Thursday 14 November 2019

Bubble On!!! FOMO. The Final Exit Rally?


Baltic Dry Index. 1365 +11 Brent Crude 62.85 Spot Gold 1466

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.

"The principal cause of the crisis was the dismantling of the system of regulation and supervision in the financial sector which had for much of the post-war period kept the most dangerous elements of that sector in check. In the absence of an appropriate system of effective supervision and regulation, what happens is that the actors in the system, who are intent upon taking the greatest degree of risk — including actors who are intent upon using fraudulent methods to increase their returns — come to dominate parts of the system. 

As they do that, the general methods of assessing performance in the market, specifically stock-market valuations, become counter-productive. That is to say, they invariably reward the worst actors, while they force more traditional actors, who are still respecting the old norms of conduct, into a competitively disadvantaged position. Thus the bad actors, the fraudulent actors, and the speculative extremists quickly take over”

John Kenneth Galbraith. The Great Crash: 1929.

Has trade war team Trump already killed the goose that laid the golden eggs? Well you might not think so judging by US stock markets making “Fear Of Missing Out” greater fool bubble highs.

But a look at the real economy that underpins everyone else’s prosperity, and the view is very different. A massively slowing global economy, growing global social unrest, and an America plunging into party political impeachment madness, are all about to come crashing down on America’s latest stock market bubble.

Later today we find out if Germany, Europe’s top economy, has plunged into actual recession.  If it has, the rest of the EU will swiftly follow, no deal Brexit or no Brexit. I suspect the rest of the global economy will plod along behind an EU recession. The EUSSR is the world’s largest trading block.

Time to head for the bunker, and safety of increased holdings of tangible assets, led by precious metals. The next 12 months flirt with a global economic horror show.

Dow closes at record high as Disney pops more than 7%

The Dow Jones Industrial Average hit an all-time high on Wednesday as Disney shares popped while investors digested testimony from the top-ranking Federal Reserve official. 

The 30-stock average closed 92.10 points higher, or 0.3% at 27,783.59, notching intraday and closing records. Disney jumped 7.4% after the media giant said its Disney+ streaming service got more than 10 million sign-ups after launching on Tuesday. 

Meanwhile, the S&P 500 eked out a record closing high, its 20th of the year, ending the day up 0.1% at 3,094.04. The Nasdaq Composite, however, closed just below the flatline at 8,482.10. 

Gains were capped after Dow Jones reported U.S.-China trade talks have hit a snag over agricultural purchases. The report also said Beijing is resisting requests from the U.S. to curb tech transfers as well as enforcement mechanisms. China is also reportedly balking at commitments to specific farm purchases from the U.S.

The major indexes quickly pared gains following the report but later regained their footing.

“We can make the case for the market to go higher, but it’s going to be dependent on trade,” said James Ragan, director of wealth management research at D.A. Davidson. “Not surprising that when we get more negative headlines on trade, the market pauses.”

“There’s a lot of pressure on the trade agreement,” he said. “if they’re not even able to sign a phase one trade deal, that’s pretty negative.”

CNBC’s Kayla Tausche reported the U.S. is trying to secure stronger concessions from China on intellectual-property theft enforcement and curb forced technology transfers. In exchange, the U.S. would roll back tariffs. 

Wednesday’s news comes a day after The Wall Street Journal reported, citing people familiar with the talks, that both sides where at an impasse on whether the U.S. should remove existing tariffs or would only cancel duties that are set to take effect on Dec. 15.

It also follows President Donald Trump telling the Economic Club of New York on Tuesday that China was “dying” to make a trade deal. 

---- Fed Chairman Jerome Powell addressed the Congressional Joint Economic Committee later in the day. In prepared remarks, he said the path of Fed interest rates is unlikely to change as long as the economy keeps growing.

“We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook of moderate economic growth, a strong labor market, and inflation near our symmetric 2 percent objective,” he said in the prepared testimony.

However, he cautioned that challenges such as low inflation and weakness overseas remain.
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Asian markets mixed after weaker economic data from China, Japan

Asian markets were mixed in early trading Thursday after weaker-than-expected economic data from China and Japan, and reports of a sticking point in U.S.-China trade negotiations.

The Wall Street Journal reported Wednesday that the trade talks were being held up by China’s reluctance to agree on a specific figure for U.S. agricultural purchases. President Donald Trump has said China has agreed to buy $50 billion of farm goods. Rolling back tariffs and enforcement mechanisms are also reportedly still points of contention.

In economic news Thursday, China said its economic activity grew slower than expected in October, up 4.7% from a year ago, and down from September’s 5.8% increase. Economists had expected a 5.2% rise. Data also showed Japan’s economy grew slower than expected in the September-ending quarter, up just 0.2% year-over-year, following a 1.8% expansion in the previous quarter. Economists had forecast a 0.8% gain.

Also Thursday, Australia’s government reported employment fell by a bigger-than-expected margin in October. That prompted expectations the central bank will cut interest rates to prop up economic growth.

More

But back in the real world where most people make their living, more signs of that arriving global recession. As China slows, so does the global economy. It was China’s vast spending response to the Great Recession that ended it, far exceeding the US spending response.

If Trump’s trade war finally knocks out modern China, it’s our massively integrated global economy that breaks, not just China’s economy.

If our global economy breaks, get prepared for massive social protests similar to Hong Kong, Chile and Paris. Get ready for negative interest rates virtually everywhere, rampant populist socialism, universal basic income, and the failure of the Great Nixonian Error of fiat money.

China's economy grinds lower as Oct indicators miss forecasts

November 14, 2019 / 2:12 AM
BEIJING (Reuters) - China’s industrial output grew significantly slower than expected in October, as weakness in global and domestic demand and the drawn-out Sino-U.S. trade war weighed on activity in the world’s second-largest economy.

Industrial production rose 4.7% year-on-year in October, data from the National Bureau of Statistics released on Thursday showed, below the median forecast of 5.4% growth in a Reuters poll.

Indicators showed other sectors also slowing significantly and missing forecasts with retail sales growth back near a 16-year trough and fixed asset investment growth the weakest on record.

The disappointing economic data adds to the case for Beijing to roll out fresh support for the economy after China’s economic growth slowed to its weakest pace in almost three decades in the third quarter as the bruising U.S. trade war hit factory production.

Broad activity in China’s manufacturing sector remains weak with data on the weekend showing factory gate prices falling at their fastest pace in more than three years in October.

China’s official Purchasing Managers’ Index (PMI) also showed activity in the factory sector remained in contraction for a sixth straight month in the month.

---- Other data on Thursday showed China’s property investment growth in the first 10 months of the 2019 slowing year-on-year.

The tariff war between China and the United States has hit global demand, disrupted supply chains and upended financial markets.

While some signs of recent progress in trade negotiations between the superpowers have cheered investors, officials from both sides have so far avoided any firm commitments to end their dispute.
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Jobs at risk as China's services sector feels heat of trade war

November 14, 2019 / 2:41 AM
BEIJING (Reuters) - Annual profits at China’s Ningbo S-Power International Logistics Co are down a sharp 40% year-on-year, and export orders have also fallen at a similarly dizzying rate.

The firm’s woes highlight a bigger problem for the world’s second-largest economy and its stability-obsessed leaders - the intensifying pressure on employment as a structural slowdown in the once-booming services sector is exacerbated by the protracted Sino-U.S. trade war. 

The simultaneous downturn in the services and manufacturing industries poses a daunting challenge for authorities seeking to keep a lid on unemployment and prevent social unrest as economic growth slumps to near three-decade lows.  

“The employment problem is rising as the services sector is slowing,” said a policy insider who advises the government.

The worries are palpable as services firms have been the shock absorber in China’s labor market, creating more new jobs to offset rising factory layoffs, but increases in U.S. tariffs are starting take a toll on logistics, shipping, transport and storage firms.

China’s survey-based urban jobless rate climbed to 5.1% in October from 4.9% in April 2018, when the United States and China began imposing tit-for-tat import tariffs, official data showed. Analysts have long been skeptical about the reliability of the employment numbers.

Mei Zhenhua, a manager at the logistics concern Ningbo S-power, which is based in eastern Zhejiang province, told Reuters the firm’s profits and export orders have taken a tumble this year.

“If our customers face difficulties due to the higher (U.S.) tariffs, they may cancel their orders,” Mei said.

“Orders have fallen by about 40% and profits have dropped by a similar margin.”

Hao Yao, a manager at Yingsheng Global Logistics Co. in Shenzhen in southern Guangdong province - China’s export powerhouse - said company profits have been slashed by nearly a third this year with clients hit by the trade war.
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Hong Kong's Cathay defers delivery of 4 Airbus planes as demand falls

November 14, 2019 / 6:10 AM
(Reuters) - Hong Kong’s Cathay Pacific Airways Ltd (0293.HK) said on Thursday it would defer the delivery of four Airbus SE (AIR.PA) narrowbodies in 2020 as it cuts capacity to deal with falling demand due to anti-government protests in its home city.

In addition to delaying the arrival of three A321neos at regional arm Cathay Dragon and one A320neo at budget carrier HK Express, it said it would retire one Boeing Co (BA.N) 777-300ER and one Cathay Dragon A320 earlier than expected.

The airline said on Wednesday the short-term outlook remained “challenging and uncertain” as it lowered its profit guidance for the second time in less than a month.

Anti-government protests paralysed parts of Hong Kong for a fourth day on Thursday, forcing school closures and blocking highways and other transport links amid a marked escalation of violence.

Cathay said the unrest was expected to lead to a small post-acquisition loss for HK Express, which it bought this year from Chinese conglomerate HNA Group for HK$4.93 billion (£492.08 million).
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Japan's economy nearly stalls in third-quarter, growth at 1-year low as trade war bites

November 13, 2019 / 11:56 PM
TOKYO (Reuters) - Japan’s economy ground to a near standstill in the third quarter with growth at its weakest in a year as the U.S.-China trade war and soft global demand knocked exports, keeping pressure on policymakers to ramp up stimulus to bolster a fragile recovery.

Private consumption also cooled from the previous quarter, casting doubt on the Bank of Japan’s view that robust domestic demand will offset the impact from intensifying global risks. 

The world’s third-largest economy grew an annualized 0.2% in the third quarter, slowing sharply from a revised 1.8% expansion in April-June, preliminary gross domestic product (GDP) data released by the government showed on Thursday.

It fell well short of a median market forecast for a 0.8% gain and marked the weakest growth since a 2.0% contraction in July-September last year.

“Domestic demand had made up for some of the weakness in external demand, but we can’t count on this to continue,” said Taro Saito, executive research fellow at NLI Research Institute.

“A contraction in October-December GDP is a done deal. The economy may rebound early next year, but will lack momentum.”

The feeble data may heighten calls from lawmakers for the government to boost fiscal spending to support the economy, which many fear will take a hit from a sales tax hike that took effect in October.

Private consumption grew 0.4% in July-September, slowing from a 0.6% increase in the previous quarter, despite stronger demand from households which sought to beat the October tax hike.

Capital spending, a rare bright spot in the economy, rose 0.9% in the third quarter, accelerating from the previous three months. That helped domestic demand add 0.2 percentage point to growth.

But external demand knocked 0.2 percentage point off GDP growth, as exports were hit by the protracted China-U.S. trade war that has upended world supply chains and hurt the global economy.
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Crooks and Scoundrels Corner.

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

Today, more warnings on over-priced stocks, flying on a wing and a prayer to the Fed.  But dare the Fed follow Trump’s demand and take US interest rates into negative territory?

Do NOT show these ominous charts to stock-market bulls, says strategist who sees a correction forming

By Shawn Langlois  Published: Nov 12, 2019 2:02 p.m. ET
He’s not exactly a doom-and-gloomer, but Lance Roberts, chief strategist at RIA Advisors and author of the Real Investment Advice blog, just placed bets against the S&P 500 in all his portfolios to guard against a looming downturn.

“Given the fact that the short, intermediate, and long-term indicators have all aligned, the risk of running portfolios without a hedge is no longer optimal,” Roberts wrote in a blog post on Tuesday. “My job, like every portfolio manager, is to participate when markets are rising. However, it is also my job to keep a measured approach to capital preservation.”

With that in mind, Roberts built a rather bearish case using several charts he believes point to market weakness ahead. Here are a few of those red flags, just don’t show them to those clinging to the belief this bull market has room to run.

Why? “Because you need someone to ‘sell to’ first,” he said.

As this chart of the CBOE’s volatility index VIX, +5.36% shows, investors, thanks to Federal Reserve rate cuts and a fiscal-stimulus-driven rally in the stock market, are back to levels of extreme complacency.

----This setup “provides all the ‘fuel’ necessary for a fairly sharp 3-5% correction given the proper catalyst,” Roberts warned. And with everybody all in, as discussed last week, “there is plenty of room for investors to get forced out of holdings and push markets lower over the next few weeks.”

----Meanwhile, he pointed out that the deviation between corporate GAAP earnings, or those that adhere to Generally Accepted Accounting Principles, and corporate profits has reached “unsustainable” levels. This will revert to the norm, he said, and that’s typically a negative. 

Expectations for corporate earnings going forward are still way to elevated, and with corporate share buybacks slowing, this leaves lots of room for disappointment,” Roberts wrote.

----Positioning in the eurodollar ED00, +0.01%, which refers to dollar-denominated deposits at foreign banks, is also sending “a major warning,” Roberts said. As the global economy slows, those banks are hedging their risk by loading up on those deposits. “Historically,” he explained, “when you have an extremely sharp reversal in Eurodollars, it has preceded more troubling market events.”

----Roberts also pointed to sentiment being heavily skewed toward buyers, and when that flips — it always does — whipsaw reversals tend to follow.

“When sellers panic, and are willing to sell ‘at any price,’ the buyers that remain gain almost absolute control over the price they will pay,” he wrote. “This lack of liquidity for sellers leads to rapid and sharp declines in price, which further exacerbates the problem and escalates until sellers are exhausted.”
More
https://www.marketwatch.com/story/do-not-show-these-ominous-charts-to-stock-market-bulls-says-strategist-who-sees-a-correction-forming-2019-11-12?mod=home-page


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?

Carbon nanotubes show a love/hate relationship with water

Date: November 12, 2019

Source: University of Pittsburgh

Summary: New research reveals that carbon nanotubes (CNTs) as a coating can both repel and hold water in place, a useful property for applications like printing, spectroscopy, water transport, or harvesting surfaces. When water is dropped on a CNT forest, the CNTs repel the water, and it forms a sphere. However, when flipped over, the drop does not fall to the ground but rather clings to the surface. 

Carbon nanotubes (CNTs) are valuable for a wide variety of applications. Made of graphene sheets rolled into tubes 10,000 times smaller than a human hair, CNTs have an exceptional strength-to-mass ratio and excellent thermal and electrical properties. These features make them ideal for a range of applications, including supercapacitors, interconnects, adhesives, particle trapping and structural color.

New research reveals even more potential for CNTs: as a coating, they can both repel and hold water in place, a useful property for applications like printing, spectroscopy, water transport, or harvesting surfaces. When water is dropped on a CNT forest, the CNTs repel the water, and it forms a sphere. 
However, when flipped over, the drop does not fall to the ground but rather clings to the surface.

"In contrast to superhydrophobic surfaces where droplets roll off easily when tilted, CNTs forests are parahydrophobic, where the droplet is both repelled and attracted to the CNT surface," explains Ziyu Zhou, lead author of the paper and graduate student in the LAMP Lab. "It is a love-hate relationship."

The key to this wetting behavior is the use of CNT forests that are densely, vertically packed on the surface and the inherently hydrophilic CNT surface. The forests are about 100 microns in height and so dense that there are over 100 billion (1011) CNTs in 1 cm2 area. Some amount of water sinks below the carbon nanotubes and clings to the hydrophilic material, while the rest is repelled into a sphere.

This research represents the first observation of parahydrophobicity of CNT forests, where the droplet can roll along the surface but does not fall off when turned upside down. Other surfaces in nature such as peach fuzz or rose petals also exhibit this wetting behavior, which may be used to for liquid transportation, fabrics coating design, membrane selectivity and even wall-climbing robotics.

This wetting behavior could also be used to as a way to construct CNTs into various arrangements.

"Previous research showed CNT forests to be unstable under the application of water, but we show that water droplets are, in fact, stable on these dense CNT forests," explains Paul Leu, PhD, associate professor of industrial engineering at the University of Pittsburgh's Swanson School of Engineering and author on the paper. "This wetting behavior may be used to assemble CNTs into dense vertical arrays, surface stripes, and other unique shapes that could be used for supercapacitors, interconnects, and other applications."

"Indeed the temporary breaks in the market which preceded the crash were a serious trial for those who had declined fantasy. Early in 1928, in June, in December, and in February and March of 1929 it seemed that the end had come. On various of these occasions the [New York] Times happily reported the return to reality. And then the market took flight again. Only a durable sense of doom could survive such discouragement. The time was coming when the optimists would reap a rich harvest of discredit. But it has long since been forgotten that for many months those who resisted reassurance were similarly, if less permanently discredited.”

J. K. Galbraith. The Great Crash: 1929.

The monthly Coppock Indicators finished October

DJIA: 27,046 +59 Up. NASDAQ: 8,292 +67 Up. SP500: 3,038 +67 Up.

Another inconclusive month, but all three continued to move up weakly. A buy signal. But, like the Fed, I would await more data.

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