Thursday 26 September 2019

Recession Odds Shorten.


Baltic Dry Index. 2053 -63 Brent Crude 62.43 Spot Gold 1510

Never ending Brexit now October 31, maybe. 35 days away.
Trump’s Nuclear China Tariffs Now In Effect.
USA v EU trade war postponed to November, maybe.

There is nothing like losing all you have in the world for teaching you what not to do.

Jesse Livermore

In addition to the wild demented politics on both sides of the Atlantic now underway, add a rising probability that the next recession is/has arriving/arrived. When it hits and a new EU banking crisis also arrives, how many European banks will join Deutsche Bank in crashing into the rocks?

While America and Japan signed an interim trade deal yesterday that left out the main issues for both sides, well politicians can never turn down a good opportunity for a positive photo op, the trade deal “lite” didn’t fool the markets.

With communist China closing next week for it’s 70th anniversary celebration, and the month-end and end of quarter fast approaching, and stocks just churning and burning near the top, to this old dinosaur market follower since the late 60s, if the market isn’t rolling over with sentiment fading from bull to bear, the market is giving an Oscar winning performance at faking it.

Below, a tired market limps towards month-end and the always dangerous month for stocks of October.

Asia stocks struggle to stay positive with trade deal developments in focus

Published: Sept 26, 2019 1:00 a.m. ET
The U.S. and Japan on Wednesday signed a limited trade deal that will eliminate tariffs and expand market access on farm, industrial and digital products. But the deal does not address autos, a key sticking point during months of contentious negotiations, and President Donald Trump indicated the two countries were still working on a broader agreement.

The trade agreement helped set a positive tone for some, but not all stocks in Asia Thursday, though some of the gains faded by the afternoon. Tokyo’s Nikkei NIK, +0.29%  was up 0.3% and Hong Kong’s Hang Seng HSI, +0.16%  managed a 0.2% rise. Chinese stocks SHCOMP, -0.73% 399106, -2.31%  slid 2.3%.

Chinese markets retreated as investors took profits before trading is suspended next week for the country’s National Day following an extended rise in share prices, especially for tech companies.

The U.S.-Chinese dispute over Beijing’s trade surplus and technology ambitions has fueled anxiety the global economy could tip into recession. Both sides have raised tariffs on billions of dollars of each other’s goods, hurting factories and farmers on both sides.

Negotiators are due to meet next month in Washington for a 13th round of talks. Economists say a temporary deal is possible but a final settlement is unlikely this year.

Trump signed a trade deal with Prime Minister Shinzo Abe of Japan on Wednesday that covers farm, industrial and digital trade but leaves tariffs on autos and parts intact at 2.5%.
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U.S., Japan sign limited trade deal, leaving autos for future talks

September 25, 2019 / 6:54 PM
NEW YORK (Reuters) - U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe signed a limited trade deal on Wednesday that cuts tariffs on U.S. farm goods, Japanese machine tools and other products while further staving off the threat of higher U.S. car duties.

Trump said the first-phase deal would open up Japanese markets to some $7 billion worth of U.S. products annually, cutting Japanese tariffs on American beef, pork wheat and cheese. 

Although the agreement does not cover trade in autos, Abe said he had received reassurance from Trump that the United States would not impose previously threatened “Section 232” national security tariffs on Japanese car imports.

“Between President Trump and I, myself, this has been firmly confirmed that no further, additional tariffs will imposed,” Abe told a news conference. “And with the entry into force of our trade agreements, I believe both of our economies will be able to further grow and develop.”

U.S. Trade Representative Robert Lighthizer said after a signing ceremony between the two leaders on the sidelines of the United Nations General Assembly that the two countries would tackle cars in a later round of negotiations expected to start next April.

Autos are the biggest source of the $67 billion U.S. trade deal, and Trump has frequently complained that U.S. automakers do not enjoy equal access to Japan’s market.

Lighthizer said it was not the U.S. intention to impose additional car tariffs, which would be based on the results of a Commerce Department study that has found auto imports to threaten national security.

Japanese Foreign Minister Toshimitsu Motegi, who had negotiated the pact with Lighthizer, said that as long as the agreement was faithfully implemented, the tariffs would not be applied.

A Japanese government statement also said further talks would seek to eliminate the existing 2.5% U.S. tariff on Japanese cars and would not result in the imposition of U.S. import quotas on Japanese autos.
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Japan auto group says U.S. trade discussions going in direction of avoiding auto tariffs

September 26, 2019 / 4:50 AM
TOKYO (Reuters) - The chairman of the Japan Automobile Manufacturers Association said on Thursday that trade discussions between the United States and Japan were going in the direction of avoiding auto tariffs and that it was good for both countries.

Akio Toyoda, also president of Toyota Motor Corp (7203.T), was speaking to reporters after U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe signed a limited trade deal that staved off the threat of higher duties on Japanese cars exported to the United States.

In other news, a new recession is coming if not already here, as smart money heads for the bunkers.

‘The most important chart in the world’ has one market bull unloading his stocks

By Shawn Langlois  Published: Sept 25, 2019 10:57 a.m. ET
Looking for reasons to bail on this market?

Take your pick: Triple-witching quarterly expiry, shenanigans in the repo markets, mounting geopolitical tensions — those are all factors weighing on the mind of Kevin Muir, market strategist at Toronto-based East West Investment Management. 

But the typically bullish investor behind the Macro Tourist blog pointed to this chart Jim Bianco at Bianco Research as the pressing reason he’s getting out of all his long positions in U.S. equities and looking for opportunities on the short side:

----His main worry: The U.S. is too tight for the world economy.

“The country with the world’s reserve currency has the highest policy rate out there in the developed world,” Muir wrote, pointing to the chart above. “If we look back over time, this has often coincided with market crises.”

He said the world should follow the U.S.’s lead and implement fiscal stimulus and stop relying on monetary madness. “But our job is not to decide what should be, but calculate what is,” he wrote. “And with the Fed so tight relative to the rest of the world, eventually it causes problems. Big ones.”
While he’s unloading stocks and looking to “take stabs on the short side,” he’s not completely apocalyptic with his view.

“I am not turning into one of those the end-of-the-world-is-upon-us bears. Yet I think the time to be heavily long is past,” he said. “The next 5%-10% in the stock market is more likely to be down than higher.”
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Opinion: It pays to prepare now for the end of the bull market

By Mark Hulbert  Published: Sept 25, 2019 3:45 p.m. ET
You might start reducing your exposure to stocks now, even if you think the bull market has room to run. That’s because stock returns in the last months of a bull market tend to be mediocre at best. So don’t try to hang on for that last penny of profit.

I reached these conclusions after analyzing the bull market returns of the several hundred investment newsletter model portfolios tracked by my Hulbert Financial Digest. I focused on bull markets since 1990 in the calendar maintained by Ned Davis Research — with one notable exception, which I will discuss in a moment.

On average, the newsletters’ return in the last 12 months of those bull markets was less than half their annualized bull market gains up until then. And their average annualized return in the last three months of those bull markets was even lower still. (See chart below.)

----The exception I didn’t include in this calculation was the bull market that ended at the top of the internet bubble in early 2000. In that bubble, portfolio returns accelerated rapidly as the bull market neared its end. Extrapolating from that experience is risky, however, since it was so different than the pattern emerging from the other bull markets in the Ned Davis calendar.

The safer bet would be that bull markets gradually fizzle out rather than end in a bang. (Excepting high-momentum stocks with the best trailing 12-month returns.) That’s why the benefits of hanging on to a bull market’s bitter end are low, relative to the risks. We gain relatively little even if we’re right, and can lose big if we fail to get out at the very top.

Speculators in the latter stages of a bull market can look at the highest-momentum stocks. As the rest of the market is faltering, momentum stocks are among the few that keep performing, as I outlined in a recent column. Keep in mind that this approach is quite risky, since high-momentum stocks tend to be among the biggest casualties when the market turns.

---- But planning for a bear market is a matter of probabilities rather than an all-or-nothing proposition. While conceding that it’s difficult to predict recessions, we can also acknowledge that recession risks are higher at some times than at others.

Now would certainly appear to be one such time. Just take the inverted yield curve, which is one of the economic profession’s leading indicators of increased recession risk. Consider a famous econometric model based on the yield curve that was constructed two decades ago by Arturo Estrella, currently an economics professor at Rensselaer Polytechnic and, from 1996 through 2008, senior vice-president of the New York Federal Reserve Bank’s Research and Statistics Group, and Frederic Mishkin, a Columbia University professor who was a member of the Federal Reserve’s Board of Governors from 2006 to 2008.

According to their model, the current yield curve inversion translates into between a 30% and 40% risk of a recession in the next 12 months. That is double where the odds stood at the end of last year.
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Finally, there goes Trump’s trade war win. Amazon will soon turn every online American into an importer!!!

Amazon buys cloud startup INLT to help merchants import goods

September 25, 2019 / 12:11 AM
SEATTLE (Reuters) - Amazon.com Inc has bought technology startup INLT for an undisclosed amount, the company told Reuters on Tuesday, in a transaction that will help merchants on its online marketplace more easily import goods into the United States.

The firm, with around a dozen employees based in Los Angeles and Philadelphia, makes software for sellers to manage costs and customs clearance of cross-border shipments. Seattle-based Amazon said it will offer INLT’s cloud-based computing technology to its merchants. 

 “INLT is a smart, nimble team that is helping companies simplify and lower the cost of importing goods into the U.S.,” an Amazon spokeswoman said in a statement. “We’re excited to work with them to develop the next generation of solutions for their customers and Amazon selling partners.”

Amazon is looking to expand the services it offers merchants to add tools for complicated cross-border sales processes, which sellers largely needed to manage on their own.
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 In a bull market your game is to buy and hold until you believe that the bull market is near it’s end. To do this you must study general conditions and not tips or special factors affecting individual stocks. Then get out of all your stocks; get out for keeps!

Jesse Livermore

Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

Today, Tesla again, but as all too often, for all of the wrong reasons.

Tesla's Musk pushed for SolarCity deal despite major cash crunch: lawsuit

September 23, 2019 / 11:52 PM
(Reuters) - Tesla Inc (TSLA.O) Chief Executive Elon Musk urged investors to approve the 2016 purchase of SolarCity at a big premium to its market value despite knowing the solar installer faced a cash crunch and publicly stating he had recused himself from involvement in the deal, according to court documents unsealed on Monday.

The filing was part of a lawsuit by Tesla shareholders alleging the company’s board breached its duties to investors by approving the $2.6 billion acquisition of the struggling company, which was run by Musk’s first cousins and of which he was a chairman and the largest stakeholder. The former SolarCity operations have been a drag on Tesla, with panel installations slumping since they were acquired. 

Defendants asked the Delaware Court of Chancery judge to dismiss the case before it heads to a trial in March. Shareholder lawsuits that survive a motion to dismiss often settle before trial, which in this case might involve a payment to shareholders by Musk as well as money from directors’ insurance.

Tesla rejected the allegations in an emailed statement, saying they were “based on the claims of plaintiff’s lawyers looking for a payday, and are not representative of our shareholders who support our mission and ultimately voted in favor of the acquisition.”

The suit represents another legal headache for Musk, the high-profile entrepreneur who settled a lawsuit by U.S. securities regulators last year over his use of Twitter and is being sued by for defamation by a British diver who said Musk falsely branded him a pedophile. Just last week, a Delaware judge ruled that Tesla must defend at trial Musk’s multibillion-dollar pay package.

According to the filing, Musk was informed at a SolarCity board meeting in October 2015 that SolarCity needed to raise up to $300 million and was slashing its solar installation forecast for the year. The company issued $113 million in convertible notes a month later, of which Musk bought $10 million.

By February 2016, SolarCity management told the board its cash balances were forecast to drop below amounts required for a key line of credit for several months of the year. A default on that line of credit would trigger defaults on other debt instruments, the filing said.

Despite the bad news, Musk proposed the acquisition of SolarCity to the Tesla board later that month after a Lake Tahoe family vacation with his cousin, SolarCity Chief Executive and founder Lyndon Rive. SolarCity did not disclose the details of its liquidity concerns to investors.

At a meeting of Tesla’s board on June 20, 2016, Musk advocated to fellow board members an initial acquisition price of $28.50 per share for SolarCity - a 30% premium to its market price - even though Tesla’s financial adviser, Evercore, had recommended $25 to $27 a share.
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Without faith in his own judgement no man can go very far in this game.

Jesse Livermore

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?

Graphene is 3D as well as 2D

Date: September 23, 2019

Source: Queen Mary University of London

Summary: Graphene is actually a 3D material as well as a 2D material, according to a new study.
Graphene is actually a 3D material as well as a 2D material, according to a new study from Queen Mary University of London.

Realising that it is a 3D material is important for understanding its mechanical properties and for developing novel graphene-based devices.

Often hailed as a 'wonder material', graphene has the highest known thermal and electrical conductivity, is stronger than steel, light, flexible and transparent. Its uses are wide-ranging and recently it has been shown it could even act as a barrier against mosquito bites.

In this study, published in the journal Physical Review Letters, the researchers asked two fundamental questions: to what extent is graphene graphite, and what is the true thickness of graphene?

To their surprise, they found that 2D graphene, which is a flat single layer of carbon atoms arranged in a honeycomb structure, has many of the same mechanical properties as 3D graphite, which is a naturally occurring form of carbon made up from a very weak stack of many layers of graphene.

They show that graphene shares a similar resistance to compression as graphite and that it is significantly thicker than is widely believed.

If the thickness of a block of graphite 100 layers thick is measured, the thickness of a single graphene layer is simply the thickness of the graphene block divided by 100. Therefore, it is reasonable to consider the thickness of graphene as 0.34 nm.

Dr Yiwei Sun, lead author of the study from Queen Mary University of London, said: "Graphene owes its thickness to an array of chemical bonds sticking out above and below the 2D plane of carbon atoms. Hence graphene is really a 3D material, albeit with a very small thickness.

"By applying conventional 3D theory, which has been used for around 400 years, to 2D materials such as graphene, which have been known for 15 years, we show that similar arguments apply to other so-called 2D materials, such as boron nitride and molybdenum disulphide. In that sense, 2D materials are actually all 3D."

Graphene is often called the world's first two-dimensional material. It was discovered in 2004 by peeling off graphene flakes from bulk graphite (used in pencil leads and lubricants) using sticky tape.

It is regarded as part of a new class of 2D materials and it is currently modelled by scientists as a sheet of atoms with very little depth, hence the name 2D material.

 When it comes to selling stocks, it is plain that nobody can sell unless somebody wants those stocks.

Jesse Livermore

The monthly Coppock Indicators finished August

DJIA: 26,403 +52 Down. NASDAQ: 7,963 +59 Down. SP500: 2,926 +53 unchanged.

An inconclusive month, but all three shows signs of weakening. 

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