’s bond portfolio at the end of September — seemed to spook investors. But Thursday, those same announcements and the lower interest rates they implied had helped lift stock prices.

The bond market sent a prerecession signal on Friday, as the yield on 10-year U.S. Treasury notes TMUBMUSD10Y, +0.00%  skidded 10 basis points to 2.44%. That put it lower than the 2.46% yield on 3-month Treasury bills TMUBMUSD03M, +0.00%  — the first time since 2007.
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In other news, politics on both sides of the Atlantic turns “interesting.” But “interesting” is far from what over priced stock markets need.

Mueller Closes Trump Probe; Barr May Reveal Details Over Weekend

By Chris Strohm
Updated on 23 March 2019, 03:27 GMT
Special Counsel Robert Mueller has submitted his final report, a still-secret document that closes his 22-month investigation into whether President Donald Trump or those around him conspired in Russia’s interference in the 2016 election.

Attorney General William Barr said in a letter to Congress Friday that he may be able to provide lawmakers with the special counsel’s principal conclusions “as soon as this weekend.”

There were no instances in which Mueller was told not to take a specific action in his wide-ranging probe, Barr said.

“I remain committed to as much transparency as possible, and I will keep you informed as to the status of my review,” Barr wrote. He added that he would consult with Deputy Attorney General Rod Rosenstein and Mueller to determine what additional information from the report can be released to Congress and the public.

“The next steps are up to Attorney General Barr, and we look forward to the process taking its course,” White House Press Secretary Sarah Sanders said in a tweet. “The White House has not received or been briefed on the Special Counsel’s report.”

It’s only the beginning of a struggle between Barr, lawmakers and the White House over how much of Mueller’s findings -- and the evidence behind them -- will be disclosed to Congress and the public. That fight is likely to escalate from social-media wars between the president and his critics to hearing rooms on Capitol Hill and ultimately to the Supreme Court.

Mueller didn’t issue any final indictments before turning in his report and no sealed indictments are pending, according to officials. That means several people close to Trump, including his eldest son Donald Trump Jr., avoided criminal charges from the special prosecutor.

“The investigation is complete -- it’s concluded,” Kerri Kupec, a Justice Department spokeswoman, told reporters.
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Five percent? EU leaders doubt May's Brexit vote chances

March 22, 2019 / 3:24 AM
BRUSSELS (Reuters) - After British Prime Minister Theresa May reassured them she could win a crunch vote in parliament next week to ensure an orderly Brexit, EU leaders were left even more doubtful of her chances.

Following more than an hour of explanations that with days left until Britain might crash out she could win over lawmakers who have twice rejected her EU withdrawal deal, May left the summit room on Thursday and the other 27 leaders conferred — finding a consensus that they were even less convinced than before, officials familiar with their discussions told Reuters.

French President Emmanuel Macron told the room that before coming to Brussels he had thought May had only a 10 percent chance of winning the vote. After listening to the prime minister, he said, he had cut his estimate — to five percent.

To general assent, one person present said, summit chair Donald Tusk shot back that Macron was being “very optimistic”.

After hours of discussion, the leaders agreed to delay Brexit beyond the deadline of next Friday — but possibly only to April 12 or into May, trying to shift responsibility for any chaotic no-deal outcome back to London from Brussels.

Finally, in USA mid-west flooding news, is a food disaster in the making? 

Catastrophic Midwestern flooding costing farmers $1 billion and counting

Updated March 21, 2019 at 5:36 PM
EVANSVILLE, Ind., March 21 (UPI) -- Catastrophic flooding across the central Midwest has wiped out livestock and probably will prevent farmers from planting this spring.

Thousands of livestock were killed, and many more are expected to die from lack of food and water. The Nebraska Beef Cattlemen's Association alone estimated the lost livestock was worth $400 million.

"The magnitude of this is hard to comprehend," said Steve Nelson, the president of the Nebraska Farm Bureau. "This flood has covered 70 percent of our state. I've talked with lots of [cattle farmers] who moved their cattle to places that had never been flooded before, and yet they lost their cattle."

Moreover, the flooding will likely prevent farmers from planting this spring, costing an estimated $440 million more, according to an application for expedited federal disaster assistance in Nebraska.
The flooding has mainly hit Nebraska, Iowa and Minnesota. On March 12, Nebraska Gov. Pete Ricketts declared a state of emergency.

In Iowa, state leaders declared disasters in more than 40 counties. Fewer Iowa livestock producers were impacted, according to early reports, but corn and soy growers have lost large stores of grain and soybeans.

In just one Iowa county with 28 farmers, an estimated 390,000 bushels of stored soybeans and about 1.2 million bushels of stored corn were ruined by floodwaters, said Jeff Jorgenson, an Iowa corn and soy grower. The value of the lost grain is around $7.3 million.

"That's not $7.3 million in profit," Jorgenson said. "That's money farmers use to operate their farms. It's going to be really difficult for a lot of farmers."

That grain is not insured, Jorgenson added. Farmers often store grain waiting for a good price to sell. A few cents more per bushel could mean a few thousand dollars more in profit.

Besides the lost grain, many more farmers fear that the soaked fields are unlikely to be read for spring planting.

"There's a lot of this land that will not be touched this year just because it will not dry out," Richard Crouch, the chairman of the Mills County Emergency Management Commission in Iowa, told the Des Moines Register. "It's going to take years for it to come back to a natural use on account of the amount of sand and debris that's left on it."

Iowa farmers usually plant in mid-April, Jorgenson said.

"That's not going to happen," Jorgenson said. "If we get it in by May, I'll be surprised."

---- "Additional spring rain and melting snow will prolong and expand flooding, especially in the central and southern U.S.," the NWS said in a statement. "As this excess water flows downstream through the river basins, the flood threat will become worse and geographically more widespread."

Spring flooding could be 'unprecedented' with 200 million Americans at risk

Doyle Rice USA TODAY Published 9:51 PM EDT Mar 21, 2019
Spring flooding has already been disastrous, and it's likely to get worse, federal forecasters announced Thursday. Floods could reach "unprecedented" and "potentially historic" levels.
Almost the entire eastern two-thirds of the nation should see flooding this spring, National Weather Service deputy director Mary Erickson said at a news conference on Thursday. Some 25 states are forecast to see "moderate" to "major" flooding, the weather service said.

The Midwest floods are “a preview of what we expect throughout the rest of the spring,” she said. "The flooding this year could be worse than what we have seen in previous years ... even worse than the historic floods we saw in 1993 and 2011," Erickson added.

The deadly, destructive flooding that began last week from Minnesota to Missouri has killed at least four people, caused more than $1.5 billion in estimated losses and damages and destroyed more than 2,000 homes. 

---- "This is shaping up to be a potentially unprecedented flood season, with more than 200 million people at risk for flooding in their communities," said Ed Clark, director of NOAA's National Water Center in Tuscaloosa, Alabama.

Catastrophe: Before and after satellite images show destruction in Nebraska and Iowa after Midwest floods

The water that's now soaking the Upper Midwest will eventually make its way down the Mississippi toward the Gulf Coast, where flooding will worsen in May. 

“The extensive flooding we’ve seen in the past two weeks will continue through May and become more dire and may be exacerbated in the coming weeks as the water flows downstream,” Clark said.

Forecasters say the biggest risks include all three Mississippi River basins, plus the basins of the Red River of the North, the Great Lakes, the eastern Missouri River, the lower Ohio River, the lower Cumberland River and the Tennessee River.
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A stock is, for all practical purposes, a piece of paper that sits in a bank vault. Most likely you will never see it. It may or may not have an Intrinsic Value; what it is worth on any given day depends on the confluence of buyers and sellers that day. The most important thing to realize is simplistic: The stock doesn’t know you own it. All those marvelous things, or those terrible things, that you feel about a stock, or a list of stocks, or an amount of money represented by a list of stocks, all of these things are unreciprocated by the stock or the group of stocks. You can be in love if you want to, but that piece of paper doesn’t love you, and unreciprocated love can turn into masochism, narcissism, or, even worse, market losses and unreciprocated hate.

The Money Game (1968 ) George J. W. Goodman aka “Adam Smith.”

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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