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There is no argument that the goal of reducing carbon emissions is a laudable one. However, shuttering the nuclear industry in Germany, which has neither a history of seismic or tsunami activity, is another example of how blind adherence to ideals rather than reality on the ground results in less than optimal outcomes. This is another symptom of the wider problem inside the EU where observance of ideals is prioritized over the needs of the population.

“Clearly, the commentary from Russia and Saudi Arabia popped the bubble,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund. “There’s some legitimate skepticism about whether or not they will follow through. There is going to be nervousness right up until next month’s meeting.”

It is looking increasingly likely that a process of mean reversion is now underway for the oil price. The commitment to lower supply by both OPEC and Russia was one of the primary drivers behind the persistence of the advance over the last 18 months and that now appears to be over.

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“Given current developments, with supply worries driving the price to $80, it would make perfect sense to remove the over-compliance by compensating for the shortfall from Venezuela,” said Ole Sloth Hansen, an analyst at Saxo Bank A/S in Copenhagen.

Excess cuts amounted to about 740,000 barrels a day in April, according to estimates from the International Energy Agency. Without compensating supply from other members, this number looks likely to expand as the U.S. re-imposes sanctions on Iran and the collapse of Venezuela’s oil industry worsens.

Whether the size of the supply increase is ultimately "a million, more, or less, we’ll have to wait until June," when OPEC and its partners will meet, Al-Falih said. Novak echoed that, saying “it’s too early now to talk about some specific figure, we need to calculate it thoroughly.”

Typically, OPEC operates by consensus, meaning members that have little prospect of boosting production -- Venezuela, Iran and Angola -- would have to agree to the proposal.

Saudi Arabia has recently shown willingness to push prices higher to bankroll domestic economic reforms and underpin the valuation of its state oil company in a planned initial public offering. That appears to be changing, with the Aramco listing delayed until 2019 and Brent crude flirting with the kingdom’s desired price of about $80 for most of this month.

The USA has re-imposed sanctions on Iran and no one is likely happier about that than Saudi Arabia. That is also likely to have a played a role in the decision to help rebalance the oil market. Brent crude is no longer in backwardation between the first and second months suggesting some of the near-term pressure on supply is easing.

A link to the full report is posted in the Subscriber's Area.

There is always a new demand led story in any bull market and renewables do represent such an opportunity. However, the success of that new idea is dependent on the conventional sources of demand remaining on a steady trajectory and it is in that regard that doubts tend to be raised about copper.

Tokyo Bitcoin Whale Strikes Again: Mt. Gox Bankruptcy Trustee to Blame for Latest Bitcoin Price Drop - This article from bitcoinist.com dated May 11th may be of interest to subscribers. Here is a section:

Several crypto monitors are accusing the Mt. Gox trustee of dumping the coins on the exchange market. These reports are still unconfirmed, but some commentators say it is a way of shorting the market. According to Cryptoground, the Mt. Gox bankruptcy trust still has a balance of 137, 891 BTC. Cryptoground is a website that monitors the cold wallet of the defunct platform’s bankruptcy trust. Kobayashi earlier said that he planned to sell the remaining Mt. Gox crypto holdings over the coming months.

Usually after a market crash there are people who still hold long positions bought at unattractive positions and who use occasional rallies to liquidate positions. Usually we do not know who the sellers are but on this occasion the Mt. Gox trustee is a guaranteed seller on rallies. That represents a significant headwind for the market until that substantial inventory is disposed of.

Beijing could also rip up its unwritten rules on pricing caps to make way for these blockbuster deals, said the sources who have direct knowledge of the matter, adding that Alibaba and Xiaomi were furthest along the CDR planning path.

Selling CDRs equivalent to say about 1 percent of Alibaba’s market capitalization would mean raising $5 billion in Shanghai or Shenzhen, marking what would be China’s largest share sale on the open market since 2009, according to Thomson Reuters data.

While such deals would allow mainland investors to benefit from any further share price rally, the securities regulator is worried they “will take up too much liquidity in the secondary market, which may lead to a drop in the main indices”, one of the sources told Reuters.

The Chinese mainland market is underperforming at present amid concerns about deteriorating standards of governance, trade wars and debt. However, the introduction of new sources of supply is a more pressing issue in the short-term.

Many mainland investors have felt left out by the success of domestic companies on overseas bourses without being given the opportunity to participate. If they get the chance to investor via the mainland market they are likely to take it in preference to other domestic shares.

The Shanghai A-Share Index pulled back from the region of the trend mean today to confirm this year’s downward bias.

Meanwhile Alibaba is testing the upper side of its six-month range.

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Some of the topics discussed include: Italy's populist government and Europe's potential response, China property Index leading lower, Wall Street closes off intraday lows, Dollar stable, commodities index breaks out, gold firms, oil steady

How serious a threat is China’s debt?  See attached speech by the Governor of the Reserve Bank of Australia.

Thank you for this article which may be of interest to other subscribers. Here is a section:

“The deepening relationship has also benefited China in many ways,” the governor said. “We will of course have differences from time to time, but we will surely be better placed to deal with these if we understand one another well”.

The Reserve Bank now employs three staff full-time in Beijing to monitor Chinese economic and financial developments.

“The complex web that has developed in China is characterised by opaque risk transfers, implicit guarantees and complex connections,” the governor said. “The influence of the state and the incentives within financial institutions have almost surely distorted credit allocation and led to some poor lending decision” he added.

More than 3500 “shadow banks” have emerged in China, which provide an array of riskier financial products outside the state-controlled banking system.

“The extent that experience elsewhere in the world is any guide, it is difficult to escape the conclusion that this complex web in a highly indebted economy is a risky situation,” Dr Lowe said. Combined, shadow banks now make up 45 per cent of credit, up from 25 per cent a decade ago.

“The build-up of financial risks like those seen in China is almost always followed by a marked slowdown in GDP growth,” the governor said, stressing an economic collapse in China wasn’t inevitable.

I believe it is correct for Australian investors to keep a close eye on China. It was China’s unprecedented stimulus that helped Australia avoid recession during the global financial crisis because of its voracious appetite for commodities and if China eventually had a recession it will undoubtedly have a knock-on effect for Australia.

The reaction was swift and severe. Petrobras Chief Executive Officer Pedro Parente woke up this morning to a wave of downgrades from the same Wall Street analysts who had been praising him since he took the helm of the state-controlled oil producer two years ago.

Bank of America Merrill Lynch, Morgan Stanley and Credit Suisse Group AG all cut their recommendations after Parente announced a 10 percent cut in wholesale diesel prices late Wednesday to help the government negotiate an end to a nationwide truckers strike that has wrought havoc on Latin America’s largest economy.

“The just announced diesel price reduction in response to truckers’ protest is likely to materially damage Petrobras’ perceived independence in a way that may be difficult to recover,” Frank McGann, an analyst at Merrill Lynch, wrote in a report where he cut his recommendation on the company’s American depositary receipts to neutral and his price objective to $17.

“We think that the investment case for Petrobras has been seriously damaged, and the risk profile has risen.”

While Parente said Petrobras isn’t bowing to pressure and that the temporary measure doesn’t mean a change in its pricing policy, shares extended losses in after hours trading to as low as $13.40 in late New York trading.

Petrobras is a major constituent in global high yield benchmarks so its decision to cut price against a rising oil price environment is not especially good news. Along with Turkey and Argentina, the risk in the high yield sector has increased this year.

WhatsApp has largely escaped that notice because it is used more heavily outside the United States, with people in countries like India, Brazil and Indonesia sending a total of 60 billion messages a day. And unlike Facebook and Instagram, where much of the activity is publicly visible online, WhatsApp’s messages are generally hidden because it began as a person-to-person communication tool.

Yet WhatsApp has several features that make it a potential tinderbox for misinformation and misuse. Users can remain anonymous, identified only by a phone number. Groups, which are capped at 256 members, are easy to set up by adding the phone numbers of contacts. People tend to belong to multiple groups, so they often get exposed to the same messages repeatedly. When messages are forwarded, there is no hint of where they originated. And everything is encrypted, making it impossible for law enforcement officials or even WhatsApp to view what’s being said without looking at the phone’s screen.

Govindraj Ethiraj, the founder of Boom and IndiaSpend, two sites that fact-check Indian political and governmental claims, called WhatsApp “insidious” for its role in spreading false information.

“You’re dealing with ghosts,” he said. Boom worked with Facebook during the Karnataka elections to flag fake news appearing on the social network.

There is no getting around the fact that social media is now part of the fabric of everyday life. It is the medium through which many people stay in contact with family, friends and acquaintances. It is also how companies, marketing firms and political parties maintain constant contact and attempt to influence our decisions.

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Some of the topics discussed include: buying opportunities arise when central banks intervene to support currencies, risk-off turns to risk-on intraday, dollar firm, stock markets steady, Brent crude oil pausing near $80, an increasing number of shares breaking out. 

10-year Treasury yields fell back to test the psychological 3% today. The Fed’s Minutes highlighted less urgency to tackle the inflation rate coming in mildly ahead of target. That eased fears the yield would surge higher imminently. An overextension relative to the trend mean is evident, so there is scope for an additional pause in this area but a sustained move below 2.7% would be required to question supply dominance.

Turkey’s central bank raised interest rates to halt a slide in the lira that’s seen the currency post a series of record lows.

The central bank raised its late liquidity window rate by 300 basis points to 16.5 percent, after an extraordinary meeting of its monetary policy committee on Wednesday to “discuss recent developments.” It kept other rates unchanged, describing the move as a “powerful monetary tightening” and saying it’s ready to continue using all instruments.

The lira reversed Wednesday’s losses after the bank’s move. It was trading 0.7 percent stronger at 4.6367 per dollar as of 7:32 p.m. in Istanbul. The currency earlier fell as much as 5.5 percent.

The central bank acted after three weeks of turmoil on Turkey’s currency markets. Turkish President Recep Tayyip Erdogan, who’s seeking re-election next month, has publicly opposed any moves to raise interest rates, while investors and economists argued that was the only way to halt the rout.

Erdogan told Bloomberg in an interview this month that he’ll seek more control over monetary policy if he wins the vote.

The central bank’s rate-setting committee hadn’t been scheduled to meet until June 7. After news broke of its emergency session on Wednesday, Finance Minister Mehmet Simsek said on Twitter that it’s time to restore the credibility of Turkey’s monetary policy.

The Lira has been accelerating lower and dropped to test TRY5 to the US Dollar this morning, before the central bank finally intervened by raising the interest rate. 16.5% represents a substantial premium over anything available in Europe and is aimed squarely at stemming foreign capital flight.

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China’s steel industry demonstrates how quickly the country can ramp up supply when the central government makes a decision to champion a sector. It did exactly the same in solar and wind and it’s doing it today in artificial intelligence and battery manufacturing. Nevertheless, the extent to which it went to any lengths to build out steel capacity now represents a challenge as the infrastructure led boom transitions to focusing on services and domestic demand.

The shares jumped as much as 17 percent to $119.60 in New York trading, an all-time intraday high and the biggest one-day leap in almost a decade.

The overhaul started by Chief Executive Officer Alessandro Bogliolo consolidated a rebound under way when he took over last year, with revenue growth last quarter at the highest since 2012. The former Diesel executive aims to woo a younger clientele with refreshed jewelry lines and generate hype for the 181-year-old brand. The revitalization attempt includes redesigned stores and back-end improvements in procurement and technology operations.

“We are particularly encouraged by the breadth of sales growth across most regions and all product categories,” Bogliolo said in a statement.

Global same-store sales climbed 7 percent, in the quarter ended April 30 when holding currency constant, compared with the 2.6 percent growth projected by analysts, according to Consensus Metrix.

On that basis, sales rose 9 percent in North America, Asia- Pacific and Japan, all beating analysts’ predictions. Asia was particularly strong in China and Korea. The weak spot was Europe, which saw a 9 percent decline due to reduced spending by overseas tourists, the New York-based company said.

There has been a high degree of commonality in the luxury goods sector this year as the Trump tax cuts unleashed some pent-up consumer demand. Front loading purchases of goods likely to rise in value in anticipation of inflation has also been a factor in the outperformance of the sector. Additionally, luxury goods manufacturers have been at pains to try and appeal to a younger demographic.

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Some of the topics discussed include: Consumer Staples and the outlook for bond proxies, accelerating trends in lumber and luxury goods, stock markets steady, midcaps continue to outperform, bonds steady, Dollar eases slightly, oil pauses at $80. 

Moody’s Investors Service said it may cut Campbell Soup Co.’s credit rating after the company posted a steep drop in profitability and its chief executive officer suddenly stepped down.

All of the company’s ratings are under review, including its Baa2 senior unsecured rating, Moody’s said in a report Monday. That’s only two steps above speculative-grade. Moody’s did not say how many levels the downgrade could amount to.

Campbell Soup has short- and long-term debt of $9.84 billion and its leverage as measured by debt-to-Ebitda -- earnings before interest, tax, depreciation and amortization -- was about five times at the March closing of the Snyder’s-Lance Inc. acquisition. Moody’s says it’s now doubting that the company can meet its expectations to reduce that metric to below four times within two years via cash flow and cost savings.

“The sharp and unexpected decline in profitability in the third quarter casts serious doubt that Campbell will be able to meet its deleveraging plans following the Snyder’s-Lance acquisition,” Moody’s analyst Brian Weddington said in the report. “Additionally, the departure of the CEO adds further uncertainty about whether the company will respond successfully to its operating challenges in the near term.”

Campbell Foods is not a dividend aristocrat because there have been occasions in the last 30 years when it cut the dividend. On each of those occasions it stopped raising the payout before the decision to cut. That is at least part of the reason that the share has been falling over the last year but does not explain the fall from the peak in 2016.

The futures market is dictated by a set of rules that control trading. Two of these are margin rates and daily limits. When prices accelerate in either direction the exchange has the option to change either the limits or the margin rate in order to increase or decrease the cost of trading which then acts as a catalyst for reversal.

Italian President Sergio Mattarella takes center-stage as he weighs whether to give law professor Giuseppe Conte a chance to lead a populist government following a last- minute wobble over the candidate’s suitability for the post.

Mattarella is due to announce his decision as early as Wednesday after Conte, 53, was put forward by Luigi Di Maio of the anti-establishment Five Star Movement and Matteo Salvini of the anti-immigrant League. A flurry of reports in Italian media cast doubt on Conte’s premiership before it even began, prompting Five Star and the League to reaffirm Conte’s candidacy on Tuesday evening.

The marriage of two populist parties which are essentially from the two opposing extremes of the populist field i.e. cut taxes versus boost benefits, is proving more fraught with difficulty than might initially have been apparent. They are still likely to try and install a compromise candidate but there is no doubting that strong personalities are to the fore.

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Thanks for your comments which are very interesting, especially your focus on technology and its potential to alter radically the investment landscape.

I have 2 points of my own to make. Using gold as the standard of value for stocks is interesting but I would think valuation metrics are more useful. As you know the Shiller PE, derived by comparing the S&P to the 10-year moving average of real corporate earnings- GAAP (not adjusted)- is at the highest level since the TMT bubble popped in 2000. The ratio of market value (the Wilshire 5000+) to GDP was at all-time highs in January. We have lived through a decade of extraordinary monetary policy (almost zero interest rates and QE), which is now being reversed. I think S&P market value to S&P sales may also be at all-time highs, but I may be wrong about that.

So the starting point is pretty rich. The PE is at 25 times 4 quarter GAAP earnings, implying a 4% earnings yield. The Moody's Baa 20-year bond yield is around 4.6% so the equity premium has been negative the last 5-6 years for the first time since 1961 when the Bloomberg series started. On average equity holders over this period have earned a premium of 1.62% to reward them for investing in the riskier part of the capital structure, but now they must pay for the privilege.

However, this does not address your major point about the enormous earning potential of companies involved in future technology. Now a standard criticism of your point is that competition between businesses will reduce the excess profits to "normal profits". What economists call "consumer surplus" consists of the extra value that is transferred from businesses to consumers for free due to the operation of the competitive market which eliminates excess profits.

This flows from the ideal world of independent competitive enterprises. Anti-trust laws in the USA have been around since 1890 (Sherman Anti-Trust Act) and were designed to cause real world behaviour to better approximate the theoretical. 

What I have found interesting is that Anti-Trust is no longer as big a deal as it was when I was a student. In fact, when Mark Zuckerberg testified he named 5 or 6 tech companies that are competitors of Facebook's. In this list he mentioned WhatsApp and another company (Telegram?) that he has already bought and perhaps one or two others. He also mentioned Skype, which Microsoft has bought. The big tech companies have the where with all to buy smaller rapidly growing companies and maintain tight oligopolies and thus earn outsize profits. I doubt whether many of these purchases would have passed muster from the Department of Justice's Anti-Trust division one or two generations ago.

So the key may be to watch politics and see whether the populists at some point turn their attention to Anti-Trust.

Thank you for this detailed email which has given me much food for thought. As you point out there is a tendency among the producers of widgets to encounter competition which reduces the price to often unprofitable levels. At that point some of the weaker producers go out of business and a process of consolidation unfolds. The competitive Amazon marketplaces is a good example of this where producers of widgets compete on price to gain market share only for many to disappear after a relatively short time to be replaced by lower cost producers.

In your 30th April response to my email, you say as follows "The only problem I have with comparing the current environment to that which prevailed from the early 1960s is that the market spent 13 years ranging from 2000 to 2013 so it would be unusual to begin another similar range so soon after the last one ended"

My response:  Yes, it is true that it would be unusual to "commence a similar such range so soon after the last one ended."  However, in this circumstance, there are a range of other very unusual related circumstances.

In the last 10 years, we have had a unique period of historically extreme money printing with very little consumer prices inflation as measured by the official CPI number, but this extreme period of money printing has caused very high asset price inflation - pushing many sectors back up into fairly extreme valuations as measured by historical norms.

We can also look at this phenomena from another. If we look at Professor Robert Shiller’s cyclically adjusted price/earnings ratio series commencing 1880, we can see that secular bear markets have typically ended with a single digit CAPE - at the end of a secular bear market, the cyclically adjusted P/E has been in the range of 5-7 in 1982 and 1921.

By contrast, the January 2018 peak in the US cyclically adjusted P/E of 33 was the second highest instance since 1880 - only being surpassed by the dot com peak in 2000 but surpassing the 1929 peak by a small margin.

So, by this (Shiller CAPE) normally fairly reliable valuation measure, the US share market on broad averages is at a fairly extreme level. I think it is fair to say that if you buy expensive assets, you should expect poor to bad average real returns over the following 10 years or so.

One last point to you 30th April comments, to the section where you say "The stock market is a better hedge against inflation than bonds because companies have the ability to raise prices and therefore dividends while bond coupons are fixed."  In a period of rapidly rising inflation like the 1970s, all listed securities including shares and bonds tend to do poorly because of the rapidly rising discount that needs to be applied when valuing such assets. By contrast, in Australia at least, during the 1970s, cash and hard assets like gold and commercial property were better investments. 

Thank you for this riposte to my answer to your original question posted in Comment of the Day on April 30th.

Really interesting data, suggesting to-date continuation of the growth of the US economy (and this data is not fettered with political agendas and BS)...

Thank you for this chart of the Truckload Linehaul Index which as you point out is still trending higher in a consistent manner.

The combination of higher debt levels and share of debt denominated in foreign currency means many emerging markets are now more exposed to dollar appreciation than in 2009, amid signs the robust growth in developing economies may be slowing, the Institute of International Finance said in a May 17 note.

While the U.S. Treasury will sell some of its largest offerings since 2010 this week, a slew of Fed speakers may reiterate plans for gradual rate increases.

The selloff in developing nation currencies is hurting other assets.

Emerging-market local-currency government bonds declined for a sixth week, the worst run since 2016. Developing-nation stocks retreated 2.3 percent last week.

The last time there was angst expressed at the impact a resurgent Dollar would have on emerging markets was in 2015. The same arguments are being made today and it appears that the figures for US Dollar denominated debt are even higher.

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“The payers recognize that there is a clear and longstanding unmet need in migraine,” said Tony Hooper, executive vice president of global commercial operations at Amgen, on a call with analysts Friday. Hooper said the company is in talks with pharmacy-benefit managers and insurers and “by and large, they are supportive of our price.”

Amgen and partner Novartis AG said that they will launch the drug within one week in the U.S. Hooper said that the company expects patients will take the drug if they have tried and failed on other migraine treatments.

The drug’s lower-than-expected price was met positively by analysts who said they expect it will win broad reimbursement from insurers.

“Overall, we think their pricing strategy fits well into the current reimbursement environment,” said Michael Yee, an analyst with Jefferies wrote in a note. Yee, who has a “buy”

rating on Amgen shares, said the lower price “sends a good message.”

But Baird analyst Brian Skorney said once rival treatments come to market, insurers and drug middlemen may pit drugs against each other to get the lowest possible price.

“If anything it just makes the eventual lowest net price that much lower once there are several on the market,” wrote Skorney, who rates Amgen shares “neutral.”

Drug pricing is now as much a political calculation as it is a business decision. Historically drug companies opened with a high price to try and recoup as much of the cost of development as possible in as short a period of time as possible. This was viable because they believed unmet need represented a potent source of capital that could be unlocked before competition resulted in price drops.

The London-Shanghai Stock Connect will allow companies from China to sell global depository receipts in the U.K. and enable London-traded firms to list similar securities in Shanghai, according to an LSE presentation seen by Bloomberg News. Starting later this year, the securities issued by Chinese companies will appear on what LSE calls the Shanghai Board. A spokesman for LSE declined to comment.

The London link will be yet another step in China’s financial opening, which began in earnest with a stock connect to Hong Kong in 2014. For the LSE, the move will help the exchange offset a possible decline in activity with Russian companies after the step-up of U.S. sanctions.

“This is a real step in the integration of China’s financial markets,” said Karine Hirn, partner at East Capital Asset Management in Hong Kong. “What’s exciting about this project is that it’s Chinese money going into Western companies.”

200 of China’s mainland listed A-Shares will be added to the MSCI Emerging Markets basket on June 1st. The primary reason they are not already included along with overseas listed Chinese companies is because of issues with buying them. Even with the QFII program it is not a simple matter to buy, or indeed sell, mainland Chinese equities. Since the Chinese administration is intent on controlling capital flows, especially out of the country, dealing in equities is a strictly regulated enterprise. The introduction of depository receipts for the UK and other bourses is a positive step in further opening up the market.

Bank regulatory team in place. McWilliams’ confirmation will be the last piece of the puzzle that puts into place President Trump’s bank regulatory team and continues the advance of the administration’s deregulatory agenda. Several deregulatory actions have emerged from the Fed under Vice Chair for Supervision Randal Quarles, and we expect bank regulatory relief actions and proposals to pick up in pace with the confirmation of McWilliams. We are monitoring the expected release of an inter-agency revised Volcker Rule proposal which could come within the next month following the confirmation.

FHA nomination. The focus with Montgomery’s nomination will be on whether he seeks to limit FHA lending, which could benefit private mortgage insurers. We think he will be incremental in his changes in the near-term and is unlikely to increase FHA premiums. He has held the position previously, serving as a non-controversial head. Overall, he is a likely positive for mortgage credit availability.

The banking sector has been labouring under increased scrutiny for much of the last decade with the number of compliance personnel increasing while traders have all but been eliminated in favour of computers.

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Some of the topics discussed include: Tencent earnings, China, Dollar rebound is positive for Japan and Europe, Midcaps are showing a high degree of commonality globally. oil pauses at $80, 

Over the next 30 years, air-conditioning could increase global demand for electricity by the entire capacity of the US, the EU and Japan combined, unless there are significant improvements in the efficiency of the equipment, the IEA warned.

In a report released on Tuesday, the agency urged governments to use regulations and incentives to improve the efficiency of air-conditioning units, to avoid a surge in demand that could put strains on energy supplies and increase greenhouse gas emissions.

Fatih Birol, the IEA's executive director, said: “This is one of the most critical blind spots in international energy policy.”

Air-conditioning has had an enormous effect on the quality of life in hot regions, but its use is unevenly distributed around the world. About 90 per cent of homes in the US and Japan have air-conditioning, compared with about 7 per cent in Indonesia and 5 per cent in India.

Electricity used for cooling in the US is almost as great as the entire demand for power in Africa.

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There was a story a few years ago where world leaders were asked what the greatest invention of the 20th century was. Some said the electrical grid but the Prime Minister of Singapore said air conditioning. He opined that without it most people in the country would still be seeking shelter from the heat under the nearest tree.

I just returned from a very eye-opening trip to Arizona, visiting Scottsdale (in the Sonoran desert) and the mountains of Northwestern Arizona. We flew into Phoenix and drove a lot. We saw zero Teslas. I'm told there are a few around Phoenix. But with the poor performance of electric vehicles in both cold and hot environments, it probably should not be shocking.

Going to Arizona from California is like going from lala land, where the majority of people are drinking weird kool-aid, to the real world, where people work for a living, dislike taxes, and are really concerned about the massive influx of Californians who are oddly leaving their dream state.

Electric car enthusiasts here in CA get the pleasure of paying $0.38/kwh for their electricity, FAR above the advertised $0.12/kwh, thanks to tiered billing and some of the highest real electric rates in the nation. When an electric car is parked in every driveway, neighborhood power distribution systems will be grossly overloaded (recharging typically starts after 6pm and finishes before 8am, compressing the "average" load on power networks). So, these systems will have to be replaced at taxpayer or ratepayer expense, with lower income people getting no benefits but definitely sharing substantially in the costs.

All this means that one of the highest tax states in the Union will become far higher taxed, both in direct taxes and indirect taxes like state mandated burdens on electricity ratepayers. Meanwhile gas taxes remain some of the highest in the nation, and will only go higher, putting yet more burden on the lower income folks. 

Meanwhile, the exodus of retirees naturally accelerates.

Thank you for this illuminated article. Filling up in California right now is definitely resulting in sticker shock with premium at $3.67 at Costco and testing $4 on the westside of LA. Electric vehicles have come a long way in terms of both efficiency and range but still have a long way to go in order to fully displace the internal combustion engine. Thanks also for the educative report from Continental Economics which I’m sure will be appreciated by subscribers. Here is a section:

Revenue from Value Added Services, which includes online games and messaging, rose 34 percent to 46.9 billion yuan. The company has however been leery of barraging its users with ads - on Wednesday, it declared it had raised the maximum number of ads that customers see on WeChat Moments, a function similar to Facebook’s newsfeed, to just two a day from one previously.

“The results were good even without the one-time gains, but the gains made it even better,” said Bhavtosh Vajpayee, a Hong Kong-based research analyst at Bernstein.

But overall costs surged 51 percent. Tencent executives have signaled a willingness to sacrifice margins in favor of longer term growth in new businesses, though that would depend on growing and engaging a massive user base now primarily confined to China.

Profit was also helped by one-time gains of almost 7.6 billion yuan from its investments in arenas like video and news.

“The reason why analysts had been modeling down was because they did mention about subsidies on payments and also continued investments in content costs,” Citigroup Global Markets’s Head of Pan-Asia Internet Research Alicia Yap told Bloomberg Television. “All these years of investments in digital content, for example music and video, actually started to show some leverage” this quarter.

Tencent is a heavy weight in the Hong Kong, any Chinese equity index as well as the MSCI Emerging Markets Index. It needed a good earnings report to signal to investors that the company’s best growth days are not already behind it.
 

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A link to the full report is posted in the Subscriber's Area.

The futures curves for crude oil, gasoline, gasoil and heating oil are all in backwardation which confirms there is a supply shortage. OPEC and Russia’s curtailment of supply coupled with the re-imposition of sanctions on Iran and Venezuela’s implosion at certainly part of the story. The surge in supply from unconventional supplies is also pulling pressure on refineries because of the differing grades from what they are set up to receive.

Confirmation that Italy’s putative government is talking about asking the European Central Bank for debt forgiveness is weighing on the nation’s debt. The extra yield investors demand to hold 10-year Italian government bonds instead of German bunds, Europe’s benchmark, widened to the most since January. League lawmaker Armando Siri told La7 television that they are discussing a 250 billion-euro ($300 billion) write-off, confirming an earlier report by the Huffington Post.

Greece has now successfully pushed the maturity of its massive debt load out decades and that is an attractive proposition for other countries. Considering how much public debt Italy has something has to be done to get finances under control and clearly the population has had enough of belt tightening.

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Some of the topics discussed include: Treasury yields break above 3%, TIPS yields on the cusp of breaking out, Dollar strong, emerging market currencies weak, Wall Street pares decline somewhat, gold breaks down, oil eases from $80. 

But that’s not the ominous undertone. It’s about how the traditional fortifications of emerging markets -- strong oil and commodity prices -- are failing to protect developing-nation currencies from the onslaught of a stronger dollar.

Look at the chart below. In January, developing-nation currencies and commodities fell together and rose back in tandem. But this time, while the Bloomberg Commodity Index is extending gains, currencies have collapsed. This divergence suggests that a strong U.S. dollar is more decisive for risk appetite than commodity prices.

That’s bad news for countries such as South Africa and Russia. The ruble, for instance, is now moving in the opposite direction to oil even though it’s the country’s biggest export earner. Their usual positive correlation was destroyed by a four-day decline in the currency in the wake of enhanced U.S. sanctions.

The Dollar’s rally is resuming with some of the most pressured emerging markets being forced to raise rates aggressively to stem declines. Argentina’s 40% repo rate is beginning to have the desired effect but it is one of a very small number of currencies that was able to squeeze out a rally against a resurgent Dollar today.

The rude crude rally has not gone unnoticed by the gasoline market where there is the potential for gasoline prices to spike this summer with prices at a four-year high amid record demand (prices).  So far such price increases have not bled into the inflation figures, but the truckers are seeing the pinch.  To wit (as reprised by David Lutz): Trucking companies increased leverage is applying added pressure to cargo costs as accelerating economic growth bolsters transportation demand and exacerbates driver scarcity.  With first-quarter trucking spot rates up 27 percent from a year earlier, according to Bloomberg Intelligence, freight expenses are crimping profits at companies.

To us, the creeping inflation, and marginally higher interest rates, suggests the economy is going to strengthen in the back half of 2018.  Certainly that is what the stock market is telegraphing as earnings continue to ramp-up.  As we write, the D-J Industrial Average has made it eight consecutive winning sessions, leaving the equity market very overbought in the short term.  Also worth consideration is that the Industrials rarely make it more than nine straight sessions in any one direction.  Consequently, there could be a pause in the upward onslaught or even an attempt to pull stocks back.  However, we think the S&P 500 (SPX/2730.13) should be well supported at the 2670-2685 level and that should contain any decline barring unexpected news.  Also waxing bullishly is the TD Ameritrade Investors Movement Index, which is back down to its 2015-2016 levels.  That means investors are not very optimistic currently and, therefore, not buying stocks.  Further, there was over $8 billion of money flows into prime money market funds last week.  These are not the kind of metrics one sees at stock market tops.  However, it’s May option expiration week, which has been bearish for the last nine years, and with stocks stretched for the aforementioned reason, look for some kind of pause/pullback that does not get very far.

A link to the full note is posted in the Subscriber's Area.

As I spoke about in last night’s video/audio there is a risk of some consolidation following the impressive rally over the last couple of weeks.

A link to the full report is posted in the Subscriber's Area.

If the USA’s increasingly powerful position as a swing producer of oil and gas is reducing the need for it to play the part of the global police force then what can we conclude from China launching its first domestically produced aircraft carrier this week?

FullerTreacyMoney has a very varied group of people as subscribers. Some of you like to receive our views in written form, while others prefer the first-person experience of listening to the audio or watching daily videos.

The Big Picture Long-Term video, posted every Friday, is aimed squarely at anyone who does not have the time to read the daily commentary but wishes to gain some perspective on what we think the long-term outlook holds. However, I think it is also important to have a clear written record for where we lie in terms of the long-term themes we have identified, particularly as short-term market machinations influence perceptions.

Here is a summary of my view at present:

A link to today's video commentary is posted in the Subscriber's Area. 

European Central Bank policy maker Francois Villeroy de Galhau said the institution’s first interest-rate increase could come “at least some quarters, but not years” after policy makers end their bond-buying program.

In an interview in Paris, the French central banker played down concerns about the euro area’s first-quarter economic slowdown and signaled that the ECB is still likely to halt quantitative easing this year. He said inflation will resume its acceleration in coming months, with underlying price pressures set to strengthen as the bloc’s temporary weakness passes.

“We will probably give additional guidance for the end of the year for the timing of the rate hike and the contingencies,” Villeroy said in a Bloomberg TV interview with Francine Lacqua.

“We’ll see exactly how we formulate it. We’re predictable, and it’s a clear virtue of our gradual normalization path, but we are not precommitted.”

ECB policy makers have yet to formally discuss the future of their QE program. Purchases are currently scheduled to run until at least September, totaling more than 2.5 trillion euros ($3 trillion), and officials expect interest rates to stay at current record lows until “well past” the end of net buying. Maturing debt will be reinvested.

It could be argued Germany, Netherlands and maybe Austria are ready for higher interest rates. Since together they make up a substantial proportion of the Eurozone economy that is what the focus of ECB actions is likely to be.

The U.S. Supreme Court struck down the federal law that bars gambling on individual sporting events in most of the country, in a ruling likely to unleash a race among the states to attract billions of dollars in legal wagers.

Ruling in a New Jersey case, the court said the 1992 law unconstitutionally forced states to maintain laws that outlaw gambling. Nevada is the only state where single-game wagering is now legal.

Sports gambling could begin in a matter of weeks in casinos and racetracks in New Jersey, which instigated the legal fight by repealing its gambling prohibition. Mississippi, Pennsylvania, New York, Delaware and West Virginia could follow soon, and the number of states might reach double digits by the end of the year.

The vote was 6-3 to strike down the entirety of the federal prohibition. Americans place $150 billion a year in illegal sports bets, according to the casino-backed American Gaming Association. The research firm Eilers & Krejcik Gaming puts the number at $50 billion to $60 billion, not counting bets among friends.

The ruling starts a new era for the largest sports leagues, which fought New Jersey in court even while moving toward embracing legalized sports wagering. In January, a National Basketball Association executive told New York lawmakers the leagues should get 1 percent of all bets. The NBA says it would prefer a new federal law to set nationwide standards.

However one feels about investing in vice, there is no doubt that people like to gamble and the removal of the Federal prohibition will be a major benefit to casino. Since there was never a prohibition on online gambling this news is unlikely to be of particular interest to that segment while the biggest losers are likely to be Indian casinos which have been able to skirt the law for the last few decades.

The outlook for electric car adoption is a central theme in the outlook for lithium miners and other suppliers of the growing battery market. Going from 0.8% in 2017 to 7.5% in 2025 is not far of a 10X growth rate and while ambitious is realizable. There are massive construction projects underway, particularly in Asia to build out production capacity of batteries.

The big question surrounding automation has long been whether robots would compete with workers or help them. Initially, workers feared robots would destroy jobs across the economy. Scholarly research and real-life experience has eased that concern, although some types of workers and industries are ending up on the losing side.

Today, the question is more precise: In which industries does automation help both employer and employee?

The companies that may have cracked the code are those that can assign repetitive, precise tasks to robots, freeing human workers to undertake creative, problem-solving duties that machines aren’t very good at. That’s particularly relevant for manufacturing, the food sector and service sectors such as billing, where timetable spreadsheets can be automated, freeing up workers to do higher-value tasks.

With demand for Bosch-built steering controls high, the company has used automation to increase its output, leading it to hire more people to perform the type of checks Mr. Rösch conducts.

“We looked for 20,000 new hires last year,” a mix of new positions and replacement staff, said Stefan Assmann, one of the company’s chief engineers, to join Bosch’s total 400,000 employees. Bosch factories world-wide now make use of 140 robotic arms, up from zero in 2011. “We can’t see robots having a negative impact on our workforce,” Mr. Assmann said.

If robotics and automation are helping to improve productivity and leading to expanded employment then there must be another reason why factories have been closing and people losing their jobs. The answer is pretty simple when we hear of workers having to train their replacements from overseas before they are fired.

A link to this week's Big Picture Long-Term video is posted in the Subscriber's Area.

Lumber prices are really high right now! The Chicago Mercantile Exchange futures contract for the softwood two-by-fours used in framing houses closed at its highest price ever on Tuesday, in fact.

If one adjusts for inflation, current prices are no longer record-setting. But an interesting pattern does appear if one adds in a few other key data points.

It appears that every time the U.S. picks a fight with Canada over its alleged subsidies of softwood lumber — which comes from coniferous trees such as pines, firs and cedars — U.S. lumber prices go up. The match is likely even closer than the chart above indicates, given that threats of tariffs (“countervailing duties,” to be precise) and follow-up tariff increases also affected prices.

The U.S.-Canada softwood lumber war first flared up in the early 1980s. Imports of lumber from Canada had been on the rise as environmental restrictions cut back on logging in U.S. National Forests, and the U.S. timber industry began to complain that Canadian local, provincial and national governments, which own almost all of the country’s forest land, were charging such low prices for timber that it amounted to an unfair subsidy.

How long before the homebuilding lobby starts to complain about an inability to pass on higher input costs to the end consumer? So far, the rising real estate market has meant that hasn’t been an issue, but it is inevitable at some stage. When that happens the reduction in tariffs on Canadian timber will represent a significant headwind for lumber prices. After all, the oldest adage in the commodity markets is “the cure for high prices is high prices”.

A six-minute walk through an office and lab facility is chronicled in the video, and Boston Dynamics reports that before this recorded autonomous run, the robot was guided along the route manually by a human so a map of the space could be constructed. The video highlights SpotMini's obstacle avoidance systems and navigation map as it moves through the space, so it’s not entirely clear how much autonomy the robot has regarding its overall route, but it can clearly dynamically respond to obstacles in the space.

As with other subdued Boston Dynamics video reveals, not much more detail is offered outside of the actual footage. The company was acquired by Japanese company SoftBank from Google parent company Alphabet for an undisclosed sum in 2017.

These videos of Boston Dynamics impressive robots are always visually astounding but they seldom show the human operator with the remote control running around behind the robot. The big success for Boston Dynamics is that it has demonstrated that it is possible to develop a robot that can navigate the human environment with relative ease and grace. That is already a huge achievement.

A NEW ERA FOR THE ALUMINUM INDUSTRY

There’s a new, revolutionary way to make aluminum. It eliminates all direct greenhouse gases. And it produces pure oxygen.

 The technology can create more aluminum in the same size smelting cell as the traditional process. And it can be installed in new facilities or retrofitted for existing ones.

What I think will surprise many people is that a test facility has been running at Alcoa’s Pittsburgh test facility since 2009 so this is not some far-off pipe dream but it already has a proof of concept and is primed for commercialization. The first commercially oriented industrial project is expected to begin producing aluminium in 2024.

Are we close to seeing a fiat trading on IOTA?
Qubic offers an oracle that connects IOTA USD/EUR conversions with the rates obtained from Bloomberg.com on a smart contract. This is a unique feature seen in the blockchain industry that can allow the writing of forwards and options on cryptocurrencies which can lead to greater stability in price. The technology may not seem a big deal at the moment, but imagine a scenario whereby you could hedge your extremely volatile cryptocurrencies? This would lead to increase in adoption of the token massively as merchants and other real life users would be ready to accept crypto.

IOTA (MIOTA) trading platforms aim to benefit the most from Qubic’s development. Trading platforms on IOTA will have decentralized margin trading in a trustless and low transaction fees on its tangle. The platform allows writing of smart contracts on the system where you can readily exchange your IOTA to either EUR or USD any-time.

Right now there are almost two different markets in cryptocurrencies. The first is heavily influenced by bitcoin. Many other cryptos require bitcoin as a base currency to buy them. That creates a daisy chain of contagion between the smaller tokens and bitcoin which is represented by volatile high beta performance relative to bitcoin.

A link to today's video commentary is posted in the Subscriber's Area.

Some of the topics discussed include: yield curve spread contracts further, projecting what will follow this period of ranging on stock markets, Dollar eases after strong advance, gold steady, oil extends advance, Australian market tests highs, Malaysia ETFs pullback following election 

What comes next is unclear. Mahathir helms an unwieldy four-party coalition that includes Malaysia’s largest ethnic Chinese party, and he plans to step aside once de facto opposition leader Anwar Ibrahim gets out of jail on a sodomy charge. Mahathir said he would seek a pardon for Anwar.

“I have to manage four presidents of four different parties,” Mahathir said. “It’s going to be a headache.”

Mahathir has pledged to set term limits for prime minister and reduce its power, while promising to scrap the GST within 100 days in power.

It’s uncertain whether the outcome will fundamentally reshape race relations in Malaysia. Najib’s party had long staked its legitimacy on providing preferential treatment for the bumiputera, or “sons of the soil,” which include ethnic Malays and indigenous groups.

Mak Hon Hoe, a 46-year-old ethnic Chinese voter, on Wednesday deplored the fact that Malaysians were separated in different racial categories.

“I want to see a fairer system,” he said while casting his ballot. “Race is still an issue. We want a Malaysian identity.”

The 1MDB scandal has finally brought down Nijab Razak’s government but it is unlikely that the figurehead of 92-year old Mahathir is going to be enough to hold together a disparate coalition of four smaller parties. The new administration is going to have to move swiftly and definitively to stamp its intent to improve governance if it is to have any hope of seeing out its term.

Yet Brussels has already run into plenty of opposition from across the EU. The sums involved may be small in the grand scheme of things—just 1.11% of the EU’s gross national income and just €109 billion of new spending commitments—but the Brussels plan exposes every major fault line in Europe.

The Netherlands and its northern allies have already branded the proposal as unacceptable because the commission has ignored their demands to cap the budget at its pre-Brexit level of 1% of GNI and will instead tap them for substantial rises in contributions. French and Irish ministers have criticized cuts to farming subsidies. Poland argues that providing cohesion funds to address social factors rewards governments for poor structural policies.

Crucially, the commission proposal is an attempt to tilt the EU in a more federal direction in ways that are bound to make some member states uncomfortable. For example, the rule-of-law mechanism as currently proposed would hand the commission wide discretion to determine a deficiency, removing the veto rights of individual member states. Warsaw says any mechanism judging a country’s rule of law should be based on objective criteria and overseen by the courts.

The rule of law is such a wonderful turn of phrase that it tends to turn up in all sorts of places. However, for those suspicious of centralized power it holds the threat of rules being made against their wishes but enforced from a far nonetheless. That was one of the primary arguments for Brexit before the issues of immigration and budget contributions became central themes and it is something that will be resonating through the capitals of all countries outside the small number of creditor nations.

Trust that you have been keeping well. You used to post a monthly update on World Equity Market Valuations Tables. Would you be able to provide this or if you could advise where such data may be available will be great? Thanks for the excellent service as always.

Thank you for this email which may be of interest to subscribers. I produced the Fundamental Valuation Tables on a monthly basis for approximately 8 years but they always had to carry a number of riders at the bottom of the page highlighting caveats that needed to be taken into account before looking at the data. These included the absence of data for some indices, the distorting effect of ADRs and the fact P/E ratios are based on indicated earnings rather than any other calculation and as a result were prone to spikes. As a result, I stopped producing the reports when I found a better online resource. 

One board member said the bank needs to make it clear that there is no change in its commitment to fulfill the objective as soon as possible, according to the summary, which don’t identify who said what. Kuroda said the BOJ will continue easing “very persistently” at a press conference following the policy decision.

BOJ’s updated price forecast for four years through fiscal 2020 was also released on April 27, showing no board members see inflation rising above 2 percent in a stable manner.

“In order to continue with powerful monetary easing, the bank needs to constantly consider enhancing its sustainability while aiming to gain consensus among the public on the necessity of the price stability target,” one board member said.

One member said an early rate hike would result in multiple adverse effects, including falling bond and stock prices, while a stronger yen would cut into corporate profitability.

Real Estate prices are the primary drag on inflation from the latest BoJ report. That is perhaps not so surprising with a shrinking population. However, the other point that needs to be borne in mind is that job openings are rising, labour force participation is high and wages just broke out. Against this background the BoJ is not going to be removing stimulus any time soon and may even increase it.

A link to today's video is posted in the Subscriber's Area. 

Some of the topics discussed include: midcaps continue to outperform led by the Russell 2000, oil breaks out, Treasuries back above 3%, stock firm, Dollar strong, gold steady, Japan wages increasing, 

The message that Google sees AI as doing things for us and is delivering on that promise is a significant riposte to the argument that newer technology platforms are not contributing to productivity. If my phone can secure a reservation for me, book a haircut, schedule a visit to the doctor or dentist then that is one less thing I have to worry about and I can spend my time in more productive pursuits; hopefully not watching more videos on iFunny.

Coffee and your long-term video. my start on Saturday morning...really enjoying and appreciating it. I am confused. There is a chart which is making me feel slightly nervous. It is the Citigroup Eurozone Economic Surprise Index. When comparing the Economic Surprise Index with the Dax on the 20-year overlay chart I see lower lows and a 20 year low on the Surprise Index and a nicely higher trending Dax. The European PMI indices show economic growth. It looks like Europe is slowly recovering. What causes the Economic Surprise Index to be so low? should we sound the alarm? Kind regards.

Thank you for this interesting question and I am delighted the Long-Term video is a valuable part of your weekend routine. To the best of my knowledge economic surprise indices are calculated on a cumulative basis so if economic figures surprise on the downside on a persistent basis then you get a downtrend. Eurozone GDP has been increasing but not at the pace expected by economists and that is probably why the index is so weak.

I was trying to recreate the chart of SPX vs PP of Dollar from your COD a few days back on my Bloomberg terminal and can’t seem to figure it out. Can you let me know when you have a chance? Thanks.

Thank you for this question. A good many of our subscribers have Bloomberg terminals so I created this video to show you how to compose the chart. The appropriate function is custom indices (CIX ). Here is a video on how to create the Chart. 

Here also is a video of how to create a US Dollar purchasing power parity chart in the Chart Library. Once you have saved the custom chart as a Preset template you will always have it available to adjust any other instrument by that measure. 

To deliver on longstanding pledges and help stave off the threat of tariffs from U.S. President Donald Trump, Chinese officials have set a June 30 deadline to ease ownership and business restrictions for banks, securities firms, asset managers and life insurers.

Securities firms like Goldman Sachs Group Inc. and UBS Group AG have an opportunity to boost their share five-fold as they take more direct control of joint ventures, projections by Bloomberg Intelligence show. Insurers including AIA Group Ltd. are set to cash in on their already healthy presence, while banks like HSBC Holdings Plc and Citigroup Inc. face a steeper road ahead to build market share, but will reap juicy profits as they do so.

Much as World Trade Organization entry in 2001 revolutionized the manufacturing industry, opening the financial sector could transform how capital is allocated and wealth managed across China. The charts below show the state of play and estimates on how that’ll change.

China is a major emerging financial market but it is also one where there is already a great deal of debt and where regional governments as well as consumers are heavily leveraged to the property sector. That is a risk the Chinese government is only beginning to get to grips with.

A link to today's video commentary is posted in the Subscriber's Area.

Some of the topics covered include: broad-based Dollar rally, Gold firming against the majority of currencies, oil holds the $75 area, emerging markets at risk from continued Dollar strength, Europe steady, Wall Street quiet.

Crude plunged, then rebounded a bit after a report that U.S. President Donald Trump has told his French counterpart he’ll abandon the Iranian nuclear accord and enact a tougher round of sanctions.

An earlier story from CNN saying the U.S. would re-impose sanctions that could take months to bite pushed futures down as much as 4.4 percent, the worst plunge in three months. Moments later, the price began rising when the New York Times reported on Trump’s comments to France’s Emmanuel Macron.

“I’m not surprised we’re seeing these whipsaws in prices as people try to find facts to hold on to,” said Ashley Petersen, lead oil analyst at Stratas Advisors in New York. The sentiment “is still basically he’s going to end up pulling out and we’re going to eventually lose that supply from Iran.”

The sweetheart deal given to Iran, in order to bring them into the global conversation on nuclear non-proliferation, has been an irksome reminder of the Obama administration’s go easy policy on intransigent international geopolitical problems for many conservatives. By withdrawing from it President Trump serves the dual purpose of fulfilling a campaign promise and boosting the price of an increasingly important US export.

5. Who would likely win?
Opinion polls show the League -- the rebranded, formerly secession Northern League, once known for deriding residents of the country’s south as beggars, thieves and good-for-nothing rednecks -- has gained the most from two months of bargaining. Its support rose to 24.4 percent from 17.4 percent in the March vote, according to an SWG opinion poll carried out May 3-6. Five Star is still the biggest single party, slipping half a percentage point to 32.2 percent. (A center-right alliance including the League and the Forza Italia party of Silvio Berlusconi, the four-time former prime minister, rose to 38.5 percent from 37.1 percent.) If Salvini’s League strengthens in the next election, he could decide to break with Berlusconi and finally form a coalition with Di Maio. This time around, Di Maio’s insistence on excluding Berlusconi was a primary obstacle to a populist coalition government.

6. Why does this matter?
Italy is facing political decisions and economic problems that affect other nations too. At more than 130 percent of gross domestic product, Italy’s debt is second-highest in the euro area, after Greece. The European Commission called the debt “a major source of vulnerability” for Italy and has been overseeing the country’s efforts to reduce spending. Underlying problems remain in Italy’s banks, including cronyism with many lenders too entwined with politicians, unions and foundations of all shapes. Mattarella has warned that the timing of the next elections could jeopardize the 2019 budget, which has to be approved by the end of the year, and unsettle financial markets. And nobody’s fully forgotten Five Star’s past talk of a referendum on leaving the euro.

Small political parties seem to have learned that the only way they will ever succeed in ousting the status quo is to refuse to be co-opted. If we look at the history of coalitions, the insurgent party does well until they give up on their ideals for a chance to hold power. They then get lumped in with the status quo for any egregious activity that occurs during government and subsequently get annihilated at the next election because their support base feels betrayed. The Five Star Movement’s refusal to enter government with Silvio Berlusconi is an example that they have learned this lesson.
 

Internationally oriented investors have become accustomed to having the best of both worlds. They favour benefitting from both currency and stock market appreciation as well as picking up a yield premium along the way. The weakness of the Dollar over the last couple of years has been a tailwind for emerging markets because it delivered all three of these profit opportunities for investors willing to invest abroad. However now that the Dollar is rebounding that trade appears to be reversing.

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: China bounces with talk of opening up the financial sector, Dollar firm, Europe steady, Italy breaking out led by exporters, Treasuries steady, oil closes above $75, trade wars are a risk for the remainder of the year.

Why did China have such a big impact? In their 2016 study, economists Justin Pierce and Peter Schott argue that China’s accession to the WTO in 2001—set in motion by president Bill Clinton—sparked a sharp drop in US manufacturing employment. That’s because when China joined the WTO, it extinguished the risk that the US might retaliate against the Chinese government’s mercantilist currency and protectionist industrial policies by raising tariffs. International companies that set up shop in China therefore enjoyed the benefits of cheap labor, as well as a huge competitive edge from the Chinese government’s artificial cheapening of the yuan.

The resulting appreciation of the dollar hurt US exporters—in particular, manufacturers. A 2017 study on the dollar’s appreciation in the early 2000s by economist Douglas Campbell found that the dollar strengthened sharply, in real terms, compared to low-wage trading partners including China. The subsequent increase in foreign imports and diminished demand for American exports resulted in a loss of around 1.5 million manufacturing jobs between 1995 and 2008.

There are also observable signs that automation wasn’t to blame. Consider the shuttering of some 78,000 manufacturing plants between 2000 and 2014, a 22% drop. This is odd given that robots, like humans, have to work somewhere. Then there’s the fact that there simply aren’t that many robots in US factories, compared with other advanced economies.

I recommend taking the time to read this article. It represents the best elucidation of the growing skepticism towards the benefits of globalization I have read yet and I suspect we are going to hear a lot more about what developed countries have lost from globalization going forward.

“You will have, for the first time, cars speaking together and it’s important for them to speak the same language,” said Christoph Voigt, head of R&D connectivity for Audi. As chairman of 5GAA, a trade group supporting automotive 5G, Mr. Voigt petitioned federal regulators to avoid “directly or indirectly pick[ing] technology winners and losers” because he is confident 5G will become the de facto standard on its own merits.

Even as Volkswagen AG is aligning its premium Audi brand with 5G in the U.S. and China, it is hedging its bets by deploying a version of DSRC on VW branded vehicles in Europe starting next year. A representative for VW said the German auto maker currently has no plans to introduce that technology to its lineup in the U.S. market.

The Trump administration, pointing to the expected proliferation of 5G, this year blocked the takeover of U.S. chip maker Qualcomm Inc. by Singapore-based Broadcom Ltd. on national-security grounds. Qualcomm is negotiating chip supply contracts with at least half a dozen auto makers for coming models.

Industry experts say 5G smartphones will debut next year and the first cars with 5G modems will appear as soon as 2020. That is about twice as fast as the transition for current 4G technology, which was introduced for smartphones in 2011 but didn’t show up in cars until GM integrated it into its latest version of OnStar remote communications in 2014.

There is an active discussion going on now between the car companies that wish to pioneer 5G connectivity and those which are putting short-range communications chips in cars. In essence it is a war between a chip led technological revolution or a router led evolution.

Thank you again for your weekly Big Picture video which continues to provide steady guidance through uncertain times.  You have often referred to opportunities in the biotech sector and, in the last summary, referred to opportunities in the development of anti-cancer treatments.  Are there any specific companies that one could follow?

Thank you for this question which may be of interest to other subscribers. The blistering pace of innovation in the biotech sector is resulting in new discoveries being made on a daily basis. The enabling technologies of speedy and detailed genetic sequencing coupled with genetic editing are leading to an accelerating pace of innovation in the sector.

A link to today's video commentary is posted in the Subscriber's Area. 

Here are some of the other important variables mentioned in the Berg paper, based on the analysis of data collected by a German e-commerce company that sells furniture as it processed 270,399 purchases. (It ships the furniture first and gets paid later, so defaults are observable;  the annualized default rate is around 3 percent, roughly in line with the statistics for consumer loans issued by German banks and comparable with U.S. rates).

Those who order from mobile phones are three times as likely to default as those who order from desktops.  A customer who arrives at a shopping site from a comparison engine is twice as likely to default as one who clicks on a search engine ad.

A customer who uses her name in her email address is 30 percent less likely to default than one who doesn’t. But it’s better if the email address is linked to a paid internet or cable package than if it’s from a free service, especially an outdated one like hotmail.com or yahoo.com. And it’s better if the address contains no numbers.

Those who shop between noon and 6 p.m. are half as likely to default as midnight to 6 a.m. buyers. Businesses can also expect more trouble from those who make an error when typing in their email address or put in their name and address in all lowercase letters.

These findings seem intuitive. People with regular habits and better self-control are relatively more reliable than those who lack those qualities. People who pay for services (and expensive devices) are likely more affluent than people who don’t. According to the Berg paper, the model based on these parameters -- the most rudimentary data we provide to any site on which we have to register -- is slightly more predictive of default than the German equivalent of a FICO score. A model that uses both the digital footprint and the credit score is even more predictive.

There are, however, multiple problems with this kind of modeling, even apart from the widespread worry that black-box scoring algorithms could end up making decisions on the basis of race, gender or other equally sensitive variables.

Consider this hypothetical case: I’ve paid out two mortgages and never defaulted on a loan. But not only do I own a cheap Android device, I also give e- commerce sites a free email address with numbers in it, so they don’t spam my main address. Making matters worse, I often make purchases late at night because I’m too busy to surf shopping sites during the working day. I’m a fat-fingered typist. And I use shopping comparison sites to find the best price. This pretty much rings all the default bells in the Berg model; I’m clearly not the only person with a high credit rating who does: The Berg paper says the model’s results are weakly correlated with credit scores.

Big Data is going to be used to make decisions on our credit scores. I think it is a given considering the pace with which artificial intelligence systems are being implemented in large data sets. It doesn’t have to be an either/or situation particularly because there is a statistical difference between loose correlations and hard correlations.

Some of the more significant declines are occurring in China, the top mine operator, and financing for new supplies is drying up. That’s creating a windfall for the producers who remain.

“It’s a perverse consequence” of policies intended to combat climate change, said Julian Treger, co-founder of activist investor Audley Capital Advisors LLP. “It’s going to be very difficult for funders to provide capital to bring new coal assets online. We have a very interesting supply and demand picture being set up.”

Anglo American, which not long ago wanted to unload its coal assets, has seen income from the business triple since 2015 to become the mining company’s most profitable commodity. Last year, Glencore reported earnings from the fuel more than doubled, while BHP Billiton said it surged sixfold.

While global coal use and mine output has been dropping, production failed to keep pace with demand in 2016 for the first time in seven years, data compiled by BP Plc show. As supplies continue to drop, the amount available for export is shrinking. BMO Capital Markets says the 1 billion-metric-ton seaborne market will have a small deficit by 2021 and expand to 15 million tons in 2022.

Coal is about as unfashionable as one might imagine and it must be very difficult for companies to raise capital to increase supply considering how negative sentiment is. At the same time, coal is one of the world’s most popular sources of energy and is indispensable in the production of steel. A good many coal companies when bust before prices started to recover in 2016 and supply is still constrained.

"This is the first new reactor not just for space and not just for NASA, but of any kind in the US in 40 years," David Poston, the project's chief designer at Los Alamos National Laboratory, said during a press conference Wednesday. "We demonstrated a concept that NASA can use right now. It's ready for a flight program."

And

In March, NASA tested that process in an experiment called Kilopower Reactor Using Stirling Technology, or KRUSTY. The test run generated about 100 watts of electrical power, or enough to run a bright incandescent lightbulb.

But Poston said Kilopower could easily scale up to 10 kilowatts — 100 times more, or enough to power a typical US home — and even megawatts.

He called the experiment "incredibly successful" and said it cost NASA relatively little.

"People thought it would cost billions of dollars to do these reactors," Poston said. "We showed we can design, build, and test a reactor for less than $20 million."

It says a lot about how negative sentiment is about nuclear energy that in order to get a design built you have to promise to deploy the reactor in space. If that isn’t the starkest example of Not In My Backyard (NIMBY) then I don’t know what is.

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Some of the topics discussed include: Wall Street pauses in the region of the lower side of its range, Nasdaq continues to outperform Argentine Peso and Turkish Lira breaking down, Euro, Pound, Yen steady, Europe and Japan equities susceptible to some consolidation. gold steadies.

Tesla Inc. may have some bad news for those betting on cobalt to continue its record-breaking rally, and good news for nickel bulls.

While the weight of its Model 3 is on par with gasoline- powered counterparts, its battery cells are of the highest energy density used in any electric vehicle, the Palo Alto, California-based company said Wednesday in a letter to shareholders.

“We have achieved this by significantly reducing cobalt content per battery pack while increasing nickel content and still maintaining superior thermal stability,” Tesla said.

Cobalt prices have more than tripled in the past couple of years as companies like Tesla strive to bring electric vehicles into the mainstream car market, and with supply largely dependent on a few mines in the politically volatile Democratic Republic of Congo. Nickel, which has gained about 50 percent in the same span, is far more widely available.

Tesla says the cobalt content in its nickel-cobalt-aluminum cathode chemistry is already lower than next-generation cathodes that will be made by other cell producers with a nickel- manganese-cobalt ratio of 8:1:1.

In the last six months I have seen estimates for when the 8:1:1 ratios of nickel : manganese : cobalt would be achieved in commercial batteries that ranged from 5 to 10 years from now. Tesla has these batteries in the limited number of Model 3 cars it is putting out today. That is a testament to exponential pace of technological innovation because it represents another powerful enhancement to energy density.

Not so fast, say critics. The negative trends affecting the economy reflect deep social problems that resist change. “Rising educational attainment during the 20th century was an important source of productivity growth,” writes Gordon, “but the pace of that increase slowed markedly after 1980.” The truth is that we’ve been trying to improve schools for decades with, at best, modest success.

Or take the drain of prime-age men from the job market. The main problem, argues Gordon, “reflects in large part the loss of stable middle-income employment opportunities.” The result has been fewer marriages, more drug use and more suicides, writes Gordon. None of this is easily altered. Among 20 advanced countries, the United States has the second-lowest labor-force participation rate of prime-age men. Only Italy is lower.

We seem to have entered a new economic era — one defined more by the limits on our economic power than by its promises. The explosion of new technologies seems to have fooled us into thinking that a burst of innovation will magically restore our economic vitality. On the evidence, this is a mirage.

I use YouTube when I want a refresher on how to wire a plug or replace a bulb in my car’s headlight. Unfortunately, my children live on YouTube, it’s a substitute for TV but they also post videos of their own. However, it is hard to justify endless videos of cats or people falling over as being beneficial to the economy beyond being a distraction. If that is your measure of technological innovation then you really should get out more.

Cancer costs the global economy about $1 trillion a year. Even today that is still a lot of money. By comparison the global economy spends about $6 trillion on energy a year.

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ETFs have been a wonderful financial innovation which have reduced upfront costs for investors and greatly increased the availability of different markets for investment. However, the size of the market, which is by definition a derivative of the total market, represents a challenge for investors particularly when so many funds employ leverage and depend on the credit worthiness of the issuer.

A link to today's video is posted in the Subscriber's Area. 

Some of the topics discussed include: Dollar at key first areas of resistance against Euro, Pound and Yen, breaking out against emerging market currencies, gold and silver at lower side of the range, Treasuries continue to pause at 3%, Europe flattered by weak Euro, Wall Streets fades into the close. 

If you could clarify a few points you raise it would help understanding. Thank you.

1. "However, it would not be hard to see inflation higher than it has been over the last decade and that is likely to flatter nominal prices."

Perhaps this is just overstated, but does this mean inflation will result in inflation, or does "flatter" add some additional meaning?

2. "If bond yields rise there are logically going to be ramifications for the relative value argument based on the spread between the return on bonds versus equities."

"Ramifications" opens paragraphs of thought for me. Let's see...bond yields rise, so bond prices fall, but yields on equities become less attractive, so equities fall. Are those the ramifications you anticipate?

3. "The only problem I have with comparing the current environment to that which prevailed from the early 1960s is that the market spent 13 years ranging from 2000 to 2013 so it would be unusual to begin another similar range so soon after the last one ended."

The SPXPPP chart from the early 60's looks very dissimilar to the pattern from 2000-2013. The peaks and valleys of the 2000-2013 are much more pronounced on the mathematically correct log chart. It appears to me it negates the assertion "...it would be unusual to begin another similar range so soon...?" Nevertheless, unusual is usual in charts, n/est-ce pas?

Thank you for these questions which I would like to take in order.

Inflation has been absent from official statistics for over a decade because wages have been flat. Since the kinds of things we spend money on every month are often not included in how inflation is calculated, the rising cost of living has not appeared in official statistics. However, there is growing evidence of wage demand growth and more job openings. The fiscal stimulus enacted in the USA is also inflationary because is being introduced at a mature stage in the recovery although it may delay wage demand growth in the short term.

Could you give me your thoughts on Goodman Group AU GMG as it appears to be in a beautiful 10-year uptrend with more room to rise to above $10?

Thank you for this question which may be of interest to other subscribers. David always used this graphic from a Far Side cartoon in the preamble to talking about targets and stops.

Here’s how it works. Lightweight sensors embedded in workers’ hats or helmets wirelessly transmit the wearer’s brainwave data to a computer — it probably works a bit like an electroencephalogram (EEG), as MIT Tech Review notes. Then, artificial intelligence (AI) algorithms scan the data, looking for outliers that could indicate anxiety or rage.

Some organizations use the sensors during routine work, while others embed them in virtual reality (VR) headsets to monitor workers’ emotions during training exercises.

We don’t know exactly how many workers have been subjected to this surveillance system, but the SCMP article does say the technology is being deployed “on an unprecedented scale” in China.

At least a dozen Chinese factories and businesses are using the emotional surveillance system to monitor workers, according to the SCMP report. Manufacturing company Hangzhou Zhongheng Electric uses it to keep tabs on production line workers, while State Grid Zhejiang Electric Power monitors workers as they help the company provide power to the Zhejiang province. The nation’s military, public transportation companies, and various state-owned businesses use it, too.

It turns out George Orwell was not imaginative enough when he came up with the premise for 1984. I have to admit my favourite book of all time is the Master and Margarita because it so expertly challenges the mores of one society with what are held out to the reader as objective facts quite beyond the lexicon of many of the characters. 

Partly because of the stepped-up pace, Nokia said Thursday it now expects industrywide declines in equipment sales to carriers to come in less than feared. Nokia said those sales should fall just 1% to 3% in 2018. In February, Nokia predicted a 2% to 4% drop.

Meanwhile, Ericsson shares have risen 20% since it reported last week that its losses narrowed sharply. Investors see a turnaround effort—involving cutting jobs and divesting itself of businesses that aren’t related to selling telecom equipment—taking hold. Ericsson also sees 5G momentum rising in the U.S.

Chief Executive Borje Ekholm said carriers in North America are “investing heavily…in order to be early on 5G.

In much the same way that batteries, gene editing and the microchip are enabling technologies, 5G has the potential to deliver the connectivity speeds that will power the next wave of connected devices. Everything from the billions of sensors predicted by the Internet of Things to autonomous vehicles will depend on fast, seamless internet connectivity while mobile. That is going to require a completely new infrastructure development push to get the networks built before the reality of these expected innovations can be realised.

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Some of the topics discussed include: Euro, Pound & gold at potential areas of support against the Dollar, oil pauses at $75, grains, beans, cotton, coffee all firm, bonds ease back, stock markets rally of their intraday lows.

The Bloomberg article highlighted the plight of Big Oil.  Its weighting in global equity indices is at a 50-year low.  Of the MSCI World Index’s 100 biggest stocks, only six are oil producers.  Within the Standard & Poor’s 500 Index, Exxon Mobil Corp. (XOM-NYSE), which a decade ago was the largest company, has fallen to ninth place, and investors are requiring higher dividend yields to sustain the share price.  So, what’s the problem for Big Oil?  Simple.  There is a perception that the world is awash in oil at the same time its long-term demand may be falling due to the public’s embrace of climate change policies promoting renewable energies and electric vehicles.  

Institutional money manager Kevin Holt of Invesco Ltd. was quoted in the Bloomberg article saying, “Earnings have started to come through but no one believes it’s sustainable.  That’s why the stocks haven’t worked even though the commodity has gone up.  Everyone’s saying they don’t believe it.”  

Stock market valuations are the collective view of investors as to the future earnings and dividend prospects for companies.  Current low valuations are a manifestation of the industry’s negative perception.  Mr. Holt is certainly correct about oil prices.  Since the start of this year, Brent/WTI prices have climbed 12.2%/13.3% through April 23rd.  If we go back to the oil price low of 10 months ago, prices have soared by 66.7%/61.4%.  In the past, an increase in oil prices of those magnitudes would have sparked a meaningful recovery in oil company and oil-related company share prices.  

A report by the oilfield service research team at Barclays delivered a similar message about their universe of stocks as cited by Bloomberg about Big Oil.  The most telling chart shows a nearly complete correlation (0.96) between the movement in oil prices and the value of the Philadelphia Oilfield Service Stock Index (OSX) between January 2012 and January 2016.  However, from June 2017 to April 2018, the correlation has fallen to only 0.06.  And, June 2017 marked the low price for crude oil!  

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One of the biggest consensuses in the markets at present is that the future is going to be carbon free, and not in a couple of decades but imminently. There is no doubt that electric car penetration is rising, particularly in China, but it will still be years before it reaches even 10% of the global fleet. I think there is reason for optimism about the future of carbon emissions based on technological improvements alone but perhaps enthusiasm has overtaken the reality represented by the market.

A picture of an economy losing momentum was reinforced by figures from the BOE showing unsecured credit rose just 254 million pounds ($348 million) in March, the least since November 2012. Mortgage approvals meanwhile dipped to the lowest level this year.

An interest-rate hike this month was seen as a done deal until recently. Investors, who at one stage were assigning a more than 90 percent chance to such a move, have slashed those odds to about 20 percent after weaker-than-expected inflation, cautious comments from Governor Mark Carney and dismal growth figures for the first quarter. Only a small part of the slowdown was due to the heavy snowfalls that brought chaos to the country, statisticians estimate.

“While adverse weather was partly to blame in February and March, there are no excuses for April’s disappointing performance,” said Rob Dobson, director at IHS Markit. “The chances of a near-term hike in interest rates by the Bank of England look increasingly remote.”

The strength of the Pound over the last 18 months will have been at least a contributory factor in the underperformance of factory output that has been cropping up in official statistics over the last few months. The prospect of a Bank of England rate hike is receding in the near term and in turn that has been weighing on the Pound.

President Donald Trump is aiding Sawiris in one way, though: If a North Korean peace deal can be reached, the Egyptian’s investments there may finally pay off. After 10 years of waiting to repatriate all his profits easily and control his mobile-phone company, Egypt’s second-richest man says an accord would let him reap some of his returns.

“I am taking all the hits, I am being paid in a currency that doesn’t get exchanged very easily, I have put a lot of money and built a hotel and did a lot of good stuff there,” said Sawiris, who founded North Korea’s first telecom operator, Koryolink. The North Korean unit’s costs and revenues aren’t currently recognized on the financial statements of Sawiris’ Orascom Telecom Media & Technology Holding SAE.

Sawiris over the years has been pressured by “every single Western government in the world” for his presence in the country hit by international sanctions for its nuclear threats, he said, but he considered himself a “goodwill investor.” His advice for governments and to Trump ahead of his expected meeting with North Korean Leader Kim Jong Un: Don’t bully him, and promise prosperity in exchange for concessions on nuclear.

Investing in North Korea is not for the faint hearted or indeed for those who wish to avoid state sponsored mischief making. However, with the prospect of improving relations between North Korea and the USA, investors will turn to thinking about how best to leverage that event in their portfolios.

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Some of the topics discussed include: looking at the S&P500, gold, oil and bonds reduced by the purchasing power of the Dollar, Wall Street remains in a corrective phase, further evidence of rotation, Dollar at first area of potential resistance, gold at potential area of support.

In your 10/April long-term themes review, you said: "So, the big question many people have is if we accept the bullish hypothesis how do we justify the second half of this bull market based on valuations where they are today? ..... However, the answer is also going to have to include inflation. "

My thoughts, not in any particular order:

If we look at Robert Shiller's research ~1870-now, on the US share market, his studies show that historically, extreme valuations in the US share market (as assessed by cyclically adjusted P/E ratio) have always been followed by poor average real return over the following 10-20 years."
You point to inflation as to how a secular bull market (in nominal terms implied) can now occur for the US share market (by implications I think you are reflecting on the US share market) over say the next 10-15 years (say).  You use the experience of Argentina and Venezuela as justification for your argument - where from memory, there was hyperinflation in the periods to which you refer.

First, I do not think you are suggesting hyperinflation for the USA .... mismatch 1.
For Argentina and Venezuela, I think their currencies also crashed. I do not think you are suggesting the US dollar is going to crash. Possible mismatch 2.
Rather than a comparison with Venezuela and Argentina, perhaps a better analogy is to the period in the USA following the late 1960s, when US share markets where at quite high valuations (though not nearly as expensive as now on a CAPE basis). Following the peak valuations of the late 1960s, the US share market went sideways (with some large dips) over the next 16 years or so.

In summary, I am not sure that your argument is particularly robust.  Yes, the technological revolution is a critically important new phase which will have a huge impact over the next 10 and 20 years..... and there may well be a secular bull market in that sector ... but does that really mean that the technology sector by itself will take the whole S&P500 with it in a secular bull market for the next 10 or 20 years?

Your thoughts?

Thank you for this question which gave me plenty of room for thought. My first reflection is that one of the benefits of this service is the Socratic dialectical method unfolds in real time as these big topics offer endless room for discussion and revision. I spent a good deal of time talking about long-term cycles in the Big Picture Video on the 27th which you may find of interest. 

China is a rival of the US on two dimensions: power and ideology. This combination of attributes might remind one of the clash with the Axis powers during the second world war or the cold war against the Soviet Union. China is of course very different. But it is also potentially far more potent. China’s rising power, economic and political, is evident. According to the IMF, its gross domestic product per head in 2017 was 14 per cent of US levels at market prices and 28 per cent at purchasing power parity, up from 3 per cent and 8 per cent, respectively, in 2000. Yet, since China’s population is more than four times as big as that of the US, its GDP in 2017 was 62 per cent of US levels at market prices and 119 per cent at PPP. Assume that by 2040, China achieves a relative GDP per head of 34 per cent at market prices and 50 per cent at PPP. This would imply a dramatic slowdown of the rate it is catching up (a fall of around 70 per cent from the rate since 2000, starting in 2023). China’s economy would then be almost twice as big as that of the US at PPP and almost 30 per cent larger at market prices. (See charts.)

China is an increasingly confident ascendant power. The investments it is making in Europe, Africa and commodity producers are well reported upon while it is also a major holder of US Treasuries. It is also a middle-income country with a well telegraphed desire to become the world’s pre-eminent power over the course of the next few decades.

The Arab world’s biggest stock market will probably face difficulty in retaining foreign money unless companies become more transparent, according to some investors. Executives aren’t used to the level of scrutiny demanded by global funds as retail buyers, who typically focus on charts rather than financial analysis, account for about 75 percent of daily trading, according to Gary Dugan, chief investment officer at Dubai-based family office Namara Wealth Advisors Ltd.

Gary Greenberg, an investing veteran, isn’t joining the Saudi party. The London-based head of global emerging markets at Hermes Investment Management Ltd. wants more evidence of economic and political change as well as confidence in the rule of law as Crown Prince Mohammed bin Salman seeks to modernize the kingdom and wean it off its reliance on oil. Other investors including J O Hambro Capital Management are wary of adding to their emerging-market holdings as concern over the pace of U.S. policy tightening sent equities retreating from a multi-year high.

Admittance to the MSCI Emerging Markets basket is a big event for any market because it opens up one of the world’s largest cohorts of index tracking funds as potential investors.

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Kim and Moon embraced after signing the deal during a historic meeting on their militarized border, the first time a North Korean leader set foot on the southern side. They announced plans to replace the 1953 armistice that ended hostilities with a peace treaty by year’s end.

Their statement on a “common goal of realizing, through complete denuclearization, a nuclear-free Korean Peninsula,” stopped short of the “complete, verifiable and irreversible denuclearnization” long sought by the U.S. and its allies. The statement didn’t elaborate on what the term meant and Kim didn’t personally utter the word during remarks Friday.

The International community is understandably skeptical regarding North Korea’s overtures with skepticism considering how duplicitous the country has been over it’s post war history. Some appear willing to think sanctions have played a role, others that China is more active in pressuring the regime but there is another reason why North Korea is suddenly willing to sit down to talk.

The data is a fresh rebuttal to those who warned that hundreds of billions of dollars of tax relief will head directly to the stock market and be harvested by shareholders already fattened by a nine-year bull market. While buybacks indeed got a boost from the windfall, companies increased the rate at which they unleash cash for building factories and upgrading equipment, a strategy that’s preferred by investors for the benefit of future growth.

Corporate buybacks, while increasingly a key pillar of the second-longest bull market on record, are constantly drawing criticism from politicians and money managers as being short-sighted. By their line of logic, companies take advantage of low interest rates to borrow money and buy back shares as a quick way to boost per-share earnings. In doing so, they’re forgoing investment opportunities that may benefit long-term growth.

In the past year, shares of companies with the highest layouts on repurchases and dividends relative to market value are trailing those that spend most on capital expense by almost 5 percentage points, according to data compiled by Goldman Sachs Group Inc. and Bloomberg.

Capital expenditure is an interesting topic considering how much the complexion of industrial base has changed over the last decade. Warehouses have replaced retail space, robots are replacing workers and the cloud is replacing office space. Therefore, when we think about what companies are going to be spending their tax windfall on it is probably going to be on warehouses, robots and servers.

Still, it is difficult to pinpoint reasons for the rise and fall of SNB shares. Most of the SNB’s profit in 2017 went to its own reserves and provisions, with two billion francs distributed to the federal government and Cantons.

The stock is thinly traded, which tends to exaggerate price moves. It pays a small dividend of 15 francs a share that is set by law. Analysts typically see SNB shares as a bond substitute, meaning its shares are particularly attractive at a time when government bond yields are low. Indeed, the recent retreat of the SNB’s share price has coincided with a rise in global government bond yields.

Mr. Studer noted that because SNB shares are governed under a mix of public and private-sector rules, the property rights of shareholders “are heavily restricted.”

The dividend can’t be increased beyond the legally-set maximum, he said, and “even a high profit in the preceding year does not change this.”

Listed central banks are stock market oddities since shareholders have no recourse to voting rights or an ability to pressure the board for better conditions. Instead they represent an institutional ploy to extract capital from traders willing to punt on the state’s fortunes.  

“There is a legitimate concern on the side of battery manufacturers about long-term availability of supply,” said Daniel Jimenez, an SQM vice president who recently estimated that the industry will require a capital investment of $10 billion to $12 billion in the next decade to meet demand.

The green light to mine vastly more lithium, combined with pending changes in its ownership structure, has suddenly put SQM in the sights of several global mining companies, including London-based giant Rio Tinto Group. Among the most aggressive bidders is China’s Tianqi Lithium Corp., which has offered to buy SQM shares at a 20 percent premium, Eduardo Bitran, the former head of government development agency Corfo, said earlier this year.

“Tianqi owning the stake would be another step towards overall Chinese consolidation of the lithium industry,” Chris Berry, a New York-based energy-metals analyst and founder of House Mountain Partners LLC., said in an email.

SQM’s growth projections have been among the chief catalysts in the decline of lithium miners over the last few months. The big question is how quickly demand picks up over the next decade to absorb additional supply. Lithium was a supply inelasticity meets rising demand market from 2013 but really only garnered interest in the last couple of years as the shares turned to outperformance. Supply is now increasing so we are likely to see more volatility in the respective shares. This story further highlights China's intention to be the dominant force in the electric car sector. 

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Some of the topics discussed include: stocks rebound led by technology, Dollar firm, gold at lower side of its range, oil steady, India and Japan continue rebound, Europe steady, China underperforming, industrial metals steady

Amazon.com Inc. is expected to post a sharp rise in sales when it reports first-quarter earnings Thursday, but investors will be watching to see how much revenue it’s plowing back into its many businesses.

Revenue in the first quarter is estimated to reach $49.9 billion, up 40 percent from a year earlier, thanks in part to a big boost from last year’s acquisition of grocery chain Whole Foods. Analysts project earnings of $1.26 per share, down from $1.48 a year earlier, as Seattle-based Amazon keeps investing in international expansion, data centers for its cloud-computing division, new devices and original programming for video streaming.

Analysts at Stifel Financial Corp. anticipate sales beating estimates, given record consumer sentiment levels and an expanding Prime membership base. Bloomberg Intelligence analysts said Whole Foods’ introduction of free home delivery may lift sales, while demand for the Echo line of smart speakers could help cement Amazon’s market-share dominance.

Amazon rallied impressively during today’s session in advance of the earnings announcement not least because of renewed enthusiasm for the technology sector.

The central bank’s quest to restore sustainable inflation of just under 2 percent has been complicated by data suggesting that the euro area’s strongest growth in a decade may be faltering. As well as waning industrial output and deteriorating business confidence, the threat of a global trade war is hanging over Europe’s export-oriented economy.

“Incoming information since our meeting in early March points towards some moderation, while remaining consistent with a solid and broad-based expansion of the euro-area economy,” Draghi said. “The underlying strength of the euro area economy continues to support our confidence that inflation will converge towards our inflation aim of below, but close to, 2 percent over the medium term.”

Mario Draghi’s statement “An ample degree of stimulus remains necessary.” Is what the market was expecting. The ECB and Bank of Japan remain the primary providers of liquidity to the global economy so when they eventually begin a process of quantitative tightening is likely to be an important catalyst for liquidity fueled uptrends.

An immunotherapy treatment — one that boosts the immune system — has improved survival in people newly diagnosed with the most common form of lung cancer (advanced non–small-cell lung cancer), according to an open-access study published in the New England Journal of Medicine.

The study results were presented last Monday, April 16, at the annual American Association for Cancer Research conference in Chicago.

Cutting the risk of dying in half. The new study, led by thoracic medical oncologist Leena Gandhi, MD, PhD, associate professor of medicine and director of the thoracic medical oncology program at NYU’s Perlmutter Cancer Center, shows that treating lung cancer by a combination of immunotherapy with Merck’s Keytruda (aka pembrolizumab) and chemotherapy is more effective than chemotherapy alone, according to a statement by NYU Langone Health.

It is easy to forget during a period of market turbulence that the capital markets cycle and the technology cycle are not the same thing. The former affects the price of securities but the latter represents the basis for long-term value.