Baltic Dry Index. 711 +12 Brent Crude 70.34
“Curiouser and curiouser!”
Lewis Carroll, Alice in Wonderland.
This
weekend, other news. Important news not part of all the incessant Brexit or USA
v China trade war hype. We open with Europe about to open up a second front
against China. We may or may not have man-made global warming, but how much
longer can our new man-made global recession be delayed?
EU, China stumble over trade, human rights ahead of summit
April 5, 2019 / 12:56 PM
BRUSSELS (Reuters) - Tensions over trade,
investments and minority rights are preventing China and the EU from agreeing a
joint declaration at a summit next week, multiple sources in Brussels said on
Friday, sapping a European push for greater access to Chinese markets.
Alarmed by
potential Chinese dominance of strategic European industries, EU leaders last
month sought to prepare for the April 9 summit - flagged as an opportunity to
cement bilateral ties - by agreeing what they said was a more assertive stance
towards Beijing.
By
diplomatic convention, joint statements are issued at the conclusion of
high-profile bilateral summits to formalise policy.
Donald Tusk,
the head of the European Council, has recommended rejecting the statement as it
stands, according to an EU source. China had not met EU hopes that it would
open its markets, nor seriously committed to reforms of global trade rules.
According to
an early draft put forward by the European Union and seen by Reuters, Beijing
would be bound into completing talks on an investment agreement and committing
to remove what the EU says are unfair barriers to trade.
The EU also
wants to show the United States that the trade war route is not the only way to
coax Beijing to open up.
But Chinese
officials have removed or changed many of those references, the EU diplomats
said, raising the embarrassing probability of no communique at all after
Chinese Premier Li Keqiang, European Commission President Jean-Claude Juncker
and European Council President Donald Tusk have met.
Envoys for
EU nations including Britain, Germany and France said they could not back the
communique on the basis of China’s changes, an EU official said.
More
Up next, what’s wrong with this? The
curious case of forever rising stocks. Cui bono?
“When I used to
read fairy tales, I fancied that kind of thing never happened, and now here I
am in the middle of one!”
President Trump, with apologies to Lewis Carroll.
‘How is this possible?’ Analysts puzzle over stock market’s rally amid equity-fund exodus
By Chris
Matthews Published: Apr 5, 2019 4:53
p.m. ET
U.S. stocks at the end of March posted their best
quarter in nearly a decade, but they did so without help from
investors in U.S. stock mutual funds and exchange-traded funds, which have seen
sizable outflows since the start of the year, according to data from Lipper and
EPFR global. For the quarter, the S&P 500 SPX, +0.46% rose 14%, and added another 1.9% so far this month, putting the broad-market index just 1.3% shy of its Sept. 20 record, even as U.S. equity funds posted outflows of $39.1 billion, according to a Bank of America analysis of EPFR data.
“This has been a
huge question for us: How this is possible?” Jared Woodward investment
strategist at Bank of America Merrill Lynch told MarketWatch. He said although
it isn’t unprecedented for equity fund flows to be negative while stock prices
climbed, the pace and magnitude of the stock market’s rise and equity outflows
are much greater so far this year. Back in 2016, equity outflows totaled $93
billion, but the accompanying 5% rise in global stocks was far less potent than
this current period, the analysts said.
Woodward and his colleagues theorized in a
Thursday research report that the divergence between outflows and outsize
gains, perhaps, can be explained by corporate buybacks, as S&P 500 firms
have repurchased $227 billion of their own stock in the first quarter of 2019,
according to FactSet data, up from $143 billion in the first quarter of 2018.
---- Nevertheless, corporate buybacks
alone cannot account for the extent of this year’s rally, which has seen the
total market capitalization of the S&P 500 rise by $2.96 trillion
year-to-date, according to FactSet data. Stock index and individual options
bets could be another culprit behind the divergence, according to Bank of
America analysts, who point out that open interest in stock-index derivatives
has risen from $446 billion today from a negative $1.2 trillion at December’s
lows. Open interest refers to futures and options contracts that haven't been
settled.
---- Tom Roseen, head of research services at Lipper, said that his firm is seeing a similar pattern of equity fund outflows, with that money being diverted to international stock funds, taxable bond funds, and money-market mutual funds, a cash-like asset that many investors turn to in times of market turbulence. Year-to-date money-market funds have seen $48.9 billion in inflows, according to Lipper data. “Mom and pop are listening to all the naysayers and are ducking for cover,” Roseen said. “They don’t trust the market.”
Yousef
Abbasi, director of U.S. institutional equities and global market strategist at
INTL FCStone, told MarketWatch that equity fund outflows are one reason to be
skeptical of the longevity of the current bull market. Another reason for
caution is that “this rally has occurred on super light volume,” Abbasi said.
“Even on a big data day,” like Friday, which saw the release of the closely
watched jobs report, “volumes are running 15% below the average,” he added.
More
Hedge-fund billionaire Ray Dalio says capitalism needs urgent reform
By Ciara
Linnane and Jonathan
Burton Published: Apr 5, 2019 3:08 p.m.
ET
Capitalism is no longer working for most Americans,
according to one hedge-fund billionaire, who says the expanding wealth gap
dividing the haves and have-nots is creating a volatile environment with
disturbing parallels to the economic and social upheaval of the 1930s.Ray Dalio, founder of Bridgewater Associates LP, the world’s biggest hedge fund, says capitalism has developed into a system that is promoting an ever-wider wealth gap that puts the very existence of the United States at risk. In a two-part series published on LinkedIn, the noted investor argues that capitalism is now in need of reform — and offered ways to accomplish it:
---- Dalio believes capitalism is the most effective allocator of resources that raise living standards, arguing that communist systems fail because they do not recognize the need for people to be rewarded properly in order to motivate them to work.
Today, however, the system has produced little or no real income growth for most people for decades, according to the Dalio essay on LinkedIn. Prime-age workers in the bottom 60% have had no real (inflation-adjusted) income growth since 1980, and the percentage of children who grow up to earn more than their parents has fallen to 50% from 90% in 1970.
The wealth
gap is at its widest point since the late 1930s, with the top 1% owning more
than the bottom 90% combined, “which,” Dalio notes, “is the same sort of wealth
gap that existed during the 1935-40 period (a period that brought in an era of
great internal and external conflicts for most countries).”
Most people
in the bottom 60% “are poor,” he writes. About 40% of all Americans would
struggle to raise $400 in the event of an emergency, he says, citing a recent
Federal Reserve study. The childhood poverty rate stands at 17.5% and has not
shown meaningful improvement in decades. That, in turn, leads to poor academic
achievement, low productivity and low incomes.
More
In
technology news, is the USA playing by the rules or simply making up new rules
to block China’s technology lead? If the later, how will this end well? Putting up yet another drag on global trade
increases the odds of an early global
recession.
Huawei allegations driven by politics not evidence - U.N. telecoms chief
April 5, 2019 / 3:00 PM
GENEVA (Reuters) - U.S. security concerns
about 5G mobile networks built by Chinese telecoms giant Huawei appear to be
driven by politics and trade rather than any evidence, the head of the U.N.
internet and telecoms agency said on Friday.
Houlin Zhao,
secretary-general of the International Telecommunication Union (ITU), told
reporters in Geneva that security of 5G networks was in everybody’s interest
but so far he had not seen anything to substantiate claims about Huawei.
“Those
preoccupations with Huawei’s equipment, up to now there is no proof so far,”
Zhao said.
The United
States has urged its allies to ban Huawei from building 5G networks, saying it
could be used for espionage. Huawei has rubbished the allegations, saying
Washington had a “loser’s attitude”.
“I would
encourage Huawei to be given equal opportunities to bid for business, and
during the operational process, if you find anything wrong, then you can charge
them and accuse them,” the Chinese-born Zhao said. “But if we don’t have
anything then to put them on the blacklist – I think this is not fair.”
Zhao was
speaking on the day South Korea’s Samsung Electronics won the race to
commercially launch 5G services, saying 5G-enabled smartphone Galaxy S10 would
allow games to be played with minimal delay, potentially changing the landscape
of the gaming industry.
Zhao said it
was in the interest of telecoms companies to ensure that they were using secure
hardware, because otherwise they could face a challenge by national authorities
or a public backlash against using their services.
“So it’s
their first concern, their first target, to make sure that the systems they use
in the market will provide service satisfaction to them.”
The ITU will
hold a meeting in October to finalise standards for the 5G spectrum, but
concerns about Huawei will not slow down that process, Zhao said.
The ITU also
has a study group of national experts looking into security.
“Up to now
we don’t have any proposal from anybody on 5G security concerns there,” Zhao
said.
The study
group includes an official from the U.S. Department of Homeland Security as
well as an official from Chinese telecoms firm ZTE Corp.
Finally,
in Boeing 737 Max crash news, has Boeing “made a safe plane safer,” or is
Boeing covering up for its earlier mistakes? I suspect the later, but the US
tort bar will determine the case. In an emergency, is the 737 Max unrecoverable?
Were
Boeing’s emergency procedures deficient?
Why wasn’t all this discovered before certification? What went wrong at
the FAA? After the Lion Air crash off Indonesia, why didn’t Boeing ground the
plane?
Explainer: Ethiopia crash raises questions over handling of faults on Boeing 737 MAX
April 4, 2019 / 9:18 PM
SINGAPORE (Reuters) - Ethiopia’s
insistence that its pilots followed procedures when their Boeing Co 737 MAX
nosedived before a deadly crash, and Boeing’s recent declaration that a new
software fix makes a “safe plane safer,” have set the stage for a lengthy fight
over the roles of technology and crew in recent 737 MAX crashes.
The Ethiopian Airlines pilots initially followed the advice to shut off the MCAS anti-stall system but later reversed the command counter to guidance at a time when they were travelling beyond maximum operating speeds, according to data contained in a preliminary report released on Thursday and experts on the jet.
WHAT ARE THE PROPER PROCEDURES?
If MCAS misfires, forcing the nose down in a manoeuvre similar to a condition that pilots know as runaway trim, pilots are supposed to hit two cut-out switches at the plane’s centre console to turn off power to the electric trim system.Under normal circumstances, trim is used to keep an aircraft flying level, but the MCAS makes automated nose-down movements.
Data from the Ethiopian Airlines flight indicates the aircraft was flying nose-heavy and not in a “neutral” attitude when pilots hit the stabilizer cutout switches to disable the MCAS system, the preliminary report showed.
That would make the situation harder to manage, possibly accounting for their decision to turn the system back on.
Boeing’s checklist for pilots tells them to “control airplane pitch attitude manually with control column and main electric trim as needed” before hitting cut-out switches and turning to a rarely used manual wheel to keep the plane’s nose in the proper position. It does not describe a specific trim setting for the pilots to achieve.
WOULD THE PROCEDURES WORK?
Experts are
questioning whether the procedures outlined after the Lion Air crash were
comprehensive enough to ensure pilots could recover from a real-life cockpit
emergency with several distractions at a low altitude shortly after take-off
rather than in a pre-planned simulator ride.
A 737 MAX
pilot said the resistance on the control yoke would be about four times normal
and it could take a few dozen turns of the manual wheel to return the nose to
the proper position, depending on the alignment when the switches were cut.
The
preliminary report indicates the pilots tried to move their wheels together but
were unable to raise the nose much at all by doing so.
More
Family of American woman sues Boeing, Ethiopian Airlines over 737 Max crash
April 4, 2019 / 7:11 PM
CHICAGO (Reuters) - The family of an
American woman killed in the crash of an Ethiopian Airlines 737 MAX filed a
lawsuit on Thursday against the airline, Boeing Co and Rosemount Aerospace Inc,
which makes a part of the aircraft that is the focus of investigators.
The
complaint was filed in U.S. federal court in Chicago by the parents of Samya
Stumo, who lawyers said was on a work trip when Ethiopian Airlines Flight 302
crashed on March 10 soon after taking off from Addis Ababa, killing all 157 on
board.
It was the
first lawsuit filed on behalf of a U.S. victim of the Ethiopian disaster and
the first to target the airline and parts manufacturer Rosemount, in addition
to Boeing.
---- Thursday’s complaint accuses Boeing of
putting “profits over safety” and said the U.S. Federal Aviation Administration
must also be held accountable for certifying the 737 MAX.
“Those in
charge of creating and selling this plane did not treat Samya as they would
their own daughters,” the victim’s mother Nadia Milleron said a news conference
on Thursday.
Milleron
said through tears that the Ethiopian disaster could have been prevented
following the Lion Air crash.
“The people
who died in Indonesia (...) their deaths should not have been in vain.”
In a
statement following the preliminary report from Ethiopian authorities, Boeing
said flight data recorder information indicates the airplane had an erroneous
angle of attack sensor input that activated a system known as MCAS, similar to
the Lion Air disaster.
Rosemount
makes the angle of attack sensor.
Chicago-based
Boeing, which is also the target of lawsuits over the Oct. 29 Indonesia crash,
has been working on a software fix and new training guidelines for the MAX.
Lawyers for
Stumo’s family have also filed a federal tort claim against the FAA over the
Ethiopian crash. Legal experts say these cases face high hurdles since government
officials and agencies are generally immune from civil lawsuits, however.
Stumo,
originally from Massachusetts, is the niece of consumer activist Ralph Nader,
who called for a boycott of the 737 MAX on Thursday.
It was all very
well to say “Drink me,” but the wise little President Xi was not going to do that in a hurry. “No,
I’ll look first,” he said, “and see whether it’s marked ‘poison’ or not.”
With apologies to Lewis Carroll and Alice.
Sadly,
this old dinosaur thinks he’s seen this sort of disconnect from reality before.
History suggests that when reality returns, it returns in highly politically
unstable ways. Politics in America,
Europe and much of Africa, seem on the cusp of great change. Generational
change at that. Generational change is rarely orderly. If accompanied by mass unemployment
by AI, robotics and self-driving vehicles, we are on the cusp of a decade of
turmoil.
The monthly Coppock Indicators finished March
DJIA: 25,929
+54 Down. NASDAQ: 7,729 +94 Down. SP500: 2,834 +53 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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