Baltic Dry Index. 685
-04 Brent
Crude 69.12
Car Crash Brexit now reset
10 days away. Day 123 of the
never-ending China trade talks.
“When it becomes serious, you have to lie.”
Jean-Claude
Juncker. Failed former Luxembourg P.M., serial liar, president of the European
Commission. Scotch
connoisseur.
Let’s
face it, the EUSSR is doomed. Between Trump’s trade wars, with Europe next in
the firing line if the never-ending trade war talks with China ever get to
conclude, and Juncker and Barrier so mishandling Brexit, that Brexit now looks
likely to be shooting continental Europe in both feet, how likely is the EU to
survive its arriving recession? Pretty unlikely it seems to me, with only the
timing of the next “Brexit” in doubt.
Below,
Germany, France and Italy, have no one to blame but themselves. I mean, who’d
leave anything important to Juncker and Barnier, let alone negotiating Brexit! Might as well have tipped euros down the
drain.
But
first this update from Asia. More disconnect from reality.
Manufacturing rebound lifts Asian shares to seven-month highs
April 2, 2019 /
2:16 AM
TOKYO (Reuters) -
Asia shares extended their rally on Tuesday as positive Chinese and U.S factory
activity surveys aided investor confidence, and the ebbing concerns over the
global economy spurred selling of safe-haven U.S. bonds as yields rose from 15 month
troughs.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.2
percent, hitting a seven-month high after rallying more than one percent in the
previous session.
Australian shares gained half a percent and Japan’s Nikkei advanced 0.3 percent,
extending its gains for a third session.
The Shanghai Composite Index climbed 0.1 percent while Hong Kong’s Hang
Seng Index was flat.
Wall Street shares jumped on Monday, with the S&P 500 and Dow Jones
Industrial Average both rising more than one percent, with the Dow lifted by
sharp gains in Caterpillar Inc and Boeing Co. [.N]
Investors cheered U.S. data overnight showing improvements in
manufacturing activity last month and construction spending for February, which
overshadowed an unexpected drop in retail sales.
More
Here are three times when the Fed denied the yield curve’s recession signals, and were wrong
By Sunny
Oh Published: Apr 1, 2019 4:14 p.m.
ET
After the yield curve’s most widely monitored measure inverted in March,
members of the Federal Open Market Committee were quick to play down the
pessimistic outlook offered by the bond-market recession indicator.
The litany of dismissive remarks comes amid concerns from market
participants that an economic downturn would force the central bank’s hands,
and push it to cut interest rates to end the current hiking cycle. In recent
weeks, members of the Federal Open Market Committee including Mary Daly, Robert
Kaplan and Charles Evans have all publicly looked past the economic
significance of the inversion, with some citing the fall in the terminal
interest rate for the subdued level in long-dated bond yields.
---- Before the 1990-’91 recession
Before the 1990s, the Fed interpreted the yield-curve inversion as a reflection of subdued inflationary pressures, allowing long-dated yields to drift closer to their shorter-term peers. This lowered the threshold for an inversion, diluting its predictive abilities.Thinking that higher prices were ultimately the trigger for monetary tightening, and thus recessions, the muted inflation pressures throughout the 1980s suggested to central bank policymakers that it had yet to reach the occasion where it was pushing policy into restrictive territory.
“The yield curve either in the United States or elsewhere has not been a reliable indicator of future inflation. Indeed, the evidence seems to cut the other way. And if it has not been a reliable indicator of future inflation and most recessions are inflation-induced, I am not prepared to bet the mortgage on the signals that the yield curve are giving off right now,” said former New York Fed President Gerald Corrigan in February 1989.
Before implosion of the dot-com bubble
This time the Fed and Treasury officials attributed the inversion and the fall in long-dated yields to the balanced budgets, and the occasional fiscal surplus, under President Bill Clinton’s administration. In their minds, the fall in bond supply relative to demand had artificially pushed bond prices higher, and yields lower, making a yield-curve inversion that much easier to achieve.“I think the changed supply outlook for Treasuries has introduced a fair amount of noise into the Treasury yield curve,” from Peter Fisher, manager of the Fed’s System Open Market Account, at the March 2000 Fed meeting.
Before the 2007-’09 recession
Former Fed Chairman Ben Bernanke in a speech at the Economic Club of New York in 2006 said bond-buying from foreign investors may have been responsible for pushing long-dated Treasury yields lower as part of his “savings glut” thesis. That is, high savings rates across the world were being funneled into U.S. assets, reducing the so-called term premium, or the extra yield investors demanded for buying long-dated bonds to compensate for the risk of interest rates not moving as expected.“First, in previous episodes when an inverted yield curve was followed by recession, the level of interest rates was quite high, consistent with considerable financial restraint. This time, both short- and long-term interest rates — in nominal and real terms — are relatively low by historical standards. Second, as I have already discussed, to the extent that the flattening or inversion of the yield curve is the result of a smaller term premium, the implications for future economic activity are positive rather than negative,” said Bernanke.
And now
More
Now
back to the wealth and jobs destroying EUSSR, and other harsh reality.
Jean-Claude
Juncker. Failed Luxembourg Prime Minister and ex-president of the Euro Group of
Finance Ministers. Confessed liar. European Commission President. Scotch
connoisseur.
Germany's manufacturing recession worsens: PMI
April 1, 2019 /
8:10 AM
BERLIN (Reuters) - A weakening global economy, risks linked to Britain’s
possible departure from the European Union without a deal and trade disputes
pushed activity in Germany’s manufacturing sector to contract at its fastest
rate since July 2012, a survey showed on Monday.
Markit’s Purchasing Managers’ Index (PMI) for manufacturing, which
accounts for about a fifth of the economy, fell to an 80-month low reading of
44.1, down from 47.6 in February and lower than the flash reading of 44.7.
It was the third successive month that the index was below the 50.0 mark
that separates growth from contraction.
“Both total new orders and export sales are now falling at rates not
seen since the global financial crisis, with more and more firms reporting
lower demand linked to Brexit, trade uncertainty, troubles in the automotive
industry and generally softer global demand,” said IHS Markit’s Phil Smith.
New orders posted their steepest drop since April 2009.
Weakening exports have translated into a slowdown in Europe’s biggest
economy, which posted its lowest growth rate in five years last year.
The economy has been relying on consumption for growth. A robust labour
market, rising wages and low interest rates have been supporting the
consumption-driven cycle.
“Manufacturing output fell markedly and at the fastest rate since 2012,
with the consumer goods sector joining intermediate and capital goods producers
in contraction,” said Smith.
He added: “The sustained solid growth in employment prior to March had
been the sector’s one remaining bright spot, but the latest survey indicated a
fall in jobs for the first time in three years amid reports from a number of
firms that some temporary contracts weren’t being renewed.”
More
German economy will grow 0.7 percent this year if Brexit is disorderly: BDI
April 1, 2019 /
10:37 AM
BERLIN (Reuters) - Germany’s economy would grow by 0.7 percent this year
if Britain leaves the European Union in a disorderly manner, the Federation of
German Industry (BDI) said on Monday, a gloomier view for Europe’s biggest
economy than in the case of a ‘soft’ Brexit.
“The British economy faces a severe recession,” BDI president Dieter
Kempf said in a statement. “A disorderly Brexit will shave at least half a
percentage point off German growth this year.”
The BDI has until now forecast that the German economy would grow by 1.2
percent this year.
German Factory Slump Leaves Euro Area as Global Economic Laggard
By William Horobin
1 April 2019, 11:18 BST
Europe’s position as the weak link in the global economy is becoming
more entrenched, with a factory slump intensifying at the same time that Asia
shows signs of stabilizing.
Monday saw the region hit with another round of bad news, from the worst
German manufacturing performance in almost seven years to euro-area core
inflation at its weakest in 11 months. Italy’s industrial contraction deepened,
and a euro-wide measure is signaling multi-year lows for confidence and demand.
The bleak European picture contrasts with an improvement in Asia, where Purchasing Managers Indexes were led higher in March by China returning to expansion. In the U.S., the PMI is forecast to hold steady, while a separate gauge by the Institute for Supply Management is expected to improve.
Diverging fortunes indicate that Europe is losing the most in the global slowdown and suffering from the trade-war crossfire between the U.S. and China. The region’s difficulties are also partly homegrown, with prolonged disruption in the auto industry and the threat of a disorderly Brexit hurting confidence.
The warning signs have already forced the European Central Bank to redraw its plans for exiting stimulus measures. It’s currently working on a new round of cheap loans to banks in an effort to respond to the downturn, but that may not be enough, said Christopher Dembik, global head of macroeconomic research at Saxo Bank.
“Europe is currently the weakest point in the global economy,” Dembik said. “We got an horrible set of new data for the euro area that confirms the risk of lower growth than expected by consensus.”
The woes of the European economy have pushed investors into government bonds, sending the yield on 10-year German debt below zero for the first time since 2016.
---- The underperformance in euro-area manufacturing was linked to order books contracting the most since the end of 2012, said IHS Markit, which produces the survey. Net job losses were recorded in Germany and Italy.
“Looking at the forward-looking indicators, downside risks have
intensified,” said Chris Williamson, chief business economist at IHS Markit.
More
EU-U.S. Trade Talks Face Delay, Risking Trump Backlash
By Viktoria Dendrinou and Nikos Chrysoloras
Updated on 2 April 2019, 04:03 BST
European Union governments are struggling to reach
consensus on a mandate to begin trade talks with the U.S., risking a delay that
would further provoke Donald Trump’s ire after the bloc’s refusal to include
agriculture in the negotiations.At a meeting of EU ambassadors in Brussels on Wednesday, France is expected to resist giving the European Commission the green light to start negotiations to eliminate industrial tariffs between the regions, according to two officials familiar with the matter, who asked not to be named because the talks are private. Failure to get France on board would mean the EU’s executive arm won’t be given a mandate to negotiate.
The main sticking points include the role of climate and environment in
the mandate given the U.S. decision to withdraw from the Paris climate accord
and a clarification of what this negotiation would mean for the shelved
Transatlantic Trade and Investment Partnership, according to the officials.
A draft mandate prepared ahead of the meeting of ambassadors and seen by
Bloomberg reiterates that the EU seeks trade accords only with countries that
have signed up to the Paris agreement against climate change, even though the
U.S. has pulled out.
More
Central Bankers — Keeping The Wheels On The Bus
March 29, 2019 By Tim Taschler, CMT
So now the big central banks are all on the same page, blaming those
nasty “external forces” for economic slowdowns:
- US on pause, blames ‘external forces’
- ECB launches TLTRO, blames ‘external forces’
- BoJ downgrades outlook, blames ‘external forces’
- China launches fiscal easing, blames ‘external forces’
Simply put, the days of quantitative easing are back, and we’re not even
in a recession yet.
Graham Summers, Chief Market Strategist at Phoenix Capital, summed it up
nicely:
As for heading for a recession, the 3-month and10-year yield curve went
negative last week.
Furthermore, the 2-year and 10-year yield curve is getting close.
David Rosenberg, Chief Economist & Strategist at Gluskin Sheff, conducted a great interview with Real Vision where he said:
“And this is going to be a year — this is the first year of five years where more than a trillion dollars of corporate bonds are going to be rolling over and rolling over at interest rates that were higher than they were at the time of origination. And we have another situation where half of the investment-grade market right now, which is $3 trillion worth, is in triple-B credit. So these are called potential fallen angels where you potentially could get pushed into junk-bond status, which is a pretty big deal if that were to happen.
OK, well, when you actually look at what’s called a shadow Fed funds rate and you look at it on a balance sheet adjusted basis, so the nine hikes plus what they’ve already done on balance sheet downsizing, the net effect has been the equivalent of 340 basis points of Fed tightening.
And historically, that has been enough to tip the balance towards a recession. It’s at least as much as what the Fed did back in 1990, ’91. It’s pretty well in line with what the Fed did back into the 2001 recession. So this is a fairly, I would say, a fairly aggressive Fed tightening cycle, especially when you consider that there really wasn’t much in the way of inflation. They’ve already done a very big shift in terms of tone. So right now they’re talking the talk. And then the second half of the year, they’ll be walking the walk. And I think they’ll be cutting rates.
So it’s hard not to conclude that the global economy and US economy are rolling over. At the same time, Foreign selling of U.S. Treasuries in December hit record high-data, when foreigners sold $77.35 billion in US Treasuries after net sales of $13.2 billion in November, the largest since January 1978 when data collection began.
How will this play out going forward? A slowing US economy will probably
force the Fed to reverse course and lower interest rates and start buying bonds
again, expanding their balance sheet. If that happens, I would expect bonds,
metals and commodities to do well as the market prices this into the markets.
Once the Fed actually starts cutting, things will change and get trickier for
all market participants. However it comes to pass, it is probably time to pay
attention to all investments as they might become “trades.” The buy-the-dip and
buy-and-hold players will be challenged as central bankers try to figure out
just how they can manage to keep the wheels on the bus.
Mortgage rates plunge at the fastest pace in a decade as growth fears resurface
By Andrea
Riquier Published: Mar 30, 2019
10:09 a.m. ET
Rates for home loans tumbled, as investors snatched up safe assets
in the wake of a Federal Reserve policy announcement that took markets by
surprise. The 30-year fixed-rate mortgage averaged 4.06% in the March 28 week, mortgage guarantor Freddie Mac said Thursday. That was a 14-month low, and 22-basis point slide was the biggest weekly decline since June 2009. The popular product has managed a weekly gain only twice during 2019.
The 15-year adjustable-rate mortgage averaged 3.57%, down from 3.71%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.75%, down nine basis points.
Fixed-rate mortgages take their cue from the yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +1.65% , which has slumped to 15-month lows as investors grow increasingly itchy about the prospect of slowing global growth.
Lower borrowing costs are obviously good for would-be homebuyers. But rates aren't the housing market’s only headwind. There’s still very little inventory of homes in the areas where people want to live, in the price ranges they can afford. And mortgage lending remains tighter than before the housing crisis, even as Americans have accumulated more student debt and lower down payments.
The housing industry is, slowly, adapting. One example: home builders are increasingly constructing houses for rent, rather than for purchase by owner-occupants. The data in the chart above comes from economists at the National Association of Home Builders, who have tracked the trend across several decades.
Even with the increase, the share of single-family homes constructed for rentals purposes is only 5%, well below the share of all rental units that happen to be single-family homes. NAHB Chief Economist Rob Dietz pointed out in a research post on the topic that “as homes age, they are more likely to be rented.”
More
Edmund Burke.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled
over.
Today, golf. Because when you are POTUS, you can. Below,
meet Queen Elizabeth the pole vaulter.
"When
a President does it, that means that it is not illegal."
President
Nixon.
New book claims Trump 'cheats at the highest level' on the golf course
President Trump can frequently be seen playing golf on one of his courses in the US, and is known to be a keen player.
Monday 1 April 2019 11:26, UK
Celebrities and professional sportspeople have said that Donald Trump is
the "world's worst cheat" when it comes to playing golf, according to
a new book.
President Trump is known to enjoy golf, and he controversially spends
many weekends at his own golf courses up and down the US.
Now a new book by Rick Reilly, a former Sports Illustrated columnist,
claims the president is a serial cheater when it comes to his beloved sport.
"To say Donald Trump cheats is like saying Michael Phelps
swims," Reilly writes in the book Commander in Cheat: How golf explains
Trump, which is released this week.
"He
cheats at the highest level. He cheats when people are watching and he cheats
when they aren't."
Reilly adds: "He cheats whether you like it or not. He cheats
because that's how he plays golf".
The journalist spoke to dozens of players and celebrities, who recounted
their experiences of playing golf with the Mr Trump.
Hollywood actor Samuel L Jackson recounts
his time playing golf with the president, saying: "We clearly saw him hook
a ball into a lake at Trump National, and his caddy told him he found it!"
Even professional players have been claimed underhand tactics are used
by the president when he's out on the fairway.
Like Jackson, professional PGA tour golfer Brad Flaxon says he also saw
Mr Trump "dunk" a shot in the lake, before claiming that his ball was
out on the green.
Norwegian golfer Suzann Petersen told Reilly that "no matter how
far into the woods he hits the ball, it's in the middle of the fairway when we
get there."
Mr Trump claims his handicap is 2.8, but that's also been questioned by
Reilly, who says: "If Trump is a 2.8, Queen Elizabeth is a pole
vaulter".
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?
Record efficiency for perovskite-based light-emitting diodes
Rational molecular passivation for high-performance perovskite light-emitting diodes
Date:
March 28, 2019
Source:
Linköping University
Summary:
Efficient near-infrared (NIR) light-emitting diodes of perovskite have now been
produced in a lab. The external quantum efficiency is 21.6%, which is a record.
Efficient near-infrared (NIR) light-emitting diodes of perovskite have
been produced in a laboratory at Linköping University. The external quantum
efficiency is 21.6%, which is a record. The results have been published in Nature
Photonics.
The work is led by LiU scientist Feng Gao, in close collaboration with
colleagues in China, Italy, Singapore and Switzerland.
Perovskites are a group of materials defined by their crystal structure,
and have been the focus of intense research interest during the past 10 years,
initially for solar cells and recently also for light emitting diodes. They
have good light-emitting properties and are easy to manufacture. The external
quantum efficiency (the ratio of charge carriers emitted as light over all of
those fed into the materials) of light-emitting diodes based on perovskites has
until now been limited by defects that arise in the material during
manufacture. The defects act as traps for the charge carriers and thus cause
energy losses.
One way of dealing with defects is to add materials known as
"passiviation molecules," which bind to the atoms that cause defects.
The researchers had previously discovered a molecule with amino groups at its
ends that gave a certain improvement in properties. However, when they selected
a molecule that also contained oxygen atoms, the effect increased dramatically.
"We now understand that it is the hydrogen bonds between
passivation molecules and perovskite materials that cause problems. This
allowed us to search for a molecule that was perfect for passivation,"
says Feng Gao, senior lecturer in the Division of Biomolecular and Organic
Electronics at Linköping University.
The molecule they found has two amino groups at its ends, with oxygen
atoms at suitable distances between them. Oxygen atoms reduce the hydrogen
bonding ability of amino groups, and hence increase the probability that they
interact with defects. The number of traps for charge carriers in the
perovskite is significantly reduced, allowing the charge carriers to recombine
and emit light efficiently.
"This particular perovskite material gives highly efficient
light-emitting diodes in the near-infrared region. Near-infrared light-emitting
diodes are particularly useful for medical and telecommunication applications.
We believe that our new findings can also be applied to perovskite
light-emitting diodes with other colours," says Feng Gao.
The external quantum efficiency is a record-high 21.6%
"We have developed the best
light-emitting diodes in perovskite material yet. They can also compete with
light-emitting diodes based on, for example, organic materials," says
Wiedong Xu, postdoc in the Division of Biomolecular and Organic Electronics,
LiU.
“Europe
exemplifies a situation unfavourable to a common currency. It is composed of
separate nations, speaking different languages, with different customs, and
having citizens feeling far greater loyalty and attachment to their own country
than to a common market or to the idea of Europe".
Professor Milton Friedman, The Times 19 November
1997.
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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