Baltic Dry Index. 1782 -20 Brent
Crude 60.86 Spot Gold 1498
Never ending Brexit now January 31, or maybe sooner.
Trump’s Nuclear China Tariffs Now in effect.
The USA v EU trade war started October 18. Now in effect.
List of stock market crashes and bear markets
With the Fed rate cut in place, a trade deal “lite” part
one between China and America all but ready to be signed, though where is now
unknown, and Brexit to be resolved one way or another on December 12th,
it’s time to dress up stock markets for the last trading day of October.
Ignore those horrible manufacturing figure out of China,
and ignore Germany leading the EUSSR into recession, buy more! Buy more! What
could possibly go wrong?
Well buying overpriced stocks at the top of the market right before a recession, for one thing. And what if the next move for the Fed is up? Who makes money buying tops?
Well buying overpriced stocks at the top of the market right before a recession, for one thing. And what if the next move for the Fed is up? Who makes money buying tops?
I learned early that there is nothing new
in Wall Street. There can’t be because speculation is as old as the hills.
Whatever happens in the stock market today has happened before and will happen
again. I’ve never forgotten that.
Jesse Livermore
Asian stocks rally after Fed rate cut, BOJ keeps policy steady
October 31, 2019 /
12:48 AM
TOKYO (Reuters) -
Asian shares jumped on Thursday to a three-month high and the dollar fell
broadly after the Federal Reserve cut interest rates as expected and U.S.
Treasury yields declined.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.68%
to the highest since July 30. Hong Kong shares rose 1.16%, while Japan’s Nikkei
stock index rose 0.2%.
U.S. Treasury yields slipped in Asia after the rate cut, but Fed
Chairman Jerome Powell signalled additional trims are unlikely because there
are several areas of strength in the U.S. economy.
The yen held onto gains versus the dollar after the Bank of Japan keep
its ultra-easy monetary policy in place as expected and changed its forward
guidance to more clearly signal the future chance of a rate cut.
Debate at the Fed and the BOJ highlights the struggle that many central
banks are facing.
The U.S.-China trade war and Britain’s divorce from the European Union
have increased uncertainty, but central banks are somewhat reluctant to ease
policy aggressively because interest rates are already very low in many major
economies.
“The biggest thing that stands out is stocks look stronger after the
Fed,” said Tsutomu Soma, general manager of fixed income business solutions at
SBI Securities in Tokyo.
“Risks like U.S.-China or Brexit haven’t been resolved completely, but
the markets are starting to look beyond these risks.”
U.S. stock futures edged 0.01% higher on Thursday in Asia after the
S&P 500 rose 0.33% to close at a record high on Wednesday for the second
time in three trading sessions.
A positive mood on Wall Street carried over to Asian equities, except
for Australian shares, which fell 0.51% after weak earnings from Australia and
New Zealand Banking Group.
More
China manufacturing drops to 8-month low
By Liyan
Qi Published: Oct 31, 2019 2:06 a.m.
ET
Chinese manufacturing activity fell to an eight-month low in October, an
official gauge showed, raising another warning signal as hopes for a U.S.-China
trade truce were dealt a further blow.
China’s official gauge of factory activity, the manufacturing purchasing
managers index, dropped to 49.3 in October from 49.8 in September, the National
Bureau of Statistics said Thursday.
The index has stayed below the 50 mark, which separates expansion from
contraction, for six straight months, indicating worsening business sentiment
despite the government’s efforts to spur economic growth.
Economists were expecting factory activity to have held steady this
month, partly due to easing trade tensions between China and the U.S. But the
cancellation of a summit of Asia-Pacific Economic Cooperation members has
complicated efforts by the world’s two largest economies to sign a limited
trade agreement designed to keep new tariffs at bay.
Even if a partial trade deal were reached, that alone probably wouldn’t
help China’s economy in the absence of other policy supports, said Serena Zhou,
an economist at Mizuho Securities.
“The latest PMI again proved that China’s economy is under notable
downward pressure,” Ms. Zhou said. “I don’t think an interim trade deal in
November can quickly turn the situation around.”
The drop in manufacturing activity adds pressure on Beijing policy
makers, who are seeking to juice economic growth while taming inflation
expectations.
---- Surging pork prices pushed China’s consumer inflation to a near six-year high in September, while China’s producer-price deflation deepened more amid falling raw-material prices and soft demand, latest official data showed.
“Yes, the central bank is under pressure to stabilize [economic] growth,
but it seems more worried about heating inflation expectations,” said Yang
Weixiao, an economist at Founder Securities.
Weakness in the official factory-activity report was broad-based. A
subindex measuring total new orders received by China’s manufacturers decreased
to 49.6 in October from 50.5 in September, the statistics bureau said.
New export orders, an indicator of external demand for Chinese goods,
fell to 47.0 from 48.2 in September, while import orders tumbled to 46.9 from
47.1 a month earlier. Production also eased to 50.8 in October, compared with
51.9 in September.
Meantime, business activity outside China’s factory gates expanded at
the slowest pace in October in nearly four years, as weaker growth among
service providers outweighed strength in the construction sector, a separate
official gauge showed.
More
Chile's APEC cancellation creates hurdle for U.S.-China trade deal
October 31, 2019
/ 12:28 AM
WASHINGTON/BEIJING/SINGAPORE (Reuters) - Leaders from the United States
and China encountered a new obstacle in their struggle to end a damaging trade
war on Wednesday, when the summit where they were supposed to meet was canceled
because of violent protests.
U.S. President Donald Trump said this week he hoped to sign an interim
trade deal with Chinese counterpart Xi Jinping during the Nov. 16-17
Asia-Pacific Economic Cooperation summit in Chile. Chilean officials said they
canceled the summit to focus on restoring law and order in the country.
The White House said afterwards the United States still expects to sign
an initial trade agreement with China next month, but no alternate location had
yet been set for Xi and Trump to meet.
“We look forward to finalizing Phase One of the historic trade deal with
China within the same time frame,” the White House said in a statement that
omitted a mention of the president or his planned meeting with Xi.
China’s commerce ministry said in a statement on Thursday the bilateral
talks will continue to proceed as previously planned and the lead trade
negotiators from both countries will speak by telephone on Friday.
U.S. and Chinese negotiators have been racing to finalize a text of the
“phase one” agreement for Trump and Xi to sign next month, a process clouded by
wrangling over U.S. demands for a timetable of Chinese purchases of U.S. farm
products.
Treasury Secretary Steven Mnuchin, who was traveling in the Middle East,
told Reuters on Wednesday that U.S. discussions with China had been productive,
and work on finalizing the text of the deal was continuing. China’s commerce
ministry also said on Thursday the negotiations were progressing well.
More
Finally, the wealth and jobs destroying EUSSR again, soon to become 7.5
billion euros a year poorer. Rather than cutback and live within their new
income, most in the EUSSR want Germany and Holland to put in the missing
billions.
France outshines Germany as euro zone economic gloom deepens
October 30, 2019 /
11:28 AM
PARIS/BERLIN
(Reuters) - Strong domestic stimulus is helping France shrug off a global
slowdown even as export-dependent Germany heads closer to a recession, starkly
divergent data on the euro zone’s two leading economies showed on Wednesday.
France saw national output rise 0.3% in the third quarter - defying
forecasts for slightly slower growth - as unemployment in Germany rose faster
than expected and its chambers of commerce warned that exports would shrink
next year for the first time since the financial crisis as world trade friction
mounts.
The contrast in national fortunes was underlined as incoming European
Central Bank chief Christine Lagarde doubled down on her predecessor Mario
Draghi’s calls on Germany to use some of its budget surplus to invest in
growth-enhancing measures.
“Those that have the room for maneuver, those that have a budget
surplus, that’s to say Germany, the Netherlands, why not use that budget
surplus and invest in infrastructure? ... Why not invest in education, why not
invest in innovation, to allow for a better re-balancing?” she told France’s
RTL broadcaster.
France’s economy, which has long relied more on domestic consumption
than that of its northern neighbor, got a boost from President Emmanuel
Macron’s injection of 10 billion euros in stimulus to quell the “yellow vest”
protests this year.
Most of that money went on boosting benefits for minimum-wage earning
workers. Paris has also said it would cut taxes by more than 10 billion euros
in total next year.
“At the same time, measures enacted in recent years .. have contributed
to make the French labor market more flexible and have lowered labor costs for
corporates,” JP Morgan’s Raphael Brun-Aguerre said of reforms begun under
Macron’s predecessor Francois Hollande and pursued by him.
A separate read-out by the European Commission in Brussels showed that
economic sentiment across the 19-country euro zone as a whole deteriorated in
October for a second straight month as pessimism in industry spread to services
and consumers.
A breakdown showed that sentiment fell in Germany for the second
straight month and to its lowest level in more than six years. France also saw
a small dip but remained above the euro zone average.
The Germany economy shrank 0.1% in the second quarter, and third-quarter
output figures next month are expected to show another fall, putting the
country in recession by the standard definition.
Export-reliant Germany is also more exposed than most to the disputes
triggered by U.S. President Donald Trump’s “America First” policies and a
cooling of Chinese growth.
“For our economy, with its strong industrial core, this is a huge
challenge,” DIHK Chambers of Industry and Commerce President Eric Schweitzer
said when presenting the association’s latest business sentiment survey of more
than 28,000 managers.
DIHK said it expects Germany’s annual export growth to wither to 0.3%
this year from 2.1% in 2018, adding that exports are likely to shrink by 0.5%
next year. Germany has in recent years averaged export growth of around 5.5%,
Schweitzer said.
More
Jean-Claude
Juncker. Failed Luxembourg Prime Minister and ex-president of the Euro Group of
Finance Ministers. Confessed liar. European Commission President. Scotch
connoisseur.
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled
over.
Today, how to rig stocks the official way. Poster Child: Texas
Instruments. No problems until that
recession hits.
Opinion: Here’s how share buybacks get used to transfer billions of dollars to senior management under the guise of returning cash to shareholders
By Ben
Hunt Published: Oct 30, 2019 9:26
a.m. ET
Financialization is profit margin growth without labor
productivity growth.Financialization is the zero-sum game aspect of capitalism, where profit margin growth is both pulled forward from future real growth and pulled away from current economic risk-taking.
Financialization is the story of using share buybacks to mortgage the future of public companies over and over and over again for the primary benefit of today’s management shareholders.
Texas Instruments TXN, +0.06% recently caught my eye. And while I decided to dig into its story, what happened isn’t unique to this company.
Texas Instruments is, in fact, a poster child for financialization. And there’s nothing illegal or incompetent about it.
I’m going to focus on a five-year stretch
of the company’s financials, from 2014 through 2018. This is where the truly
meteoric stock-price appreciation took place over the past 10 years, even with
the stock market’s swoon in the fourth quarter of 2018, and comparing full-year
financials makes for a more apples-to-apples comparison.
But before I get into the numbers, let me tell you the story.
The Texas Instruments story is free cash flow and earnings growth that
management “returns to shareholders”. Earnings per share on a fully diluted
weighted basis has more than doubled from 2014 through 2018, net income
available to shareholders on a GAAP basis has doubled, and cash from operations
has almost doubled.
What makes this a story of financialization is the why of the very real
free cash flows and earnings growth and the how of the allocation of those cash
flows and earnings.
The why is pretty simple. Management has cut its cost structure to the
everlovin’ bone.
At the end of 2013, the company’s cost of goods sold (COGS) was 48% of
revenues. By the end of 2018, COGS was 35%. Gross margins went from 52% to 65%.
At the end of 2013, sales, general and administrative costs (SG&A)
was 15.2% of revenues. By the end of 2018, SG&A was 10.7%.
At the end of 2013, research and development expenses (R&D) was
12.5% of revenues. By the end of 2018, R&D was 9.9%.
And while it’s not part of the fixed cost structure, Texas Instruments
was a keen beneficiary of the Tax Cuts and Jobs Act of 2017, seeing its 2017
tax rate of 16% cut to 7% in 2018 and reducing its tax bill by $1.2 billion.
See, there was zero revenue growth at the company from 2014 to 2015
(flat in both years), and tiny growth from 2015 to 2016 (less than 3%). But
there was healthy revenue growth from 2016 to 2017 (11% or so) and so-so growth
from 2017 to 2018 (6% or so). And when you’re cutting costs like Texas
Instruments was doing over a multiyear period, even mediocre top-line increases
can lead to dramatic profit increases.
How dramatic? Cash from operations was $3.9 billion in 2014, but by 2018
was $7.2 billion. Nice!
Over this five-year period, Texas Instruments generated $25.5 billion in
cash from operations and $32.5 billion in earnings before interest, taxes,
depreciation and amortization (Ebitda).
From a cash perspective, of course you’ve got to pay taxes out of all
that, which comes to about $7 billion over the five years, but you can defer
some of this to minimize the cash hit. And you’ve got to pay interest on the
$5.1 billion in debt you’ve taken out, which comes to … oh yeah, basically
nothing … thank you, Fed! And you’ve got to account for depreciation and
amortization, which comes to $5.2 billion over the five years … but this is a
non-cash expense, so it’s not going to dig into that cash hoard. And you’ve got
some cash puts and takes from working capital and inventory and what not, but
nothing dramatic. And you’ve got $1.3 billion in stock-based comp, but again
that’s a non-cash expense … whew!
And — oh, here’s an interesting cash windfall — Texas Instruments raised
about $2.5 billion by selling stock over these five years. Wait, what? Selling
stock, not buying stock? Selling stock to whom? Hold that thought …
Put it all together and I figure the company generated about $25 billion
in truly free cash flow over this 5-year span. What is management going to
spend this treasure chest on?
More
Most accountants are honorable
men, trying to do a job. But they are hired by corporations, not by investors.
George
Goodman, aka Adam Smith, The Money Game. But What Do The
Numbers Mean?
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?
Elon Musk offers discounted solar panels and batteries after California blackouts
Millions are without power as fires rage and
preemptive outages become the new norm
Tesla
is offering a discount on solar panels and batteries to people who are affected
by wildfire power outages, Tesla CEO Elon Musk tweeted today. More than 2
million people across California have been affected by power outages since
October 25th as utility companies try to prevent their power lines from
sparking new blazes. A fire just north of San Francisco has already consumed
more than 66,000 acres and is only 5 percent under control.
Musk
offered $1,000 off to customers who are affected by the outages. His generosity
is likely to benefit more affluent Californians’ who are coping with the power
loss, given the price of a home installation. On its website, Tesla lists the
average price of a Solar Roof as $33,950. Its home battery system, the
Powerwall, costs roughly $14,100 for a 2,200-square-foot home. The company unveiled Solar
Glass Roof tiles just three days ago.
Preemptive
power outages are becoming the new normal in
California as the state faces increasingly
devastating wildfire seasons and utility companies are blamed for being the
culprits behind disasters like the 2018 Camp Fire that nearly leveled the
entire town of Paradise. The current outages are the second massive blackout
affecting Pacific Gas and Electric Company customers this month. Though the
outages are meant to avoid catastrophe, they can cause a crisis for those
who rely on powered medical devices.
The
fragile, flammable nature of the power grid means that some residents are
turning to solar power as a way to keep the lights on. Homes with solar panels
are still connected to the energy grid, but with a battery system, they can
keep the power on if the grid fails. After roughly 2 million people lost power
roughly two weeks ago, solar panel and battery sales jumped, CBS News reported. “It’s
like controlled chaos right now — it’s an overwhelming response,” Tim Hamor,
co-owner of California-based solar installer Alternative Energy Systems, told
CBS.
Tesla
seems to be seeing an uptick in sales, too. “Apologies to those waiting for
Solar/Powerwall outside California, as we are prioritizing those affected by
wildfires,” Musk tweeted today.
On an October 25th call with reporters, Musk said that his company was “seeing
some demand growth” as a result of the blackouts. “When you’re just sitting
there in the dark and all of your devices are battery powered and you lose your
phone connection, it’s like a security risk. You can’t even call 911.”
Interest
rates are the most important prices in the economy, according to Nobel laureate
F.A. Hayek, because they reflect the collective time preference of individuals
to consume either now or later. Accordingly, interest rates co-ordinate
allocation of capital across the economy by signalling to businesses whether
they should invest. Distortions in interest rates can cause “clusters of
errors” in which large swathes of businesses unwittingly miscalculate at the
same time.
Hayek
observed that interest rate stimulus interfered with economic calculations,
causing managers to invest in projects that would not otherwise have appeared
profitable. Losses can subsequently materialise as customer demand fails to
meet forecasts that were, in retrospect, optimistic. Long-term projects are
highly sensitive to interest rates and are therefore more susceptible to such
distortions. Pension obligations and long-term, capital-intensive projects are
at high risk of miscalculation based on artificially low rates.
The monthly Coppock Indicators finished September
DJIA: 26,917 +57 Up. NASDAQ: 7,999 +62 Up. SP500: 2,977 +61 Up.
Another inconclusive month,
but all three moved up weakly. I would not rely on nor take such a weak buy
signal.
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