Baltic Dry Index. 1280
+22 Brent
Crude 66.07
Never ending Brexit
now October 31st, maybe.
Nuclear Trump
China Tariffs Now In Effect.
USA v EU trade war
postponed to November, maybe.
If
inflation-adjusted interest rates decline in a given country, its currency is
likely to decline.
Ray Dalio
Another day of waiting
and guessing on what will happen at the G-20 meeting, now just two days away.
US spinners are rapidly walking back the idea that Presidents Trump and Xi will
make a deal. Not facing an election, time is on President Xi’s side. He can
wait things out and let the world, and parts of the US economy and consumers,
feel increasing pain.
But President Trump,
talked into a corner of his own making, can hardly be expected to cave in, and yet
expect it not to be noticed. But in an effort to appear tough, dare President
Trump walk out on Xi as he did with North Korea’s Kim?
Both sides will
likely cobble together yet more trade talks and defer any new tariffs for now.
On to the other one on one meetings, with Putin and Modi and all the others.
Try to get something
out of the other G-20 agenda more than just the usual talking shop and photo-op.
But from my view in cloudy old London, President Trump, the Fed and the ECB,
seem to have set off a new currency war race to the bottom. Nothing good for
most lies in fiat currency competitive devaluation.
But what will over-priced
stock markets make of that in the face of a global manufacturing recession led
by autos?
Asian Stocks Slip as Fed-Cut, Trade Optimism Fades: Markets Wrap
By Adam Haigh
Updated on 26 June 2019, 04:47 BST
·
·
U.S. consumer confidence and housing data missed
expectations
Asian stocks were mostly lower on Wednesday following a sell-off on Wall Street as investor optimism cooled with regard to the Federal Reserve being on the brink of lowering interest rates and the U.S.-China trade talks getting back on track.
Japanese shares slid and benchmarks fell at the open in Shanghai and Hong Kong. Australia and South Korea saw more limited moves, while futures on the S&P 500 Index were little changed.
American stocks dropped the most this month after Federal Reserve Chairman Jerome Powell warned the downside risks to the U.S. economy have increased, while not going beyond his previous guidance on rate cuts. Ten-year Treasury yields held around 2%, crude oil prices climbed on supply concerns, and gold gave up some recent gains. New Zealand’s dollar fluctuated after its central bank left rates unchanged.
“My biggest concern here is that people think higher tariffs, or the threat of higher tariffs, can be offset by the promise of lower rates,” David Kelly, chief global strategist at JPMorgan Asset Management, told Bloomberg TV. “That’s not going to work.”
Investor caution is returning ahead of the meeting between Presidents Donald Trump and Xi Jinping set for Saturday. The U.S. is willing to suspend the next round of tariffs on an additional $300 billion of Chinese imports while Beijing and Washington prepare to resume trade negotiations, people familiar with the plans said. At the same time, no detailed trade deal is expected at the G-20 summit, a senior Trump administration official said. Markets are betting the Fed will produce deep cuts to rates this year, and Tuesday’s drop on Wall Street underscored investor desire for confirmation on that score.
More
https://www.bloomberg.com/news/articles/2019-06-25/asia-stocks-to-slip-as-yields-drop-on-growth-worry-markets-wrap?srnd=premium-europe
Trump 'comfortable with any outcome' from pivotal Xi talks - official
June 25, 2019 /
12:34 AM
WASHINGTON
(Reuters) - U.S. President Donald Trump views this week’s meeting with Chinese President
Xi Jinping as a chance to see where Beijing stands on the two countries’ trade
war, and is “comfortable with any outcome” from the talks, a senior U.S.
official said on Monday.
The much-anticipated meeting at the G20 summit in Japan will be the first
face-to-face meeting for the leaders since trade talks broke off in May,
leading to a hike in U.S. tariffs on imports of Chinese goods.
The United States and China have waged an 11-month trade war marked by
tit-for-tat tariffs on hundreds of billions of dollars of each others’ goods,
roiling financial markets, disrupting supply chains and crimping global
economic growth prospects.
The senior administration official, speaking to reporters on condition
of anonymity, declined to give details about plans for the meeting, other than
to say it would likely happen on the second day of the Friday-Saturday summit
in Osaka.
“It’s really just an opportunity for the president to maintain his
engagement as he has very closely with his Chinese counterpart. Even as trade
frictions persist, he’s got the opportunity to see where the Chinese side is
since the talks last left off,” the official said.
“The president is quite comfortable with any outcome,” the official
added.
---- The senior administration official declined to say whether the meeting was seen as a chance to restart talks or achieve a more formal agreement.
“The president has been quite clear that he needs to see structural real reform in China across a number of issues and a number of sectors, and nothing about that has changed,” a second official said.
“The fact that talks broke down in May hasn’t changed that as the ultimate goal,” the official said.
Trump, who is known for preferring one-on-one meetings to multilateral talks, will meet separately with at least eight world leaders while he is at the summit, the first official said.
He plans to meet Russian President Vladimir Putin, Saudi Crown Prince Mohammed bin Salman and Turkish President Tayyip Erdogan, the official said, declining to give details of the dates and times because Trump’s schedule was still in flux.
More
Masters of what universe? Central bankers in a bind as G20 bickers over trade
June 26, 2019 /
5:19 AM
TOKYO/WASHINGTON
(Reuters) - For decades the United States led the push for lower tariffs
worldwide, but President Donald Trump is testing the solidarity of his G20 peers
with a protectionist line on trade, putting central bankers in a tough spot
with depleted resources to battle a downturn that may be coming sooner than
expected.
The U.S.-China trade war is the elephant in the room at this week’s G20
summit of the world’s top economies, and major central banks may find
themselves pressed into defensive action in short order should an expected
face-to-face meeting between Trump and Chinese President Xi Jinping go badly.
The resulting race to the bottom in interest rates - and currency values
- could rekindle the kind of acrimony among G20 officials so evident during the
years of massive bond buying by the U.S. Federal Reserve after the financial
crisis.
And the race may already be under way.
Under pressure from financial markets and wary of signs the global
economy might be slowing, the Fed earlier this year called an effective halt to
further rate increases, and at its meeting this month indicated rate cuts may
be on the way.
While Fed officials on Thursday pushed back on market expectations for a
significant, half a percentage point rate cut as soon as next month, the U.S.
central bank is still seen lowering rates once or twice by the end of this
year.
It is a shift that could make for tense talks at the G20 meetings, and
force a discussion on how to fight the next recession before Europe and Japan
end the extraordinary monetary steps taken to fight the previous one.
The impact of looser Fed policy may be
felt around the world through a decline in the dollar, which could pressure
Europe and Japan to follow suit to keep their exporters competitive - the
makings of the tension over currency that has plagued G20 meetings before.
More
India's tariff on U.S. apples delivers major blow to fruit industry
June 25, 2019 /
3:00 AM
une 25 (UPI) -- As America's second-leading importer of fresh apples,
India might have dealt a major blow to that U.S. industry by imposing tariffs
on the fruit, producers fear.
"India was exploding as a market for imported apples," said
Jim Bair, the president and CEO of the U.S. Apple Association. "Then, when
the tariffs went into effect, it fell off the cliff."
India announced June 15 it would impose a 20 percent tariff on U.S. apples -- along with 27 other products including almonds, walnuts and lentils.
The move came in retaliation for the Trump administration revoking India's preferential trade privileges. But India had been threatening to impose the tariffs since August, when the United States began taxing imports of steel and aluminum from that nation. India had delayed implementing the retaliatory tariffs several times as negotiations continued.
The tariff mainly impacts growers in Washington state, which produces the vast majority of America's apples. Around a quarter of U.S. apples are exported each year -- and 95 percent of those are grown in Washington.
Mexico is the top importer for U.S. apples. Canada usually claims the second spot, but last year India surpassed Canada for the first time, importing some 320 million pounds compared to Canada's roughly 280 million pounds.
That trend ended abruptly after India announced its intention to impose the retaliatory tariff, Adams said.
"When they made that announcement, there was a rush to get fruit into the market before the cost went up," Adams said. "So, all that fruit flooded the market, and it really disrupted the market."
After that, India's imports dropped substantially, and did not recover. So far this year, India has imported 60 percent fewer American apples, Adams said.
More
Safety first: markets wary of world politics and policy and dash for bunkers
June 25, 2019 /
2:41 PM
LONDON (Reuters)
- Gold, Switzerland’s franc, Japan’s yen, top-rated government bonds, and even
bitcoin — investors have dashed for havens and alternative assets this week as
anxiety grows about trade wars, U.S.-Iran tensions and negative interest rates.
Although world stocks and bonds remain near record highs thanks to
promises of ever more central bank largesse, the sudden dash for these
financial bunkers shows all is not as calm as a cursory reading of headline
indexes suggests.
Fears of a global trade war have been simmering for over a year but the
latest standoff between Washington and Beijing may come to a head at the G20
summit in Japan this weekend. New U.S. tariffs on Chinese imports could kick in
next month if there’s no progress between the two sides.
Military tensions between the United States and Iran have also gone up
several notches after Tehran’s downing of an unmanned American drone last week
and claims that U.S. retaliation was stopped at the last minute. A fresh wave
sanctions on Iran’s leaders and a war of words between the two sides have
followed.
The trade and geopolitical worries are compounding investor concern
about a looming global economic downturn and whether central banks are easing
policy again quickly enough to offset it.
Even if they are, the expanding
universe of bonds with a negative yield — effectively penalizing investors for
holding them — is unnerving for many.
“It comes at the worst possible moment because we are late-cycle, we are
worried about global growth, and the U.S. are fighting on many fronts,” said
Frederic Ducrozet, a strategist at Pictet Wealth Management, referring partly
to the trade conflict between the U.S. and China.
He said that under normal circumstances, the reaction to the dispute in
the Middle East would have been confined largely to oil prices. But because of
worries over global growth and the tail risk from trade negotiations, flows are
being directed instead into safe assets.
More
Next, when interest rates go wrong, as in now, where savers
in Europe are paying borrowers to borrow money from them. Blame it all on the
central banksters, the BIS does. But blame it on President Trump too, forcing
the Fed to cut interest rates again, as part of his re-election campaign to
boost US stocks. We all know that it ends badly, just not how badly, or when or
why.
Low interest rates
are a big opportunity for investment. But the issue is that this money should
go to the real economy, not the financial economy.
Carlos Slim
Opinion: The Federal Reserve is about to create a lot more zombies
By Brett Arends Published: June 24, 2019 5:41 p.m. ET
Long-term interest rates just fell off a cliff.
And if you think they can’t keep falling, think again.
Albert Edwards, a strategist at SG Securities, pointed out in a recent
note that none of the experts surveyed by the Wall Street Journal at the start
of the year predicted 10-year Treasury yields would fall below 2.5%.
Current level: 2%.
----He adds that
mainstream economists have been saying for years that long-term rates would
never end up at zero percent.
Yet rates in Europe are now negative. People are paying half a percent a year for the privilege of lending money to the government of Switzerland. Even in the U.S., 10-year rates adjusted for inflation are only 0.29%. A generation ago, they were typically 2% or better.
Western economists used to say that zero percent rates were a weird and unique thing you only saw in Japan — like people eating raw puffer fish and hoping not to die. It would never catch on over here, they said.
But they already have. Today European rates are even lower than those in Japan.
When U.S. rates first collapsed in 2011-2012, we were assured it was a freak one-off event and was never going to happen again.
When it happened again in 2016, we were told it was, well, a “two-off” event that was certainly never going to happen a third time.
Now it’s happening a third time, and I guess we’re waiting for the official line on why, once again, this is just a temporary derangement and nothing to worry about.
But the Bank for International Settlements — the central banks’ central banks — says there is something to worry about, and it’s the reason that economic growth, inflation and interest rates can’t get off the ground: zombies.
No, I’m not making this up.
The BIS says there are way too many zombies around, and they’re killing the economy, and it’s all the fault of low interest rates.
We’re talking “corporate zombies,” of course.
The BIS found that, ever since the 1980s, falling interest rates have made it easier and easier for bad companies with lousy management and terrible products and dismal prospects to stay in business long after they should have gone the way of all flesh.
These “zombie” companies can stay alive — or whatever the correct term is for zombies — if they can just keep borrowing. Bankers call this “extend and pretend” (as in, “extend the term of the loan, and pretend it’s ever going to be repaid.”)
And when money gets cheaper, that’s great for zombies. Lower interest rates are correlated with rising numbers of zombie companies, the BIS found.
And there are a lot of zombies around. The BIS reckons no fewer than 12% of the non-financial companies on major developed stock markets could be “zombie” companies, at least by a loose definition.
This is an epidemic. In the early 1990s, the figure was about 2%.
More
Former Shale Gas CEO Says Fracking Revolution Has Been ‘A Disaster’ For Drillers, Investors
Posted on June
24, 2019 by Lambert Strether
Lambert here: Sounds like it must have been a fun conferenceSteve Schlotterbeck, who led drilling company EQT as it expanded to become the nation’s largest producer of natural gas in 2017, arrived at a petrochemical industry conference in Pittsburgh Friday morning with a blunt message about shale gas drilling and fracking.
“The shale gas revolution has frankly been an unmitigated disaster for any buy-and-hold investor in the shale gas industry with very few limited exceptions,” Schlotterbeck, who left the helm of EQT last year, continued. “In fact, I’m not aware of another case of a disruptive technological change that has done so much harm to the industry that created the change.”
“While hundreds of billions of dollars of benefits have accrued to hundreds of millions of people, the amount of shareholder value destruction registers in the hundreds of billions of dollars,” he said. “The industry is self-destructive.”
Schlotterbeck is not the first industry insider to ring alarm bells about the shale industry’s record of producing vast amounts of gas while burning through far more cash than it can earn by selling that gas. And drillers’ own numbers speak for themselves. Reported spending outweighed income for a group of 29 large public shale gas companies by $6.7 billion in 2018, bringing the group’s 2010 to 2018 cash flow to a total of negative $181 billion, according to a March 2019 report by the Institute for Energy Economics and Financial Analysis.
But Schlotterbeck’s remarks, delivered to petrochemical and gas industry executives at the David L. Lawrence Convention Center in Pittsburgh, come from an individual uniquely positioned to understand how major Marcellus drillers make financial decisions — because he so recently ran a major shale gas drilling firm. Schlotterbeck now serves as a member of the board of directors at the Energy Innovation Center Institute, a nonprofit that offers energy industry training programs.
His warnings on Friday were also offered in unusually stark terms.
More
https://www.nakedcapitalism.com/2019/06/former-shale-gas-ceo-says-fracking-revolution-has-been-a-disaster-for-drillers-investors.html
Opinion: The Fed is now enabling politicians to act recklessly
By Michael
O'Sullivan Published: June 25, 2019
7:35 a.m. ET
As the dust settles on last week’s market-moving, dovish
communications from the Federal Reserve and the European Central Bank,
commentators continue to debate the Fed’s independence and the ECB’s wisdom. Yet, beyond the shorter-term noise of markets and the sting of tweets from President Trump, there is a much deeper issue — that the comfort blanket the Fed and other central banks extend to stock and bond markets is enabling reckless politicians to do and say reckless things.
While the majority of central bankers have engaged in quantitative easing and super-low interest rates out of necessity rather than choice, this is a policy experiment that has arguably reached the limits of its usefulness. Politicians are beginning to take advantage.
In particular, quantitative easing is very much like a doctor administering morphine — it will dull pain but won’t cure that patient. Quantitative easing dulled the pain of the aftermath of the global financial crisis, but it has done little to fix the eurozone, and has done much to extend wealth inequality and encourage indebtedness, not just in the U.S., but in Europe, Japan and by extension in some emerging markets.
----A much more profound concern relates to the intersection of central banks and politics, against the backdrop of what political scientist Larry Diamond has called a “political recession.” The widespread political volatility, agitation and generalized voter dissatisfaction we witness today are manifestations of lower expectations of income growth caused by the threat of structurally lower growth, and arguably the poorly distributed gains of globalization.
Very few politicians have responded to these threats in a thoughtful way, perhaps because the outsize presence of central banks and their willingness to calm markets removes a vital source of pressure on those politicians. For example, populist parties in Italy would show much less bravado if the European Central Bank hadn’t been buying billions of euros of its debt over the last seven years.
Equally, the White House might be much more careful and strategic in how it dealt with China if there was a sense that the Fed would not automatically respond to the collateral damage created by the trade dispute.
Read: Stephen Roach on Trump’s Fed-bashing
There are growing signs that because central banks are the only game in town, policy makers are less coherent in their thinking.
More
https://www.marketwatch.com/story/the-fed-is-now-enabling-politicians-to-act-recklessly-2019-06-25?mod=mw_theo_homepage
At the end of the
day, it's not a normal condition to have interest rates at zero.
Lloyd Blankfein
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled
over.
Today, follow up to that dirty Russian oil problem of last April. While
the pipelines are cleaned and mostly back to normal, the same’s not the case
with the tankers still loaded with polluted oil.
Exclusive: Dirty oil crisis over for Russia, but contagion felt on high seas
June 25, 2019 /
12:07 AM
MOSCOW/LONDON
(Reuters) - In the opinion of Russian officials, the oil contamination crisis
that disrupted flows from the world’s second-largest exporter of crude this
spring is long over.
But a closer look at a dozen tankers containing dirty Russian oil
suggests that for the buyers, the debacle has a long way to run and will cost
them hundreds of millions of dollars.
Two months since buyers discovered Russia was shipping oil contaminated
with organic chloride, which is designed to boost output but can destroy
refining equipment, less than half of the tainted crude loaded on tankers has
found end-users.
More than 1 million tonnes worth around $500 million remains homeless,
zigzagging between Europe and Asia. In China, buyers have refused to take dirty
Russian oil, forcing trader Vitol to send a cargo back to Europe.
The Chinese development has not previously been reported.
That means buyers are struggling to place oil even at discounts of $10-15
per barrel - or $10-15 million per regular Suezmax tanker - to the current,
regular price of $65 a barrel.
“I’m not willing to risk our equipment just for cheap crude,” said an
oil trader with a North Asian refinery.
Buyers have also paid millions of dollars in demurrage charges as
tankers are stuck with the dirty oil, preventing ship-owners from sending them
on new voyages.
Russia has promised to compensate buyers after they file claims
post-sale.
“The problem is that this oil is often impossible to sell. So how can I
file a claim?,” a Russian oil buyer said.
---- News of the dirty oil broke in late April when buyers from the Baltic port of Ust-Luga and along the Druzhba pipeline to Germany, Poland, Hungary, Slovakia, Ukraine, Belarus and the Czech Republic discovered organic chloride content 10-20 times above normal levels.
After several weeks of debate, Russian pipeline monopoly Transneft
pledged to pay compensation to Russian producers such as Rosneft,
Surgutneftegas, as well as Kazakhstan, for contaminated oil.
Those producers shall in turn compensate Western buyers including oil
traders Vitol, Glencore, Trafigura and oil majors Total, Shell, BP, Eni and PKN
Orlen, among others.
Hopes were high that China and India would take a big chunk of dirty oil
- as at least 800,000 tonnes began to sail from Europe to Asia - but those have
not materialized.
Five trading sources said Chinese customs authorities had told buyers
not to take crude with organic chloride content above the Russian standard of
10 parts per million. Some cargoes had as much as 100-200 ppm. The authorities
declined to comment.
Suezmax Chios I, fixed by Vitol, has been floating around the Suez for a
month, initially set to be sold to an independent Chinese refiner, but is now
heading back to Europe with no final buyer, according to traders and
ship-tracking data.
More
Negative interest
rates hurt banks' balance sheets, with the 'wealth effect' on banks
overwhelming the small increase in incentives to lend.
Joseph Stiglitz
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?
Concentrated Solar Power Quietly Makes a Comeback
CSP’s costs are dropping as the market gains steam in the Middle East and China. Can this once-promising technology regain its mojo?
Jason DeignJune 24, 2019
Concentrated solar power (CSP), a renewable energy technology that has more or less dropped off the radar in the U.S., is quietly becoming competitive elsewhere.
A recent analysis of power generation costs from the International Renewable Energy Agency (IRENA) revealed that CSP fell more steeply in cost last year than any other renewable technology.
It declined 26 percent year on year, double the rate seen in onshore wind and PV, and has dropped 46 percent since 2010.
IRENA said the rapid drop in CSP prices last year “should be treated with caution” because of the limited number of projects going ahead in 2018. At the same time, though, CSP deployment is set to rise in China this year, making a rebound in average global costs unlikely.
Instead, IRENA predicts average CSP costs will continue to descend
through to 2020, hitting between $60 and $100 per megawatt-hour, or roughly the
same level as offshore wind.
Between 2018 and 2021, said the agency, “CSP will experience a real step
change in costs,” falling 61 percent over the period or 27 percent year on
year.
Once again, IRENA urged caution with the prediction because it was based
on data from just five plants due to come online between 2020 and 2021. But
industry insiders are confident the technology can become significantly more
competitive.
“I think CSP still has a long way to go in cost reductions,” said Jonathan
Walters, a former World Bank director now working as an independent economic
consultant on renewable energy. “It’s still all about global scale.”
Scale has been a sticking point for CSP so far. Although CSP’s global
installed capacity has grown more than four times since 2010, it still only
added up to 5.5 gigawatts at the end of 2018. That’s the same as where PV was
at in 2005, according to IRENA figures.
More
“The great source of both the misery and
disorders of human life, seems to arise from over-rating the difference between
one permanent situation and another. Avarice over-rates the difference between
poverty and riches: ambition, that between a private and a public station:
vain-glory, that between obscurity and extensive reputation. The person under
the influence of any of those extravagant passions, is not only miserable in
his actual situation, but is often disposed to disturb the peace of society, in
order to arrive at that which he so foolishly admires.”
The Theory of Moral Sentiments.
1749.
The monthly Coppock Indicators finished May
DJIA: 24,815 +49 Down. NASDAQ: 7,453 +71 Down.
SP500: 2,752 +46 Down.
The S&P has reversed again to down after only one month. Time for
the Fed to step in again to buy stocks.
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