As
a special birthday treat, John Mauldin excels with common sense and
then quotes an extract from Michael Lewitt’s reality check from his
latest letter. If you think this ends well, think again. The
Fedster’s and other central banksters operating on the Great
Nixonian Error of fiat money, communist money, have set off the
greatest debt bubble in history, which in turn has spawned the
greatest wealth disparity in history. Populist revolutions have
occurred in the past for less.
By John Mauldin |
Nov 25, 2017
The
Bonfire Burns On
----Michael
Lewitt’s latest letter came in this morning. He began with the
marvelous Ralph Waldo Emerson quote that I used at the beginning of
this letter, and then he helpfully contributed this list of
absurdities:
Anyone questioning whether financial markets are in a bubble
should consider what we witnessed in 2017:
• A painting (which may be fake)
sold for $450 million.
• Bitcoin (which may be worthless)
soared nearly 700% from $952 to ~$8000.
• The Bank of Japan
and the European Central Bank bought $2 trillion of assets.
•
Global debt rose above $225 trillion to more than 324% of global
GDP.
• US corporations sold a record $1.75 trillion in
bonds.
• European high-yield bonds traded at a yield under
2%.
• Argentina, a serial defaulter, sold 100-year bonds in an
oversubscribed offer.
• Illinois, hopelessly insolvent, sold
3.75% bonds to bondholders fighting for allocations.
• Global
stock market capitalization skyrocketed by $15 trillion to over $85
trillion and a record 113% of global GDP.
• The market cap of
the FANGs increased by more than $1 trillion.
• S&P 500
volatility dropped to 50-year lows and Treasury volatility to 30-year
lows.
• Money-losing Tesla Inc. sold 5% bonds with no
covenants as it burned $4+ billion in cash and produced very few
cars.
This is a joyless bubble, however. It is accompanied by political
divisiveness and social turmoil as the mainstream media hectors the
populace with fake news. Immoral behavior that was tolerated for
years is finally called to account while a few brave journalists
fight against establishment forces to reveal deep corruption at the
core of our government (yes, I am speaking of Uranium One and the
Obama Justice Department). In 2018, a lot of chickens are going to
come home to roost in Washington, D.C., on Wall Street, and in the
media centers of New York City and Los Angeles. Icons will be blasted
into dust as the tides of cheap money, cronyism, complicity, and
stupidity recede. Beware entities with too much debt, too much
secrecy, too much hype. Beware false idols. Every bubble destroys its
idols, and so shall this one.
World
War I was not inevitable, as many historians say. It could have been
avoided, and it was a diplomatically botched negotiation.
Richard
Holbrooke
While
the west gets on with the business of Christmas shopping, inflating
stock market bubbles, coping with President Trump’s ever more
erratic foreign policies, and watching Europe implode as voters there
increasingly punish establishment political parties, Saudi Arabia
seems to have lost its marbles, gone loopy, and be recklessly
hurtling towards triggering a new all against all war in the Middle
East.
Despite
the fact that this would produce another 1973 style oil shock,
setting off havoc or worse across the west, no one in the west’s
leadership seems to care. Stay long fully paid up physical gold and
silver held outside the
US financial system, remember M F Global. Whether the Saudis are
pursuing some US deep state, or President Trump hidden foreign
policy is an open question, but playing Russian roulette in the
region is an incredibly reckless game with no good outcome.
Below,
this weekend update, the west walking on eggshells.
“Despite
not having the fleet we should have, we have conquered for ourselves
a place in the sun. It is now my task to see to it that this place in
the sun shall remain our undisputed possession.”
Kudos
to Germany’s spooks. Back in December 2015, the German foreign
intelligence agency, BND, distributed
a one-and-a-half-page memo to various media outlets titled:
“Saudi Arabia — Sunni regional power torn between foreign policy
paradigm change and domestic policy consolidation.” The document
was pretty astonishing, both in its undiplomatic bluntness and
remarkable prescience.
“The
current cautious diplomatic stance of senior members of the Saudi
royal family will be replaced by an impulsive intervention policy,”
the memo warned,
focusing on the role of Mohammed bin Salman, who had been appointed
as deputy crown prince and defense minister at the age of 30 earlier
that year.
Both
MBS, as he has come to be known, and his elderly father King Salman,
the BND analysts wrote, want Saudi Arabia to be seen as “the leader
of the Arab world” with a foreign policy built on “a strong
military component.” Yet the memo also pointed out that the
consolidation of so much power in a single young prince’s hands
“harbors a latent risk that in seeking to establish himself in the
line of succession in his father’s lifetime, he may overreach,”
adding: “Relations with friendly and above all allied countries in
the region could be overstretched.”
And
so it has come to pass. In fact, despite being repudiated
at the time by a German government more concerned about
diplomatic and commercial relations with Riyadh, the BND warning
turned out to be eerily prophetic.
Is
it anything other than “interventionist” to force the resignation
of the prime minister of Lebanon on a visit to your country and then
put
him under a form of house arrest (though the hapless Saad Hariri,
a long-standing client of Riyadh, publicly
claims otherwise and says he is heading back to Beirut this
week)? Or to also detain the president of Yemen? According to an
investigation by the Associated
Press, “Saudi Arabia has barred Yemen’s president, along with
his sons, ministers and military officials, from returning home for
months.”
That
the crown prince of Saudi Arabia can, essentially, kidnap the elected
leaders of not one but two Middle Eastern countries — and,
incidentally, put the leading Saudi royal he replaced as crown prince
under
palace arrest — speaks volumes about not just his “impulsive
intervention policy” but the shameless pass he gets from Western
governments for such rogue behavior. Imagine the reaction from the
international community if Iran had, say, detained the Iraqi prime
minister on Iranian soil after forcing him to resign on Iranian
television. Yet President Donald Trump has gone out of his way to
tweet
his support for the crown prince and his father: “I have great
confidence in King Salman and the Crown Prince of Saudi Arabia, they
know exactly what they are doing.”
EXCLUSIVE:
'American mercenaries are torturing' Saudi elite rounded up by new
crown prince - and billionaire Prince Alwaleed was hung upside down
'just to send a message'
Source in Saudi Arabia
says American private security contractors are carrying
out'interrogations' on princes and billionaires arrested in
crackdown
Detained members of
Saudi elite have been hung by their feet and beaten by interrogates,
source says
Among those hung upside
down are Prince Alwaleed bin Talal, an investor worth at least $7
billion who is being held at Riyadh's Ritz Carlton
Arrests were ordered
three weeks ago by Crown Prince Mohammed bin Salman
Source claims
mercenaries are from 'Blackwater', a claim also made by Lebanese
president
But its successor firm
denies it has any operations in Saudi Arabia whatsoever and says its
staff abide by U.S. law
Americans who commit torture abroad can be jailed
for up to 20 years
If the crown prince of Saudi Arabia has in mind a war with Iran,
President Trump should disabuse his royal highness of any notion that
America would be doing his fighting for him.
Mohammed bin Salman, or MBS, the 32-year-old son of the aging and
ailing King Salman, is making too many enemies for his own good, or
for ours.
Pledging to Westernize Saudi Arabia, he has antagonized the
clerical establishment. Among the 200 Saudis he just had arrested for
criminal corruption are 11 princes, the head of the National Guard,
the governor of Riyadh, and the famed investor Prince Alwaleed bin
Talal.
The Saudi tradition of consensus collective rule is being trashed.
MBS is said to be pushing for an abdication by his father and his
early assumption of the throne. He has begun to exhibit the familiar
traits of an ambitious 21st-century autocrat in the mold of President
Recep Tayyip Erdogan of Turkey.
Yet his foreign adventures are all proving to be debacles.
The rebels the Saudis backed in Syria’s civil war were routed.
The war on the Houthi rebels in Yemen, of which MBS is architect, has
proven to be a Saudi Vietnam and a human rights catastrophe.
The crown prince persuaded Egypt, Bahrain and the UAE to expel
Qatar from the Sunni Arab community for aiding terrorists, but he has
failed to choke the tiny country into submission.
----Riyadh has now imposed
a virtual starvation blockade — land, sea and air — on Yemen,
that poorest of Arab nations that is heavily dependent on imports for
food and medicine. Hundreds of thousands of Yemeni are suffering from
cholera. Millions face malnutrition.
The U.S. interest here is clear: no new war in the Middle East,
and a negotiated end to the wars in Yemen and Syria.
Hence, the United States needs to rein in the royal prince.
Yet, on his Asia trip, Trump said of the Saudi-generated crisis,
“I have great confidence in King Salman and the Crown Prince of
Saudi Arabia, they know exactly what they are doing.”
Do they? In October, Jared Kushner made a trip to Riyadh, where he
reportedly spent a long night of plotting Middle East strategy until
4 a.m. with MBS.
No one knows how a war between Saudi Arabia and Iran would end.
The Saudis has been buying modern U.S. weapons for years, but Iran,
with twice the population, has larger if less-well-equipped forces.
Yet the seeming desire of the leading Sunni nation in the Persian
Gulf, Saudi Arabia, for a confrontation with the leading Shiite
power, Iran, appears to carry the greater risks for Riyadh.
For, a dozen years ago, the balance of power in the Gulf shifted
to Iran, when Bush II launched Operation Iraqi Freedom, ousted Saddam
Hussein, disarmed and disbanded his Sunni-led army, and turned Iraq
into a Shiite-dominated nation friendly to Iran.
----So far out on a limb
has MBS gotten himself, with his purge of cabinet ministers and royal
cousins, and his foreign adventures, it is hard to see how he climbs
back without some humiliation that could cost him the throne.
Yet we have our own interests here. And we should tell the crown
prince that if he starts a war in Lebanon or in the Gulf, he is on
his own. We cannot have this impulsive prince deciding whether or not
the United States goes to war again in the Middle East.
With
most Americans to busy shopping today, and most Europeans to busy
being the western European version of the old dead USSR, market
attention turns to what’s going on in Chinese markets, and will it
spill over into other markets next week?
It
all probably comes down to at what point the authorities in Beijing
want to step in and resume rigging their market. Right now that’s
anyone’s guess, but having only just started reigning in financial
excess and risk in China’s bond market, my guess is that Beijing
will be willing to let the process run on for a few more weeks. That
probably means that it does spill over into other markets, though
probably without triggering a crash. But with US and other markets
already in bubble state and running on thin air, it doesn’t take
much for a stumble to turn into a rout, especially if the central
banksters are serious about normalising interest rates next year.
The
specs have to ask themselves, at least those not just computer driven
algo traders, at what point do I want to lock in 2017s profits?
November
24, 2017 / 12:49 AM
Asian shares off 10-year
peak, China hits three-month low
TOKYO
(Reuters) - Asian shares hovered below their 10-year peak on Friday
while mainland Chinese shares dropped to three-month lows after big
falls the previous day on concerns about fresh government steps to
curb financial risks and an ongoing rout in the Chinese bond market.
Otherwise,
markets lacked cues from Wall Street, which was closed for the
Thanksgiving holiday in the United States on Thursday, and was set to
hold a shortened trading session on Friday.
MSCI’s broadest index of
Asia-Pacific shares outside Japan was almost flat, as Hong Kong
shares bucked the softness in the mainland shares to gain 0.6
percent.
The
MSCI index hovered still just 0.5 percent below its 10-year peak hit
earlier this week and is on course to post a weekly gain of 1.4
percent.
Japan’s Nikkei fell 0.3 percent
after a market holiday on Thursday while U.S. stock futures were
little changed after shortened trading on Thursday.
“Many markets have been hitting new
highs so there should be some profit-taking and I wouldn’t worry
too much. Still, in the very near term, we could be in a phase where
patience is needed,” said Hirokazu Kabeya, chief global strategist
at Daiwa Securities.
Although solid global economic growth
and strong corporate earnings have underpinned shares in Asia and
many other parts of the world, a tumble in mainland Chinese shares
caught some investors’ attention.
The
CSI300 index fell as much as 0.9 percent to a three-month low in
choppy trade after a 3.0 percent fall - its biggest in almost a
year-and-a-half - on Thursday, as a sell-off in domestic bonds that
has been underway since last month gnawed away at investor sentiment.
Chinese Stocks to Remain
Under Pressure After Rout, Analysts Say
Bloomberg News
November
24, 2017, 1:59 AM GMT Updated on November 24, 2017, 3:47 AM GMT
Chinese
shares continue to reel after their worst day in more than a year,
and the pain is likely to persist as liquidity conditions tighten.
Credit Suisse Group AG analyst Li
Chen is among those blaming bond market volatility for the sudden
turmoil in equities, warning that fixed-income rates are
likely to remain elevated for the rest of this year, the day after a
gauge of large-cap A shares plummeted the most since June 2016.
“The rising rates make A shares
less attractive to banks and insurance institutions, and also give
some investors legitimate reasons to take profits now,” Chen wrote
in a note Friday.
Yields
on sovereign and top-rated local corporate debt have climbed amid
Beijing’s deleveraging campaign, which includes plans to tighten
supervision of asset management products. The 10-year yield on
China Development Bank debt this week exceeded 5 percent for the
first time since 2014, while that on similar maturity government
notes topped 4 percent.
“The mid-to-small financial
institutions that have not yet met the deleveraging standards, under
the newly published asset management rules (at year-end when
liquidity is relatively tight) have to sell off the bonds they hold,”
Chen said.
Index
Levels
Mainland markets dipped further on
Friday, with the CSI 300 Index of large cap stocks dropping 0.6
percent as of 11:14 a.m. local time. The gauge tumbled 3 percent
Thursday, with most of the losses coming in the last hour of
trading.
Even with Thursday and Friday’s
losses, the CSI 300 Index has climbed 23 percent this year.
State-backed funds, the so-called national team, don’t appear to
have stepped in to stabilize the market, though that could change if
the selloff continues, said Hong Hao, chief strategist at Bocom
International Holdings Co.
He said authorities may intervene to
avoid excessive moves, though the market should be allowed to find
prices free of interference. “The bond market is the more critical
issue, the central bank could ease liquidity a bit if they want to
stop the rout,” he said.
China Bank Profits Face
Squeeze From Tighter Rules, Fitch Says
Bloomberg News
November
24, 2017, 3:19 AM GMT
Profit
margins at Chinese banks will be squeezed next year and credit growth
is likely to slow as increasing regulation eats up capital, Fitch
Ratings said.
The lending businesses of the
country’s smaller banks face the most pressure and they will rely
more on larger state-owned rivals for liquidity, the ratings company
said in a statement
Friday. At the same time, the shadow-banking sector, which one
brokerage
values at about $19 trillion, will attract even more regulatory
scrutiny in 2018, Fitch said.
Chinese regulators are sweeping
through the country’s $40 trillion financial sector in a bid to
contain risk after total debt ballooned to about 260 percent of the
size of the economy. In the past week alone, they’ve proposed rules
governing returns from asset-management
products, laid out limits
on bank shareholdings and unveiled a purge
of cash micro-lenders.
“Credit
growth is likely to decelerate next year, given the tighter
regulatory stance,” Fitch said. “Funding conditions are likely to
remain tight, pointing to continued margin pressure at smaller banks
which rely more on non-deposit funding.”
The predictions from Fitch and S&P
Global Ratings on Thursday suggest the cost of the system-wide
measures will be sluggish profit growth at domestic banks, which
include Industrial
& Commercial Bank of China Ltd., the world’s largest by
assets.
New rules pushing shadow-banking
items back on to lenders’ balance sheets will lead to an increase
in risk that could weigh on bank capital, Fitch said. Net income
growth in the banking sector will remain in the “low single digits”
in 2018, it said.
The ratings company kept its outlook
on Chinese banks at stable, saying sovereign support for the sector
remains “very strong.”
“Men,
it has been well said, think in herds; it will be seen that they go
mad in herds, while they only recover their senses slowly, one by
one.”
Charles
Mackay. Extraordinary Popular Delusions and the Madness of Crowds.
Crooks and Scoundrels
Corner
The
bent, the seriously bent, and the totally doubled over.
Today
classic understatement on Zimbabwe from the IMF.
November
23, 2017 / 8:09 AM .
Zimbabwe's economic
situation 'very difficult' - IMF mission chief
Reuters Staff
JOHANNESBURG (Reuters) - Zimbabwe’s
economic growth is threatened by high government spending, an
untenable foreign exchange regime and inadequate reforms, a senior
International Monetary Fund (IMF) official said.
Zimbabwe
was once one of Africa’s most promising economies but suffered
decades of decline as former President Robert Mugabe pursued policies
that included the violent seizure of white-owned commercial farms and
money-printing that led to hyperinflation.
Mugabe, 93, resigned on Tuesday after
nearly four decades in power following pressure from the military,
the ruling ZANU-PF party and the general population.
New
ZANU-PF leader Emmerson Mnangagwa is expected to be sworn in as
Zimbabwe’s president on Friday.
Zimbabwe
has not been able to borrow from international lenders since 1999
when it started defaulting on its debt, and has $1.75 billion rand in
foreign arrears.
“The economic situation in Zimbabwe
remains very difficult,” Gene Leon, IMF’s mission chief for
Zimbabwe said in a statement to Reuters late on Wednesday.
“Immediate action is critical
to reduce the deficit to a sustainable level, accelerate structural
reforms, and re-engage with the international community to access
much needed financial support.”
Leon said Zimbabwe should resolve
arrears to the World Bank, African Development Bank and the European
Investment Bank, among other reforms, for the IMF to consider future
financing request from the country.
Zimbabwe should also be ready to
implement strong macroeconomic policies and structural reforms to
restore fiscal and debt sustainability, Leon said.
“Three
causes especially have excited the discontent of mankind; and, by
impelling us to seek remedies for the irremediable, have bewildered
us in a maze of madness and error. These are death, toil, and the
ignorance of the future..”
Charles
Mackay. Extraordinary Popular Delusions and the Madness of Crowds.
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? DC? A quantum computer next?
Could Tesla Power Its
Electric Truck With Solar Panels?
11.21.17
Tesla just keeps making cool things.
On the top of the list is its newest addition to the lineup, an
all-electric
semitruck. Oh, that might sound like a dumb idea—but I don't
think so. Just consider how much stuff is shipped back and forth
across the country. Clearly a train would be more efficient, but
trucks also play a large role. It seems like the Tesla
semi might be able to make two improvements over a traditional truck.
First, the electric truck will clearly reduce
emissions (depending on the energy source to charge these
things). Second, with more onboard automation it is likely these
semis will be significantly
safer than their diesel counterparts.
But what if the Tesla semi also had
solar panels? Elon Musk already has a whole
company devoted to solar energy—why not just combine and
conquer? Tesla and SolarCity are already teaming
up to make solar panels, home batteries, and electric cars a
unified energy system. Wouldn't slapping some solar panels on top of
this truck's surface area make the thing more efficient? You can only
learn by trying—so I'm going to estimate the effect of solar panels
on the roof of the trailer.
How Much Power from
the Roof?
How much power and how much energy
(those are two different things) could you get from solar panels on
the trailer? First, I guess I should point out the difference between
power and energy. Power is the rate that you would get energy from
the sun. At the surface of the Earth, the light from the sun produces
about 1,000 Watts per square meter. In terms of energy, this is 1,000
Joules every second (assuming the panels are 100 percent
efficient—which they're not).
The average power a solar panel
produces depends on several things. Bigger solar panels provide
greater power (that seems obvious). But it also depends on the
efficiency and the angle at which the sunlight hits the panel. The
best panels [available today are around 20 percent
efficient](https://en.wikipedia.org/wiki/Solar_panel, and they work
best when the light hits perpendicular to the panel.
Using those assumptions, let's get
some values to estimate power for a solar semi.
First, I need to estimate the size.
I'm going to say that the solar panel covers the entire top of a
standard semi trailer. Since there are apparently
different standard sizes of trailers, I am going to say this one
is 2.6 meters wides and 15 meters long for a total area of 39 square
meters. Second, I need both the time and average incident angle for
the sunlight. I am going to use a time of 8 hours at 60 degrees from
vertical. This is obviously an oversimplification of the problem, but
good enough for a rough estimate. Oh, also I will use the efficiency
of 20 percent.
Another
weekend and the Great Christmas Shopping Rush to buy mostly Asian
made tat, shifts up a gear. Thankfully your editor, writer, and
general busybody and his dog Rosie, are mostly immune to the national
December obsession with shopping. Rosie and I will mark the weekend
with the purchase of a bottle of Tanqueray to celebrate turning 68 on
Sunday. Naturally, I will not share any of this precious liquid with
poor Rosie.It's for her own good, you understand. Have a great weekend everyone.
“Well,
very long ago, on the spot where the Wild Wood waves now, before ever
it had planted itself and grown up to what it now is, there was a
city - a city of people, you know. Here, where we are standing, they
lived, and walked, and talked, and slept, and carried on their
business. Here they stabled their horses and feasted, from here they
rode out to fight or drove out to trade. They were a powerful people,
and rich, and great builders. They built to last, for they thought
their city would last for ever.”
“If
economists could manage to get themselves thought of as humble, competent
people on a level with dentists, that would be splendid.”
John Maynard Keynes.
First,
a happy Thanksgiving to all readers everywhere celebrating today. We in the
still prosperous west, have so much still to be thankful for.
It’s up, it’s down, it’s
up, it’s down, welcome to the world of the Fedster’s and other central
banksters rigged global economy.On the
Great Nixonian Error of fiat money, communist money, the wealth divide gets
ever wider, speculation gets rewarded and financially encouraged by the central
banksters, manufacturing, mining, farming and commerce get punished as so old
yesterday’s economics.
Below, hopium rules
again, but for how long?
“Beyond
this, the problem is universal. It is that governments are now held responsible
for the welfare of the people. The aspirations of the people can outrun their
ability to pay for them, and nobody has yet found a way to create answers to
the aspirations out of thin air.”
George
Goodman, aka Adam Smith, The Money Game. 1968.
November 23, 2017 / 12:24 AM
Dollar dumped, bonds buoyant on Fed
inflation caution
SYDNEY (Reuters) - The dollar was on the defensive Thursday
after suffering its worst drubbing in five months while bonds celebrated a
comeback on speculation the Federal Reserve might not tighten U.S. policy as
aggressively as previously thought.
Moves in Asian share markets were mostly minor with Japanese markets closed
for a holiday and the United States off for Thanksgiving. Spreadbetters pointed
to a slightly easier opening for the major European bourses.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS eked out a fresh 10-year peak with a rise of 0.15 percent, as did
Hong Kong's main index .HSI.
The dollar’s rout came after minutes of the Fed’s last meeting showed
“many participants” were concerned inflation would stay below the bank’s 2
percent target for longer than expected.
That echoed comments from Fed Chair Janet Yellen that she was uncertain
about the outlook for inflation and led markets to pare back pricing for more
hikes next year.
While a move in December to between 1.25 and 1.5 percent is still almost
fully priced in, Fed fund futures <0> rallied to show rates at just
1.75 percent by the end of next year.
“The US dollar was already staggering into Thanksgiving when the FOMC
minutes gave it another shove,” said Sean Callow, a senior currency analyst at
Westpac. “The FOMC seems to be increasingly uneasy about ”ongoing softness“ in
inflation.”
“Investors can be forgiven for wondering why they should buy more U.S.
dollars if we are heading into a ”Powell pause“ in the first half of 2018,” he
added, referring to newly appointed Fed Chair Jerome Powell.
Fed
Signals December Hike Even as Debate on Prices Persists
By Jeanna Smialek
Updated on November 22, 2017, 8:20 PM GMT
Federal Reserve officials meeting earlier this month saw an
interest-rate increase in the near term even as tepid inflation drove divisions
over the policy path and as financial stability concerns cropped up.
“Many participants thought that another increase in the target range for
the federal funds rate was likely to be warranted in the near term if incoming
information left the medium-term outlook broadly unchanged,” according to minutes
from their Oct. 31-Nov. 1 gathering, released in Washington on Wednesday.
Policy makers held rates steady at the meeting but
are expected to hike next month as they continue with gradual
tightening. Unemployment is at a 16-year low, although inflation remains well
beneath their 2 percent target.
The minutes showed that while Fed officials remain confident in the
labor market and above-trend economic growth, several are looking for stronger
signs that price gains will pick up. A few even want to see inflation on an
upward path before lifting rates again, underlining a persistent divide on the
policy-setting Federal Open Market Committee.
Stocks stayed lower, the dollar declined and yields on two-year Treasury
notes dipped after the minutes were released. With a December Fed rate hike
almost fully priced in, market-implied odds of another rate increase by March
held around 55 percent, based on trading in federal funds futures.
Officials have been projecting three rate increases in 2018, but that
outlook could be called into question if economic data fail to meet Fed
expectations. Analysts are watching closely for any signal that central-bank
officials will mark down their outlooks when they submit economic projections
at their Dec. 12-13 meeting.
Two
Biggest Risks Now Are China and Inflation, Market Veteran Says
By Adam Haigh
As the long-running bull markets in global equities and fixed-income rage
on, the 59-year old head of investment solutions at GAM said they are the two
largest potential risks over the next three to six months. A slowdown in
Chinese growth spurred by the authorities’ restraint of credit creation would
be a surprise to the market that it is not anticipating, he said.
“The second would be that despite little evidence of it happening, we in
fact do get a surge in inflation” that could come from the U.S., Europe or
Japan, he said in a Bloomberg TV interview in New York. “All areas where
labor product markets are now at the points where previously we would have seen
those developments. It is simply unanticipated in the markets.”
As strategists and professional prognosticators dust off their crystal balls
with year-ahead forecasts, one pivotal
question is whether 2018 may mark the turning point for markets as central
banks wind back some of the extraordinarily high levels of stimulus that have
helped fuel asset-price growth in recent years.
Hatheway, who joined UBS AG in 1992 and worked there until 2015 in roles
including global head of asset allocation, arrived at GAM in 2015. He now sits
on the firm’s management board, where he helps make decisions that affect where
GAM’s $151 billion in client assets is invested. Investors
have ultimately been able to overlook a range of concerns this year because
earnings growth and economic activity are holding up, he said.
“It really comes down to the resilience of growth in a non-inflationary
way,” Hatheway said. “In that environment we are seeing extraordinarily high
levels of profitability.”
In other news, is oil
trading on borrowed time? Some rich Saudis escape from their Ritz Carlton 5
star luxury jail.
Oil
Sets Itself Up for Fall If OPEC Can't Deliver Cuts Extension
By Grant Smith, Javier Blas, and Wael Mahdi
Updated on November 23, 2017, 12:01 AM GMT
Oil traders and analysts almost unanimously expect OPEC and Russia to
prolong their production cuts next week. However, behind the scenes Saudi
Arabia and Russia are still debating what course to follow.
These high expectations, coupled with a recent surge in bullish bets on
crude, amplify the risk to prices if the group can’t convince a hesitant Russia that it’s necessary
to agree an extension right away.
“Anything but an extension supported by Russia would have a significant
impact on the price,” said Ole Hansen, head of commodity strategy at Saxo Bank
A/S. “Not least due to the near record-long oil bet, which has left little room
for error in terms of the communication from the OPEC ministers.”
Oil climbed to a two-year high in New York on Wednesday in anticipation that
the reduction in oil shipments from the
Organization of Petroleum Exporting Countries and its allies would further
diminish the glut that’s weighed on prices for three years. The cuts are a
success, but the job isn’t done. To prevent the stockpile surplus expanding
again, International Energy Agency forecasts indicate OPEC needs to maintain
the cuts beyond their March expiry.
That’s what almost everyone expects to happen. All of the 36 analysts and
traders surveyed by
Bloomberg expected an extension, with another nine months of cuts the most
popular prediction.
It’s also what OPEC’s largest and most powerful member wants. Last week, Saudi
Arabia’s Energy Minister Khalid Al-Falih told Bloomberg television the group should announce an extension of the
curbs in Vienna because surplus inventories won’t be eliminated by March.
Russian Reservations
Yet the dominant non-OPEC participant in the deal has reservations. Russia
believes it’s too early to announce anything this month, two people with
knowledge of matter said last week. Another issue was
the duration of the extension, with options including an additional three
months of cuts being considered, they said.
Kuwait, the fifth largest OPEC producer and a member of the committee that
oversees the accord, also believes the decision to extend should be taken
closer to expiry, said people familiar with the matter. Ministers from both
nations set out that position publicly at
their last meeting in Vienna in September.
Saudi
Graft Suspects Are Said to Start Payments for Freedom
By Matthew Martin and Glen Carey
November 22, 2017, 11:50 AM GMT
Saudi suspects being held as part of the kingdom’s crackdown on alleged
corruption are starting to make payments to settle cases in exchange for
freedom, according to people with knowledge of the matter.
Some businessmen and officials being detained at the Ritz-Carlton are
signing agreements with authorities to transfer a portion of their assets to
avoid trial, the people said, asking not to be identified because the
discussions are private. Some detainees have started to transfer funds from
personal accounts to government-controlled accounts, the people said.
The payments, less than a month since the detentions, show the
speed at which Saudi Arabia wants to settle the corruption probe that involved
the sudden arrests of royals and billionaires such as Prince Alwaleed bin Talal
this month. The purge -- while welcomed by some in Saudi Arabia -- has also
stirred political uncertainty in the kingdom at a time when Crown Prince
Mohammed bin Salman is seeking to attract international investment.
The government’s Center for International Communication didn’t
immediately respond to requests for comment.
Authorities estimate they may be able to recover
between $50 billion and $100 billion from settlement agreements with suspects,
a senior official said this week. Suspects are being offered settlements to
avoid trial, the Saudi official said. If they accept, talks are held with a
special committee to work out the details. Payments are based on the amounts
authorities believe suspects have amassed illegally, not their entire wealth,
the official said.
The crackdown comes at a delicate time for Saudi Arabia, an absolute monarchy
grappling with the worst economic slowdown since 2009 as well as political
unrest in the region. Economists expect the investigation to slow already
sluggish private investment in the kingdom and hit economic growth next
year.
Wealthy Saudis are seeking to restructure their businesses to ring
fence assets in case authorities widen the crackdown, according to people with
knowledge of the matter. The purge has also prompted some Saudi billionaires
and millionaires to sell investments in neighboring Gulf countries and turning
them into cash or liquid holdings overseas to avoid the risk of getting caught
up in the sweep, other people said.
“Egol and Fabrice were way ahead of their time,” said one of the
former Goldman workers.
“They saw the writing on the wall in this market as early as
2005.”
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, more from the EUSSR
insane asylum run by the inmates. Following the rules: optional. Germany
without Merkel leaves the rump-EUSSR adrift in increasingly stormy seas.Brexit now ASAP!
"I am sure the
euro will oblige us to introduce a new set of economic policy instruments. It
is politically impossible to propose that now. But some day there will be a
crisis and new instruments will be created."
Romano Prodi, EU
Commission President. Financial Times, 4 December 2001
France,
Italy Get EU Warning Over Debt Level, Spending Plans
By Viktoria Dendrinou
November 22, 2017, 11:07 AM GMT Updated
on November 22, 2017, 11:18 AM GMT
Budget plans by Italy, France and four other euro-area countries risk
violating the European Union’s spending rules, the bloc’s executive arm said,
while it delivered a warning to Rome about high government debt.
In a set of assessments presented by the European Commission as
part of the euro area’s fiscal framework, the 2018 spending plans for France,
Italy, Belgium, Austria, Portugal and Slovenia were found to be “at risk of
non-compliance” with the bloc’s rules.
Budget plans for these countries “might result in a significant
deviation from the adjustment paths towards the respective medium-term
objective," the commission said. For Italy, France and Belgium, debt
reduction was also projected to not be in line with the foreseen level.
In the case of Italy “the persisting high government debt is a reason of
concern,” the commission said. It added that its top economic officials sent a
letter to Italian authorities to inform them that “the commission intends to
reassess Italy’s compliance with the debt reduction benchmark in spring 2018.”
“I have just sent a letter to the Italian Finance Minister Padoan,”
European Commission Vice President Valdis Dombrovskis told reporters in
Brussels. “We stress that the adoption of the 2018 budget with no watering down
of its key provisions will be crucial, as will its subsequent strict
implementation to deliver a structural effort of at least 0.3% of GDP.”
The commission said that the 2018 budget plans submitted by 12 other
members were found to be compliant or broadly compliant with the rules. It also
recommended a “broadly neutral fiscal stance” for the euro area as a whole.
“Member States with current account deficits or high external debt
should seek to raise productivity, while Member States with current account
surpluses should promote wage growth and foster investment and domestic
demand,” the Commission said.
After the collapse of
coalition talks, the German chancellor is looking weaker than ever.
By Marc Champion
November
22, 2017, 5:01 AM GMT
Angela
Merkel used to tell Germans “we can do it” when addressing the question of
integrating the million-plus refugees who have come to Germany since 2015. That
pragmatic attitude and her liberal approach have—after the election of Donald Trump and his “America First”
agenda—spurred many politicians and pundits to hail Germany’s motherly
chancellor as the de facto leader of the free world. But after a narrowelection victory in September and
the collapse of coalition talks on Nov.
19, it’s beginning to look as if she may not be able to “do it” after all.
First elected chancellor in 2005, Merkel has been a stable presence on the
global stage for so long that it’s hard to imagine Germany, or Europe, without
her. Following September’s election, in which her conservative bloc of
Christian Democrats and the Christian Social Union lost 65 seats in the Bundestag, Germany’s parliament,
she has struggled to assemble the jigsaw of smaller parties needed to form a
majority government, proving that, for all its economic strength, Germany is
vulnerable to the same forces of populism and political fragmentation
that have swept other democracies in recent years.
Despite Merkel’s legendary skills as a backroom negotiator, honed at
countless European Union and global summits during her dozen years in power,
coalition talks broke down over the vexing question of immigration as well as
economic concerns—the first time since before World War II that a German
election has failed to produce a government. Although there are as many ways
for her to stay in power as to be forced out, and she says she’s prepared for
another election, a world without Merkel as chancellor has become a real
possibility.
“Merkel was a historic figure as far as Europe’s concerned, but her time has
come and gone,” says Ashoka Mody, a former World Bank economist just finishing
a book about Merkel’s handling of Europe’s currency crisis. Even if she remains
as chancellor, Merkel is now so badly weakened that she would be a different
kind of leader. “Merkel mark 2 would be very different from Merkel mark 1,”
Mody says.
----Merkel’s declining influence is “very bad news for the European Union,” Le
Monde wrote in a gloomy editorial on the collapse of talks in Berlin. The
French daily newspaper pointed to the wider roller-coaster narrative of
European populism this year. Hopes that the center might hold, raised after
Emmanuel Macron won the French presidency with an unashamedly pro-Europe,
liberal message, have now been “suspended,” the paper wrote.
Macron had been counting on Merkel’s support to
secure sweeping change to the EU, proposing deeper cooperation on defense,
taxes, immigration, and—crucially—a common budget for the 19-nation euro area.
That’s looking much more difficult as the compromises he needs from Merkel would
be politically costly for any chancellor. Other than Merkel, “no one here has
the grasp or the popular trust to enable Germany to make the concessions
needed,” says Jan Techau, director of the Richard C. Holbrooke Forum at the
American Academy in Berlin.
“Europe exemplifies
a situation unfavourable to a common currency. It is composed of separate
nations, speaking different languages, with different customs, and having
citizens feeling far greater loyalty and attachment to their own country than
to a common market or to the idea of Europe".
Professor Milton Friedman, The Times 19 November
1997.
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?
UK, China 'natural partners' in graphene
research
By Angus Mcneice in London | China Daily |
Updated: 2017-11-22 07:37
Scientists in the United Kingdom and China are working to create a
future built on graphene, the "super material" that may soon be used
for a range of things, including charging smartphones in seconds and filtering
salt out of seawater.
At the first UK-China graphene conference last week in the southwestern
Chinese city of Chongqing, British scientists demonstrated the latest
breakthroughs in the commercialization of the highly conductive, incredibly
strong two-dimensional material made of carbon.
Researchers from the Manchester-based National Graphene Institute
demonstrated the filtration capabilities of ultrathin, graphene-oxide
membranes. The technology could be used to separate particles from solvents in
the manufacture of medication, and to transform seawater into clean drinking
water.
Graphene could play an important role in the development of wearable
electronics, and scientists at the conference demonstrated the use of graphene
in flexible, battery-like devices printed directly onto textiles.
Researchers around the world are using graphene in a number of
developing technologies, including smartphone batteries that charge in less
than a minute, and ultrathin antennas that transfer a terabyte of data in a
second.
China's interest in British research into the commercial application of
the material was highlighted by President Xi Jinping's visit to the National
Graphene Institute during his 2015 state visit to the UK.
At the conference, UK Trade Minister Rona Fairhead and Tian Shihong, director-general
of the standardization administration of China, agreed to work together to
establish an international organization for standardization in graphene
research.
Creating common standards for scientific research increases efficiency
and cooperation in international study, said Rebecca Jiang, science and
innovation officer at the UK Foreign and Commonwealth Office.
"Collaborating on graphene standards will therefore reduce
technical barriers to trade and joint research and development in an area that
is a strength for both countries, with huge market potential," Jiang said.
She noted that China and the UK are "natural partners" when it
comes to graphene research and commercialization.
Following the markets on both sides of the Atlantic since 1968. A dinosaur, who evolved with the financial system as it was perverted from capitalism to banksterism after the great Nixonian error of abandoning the dollar's link to gold instead of simply revaluing gold. Our money is too important to be left to probity challenged central banksters and crooked politicians.
