Baltic Dry Index. 1812
-56 Brent
Crude 62.01
Never ending Brexit
now October 31st, maybe. 90
days away.
Nuclear Trump
China Tariffs Now In Effect.
USA v EU trade war
postponed to November, maybe.
All the best
stories in the world are but one story in reality - the story of escape. It is
the only thing which interests us all and at all times, how to escape.
Walter Bagehot
Madness rules the
world this August summer morning. Did President Trump just blindside President
Xi and China’s trade negotiators? How much face did they just lose and how will
they react?
With his new10
percent trade war tariffs on another 300 billion of China’s exports, did
President Trump just steal Christmas from many long suffering US consumers? US importers
have just 28 days to try to beat the tariffs starting September first.
Almost as bad this
morning, a big escalation in the rapidly turning bitter new trade war between
Japan and South Korea. Reports from South Korea are of a rising consumer
boycott of Japanese products.
Below, the next
global recession by Christmas? Get long some gold. If we are going into, or have
already started a new global recession, the Fed will probably join the ECB and
BOJ in negative interest rates before it ends.
New Trump tariffs threaten U.S. consumer, spelling wider trouble for stocks, analysts say
By Chris
Matthews Published: Aug 1, 2019 4:40
p.m. ET
Two-thirds of good affected by tariffs concentrated in the tech, consumer discretionary industries
President Donald Trump on Thursday announced his intention to institute a 10% tariff starting September 1 on the $300 billion in goods that have so far escaped added levies, and financial markets have not taken the news well.The Dow Jones Industrial Average , S&P 500 index and the Nasdaq Composite index all went from more than 1% gains Wednesday to at least 0.8% losses in the final hours of trade, following the president’s Twitter announcement, but the pain felt today could be just the start of volatility, analysts warn.
The additional tariffs will exacerbate a worrying trend of declining business investment and the malaise will likely spread from the industrial sector to consumer-facing companies as well, analysts tell MarketWatch.
“It goes to confidence and clarity and credibility,” Willie Delwiche, investment strategist at R.W. Baird told MarketWatch in an interview. “The U.S. economy can handle within reason a given level of tariffs, if it’s known what the level will be,” but the presidents unpredictable raising of the stakes will directly lead to businesses feeling like they need to preserve capital to prepare for the unknown.
What’s more, the proposed next round of tariffs will mostly affect products that are either sold directly to consumers or are components for such goods. A recent analysis by J.P. Morgan’s chief equity strategist Dubravko Lakos-Bujas indicated that two-third of the products to be hit by the impending round of tariffs are concentrated in the technology and consumer discretionary sectors of benchmark stock indexes.
Consumer
discretionary stocks were among the worst performing Thursday, falling 1.3% on
the day, versus the S&P 500 index, which fell 0.9%. “Retail companies have
lower pricing power and less dedicated supply chains, which should translate
into weaker margins as companies absorb some of the incremental input costs to
their core suppliers and end users,” Lakos-Bujas wrote.
More
Japan removes South Korea from preferred trade status, raising tensions
By Associated Press
Published: Aug 1, 2019 11:50 p.m. ET
South Korean official warns of ‘grave ramifications’ over downgrade
TOKYO — Japan’s Cabinet on Friday approved the removal of South Korea
from a “whitelist” of countries with preferential trade status, a move sure to
fuel antagonism already at a boiling point over recent export controls and the
issue of compensation for wartime Korean laborers.
The decision expanding controls over exports of sensitive materials
takes effect on Aug. 28. It follows an earlier requirement that Japanese
companies’ exports to South Korea be approved on a case-by-case basis for three
materials used in semiconductors, smartphones and other high-tech devices —
South Korea’s key exports.
Trade Minister Hiroshige Seko said the decision was needed to
“appropriately carry out export controls for national security purposes” and
was based on South Korea’s “insufficient” export controls.
In addition to escalating tensions between the Asian neighbors, the move
will ripple across the high-tech sector, further affecting supply chains
already rattled by U.S.-China trade tensions.
The loss of preferential trade status will apply to dozens more products
on a list of items that potentially could be converted to weapons. That’s in
addition to more than 200 other items requiring individual inspection for
exports to all countries. Ending South Korea’s “white country” status would
also mean Japan could limit exports of any product on national security
grounds.
South Korea expressed “deep regret” and vowed a stern response over
Japan’s decision. In a statement read on national TV, the presidential Blue
House spokeswoman Ko Min-jung said that Seoul had committed to resolving its
trade row with Tokyo diplomatically and will now sternly respond to the
Japanese measures it sees as “unjust.”
South Korea says the Japanese trade curbs could hurt its export-dependent
economy and has accused Japan of weaponizing trade to retaliate over disputes
stemming from wartime history. Tokyo’s export measures since early July have
already triggered angry protests and boycotts from South Korea.
Japan’s Trade Ministry says Seoul has undermined a “relationship of
trust” in export controls after repeatedly ignoring or postponing Japan’s
request for explanation over what Japan considered problematic shipments. It
said it had concerns about whether South Korean export controls would prevent
misuse of sensitive materials.
Approvals of such exports could take up to 90 days, slowing but not
halting shipments. The standard procedure works fine with other countries and
it should not be a problem with South Korea, Seko said.
More
Sharp's first-quarter profit down 41%, below estimates
August 1, 2019 /
7:23 AM
TOKYO (Reuters) -
Sharp Corp reported a 41% drop in quarterly operating profit as an escalating
trade war between the United States and China dampened demand for its
electronics devices and television sets.
The trade dispute,
punctuated by tit-for-tat import tariffs spanning industries, has slowed demand
for consumer electronics worldwide, hitting both Sharp and its Taiwanese parent
Foxconn, the world’s largest contract manufacturer
Sharp, which makes sensors, camera modules and screens for Apple Inc’s
iPhones, posted an operating profit of 14.61 billion yen (£110.42 million) for
the first quarter ended June, down from 24.8 billion yen a year prior.
That compared with an 18.84 billion yen average of five analyst
estimates compiled by Refinitiv.
Sharp maintained its profit forecast for the year ending March at 100
billion yen, versus a consensus estimate of 90.42 billion yen from 9 analysts.
Siemens Is Latest Casualty of Europe’s Economic Slowdown
By Oliver Sachgau
August 1, 2019, 6:00 AM GMT+1 Updated on August 1, 2019,
11:50 AM GMT+1
German industrial giant Siemens
AG became the latest casualty of Europe’s economic slowdown, warning a
sharp deterioration in some markets hurt quarterly profit and has put financial
goals at risk.The shares dropped as much as 5.9% on Thursday, the most in more than three years, after the region’s largest engineering company reported a disappointing set of results, joining ArcelorMittal, Rheinmetall AG and BMW AG in providing evidence of the gathering storm.
The earnings are a sign that a deepening slump in the global car industry and a more general economic malaise are reaching further into corporate Europe. Until now, Siemens was able to rely on its digital industries division supplying factories with equipment to automate to make up for a protracted slump in the power and gas sector. In the latest quarter, even orders and sales at that unit dropped.
“It is difficult to reconcile owning Siemens for its world-class automation, software franchise when this is driving negative earnings,” Morgan Stanley analyst Ben Uglow wrote in a note.
Manufacturing in the euro area shrank for a sixth month at the start of the third quarter, dragged down by Germany’s worst slump in seven years. The downbeat figures come in the wake of reports showing slower economic growth in France, Spain and the euro area, with Italy stagnating. While part of the weakness is linked to troubles in the automotive industry, a continued downturn could spell more trouble.
Behind the economic statistics, an increasing number of companies like
Siemens are also sounding the alarm. The German company is in the midst of an
overhaul and is already shedding thousands of jobs. During the latest reporting
period, profit declined a worse-than-expected 12% and the company said a target
for sales growth will be harder to reach and another for profit margin will be
at the lower end of a range.
“The assumptions we made in the first two quarters about the economic
and political environment are no longer true,” Siemens Chief Financial Officer
Ralf Thomas said, adding that the auto sector won’t improve for at least three
quarters. “We’re taking countermeasures to secure our business’s profitability
to the greatest extent possible.”
More
A large Bank is exactly the place where a
vain and shallow person in authority, if he be a man of gravity and method, as
such men often are, may do infinite evil in no long time, and before he is
detected. If he is lucky enough to begin at a time of expansion in trade, he is
nearly sure not to be found out till the time of contraction has arrived, and then
very large figures will be required to reckon the evil he has done.
Walter Bagehot. Lombard Street. 1873
Walter Bagehot. Lombard Street. 1873
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled
over.
Although everyone is innocent until proven guilty, if found guilty the
case below illustrates what President Trump and America are up against. If the
allegations and figures in the article are correct, 1.8 billion of Liu
Zhongtian’s net worth of 3.2 billion, came from US tariff evasion under two
President’s.
Chinese billionaire indicted in U.S. for alleged $1.8 billion aluminum tariff evasion
July 31, 2019 /
4:52 PM
WASHINGTON/NEW
YORK (Reuters) - A Chinese billionaire has been indicted by a grand jury on
charges he schemed with the aluminum company he founded to evade $1.8 billion
of tariffs by smuggling huge amounts of the metal into the United States,
federal prosecutors said on Wednesday.
Liu Zhongtian, 55, and China Zhongwang Holdings Ltd (1333.HK), where he served as chairman and president, were among several defendants charged in a 24-count indictment by a Los Angeles grand jury.
The May 7 indictment had been kept under seal until late Tuesday. It came as U.S. and Chinese negotiators resumed talks to end trade tensions between the world’s two largest economies.
Neither Zhongwang or Liu, who is still the company’s controlling shareholder, have received any notice of the proceedings, the company said in a statement to the Hong Kong stock exchange on Thursday.
Zhongwang has previously described smuggling allegations as “misleading” and “without any factual basis.”
“The company would like to clarify that the group has always strictly abided by in its business operation the laws and regulations of the People’s Republic of China and destination countries of its exported products, and has developed overseas markets under the principle of fair and orderly competition,” it said in the statement to the exchange.
Zhongwang’s shares fell as much as 20.9% on Thursday to HK$3.17 ($0.41), the lowest since January 2016.
Liu is believed to be in China, which does not have an extradition treaty with the United States, and an arrest warrant has been drawn up, according to The Wall Street Journal. It was unclear whether Liu has a U.S.-based lawyer. Liu and his family are worth $3.2 billion, Forbes magazine said.
Prosecutors said the alleged scheme began as early as 2008, and
eventually involved efforts to escape duties imposed by the U.S. Department of
Commerce in 2011 on various types of extruded aluminum imported from China.
The indictment said companies affiliated with Liu went through ports in
the Los Angeles area to import aluminum extrusions that were “tack-welded”
together, to appear as finished “pallets” that were not subject to duties.
Prosecutors said Liu would then stockpile the aluminum at four southern
California warehouses, and with his associates orchestrate bogus sales to
companies he controlled to inflate Zhongwang’s financials and make it appear
more valuable.
Liu, also known as “Big Boss” and “Uncle Liu” according to the
indictment, was also accused by prosecutors of running a “massive” money
laundering operation involving the use of shell companies to transfer funds to
Zhongwang.
U.S. authorities said the scheme gave Liu’s companies an unfair
advantage over American rivals and posed other hazards.
“Our national security is jeopardized when domestic industry loses its
ability to develop and supply products for U.S. defense and critical
infrastructure applications, forcing us to become dependent on unreliable imports,”
Joseph Macias, special agent in charge for homeland security investigations in
Los Angeles, said in a statement.
Liu and several other defendants face charges of wire fraud, money
laundering, passing fraudulent papers through a customhouse and conspiracy.
Most counts carry a maximum 20-year prison term, and if served
consecutively carry a maximum 465-year term.
The case is U.S. v Liu et al, U.S. District Court, Central District of
California, No. 19-cr-00282.
“It is hard for us, without being flippant, to even
see a scenario within any kind of realm of reason that would see us losing one
dollar in any of those [Credit Default Swap] transactions.”
Joseph J. Cassano, former head of A.I.G. Financial Products, London,
August 2007. AIG was bailed out with 85 billion September 2008, after Cassano’s
riskless CDS blew up.
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?
Today, more on what
we covered on Wednesday from Stanford’s perspective. Today, Princeton puts it’s
own spin on the development.
Experiments explore the mysteries of 'magic' angle superconductors
Date:
July 31, 2019
Source:
Princeton University
Summary:
Physicists conducted experiments to explore superconductivity in a
groundbreaking new material known as magic-angle twisted graphene. The team
imaged electrons on the material's surface and found that electrons interact
with each other in ways that could help explain how superconductivity arises in
this material.
In spring 2018, the surprising discovery of superconductivity in a new
material set the scientific community abuzz. Built by layering one carbon sheet
atop another and twisting the top one at a "magic" angle, the
material enabled electrons to flow without resistance, a trait that could
dramatically boost energy efficient power transmission and usher in a host of
new technologies.
Now, new experiments conducted at Princeton give hints at how this
material -- known as magic-angle twisted graphene -- gives rise to
superconductivity. In this week's issue of the journal Nature, Princeton
researchers provide firm evidence that the superconducting behavior arises from
strong interactions between electrons, yielding insights into the rules that
electrons follow when superconductivity emerges.
"This is one of the hottest topics in physics," said Ali
Yazdani, the Class of 1909 Professor of Physics and senior author of the study.
"This is a material that is incredibly simple, just two sheets of carbon
that you stick one on top of the other, and it shows superconductivity."
Exactly how superconductivity arises is a mystery that laboratories
around the world are racing to solve. The field even has a name,
"twistronics."
Part of the excitement is that, compared to existing superconductors,
the material is quite easy to study since it only has two layers and only one
type of atom -- carbon.
"The main thing about this new material is that it is a playground
for all these kinds of physics that people have been thinking about for the
last 40 years," said B. Andrei Bernevig, a professor of physics
specializing in theories to explain complex materials.
The superconductivity in the new material appears to work by a
fundamentally different mechanism from traditional superconductors, which today
are used in powerful magnets and other limited applications. This new material
has similarities to copper-based, high-temperature superconductors discovered
in the 1980s called cuprates. The discovery of cuprates led to the Nobel Prize
in Physics in 1987.
----Seen from above, the overlapping chicken-wire patterns give a flickering effect known as "moiré," which arises when two geometrically regular patterns overlap, and which was once popular in the fabrics and fashions of 17th and 18th century royals.
These moiré patterns give rise to profoundly new properties not seen in
ordinary materials. Most ordinary materials fall into a spectrum from insulating
to conducting. Insulators trap electrons in energy pockets or levels that keep
them stuck in place, while metals contain energy states that permit electrons
to flit from atom to atom. In both cases, electrons occupy different energy
levels and do not interact or engage in collective behavior.
In twisted graphene, however, the physical structure of the moiré
lattice creates energy states that prevent electrons from standing apart,
forcing them to interact. "It is creating a condition where the electrons
can't get out of each other's way, and instead they all have to be in similar
energy levels, which is prime condition to create highly entangled
states," Yazdani said.
The question the researchers addressed was whether this entanglement has
any connection with its superconductivity. Many simple metals also
superconduct, but all the high-temperature superconductors discovered to date,
including the cuprates, show highly entangled states caused by mutual repulsion
between electrons. The strong interaction between electrons appears to be a key
to achieve higher temperature superconductivity.
To address this question, Princeton researchers used a scanning
tunneling microscope that is so sensitive that it can image individual atoms on
a surface. The team scanned samples of magic-angle twisted graphene in which
they controlled the number of electrons by applying a voltage to a nearby
electrode. The study provided microscopic information on electron behavior in
twisted bilayer graphene, whereas most other studies to date have monitored
only macroscopic electrical conduction.
More
Another summer
weekend, and an interesting one too, now that President Trump has set the cat
among the pigeons. I suspect we will not await long on responses from Beijing
and Seoul. Have a great weekend everyone.
Dullness in matters
of government is a good sign, and not a bad one - in particular, dullness in
parliamentary government is a test of its excellence, an indication of its
success.
Walter Bagehot
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.
