Baltic Dry Index. 2131 -61 Brent Crude 64.28
Spot Gold 1517
Never ending Brexit now October 31,
maybe. 40 days away.
Trump’s Nuclear China Tariffs
Now In Effect.
USA v EU trade war postponed to
November, maybe.
I was borrowing money from
30 leading banks. How could they all be wrong? I’m only a simple businessman.
Sir Freddie Laker. Laker
Airways.
When stock markets crash, why does it always
happen in October? I don’t know either, but with another October approaching,
stock markets flying on a wing and a prayer, crucial win or lose trade talks
between the USA and China about to start next month, and an October 31 no deal
Brexit to come, the last part of September might be the last gasp of the exit
rally.
Besides, suddenly the USA has an overnight liquidity problem in the banks, requiring the Fed to do daily overnight emergency Repos of 75 billion, now to be extended through Friday October 10. Is 2008 starting to repeat? Do banks no longer trust each others collateral? Or is it that European and Japanese negative interest rates make such "collateral" no longer collateral? Bunker time in any case!!! Something massive has gone wrong in the US financial system.
Besides, suddenly the USA has an overnight liquidity problem in the banks, requiring the Fed to do daily overnight emergency Repos of 75 billion, now to be extended through Friday October 10. Is 2008 starting to repeat? Do banks no longer trust each others collateral? Or is it that European and Japanese negative interest rates make such "collateral" no longer collateral? Bunker time in any case!!! Something massive has gone wrong in the US financial system.
On Friday, in another sign that China
seems to be winning the trade war, America exempted Chinese made computer
components from tariffs, something that earlier President Trump had refused to
do.
Below, sentiment changing again.
Creditors are a
superstitious sect, great observers of set days and times.
Benjamin Franklin.
A stock-market selloff could spark an economic recession, says BNY Mellon’s Liz Young
Published: Sept 20,
2019 10:30 p.m. ET
“I don’t like losses, sport. Nothing ruins my day more than
losses," said Gordon Gekko. That disdain for market declines expressed by the fictional corporate raider played by Michael Douglas in the 1987 movie “Wall Street,” remains true for investors today. And Liz Young director of market strategy at BNY Mellon, says that a sharp downturn of major equity indexes could actually tip U.S. expansion, currently in its record 11th year, into recession.
The strategist’s view underscores the belief that deteriorating investor confidence could catalyze an economic slowdown, rather than a recession inciting an equity selloff.
“There is a fragility in the markets right now, and a chance that we get a piece of news that’s negative that drives sentiment down to a lower level, and if that continues and drives a risk selloff, the market could send us into recession,” Young told MarketWatch in a Friday interview.
Young said the market is in a vulnerable state which stems from the fact that the S&P 500 index SPX, -0.49% has risen more than 19% year-to-date even as earnings growth has been flat, while corporations are increasingly holding off on capital expenditures.
“The market
returns this year have been driven by macro factors and central bank support,”
she said. “Companies aren’t in control as much as macro rhetoric, and we could
have any number of geopolitical events that come in and change sentiment.”
Young places
a 30% chance of a recession spurred by a breakdown in sentiment.
In other
words, she holds a higher chance that the U.S. economy will withstand pressures
from slower global growth and weaker corporate investment driven by trade war
concerns, and that the stock market will continue to drift higher into 2020.
But this
rosier outcome, and whether equity markets can overcome recent jitters and
break out to new highs, may hinge on what the Federal Reserve does in the
coming months, she said.
More
U.S. trade regulators approve some Apple tariff exemptions amid broader reprieve
September 20, 2019 / 11:15 PM
(Reuters) - U.S. trade regulators on
Friday approved 10 out of 15 requests for tariff exemptions filed by Apple Inc (AAPL.O)
amid a broader reprieve on levies on computer parts, according to a public
docket published by the U.S. Trade Representative and a Federal Register
notice.
The move by
U.S. officials could make it easier for both Apple and small makers of gaming
computers to assemble devices in the United States by lowering the costs of importing
parts.
Apple did
not say why it requested the exemptions, but the requests were for components
such as partially completed circuit boards. Apple manufactures its Mac Pro
computers in Texas, making the machine immune from tariffs, but such intermediate
parts were subject to the levies.
Apple did
not immediately return a request for comment.
---- The third list of U.S. tariffs that went into effect last year placed levies on both some fully assembled PCs as well as the major components to make them, meaning manufacturers faced cost increases even if they made machines in the United States.
The tariffs
also hit the PC gaming industry, where enthusiasts often assemble their own
custom machines from parts, many from China.
Apple
applied for the exemptions for some components but President Donald Trump said
U.S. regulators would not grant them. Apple Chief Executive Tim Cook later said
during the company’s July 30 earnings call that Apple wanted to keep making Mac
Pros in the United States.
---- On Friday, trade officials lifted
tariffs on a range of computer components for Apple and all other
manufacturers, including partially assembled main circuit boards and graphics
cards. Those are critical to computer assemblers because they contain chips from
Intel Corp (INTC.O), Nvidia Corp (NVDA.O)
and Advanced Micro Devices Inc (AMD.O). Those chips are typically some of the
most expensive parts in the machines.
Hopes for trade breakthrough
fade as China cancels U.S. farm visits
by Reuters Friday, 20 September 2019 23:36
GMT
WASHINGTON/CHICAGO,
Sept 20 (Reuters) - A U.S.-China trade deal appeared elusive on Friday after
Chinese officials unexpectedly canceled a visit to farms in Montana and
Nebraska as deputy trade negotiators wrapped up two days of negotiations in
Washington.
Chinese officials
were expected to visit U.S. farmers next week as a goodwill gesture, but
canceled to return to China sooner than originally scheduled, agriculture
organizations from Montana and Nebraska said.
The United
States had removed tariffs overnight from over 400 Chinese products in response
to requests from U.S. companies.
The Chinese
Embassy and the U.S. Department of Agriculture did not immediately respond to
requests for comment.
The U.S.
Trade Representative's office issued a brief statement characterizing the two
days as "productive" and that a principal-level trade meeting in
Washington would take place in October as previously planned.
Trade
experts, executives and government officials in both countries say that even if
the September and October talks produced an interim deal, the U.S.-China trade
war has hardened into a political and ideological battle that runs far deeper
than tariffs and could take years to resolve.
The Chinese
delegation did not present any new proposals on core structural issues including
intellectual property protections, forced technology transfers, industrial
subsidies and other trade barriers, said a person briefed on the talks.
"The
conclusion from the U.S. side was that we're not close to an agreement,"
the person said.
This source
and another person familiar with the talks said that the Chinese delegation's
leader, Vice Finance Minister Liao Min, laid out China's demands that any deal
must remove all U.S. tariffs and be balanced so that it is not all concessions
from Beijing and none from Washington.
More
Up next, more on the madness of modern
monetary theory, and negative interest rates. If negative interest rates stay
around for long, the Great Nixonian Error of Fiat Money will collapse, as the
whole under pinning of the modern financial system start to crumble one sector
after another. Yet there is little sign of the central banksters coming back to
their senses.
In central banking as in diplomacy,
style, conservative tailoring, and an easy association with the affluent count
greatly and results far much less.
John Kenneth Galbraith
Opinion: Dear Mr. Powell and Mr. Draghi: It’s nuts to go negative
By Peter
Morici Published: Sept 19, 2019 9:07
a.m. ET
If the definition of insanity is to do the same thing over
and over and expect a different result, then outgoing European
Central Bank President Mario Draghi and Federal
Reserve Chairman Jerome Powell, judged by their recent decisions to further
ease monetary policy, may be going bats.However, the real prize should go to President Donald Trump.
Both central bankers are chasing the wrong target — 2% inflation — with interest-rate policies that have demonstrated little effectiveness for at least the last decade.
The 2% inflation target was chosen as a compromise for the tradeoff between inflation and unemployment but that relationship is inherently unstable. Since the financial crisis, inflation has fluctuated mostly below 2% in the United States whether the unemployment rate was 10% or less than 4%, whether the Fed pursued easy money or tightened.
Since 2014, European policy rates below 0% — central banks charging banks for deposits that they must keep at the ECB and other central bank s— have ushered in ultra-cheap loans for businesses. And governments can sell bonds that charge investors for the privilege of lending them money, but those have done little to boost European growth.
Terrible in the long run
Negative interest rates can have a quick short-term positive effect — force banks to make some worthy loans in times of business crisis — but continuing those long term is a terrible idea.For one thing, ultra-low and negative rates fundamentally weaken banks. Banks make money on the spread between their cost of funds and loan rates, can lower interest rates paid depositors only so much without a serf’s revolt, and get squeezed as their primary assets—cash reserves—are essentially taxed.
And they can’t make loans to businesses lacking adequate demand to support expansion.
Ultra-low bond rates and long-term loans encourage zombie companies — unprofitable businesses that but for ultra-cheap loans would be scaling back, moving capital into new lines of activity or releasing capital to investors to shop for opportunities of their own.
Facing criticism from Germany and others, Draghi’s presumptive successor, Christine Lagarde, has promised to review the policy.
Trump’s recent invocation for the Fed to push rates below zero hardly reflects an understanding of the issues involved.
Dysfunctional
Structural dysfunctions — more than the usual whipping boys, labor-market regulations and high taxes — are to blame in Europe. When the euro EURUSD, -0.1993% was established in 1999, assets, debts and prices were translated from local currencies into the new currency at prevailing exchange rates. Since, the productivity and competitiveness appear to have improved in northern states like Germany and the Netherlands and flagged in southern states like Italy and Spain.That leaves the euro undervalued for the North and overvalued for the South, and trade imbalances between the two regions. Trade deficits in the South require large government deficits to sustain demand or for Germany to reduce its budget surpluses—spend more.
Eurozone rules place a limit of 3% of GDP on government deficits in Italy and elsewhere and German fiscal orthodoxy is impervious to facts and reason—Berlin hates negative interests rates but refuses to lead with fiscal stimulus.
Hence, the real positive effect for Europe of negative interest rates is to push down the euro against the dollar BUXX, +0.10% , increase the overall trade surplus with the United States, and essentially export some European unemployment to America. That strategy has its limits as we are seeing and the ECB continues to forecast pathetic growth.
The Chinese, Japanese and Europeans are all pursuing cheap currency policies and the U.S. trade deficit — aided by businesses’ ability to shift imports to third counties in response to higher tariffs on China — has rewarded Trump’s America First policy with a rising trade deficit.
Needs a jolt
The 2017 tax cut raised consumer spending last year but has not delivered an increase in investment, and despite a $1 trillion dollar deficit, the U.S. economy needs yet another fiscal jolt.Trump can blame the Fed but it’s doubtful that much lower interest rates could do much to boost demand. What is needed here is for Congress and the president, for example, to roll out an infrastructure bill. That would enhance long-term competitiveness and growth — whereas plunging interest rates to zero or below would only weaken U.S. banks.
What’s really nuts here is suggesting negative interest rates for America.
https://www.marketwatch.com/story/dear-mr-powell-and-mr-draghi-its-nuts-to-go-negative-2019-09-19?mod=mw_theo_homepage
More rate cuts won’t save the economy – in fact they’re making it worse
Extremely low rates may lead to slower growth by increasing market concentration and thus weakening firms' incentive to boost productivity
By Ernest
Liu, Atif Mian and Amir Sufi September
18, 2019 1:01 am GMT
The real (inflation-adjusted) yield on ten-year US
treasuries is currently zero, and has been extremely low for most of the past
eight years. Outside of the United States, meanwhile, 40% of investment-grade bonds have negative nominal yields.And most recently, the European Central Bank further reduced its deposit rate to -0.5% as part of a new package of economic stimulus measures for the eurozone.
Low interest rates have traditionally been viewed as positive for economic growth. But our recent research suggests that this may not be the case.
Instead, extremely low interest rates may lead to slower growth by increasing market concentration. If this argument is correct, it implies that reducing interest rates further will not save the global economy from stagnation.
The traditional view holds that when long-term rates fall, the net present value of future cash flows increases, making it more attractive for firms to invest in productivity-enhancing technologies. Low interest rates therefore have an expansionary effect on the economy through stronger productivity growth.
But if low
interest rates also have an opposite strategic effect, they reduce the
incentive for firms to invest in boosting productivity. Moreover, as long-term
real rates approach zero, this strategic contractionary effect dominates. So,
in today’s low-interest-rate environment, a further decline in rates will most
probably slow the economy by reducing productivity growth.
This
strategic effect works through industry competition. Although lower interest
rates encourage all firms in a sector to invest more, the incentive to do so is
greater for market leaders than for followers. As a result, industries become
more monopolistic over time as long-term rates fall.
Our research
indicates that an industry leader and follower interact strategically in the
sense that each carefully considers the other’s investment policy when deciding
on its own.
In
particular, because industry leaders respond more strongly to a decline in the
interest rate, followers become discouraged and stop investing as leaders get
too far ahead. And because leaders then face no serious competitive threat,
they too ultimately stop investing and become “lazy monopolists”.
Morehttps://www.fnlondon.com/articles/more-rate-cuts-wont-save-the-economy-in-fact-theyre-making-it-worse-20190918
In Saudi oil news, is the other shoe
about to fall?
Saudi switches crude grades, delays oil supplies to buyers in Asia
September 20, 2019 / 12:05 PM
SINGAPORE (Reuters) - State oil giant
Saudi Aramco has switched crude grades and pushed back crude and oil products
deliveries to customers by days after the attacks on its supply hub severely
reduced its light oil production and led to output cuts at its refineries.
Crude oil loading delays were widespread as most buyers have received Aramco’s request to push back shipments in October by 7-10 days, several sources with knowledge of the matter said, giving the producer more time to maintain exports by adjusting supplies from inventories and its refineries.
At least three supertankers that loaded crude in Saudi Arabia this week for China and India had their crude grades switched from light to heavy oil while more buyers in Asia have been asked to delay shipments and switch grades in September and October, according to sources with knowledge of the matter and data from Refinitiv and Kpler.
Unipec, the trading arm of Asia’s largest refiner Sinopec (600028.SS), will lift Arab Heavy crude instead of Arab Light and Arab Extra Light onboard Very Large Crude Carriers (VLCCs) Caribbean Glory and Xin Lian Yang this month.
Sinopec declined to comment.
VLCC Kalamos will also load Arab Heavy instead of mostly Arab Extra Light for Indian Oil Corp (IOC.NS).
---- Two South Korean refiners have also agreed to switch out light grades for Arab Medium and Arab Heavy cargoes loading this month and next, sources said.
Heavier
Saudi crude grades yield more high-sulphur fuel oil than the lighter ones, but
Asian refineries are able to adapt quickly because most of the plants are
equipped with secondary units that can process the residue into higher quality
oil products, the sources said.
“There will
be a little more burden on secondary units,” one source said, but “we just
inform the refineries that grades will change and they will manage somehow.”
Bahrain’s
crude exports were also disrupted after a Saudi-Bahrain crude pipeline was
shut. VLCC Tango which was scheduled to load Banoco Arab Medium crude earlier
this week from Ras Tanura for Japan is still waiting, one of the sources said.
“They
informed us (of the delay) but every day it’s revised,” he said.
“I’m afraid
the situation is more serious than we assumed but still information is
limited.”
More
Finally, the future is virtually here.
Boeing unveils its pilotless, flying fuel tank. Flying jet fuel bomb, if you
prefer. I wonder what Boeing and the US military will do with all those
unneeded pilots circa 2030?
Boeing's aircraft refueling drone flies for the first time
Nick
Lavars September 19, 2019
An advanced unmanned aircraft designed to
refuel the US Navy’s fighter jets in mid-air has taken to the skies for the
first time. Boeing unleashed an early version of its MQ-25 autonomous drone at
an airfield in St Louis for a short test jaunt to demonstrate some basic
functions, as the aerospace company prepares to deliver the military its first
prototypes in the next couple of years.
Boeing’s MQ-25 Stingray program has been in development, in various forms, since 2006. Last September the company beat out competing proposals from Lockheed Martin, Northrop Grumman and General Atomics Aeronautical Systems to earn an US$805-million contract with the US Navy. The military hopes to use it as an airborne refueling platform to extend the range of its F/A-18 Super Hornet, EA-18G Growler, and F-35C Lightning II aircraft.
Operating under the name T1, the prototype MQ-25 performed an autonomous flight over the course of two hours at MidAmerica St. Louis Airport on September 19, with test pilots controlling it as needed from a ground station. The aircraft showed its taxiing and takeoff abilities, and was then made to follow a pre-determined route to demonstrate basic flight functions.
More, plus video.
When the operations of
capitalism come to resemble those of the casino, ill fortune will
be the lot of the many.
John Maynard Keynes.
This weekend’s musical diversion. Italy’s trumpet King, Giuseppe Torelli.
The music starts at about 58 seconds in.
Maurice André, 'Sinfonia à 4' (Giuseppe Torelli)
Giuseppe Torelli
The man who is a pessimist
before 48 knows too much; if he is an optimist after it, he knows too little.
Mark Twain.
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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