Baltic Dry Index. 1950
+86 Brent
Crude 59.06 Spot Gold $1,520
Never ending Brexit
now October 31st, maybe. 77
days away.
Nuclear Trump
China Tariffs Now In Effect.
USA v EU trade war
postponed to November, maybe.
“Suckers
think that you cure greed with money, addiction with substances, expert
problems with experts, banking with bankers, economics with economists, and
debt crises with debt spending”
Did the “everything
bubble” just die yesterday? Global bond
markets think that it did. Bond markets
nearly everywhere are signalling they think a new global recession is arriving
or worse is already underway. If they’re right, this no time to be fighting a
trade war between the two largest national economies, let alone starting a new
one between the USA and Europe.
If a new recession is
starting, our central banksters are virtually out of ammo, and we are likely to
see a desperate Federal Reserve in the USA follow Europe and Japan into a mad
experiment in negative interest rates. Nothing good lies down the road to mad
money.
Below, how the Fed
and US stocks ran out of road and talent.
U.S. yield curve inversion highlights recession fears, Fed dilemma
August 14, 2019 /
4:06 PM
NEW YORK (Reuters)
- When the U.S. Federal Reserve cut interest rates last month for the first
time in more than a decade, it signaled that further reductions in borrowing
costs might not be needed. Bond markets vehemently disagree.
Sliding bond yields and the inversion of a key part of the U.S. yield
curve on Wednesday for the first time in 12 years show that bond investors have
a far gloomier outlook for the U.S. and global economies than the U.S. central
bank.
“The rates market rarely lies and globally it looks like it’s expecting
a day of reckoning,” said Tom di Galoma, a managing director at Seaport Global
Holdings in New York.
Fears are also rising the Fed may not only be behind the curve in
cutting rates, but that central banks may be running out of ammunition to
stimulate growth as countries offset each other’s attempts to boost growth with
looser fiscal policy.
Worsening economic data, weak inflationary pressures, the escalating
U.S.-China trade war and intensifying tensions between protesters in Hong Kong
and the Chinese government have boosted demand for safe-haven debt, sending
many European government bond yields deeper into negative territory while the
longest-dated U.S. Treasury yields have fallen to record lows.
The inversion of key parts of the Treasury
yield curve, in which investors in short-term holdings get paid more than those
in long-term ones, has historically been a reliable indicator of a coming
recession.
---- The U.S. central bank looks better placed to ease conditions than many of its counterparts as it still has room to cut rates. Bond markets are priced for two additional U.S. rate cuts this year and a third in the first half of next year.
The ECB, meanwhile, is evaluating cutting rates further into negative
territory and undertaking another bond purchase program.
The Bank of Japan is similarly looking at lowering its negative interest
rates and expanding asset purchases.
By easing financial conditions, a central bank can stimulate an economy
by making business and consumer loans cheaper, while the depreciation of the
local currency that results from lower interest rates can boost exports.
As central banks compete for more dovish policies, however, they
threaten to cancel each other out, making each move less effective.
More
Warning Signs Point to a Global Slowdown
Weakness in Germany, China, puts pressure on record U.S. expansion as recession risks rise; U.S. stocks tumble
ByJosh
Mitchell andJon
Hilsenrath
Warning signs pointing to a deepening global economic
slowdown—and the risk of recession—are flashing more brightly.Many of the biggest troubles are showing up overseas. But stock and bond markets are signaling that the threat of a downturn is spreading to the U.S., the world’s largest economy, now in its longest expansion on record.
Economic output in Germany, the world’s fourth-largest economy, contracted in the second quarter, according to a report Wednesday, while a report on factory output in China, the second-largest economy, came in lower than expected.
“It’s almost like we’re starting to see a textbook version of a pre-recessionary period,” Nicholas Akins, chief executive of Ohio-based American Electric Power Co. , said in an interview Wednesday.
The company provides electricity to industrial, commercial and residential customers in 11 states.
The good news is that the U.S. isn’t confronted with severe excesses to unwind, as it was in the mid-2000s with the housing boom or the late 1990s with tech-stock gains. Because of that, some economists said any downturn might be mild.
Many past recessions were traced to high interest rates instituted by the Federal Reserve, as in the early 1980s; to bubbles bursting such as the dot-com bust of 2000 and 2001; to financial instabilities as in 2007, 2008 and 2009; or some combination of the above.
Some experts predict that if a recession comes, this time it will be driven by lower business
investment.
Allen Sinai, a forecaster at Decision Economics, said that if corporate earnings slip, that could lead to less investment and then less hiring, creating a self-fulfilling process of contraction. Mr. Sinai has nudged his recession risk estimate up for the first time in years.
Already, both corporate earnings and investment are sliding. U.S. corporate profits before taxes were down 2.2% in the first quarter compared with a year earlier, according to the Commerce Department. And U.S. business investment fell at a 0.6% annual rate in the second quarter, after achieving quarterly growth rates exceeding 8% in late 2017 and early 2018.
“I think the trade thing is a big policy error,” Mr. Sinai said. He agrees with President Trump that China hasn’t been playing by the rules of global trade and needs to be confronted. But he said the tariffs the U.S. is using against China are hurting back home. “There has got to be a better way to do it,” he said.
More
Trump officials see no Chinese concessions for tariff delays amid market rout
August 14, 2019 /
1:31 PM
WASHINGTON (Reuters) - China made no trade
concessions after U.S. President Donald Trump postponed 10% tariffs on over
$150 billion worth of Chinese imports, senior U.S. officials said on Wednesday,
adding that talks aimed at resolving the trade fight would continue and markets
should be patient.
“This was not a quid pro quo,” U.S. Commerce Secretary Wilbur Ross told
CNBC television in an interview, using a Latin phrase meaning a favor exchanged
for a favor.
Trump on Tuesday backed off his Sept. 1 deadline for imposing the
tariffs on thousands of Chinese imports, including technology products,
clothing and footwear, pushing it to Dec. 15 for certain items. U.S. and
Chinese officials also announced renewed trade discussions.
Both developments drew cautious relief from retailers and technology
groups as the world’s two largest economies enter the second year of their
trade dispute.
Trump’s tariff delay coincided with
recession fears in U.S. markets sending stocks to their biggest one-day loss
since October. The U.S. Treasury yield curve inverted for the first time since
2007 - a possible recession signal - after China’s industrial output growth hit
a 17-year low in July and Germany reported a second-quarter contraction in
gross domestic product output.
More
UK yield curve inverts for first time since 2008 as global market gloom sets in
August 14, 2019 /
4:03 PM
LONDON (Reuters) - Britain’s government
bond yield curve inverted on Wednesday for the first time since the global
financial crisis, mirroring a move in the United States where it is
traditionally a sign that some investors think a recession is nearing.
The yield on the 10-year gilt fell below the yield on the two-year gilt
shortly after 1000 GMT for the first time since August 2008, according to data
from Refinitiv.
Normally, a yield curve slopes upwards as investors expect to be
compensated for the risk of owning longer-maturity debt.
An inversion - where shorter-dated yields are higher than longer-dated
ones - is sometimes considered a warning of a risk of recession, especially in
the United States.
On Wednesday the U.S. Treasury two- to 10-year yield curve similarly
inverted for the first time since 2007, spurred by downbeat news on the global
economy.
The curve in Britain has inverted before the recessions of 1980/81,
1990/91 and 2008/09. It was also inverted between 1997 and 2001, when the UK
economy continued to grow solidly, although 2001 saw recession elsewhere.
“(The inversion) says we’re in a very negative environment, in financial
market terms,” said Marc Ostwald, chief economist at ADM Investor Services,
adding that the gloom surrounding the global economy was possibly overdone.
“The correct question is whether this is the end of the asset price
bubble inflated by (quantitative easing),” Ostwald said.
More
German economy shrank 0.1% in second quarter
By Max
Bernhard Published: Aug 14, 2019 2:41 a.m. ET
Germany's economy shrank in the second quarter as trade dragged down
economic growth amid worries that the country could slip into a recession.
Europe's largest economy contracted 0.1% from the previous quarter, as
foreign trade slowed down economic growth despite robust consumption at home,
according to a first estimate published Wednesday by national statistics agency
Destatis.
In annualized terms, gross domestic product grew 0.4%, the agency said.
Higher private and government consumption and higher investments
contributed positively in the quarter, but trade and a decline in construction
dragged down the economy as exports decreased stronger than imports, Destatis
said.
"Trade conflicts, global uncertainty and the struggling automotive
sector have finally brought the German economy down on its knee. In particular,
increased uncertainty, rather than direct effects from the trade conflicts,
have dented sentiment and hence economic activity," ING Chief Economist for
Germany Carsten Brzeski said.
The economic data will increase pressure on Germany's government to act
amid calls for a stimulus package, he said.
“What are the odds that people
will make smart decisions about money if they don’t need to make smart
decisions—if they can get rich making dumb decisions?”
The Big Short: Inside the Doomsday Machine
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled
over.
Today, our lost control central banksters again, led by that usual
suspect for talking drivel. If the fiat dollar reserve standard ever drops into
negative interest rates, bad things will come fast and furious I suspect, and a
mad global scramble into gold and silver will ensue as the fiat currencies drop
into revulsion.
There was a reason for allowing recessions to reset capitalism, but
modern central banksters forgot that long ago, which is how we got to where we
are today.
“Sometimes I wonder whether the
world is being run by smart people who are putting us on or by imbeciles who
really mean it.”
Mark Twain.
Ex-Fed boss Greenspan says ‘there is no barrier’ to Treasury yields falling below zero
By Mark
DeCambre Published: Aug 13, 2019 4:38 p.m. ET
There is some $15 trillion in government debt that now
yields less than zero, and former Federal Reserve Chairman Alan Greenspan
believes there’s no reason why U.S. government bond yields couldn’t join much
of the developed world in the subzero world. Greenspan, during a phone interview with Bloomberg News on Tuesday, said “zero” has no real meaning for the U.S. bond market and that a slide below that psychological level, already traversed by many others countries, wouldn’t be inconceivable for U.S. paper.
The 93-year-old economist’s comments come as more Wall Street participants contemplate the very real possibility of negative Treasury rates.
In a blog post dated Aug. 6, Joachim Fels, a global economic adviser for Pimco, said escalating trade tensions between the U.S. and China could be a spark for U.S. Treasurys slipping to rates that are less than zero.
Current estimates hold that some $15 trillion in debt bears a negative yield, which means that investors get back less than their original investments for the privilege and perceived safety of owning government-backed debt.
The negative-yield dynamic in the market has proliferated after more than a decade of monetary-policy unorthodoxy intended to juice stubbornly low inflation and anemic growth in Europe and parts of Asia.
---- All maturities of German government debt
are yielding negative, headlined by near-record lows for 10-year German
benchmark bonds TMBMKDE-10Y, -2.33% , known as bunds,
which yield minus 0.605% (see chart attached):
---- Greenspan said he agreed with one theory espoused by Fels, which says that investors are more willing to hold on to negative-yielding debt because they have much longer time horizons.
“Why people continue to buy long-term Treasuries at such low yields may
be also due to forces having altered people’s time preferences,” Greenspan told
Bloomberg. “But there is hundreds of years of history showing the long-term
stability in time preference, so these changes won’t be forever.”
More
"Zero Has No Meaning" Says Greenspan: I Disagree, So Does Gold
Negative yields? Who cares says Greenspan. It's meaningless.
Negative Yields "No Big Deal"
---- Negative Time Preference
As noted above, Joachim Fels, global economic adviser at Pacific
Investment Management Co, suggests "there’s been a change in the
fundamental economic theory of time preference that helps explain why people
are buying debt with negative yields."
Time preference can never be negative. Never.
To believe in negative time preference is to believe things such as
"It's better to have 90 cents ten years from now than a dollar
today".
Yields are negative only because central banks manipulated yields
negative. They would never be negative on their own accord.
Investors buy negative yielding debt firmly convinced central banks will
manipulate yields even more negative.
Zero Does Have Meaning
Alan Greenspan is wrong. Zero is very meaningful with negative being
even more meaningful.
It means central banks have hit a brick wall. They cannot cram any more debt into the system. There is no tolerance for paying interest.
That's the meaning, and the evidence is overwhelming.
- More Currency Wars: Swiss Central Bank Poised to Cut Interest Rate to -1.0%
- Inverted Negative Yields in Germany and Negative Rate Mortgages.
- Fed Trapped in a Rate-Cutting Box: It's the Debt Stupid
Gold has the meaning of zero correct even if central bank clowns and analysts don't.
Mike "Mish" Shedlock
“Back in July 2003, he’d written them a long essay on the causes
and consequences of what he took to be a likely housing crash: “Alan Greenspan
assures us that home prices are not prone to bubbles—or major deflations—on any
national scale,” he’d said. “This is ridiculous, of course…. In 1933, during
the fourth year of the Great Depression, the United States found itself in the
midst of a housing crisis that put housing starts at 10% of the level of 1925.
Roughly half of all mortgage debt was in default. During the 1930s, housing
prices collapsed nationwide by roughly 80%.”
The Big Short: Inside the Doomsday Machine
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?
The Desperate Race to Neutralize a Lethal Superbug Yeast
08.13.19 09:00 am
Last September, an American traveling in
Kenya suffered a serious stroke, and was hospitalized there for a month. The
stay didn’t go well: The person suffered a bout of pneumonia, a urinary tract
infection, and a brush with sepsis, a life-threatening immune reaction to
infection.
Eventually the traveler’s condition
stabilized enough to be brought home, to the intensive care unit of a hospital
in Maryland. Because they had been in that foreign hospital for so long, the US
institution decided to be extra careful. It put the patient (who hasn’t been
named publicly, to respect medical privacy) into an isolation room and required
that everyone on the treatment team wear a gown and gloves. After consulting
the state health department, the hospital also decided to check the patient for
any superbugs that might have been picked up overseas.
It was a smart decision. In addition to an array of very drug-resistant
bacteria, the patient was carrying Candida auris, the potentially
deadly “superbug yeast” that has alarmed health authorities around the world.
That prescient detective work prevented the Maryland hospital
from enduring a fast-moving, fatal outbreak, as the Centers for Disease Control
and Prevention detailed in a recent case report. That super-yeast has
wreaked havoc in England and South Africa—as well as here in the US, where it has spread
explosively in hospitals, infecting surgical wounds, brewing whole-body
bloodstream infections, and clinging to every surface that investigators have
thought to check.
The new report also confirms something that researchers have suspected
for a while: Unlike other regions of the world, the United States doesn’t
possess its own unique strain of C. auris. When outbreaks have burgeoned
here, they came from somewhere else, carried unwittingly across the border by
travelers.
What the Maryland case couldn’t illuminate is where C. auris
originated. It’s a question epidemiologists urgently want to answer, because
understanding this bug’s origin and evolution may hold the key to preventing it
from disrupting health care even more.
The C. auris story is
complex, but here are the basics. (We untangled its full early history here
a year ago.) Over a period of about five years, physicians in Japan, Korea,
India, South Africa, and the Middle East simultaneously diagnosed patients with
infections caused by a strain of yeast that had not been recorded before 2009.
This yeast was extraordinarily unlike any other: It caused grave wound and
bloodstream infections, it spread easily from person to person, it survived
without difficulty on cool inorganic surfaces—and because of those qualities,
it sparked ferocious hospital outbreaks.
Worst of all, the super-yeast emerged already resistant to the
limited drugs available to treat fungal infections. C. auris seemed
like such a threat that, in 2016, the CDC broke its mandate of focusing on
health problems within the United States and published a warning, even though no cases had occurred
here. The agency was just in front of the curve: Within a few months, a dozen
Americans were diagnosed with the super-yeast, and four died.
Three years later, there have been more than 700 cases in the US. C. auris has been
diagnosed in patients in more than 30 countries on six continents, and when
investigators talk about it, they use ominous phrases such as “pandemic
potential.” (At an international conference last year, the head of fungal
studies at the CDC described the super-yeast as “more infectious than Ebola.”)
“It’s difficult how rapidly this has spread across the globe,”
says Johanna Rhodes, an infectious diseases research fellow at Imperial College
London and coauthor of a new review of the yeast’s global spread. “We definitely weren’t
ready for it.”
More
It is easier to
stay out than get out.
Mark Twain,
foreseeing Brexit.
The monthly Coppock Indicators finished July
DJIA: 26,864 +53 Up. NASDAQ: 8,175 +65 Down.
SP500: 2,980 +53 Up.
The S&P and Dow remain up, but in very unconvincing fashion. The NASDAQ remains down. Like the Fed, I would await a better data driven
signal.
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