Category: zerohedge

Authored by Chris Hamilton via Econimica blog,

The global economic system is premised on growth, not just any growth, but growth where it matters (economically).  However, population growth (the foundation of economic growth) among the high and upper middle income nations of the world is rapidly winding down.  As I have outlined previously, total births have been declining among the combined high/upper middle income nations since 1988 and now births are declining everywhere but among the low income nations of the world (HERE).  Without growth among the importers of the world with the income, savings, and/or access to credit… there is no growth for exporters.

The high and upper middle income nations represent 49% of the worlds population but 91% of global GNI (gross national income) and 89% of total global energy consumption (as well as gross commodity consumption).  The decades, or more properly, centuries of growth among these wealthier under 65 year old populations (that drove economic activity) will cease around 2022.  All subsequent population growth will be among the 65+ year olds of the wealthier nations, particularly among the 75+yr/old population and the masses of the poor nations.  The end of population growth and subsequent reversals in these wealthier nations is ushering in an era of economic and consumptive decline unlike the contemporary world has ever seen.

FYR – The national income groupings are based on the World Bank Atlas method (detailed HERE).  High income nations have per capita incomes over $12k/yr (and as high as $80k/yr) and upper middle nations have income per capita ranging from $12k/yr to $4k/yr.  This is compared with lower middle income nations with per capita income ranging from $4k/yr to $1k/yr and low income nations below $1k/yr.  All population data is based on UN data and medium variant forward looking estimates.

The chart below shows the annual population change of the high and upper middle income nations, further broken down by which age segments are growing, from 1950 through 2050.  Annual total population change among the high and upper middle income nations (yellow line, below) essentially double peaked in 1969 (+42 million/yr) and again in 1988 (+44 million/yr).  During both those years, the 0-64 year old population increased by 38 million/yr (blue columns) while the remainder was growth among the 65 to 74 (maroon columns) and 75+ year old populations (black columns).  The data assumes current rates of immigration…absent that, the under 65 populations would fall away significantly faster.

In 2018, total high and upper middle income population growth will be +22 million persons or just half of that of the 1988 peak…but the distribution of that growth is unlike anything seen previously.  Unlike ’69 or ’88 when over 85% of the growth was among the under 65 year old population…in 2018, just 21% of the consumer nations population growth will be among the under 65 year olds, 62% will be those aged 65 to 74, and the remaining 18% will be among the 75+ year olds…and it rapidly worsens from here.

The changing source of population growth from young to the elderly changes everything.  As the chart below details, income and expenditures (along with workforce participation rates) are a simple bell curve.  Based on the age of the head of household, income, expenditures, and labor force participation rise and then peak in the 45 to 54 year old portion of ones life.  Income/expenditures fall in half by the time one is 75+ years old.  Labor force participation at 75+ years old is just a meager 8% and only expected to rise by a few percentage points over the next decade.  Obviously, this is US data, but the point is true throughout the high and upper middle income countries.

If we focus solely on the annual growth among the potential workforce and their participation rates (70% among 0-64, 27% among 65-74, 8% among 75+ year olds), alarm bells should be ringing.  The chart below shows the annual population change, broken down by age segment and multiplied by US participation rates…US rates are far higher than most the rest of the world).  That is to say, the collapse in the potential workforce shown in the chart below is far too optimistic and the reality is closer to the annual changes among the 0-64 year old population (blue columns).  Clearly, the breakdown of growth in potential employees is a breakdown in growth of potential consumers and the negative feedback loop is off and running.

The high and upper middle income nations of the world haul in 91% of the global income.  The chart below details gross national income (GNI), by national income groupings.  High income nations (black line, below) represent 64% of the global income while upper middle income nations (yellow line) represent 27%.  The lower middle income nations (maroon line) are 3.1 billion persons in 2018 but produce just 8% and the low income nations of the world are about 700 million persons (blue line) but produce less than 1% of global income.

Total primary energy consumption (all energy consumed including oil, natural gas, nuclear, coal, renewable) by group in quadrillion BTU’s, below.  High income nations consume 48% of global energy but their energy consumption (black line) peaked in 2007.  The high income nations global energy consumption continues declining.  The upper middle income nations consume 41% of global energy and are presently in the energy consumption peaking process (yellow line).  The lower middle income nations consume 11% of global energy and the low income nations consume less than 1% of all global energy.

The end of growth among high and upper middle income nations under 65 year old populations is an absolute game changer.  The remaining growth among the 65-74 and 75+ year old populations neither supplies adequate workforces nor adequate growth in consumption to justify the growth in the workforce.  Workforce participation rates will continue to plunge.  The under 65 year old consumer population will peak about 2022 and be in decline indefinitely thereafter.  The global economy is set to suffer a massive convulsion from low interest rate fed overcapacity versus the inescapable collapse in demand.

Of course, federal government and central bank policies and activities (overt and otherwise…starting with The Farce That is the US Treasury Market like those of the EU and Japan) are driving asset prices inverse to the economic fundamentals (How Did America Go Bankrupt? Slowly, At First, Then All At Once!!! ).  Ludicrous asset prices are a sign of extreme weakness and fear of what “free markets” would do absent the invisible hand(s).  To highlight this rising disparity, the chart below shows US household net worth (HHNW, blue area) over $100 trillion representing the total current value of all assets privately owned versus US disposable personal income (DPI, green area) representing all income remaining after all taxation.  The yellow line represents net worth as a percentage of DPI.  Never has all forms of income been a smaller percentage of asset valuations (and it would be nearly 700% now had it not been for the recent farcical adjustments to DPI).  Said simply, asset prices are rising far faster than the sum of all income (and this is saying nothing about the great disparity among a shrinking cadre owning the bulk of those assets and reaping the bulk of the income).

This sort of asset price fixing in the face of organic economic weakness has never worked.  This time, in the face of large scale declines underway in the consumer populations of the world, this price fixing is only exacerbating an already monumental shift from a high growth to low/no growth world…and ultimately to a global economy that must remodel itself to survive for decades or even perhaps centuries amid secular economic decline.

Extra Credit – US federal debt growth per period versus 15 t0 64 year old population growth versus full time jobs growth per period.  As population growth among the 15 to 64 year old population wanes, jobs growth wanes, but debt creation goes beserk.  One can only guess at the minimal jobs growth and massive debt growth over the next decade as population growth will be minimal.

Federal debt added per period as a percentage of GDP growth per period vs. 15 to 64 year old population growth and full time jobs added per period. 

We are truly off the map in the most recent period but the coming decade gets far more dire.

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Talk about a tight range: the August 10Y auction priced at 2.960%. Fast forward one month when moments ago the US Treasury sold $23 billion as part of this week’s bond sale deluge  (there will be a combined $73BN of 3-, 10- and 30-year Treasury securities to be sold this week, the 2nd largest amount across said tenors in one week since 2010) at a rate of… 2.957%, effectively no change in the yield since August 8. Today’s 9 year 11 month reopening stopped through the When Issued by 0.5bps, the biggest stop through delta sine January 2018.

Compared to August, the internals were slightly better, with the Bid to Cover rising from 2.55 to 2.58, and above the 6 auction average of 2.54. The Indirect takedown also improved, rising from 61.3% to 64.0%, notable above the recent average of 60.8%, while Directs took down 22.6%, a drop from 27.5% last month, and below the 29% 6 auction average. This left 13.4% for Dealers, the highest since June, and above the recent average of 10.2.

Overall, a very strong reopening auction after yesterday’s mediocre 3 year sale perhaps the result of the recent selloff in 10Y TSYs, but more importantly, further evidence that despite ever rising debt supply the auction demand remains as solid as ever.

 

 

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The #MeToo movement has finally trickled down from the C-suite all the way to the cash register at your local McDonald’s. According to the Associated Press, employees at McDonald’s restaurants in 10 cities are planning to participate in a one-day strie next week to protest pervasive sexual harassment, the Associated Press reports.

The strike, which was organized by some of the same people who were responsible for the “Fight for $15” movement – the movement to “liberate” fast-food workers from their jobs poverty wages, will begin at lunchtime on Sept. 18. Restaurants in 10 cities will participate – though not every restaurant in those cities will join the workers. Organizers claim the walkout will be the first multistate strike in the US specifically targeting sexual harassment. The details of the strikes have been approved by “women’s committees” formed at McDonald’s across the US.

Tanya Harrell, one of the organizers of the strike

Some of the strike’s organizers include several women who filed complaints with the US Equal Employment Opportunity Commission in May, alleging entrenched harassment at several McDonald’s franchise restaurants. Organizers could not predict how many workers would participate in the strike.

Organizers said the strike would target multiple restaurants – but not every local McDonald’s – in each of the 10 cities: Chicago; Durham, North Carolina; Kansas City, Missouri; Los Angeles; Miami; Milwaukee; New Orleans; Orlando, Florida; San Francisco and St. Louis.

They said they could not predict with precision how many workers would join the strike, but noted that hundreds of workers had participated in the committee meetings at which the strike was planned.

McDonald’s defended its anti-harassment efforts in a statement to the AP:

McDonald’s, in an e-mail to The Associated Press, defended its anti-harassment efforts.

“We have policies, procedures and training in place that are specifically designed to prevent sexual harassment at our company and company-owned restaurants, and we firmly believe that our franchisees share this commitment,” the company said.

The company also disclosed a new initiative that will engage outside experts to work with the company to help “evolve” those policies and procedures. Some of the experts would come from an employment law training firm and an anti-sexual violence organization.

While one labor lawyer who was working with the strike’s organizers said the company’s efforts leave much to be desired.

Labor lawyer Mary Joyce Carlson, who has been collaborating with women who filed the EEOC complaints, says the company needs to back up such gestures with tougher enforcement.

“We see no evidence there’s been any change at all,” she said. “Whatever policy they have is not effective.”

Organizers of the planned walkout say strikers will be demanding that the company improve procedures for receiving and responding to harassment complaints, and require anti-harassment training for managers and employees. Another demand will be formation of a national committee to address sexual harassment, comprised of workers, representatives from corporate and franchise stores, and leaders of national women’s groups.

Carlson is an attorney for Fight for $15, a national movement seeking to increase the minimum wage to $15 an hour. She said McDonald’s has successfully resisted efforts to unionize its employees, and suggested that workers’ anger related to sexual harassment might fuel broader efforts to gain better working conditions.

Some of the strike’s organizers said they’ve been emboldened by the support they’ve received…because if you work at one of the participating restaurants, and you don’t join in the strike, prepare to be labeled a “misogynist” for the rest of your time there.

Among the strike organizers is Tanya Harrell, 22, of New Orleans, who filed a complaint with the EEOC in May alleging that her two managers at a local McDonald’s teased her, but otherwise took no action after she told them of sustained verbal and physical harassment by a co-worker. Harrell, who makes $8.15 an hour, said she and many of her colleagues were skeptical of the company’s commitment to combating harassment.

“They want people to think they care, but they don’t care,” she said. “They could do a way more better job.”

Another organizer is Kim Lawson, 25, of Kansas City, who also filed an EEOC complaint alleging that managers responded ineffectively when she reported sexual harassment by a co-worker.

Lawson, who has a 4-year-old daughter, says she makes $9 an hour. She is heartened by strong support from other workers for the planned walkout.

“Everybody’s been brave about it,” she said. “It’s time to stand up for what we believe in.”

Walking out on a minimum-wage food-service job during the middle of an industry-wide shift toward more automation sounds like a brilliant plan, and we imagine that all of the participants in the strike have put a lot of thought into the consequences.

Of course, if they do participate, nobody should be surprised if they find one of these doing their old job when they return.

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Top tennis umpires are reportedly banding together to consider boycotting Serena Williams, after she responded poorly to a late game penalty in last weekend’s US Open women’s final, according to the Washington Post. The umpires are also considering the formation of a union according to a Tuesday report, “in part because they are not allowed to discuss specific matches.” 

Williams was free to speak her mind after losing, 6-2, 6-4, Saturday to Japan’s Naomi Osaka, and she accused chair umpire Carlos Ramos of sexism. He had given her a warning for coaching, then a point penalty for smashing her racket and, after she repeatedly expressed frustration, including calling him a “thief,” Ramos levied the game penalty for verbal abuse.

…

A report by The Times of London cited an anonymous official who claimed that umpires felt they were frequently “not supported” by the USTA and that Ramos was “thrown to the wolves for simply doing his job and was not willing to be abused for it.” That has led to talk of a boycott, with the Guardian reporting that umpires feel Ramos was “hung out to dry” while “no one is standing up for officials,” lending renewed energy to long-standing discussions about unionizing. –WaPo

Her coach, Patrick Mouratoglous, admitted to ESPN that he had in fact been coaching her from the stands – a clear violation. 

Coaching or not? This is the question #Mouratoglou #SerenaWilliams #usopen pic.twitter.com/vHMNwkHSq6

— thibnice10 (@thibnice10) September 8, 2018

“Everybody does it — you all know it,’’ said Mouratoglou. 

Williams, on the other hand, told Ramos: “I have never cheated in my life. I have a daughter and I stand for what’s right!” 

“You only me an apology. I have never cheated in my life. I have a daughter and I stand for what’s right!” – Serena to Carlos Ramos after receiving the point penalty #usopen pic.twitter.com/g34xn851JR

— Andrew Jerell Jones (@sluggahjells) September 8, 2018

The tennis champion – fined $17,000 on Sunday, cried sexism – claiming that Ramos affords men greater freedom of expression on the court. Women’s Tennis Association CEO Steve Simon quickly supported the 23-time Grand Slam singles winner, saying in a statement that his organization “believes that there should be no difference in the standards of tolerance provided to the emotions expressed by men vs. women” and that it did “not believe that this was done last night.”

Others have pointed to Williams’ history of harassing and intimidating female judges.

[VIDEO]: If Serena Williams is “fighting for women’s rights and for women’s equality” why does she have a history of harassing and intimidating women line judges/players? She told one woman she was “unattractive inside” and threatened to hit another.

When is it feminsim? pic.twitter.com/7fh3GQFPPL

— Austen Fletcher (@fleccas) September 9, 2018

The New York Post‘s Maureen Callahan said Williams’ behavior was shameful – robbing her opponent, 20-year-old Naomi Osaka, the satisfaction of achieving her dream. 

Osaka spent what should have been her victory lap in tears. It had been her childhood dream to make it to the US Open and possibly play against Williams, her idol, in the final.

It’s hard to recall a more unsportsmanlike event.

Here was a young girl who pulled off one of the greatest upsets ever, who fought for every point she earned, ashamed.

At the awards ceremony, Osaka covered her face with her black visor and cried. The crowd booed her. Katrina Adams, chairman and president of the USTA, opened the awards ceremony by denigrating the winner and lionizing Williams — whose ego, if anything, needs piercing. –New York Post

Here is Osaka, beside herself, trying to answer how it feels to have achieved her lifelong dream: 

The International Tennis Federation – the sport’s governing body, defended Ramos on Monday, saying in their own statement that his “decisions were in accordance with the relevant rules” and that he “acted at all times with professionalism and integrity.”

“Umpires don’t have any independent means of representation and are employed by the governing bodies,” one source told The Guardian. “If talking to the media is not allowed, and governing bodies are speaking out against them, what are umpires supposed to do?”

Former top-level umpire Richard Ings told ESPN on Tuesday: “The umpiring fraternity is thoroughly disturbed at being abandoned by the WTA,” adding “They are all fearful that they could be the next Ramos. They feel that no one has their back when they have to make unpopular calls.”

Ramos also received support from several major figures in the world of tennis. Former pro and sportscaster Mary Carillo said that he was “very, very respected,” and that Williams on occasion “acts like a bully.” 

Martina Navratilova said in a New York Times Op-Ed that Williams deserved much of the blame; that she was “missing the point” of the game, and should have conducted herself with “respect for the sport we love so dearly” – adding “we cannot measure ourselves by what we think we should also be able to get away with … In fact, this is the sort of behavior that no one should be engaging in on the court.”

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The forint and Hungarian stocks weakened on the news that Hungarian Prime Minister Viktor Orban has been hit by an unprecedented European Union censure for which his government now faces the threat of sanctions by fellow EU member states. 

On Wednesday members of European Parliament voted on the move as a result of what EU lawmakers say is a breach of the European bloc’s values and laws and eroding democratic standards, and amidst accusations Hungary is now an “autocracy”. The rebuke was passed by 448 votes to 197.

Meanwhile Orban bit back ahead of the EU censure vote, saying before Parliament the planned move “insults the honor of the Hungarian nation” and was “a slap in the face”; and the controversial prime minister further cast the whole charade is an attempt to “blackmail” Hungary into bowing to EU pressures to soften its hard line stance on the migrant issue. 

The rare disciplinary rebuke, which many expected, comes as Hungarian leadership has been complaining about migrants while remaining under intense pressure to accept them. 

The decision puts Hungary under the same “Article 7” action as Poland, in which fellow EU states probe whether the censured and accused countries breached particular EU rules and more vaguely defined “values”. Ultimately the process could result in Budapest’s EU voting rights being suspended — unlikely, considering all other 27 EU nations would have to agree. 

On Wednesday Hungary’s currency declined upon the news, leaving the US dollar up 0.6 per cent on the day, buying 281.2 forint, per FT. The country’s main stocks gauge also were down 0.28 percent in session lows.

Since coming into power in 2010, Orban has refused to take in asylum seekers arriving in Europe and has been seen as bullying his own courts and media into submission. 

As Bloomberg reports, members of his own right Christian Democrats have increasingly split under the pressure, as momentum builds to expel anti-migrant far right influence across EU states:

Numerous members of Europe’s  Christian Democratic faction, which includes the Fidesz party of Orban, abandoned him in the roll-call vote that became a litmus test with EU Parliament elections looming next May. That expanded support for the move against Hungary from Socialists, Liberals, Greens and the post-communist left.

…Guy Verhofstadt, leader of the Liberals in the chamber, said Orban was bent on wrecking the EU in tandem with the likes of populist Italian Deputy Prime Minister Matteo Salvini and the goal of the proposal against Hungary was to “stop this nightmare.”

The split within the assembly’s Christian Democrats casts doubt about Fidesz’s future in the group and raises the prospect of new European alliances as French President Emmanuel Macron urges pro-EU forces to unite against nationalists, who gained ground most recently in Swedish elections on Sunday.

Meanwhile the prospect of actual sanctions and suspension of voting rights for Hungary remains slim in terms of the high procedural hurdle that must result, which would effectively make Hungary a pariah state in the union.

Article 7 is applied if an EU member state presents a “systemic threat” to the bloc’s values, which Hungary was adjudged to have done in a report by Green MEP Judith Sargentini earlier this year.

At this point, with Article 7 proceedings begun, all the other EU nations will now need to agree unanimously to punish Budapest. Such consensus has never been achieved, meaning that Article 7 has never been actually fully implemented, and is not likely this time either.

Former UK leader Nigel Farage, who recently called the proceedings against Budapest “a show trial,” had previously commented, “Thank God there is at least one European leader prepared to stand up for his principles, his culture, his nation and his people in the face of such extreme bullying.” 

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Apple is still riding high after adding more than $160 billion to its market cap since the beginning of August, a sum that vaulted the once-bankrupt consumer-tech giant past the $1 trillion valuation mark, cementing its status as the world’s most valuable publicly-traded firm. So, with its eye firmly fixated on the prize, the company is reportedly preparing to unveil its latest batch of three new iPhone models that, according to Bloomberg, will represent the most expensive offerings that the company has ever introduced. And when Apple CEO Tim Cook takes the stage on Wednesday for the company’s annual product launch, analysts will already be looking ahead to the year-end holiday sales season.

While smartphone sales increased by a meager 2% last quarter, analysts widely expect that Apple, which commands an army of dedicated consumers, won’t disappoint, as Deutsche Bank’s Jim Reid humorously explains.

Today is the day where every year I wake up completely happy with my current phone but go to bed completely dissatisfied with it and the day I have to justify to my wife why I need a new phone while realising after listening to myself that I don’t. However, since having children this conversation has gotten easier as the camera usually gets ever so slightly better each year and I can persuade my wife that the photos of the kids will be enhanced. So yes, it’s the annual Apple iPhone launch day. Given their status as the world’s biggest company it does matter for markets as well as for personal curiosities. They’ve added $160bn of market cap since the start of August which to put in some context that amount would equate to the 35th biggest S&P 500 company and the 13th biggest STOXX 600 company.  

Looking back to Apple’s latest earnings report could provide some insight on the company’s strategy going forward. While iPhone sales, historically one of the company’s most important metrics, declined, Apple still managed to beat on both the top- and bottom lines, largely thanks to the $1,000 price tag of the Apple X, which was, at the time, the most expensive phone the company had ever released. This allowed the company to reap higher profits even as unit sales disappointed.

Analysts believe the company probably recognizes that it has reached a level of saturation that will be difficult to surpass (which explains reports from earlier this year about cutbacks in supplies), meaning that instead of focusing on the number of units shifted, the company will focus on wringing every last cent of profit from each phone it sells. Because of this, the pricing of the new products will be a much as – if not more – of a focus than their specs, as the Seattle Times reminds us, with prices on the most expensive model exceeding $1,000.

The iPhone X, a dramatically redesigned model released last fall, got rid of the home button and introduced facial-recognition technology to unlock the device. It was the first mass-market smartphone to demand a $1,000 starting price. Although the iPhone X didn’t fulfill analysts’ lofty sales expectations, it fared well enough for Apple to up the ante with the bigger model, whose price is expected to unveil Wednesday.

Apple also is expected to release an iPhone with minor updates to last year’s $1,000 model and another version made of cheaper materials, including a 6.1-inch LCD screen. Even so, the cheaper iPhone is still expected to sell for $650 to $750. The cheaper phone also is expected to lose the home button. Price cuts for older models, with the home button, are also likely.

[…]

By making more expensive iPhones, Apple has been able to boost its profits despite waning demand as people upgrade phones less frequently. IPhones fetched an average price of $724 during the April-June period, a nearly 20 percent increase from a year earlier.

The names for the new phones haven’t been released, though Apple is widely expected to offer two updated versions of last year’s iPhone X that will carry the moniker “iPhone Xs”. The third model is expected to be a successor to last year’s iPhone 8.

Here’s a rundown of what’s known about the new models, courtesy of Bloomberg.

There will be a trio of new smartphone models that look and act like the iPhone X from last year:

• An upgraded version of the iPhone X with a 5.8-inch screen, but adding a faster processor and upgraded cameras. This device is likely to be called the iPhone Xs, which would follow Apple’s naming approach for new iPhones that look like the previous models but add new bells and whistles. It’ll also come in gold, adding to the gray and silver versions from last year.
• A larger version of last year’s iPhone X with a nearly 6.5-inch screen. That would make it one of the largest mass-market phones ever sold and about an inch larger than the screen on the iPhone 8 Plus. To signify the even larger screen, Apple is likely to give the phone a new name: “iPhone Xs Max,” according to people familiar with Apple’s internal deliberations.
• The third phone, a new low-cost version of the iPhone X, could be the hit of the product roll out. It’ll have a roughly 6.1-inch screen with LCD instead of newer OLED technology. It will also use aluminum instead of stainless steel edges, and come in several additional colors. Apple has considered calling the phone the “iPhone Xr,” one of the people said.

* * *

And here’s more from BBG:

The focus will be on Apple’s latest iPhones. It’s still the company’s most-important product, generating about two-thirds of revenue and spurring purchases of other Apple devices, along with services like app subscriptions, movie downloads, and iCloud storage. While smartphone market growth has slowed, higher prices have helped Apple keep expanding and it has gained market share.

What’s more, by releasing the phones nearer to the date of the event instead of waiting until November, the company is hoping that a boost in holiday sales will continue to power its stock higher when the company reports earnings.

But phones won’t be the sole focus of Wednesday’s event: analysts will be closely watching the company’s unveiling of the latest generation of Apple Watches, which are expected to be the most significant updates since 2014. According to the Seattle Times, Apple could unveil a new generation of the smartwatch on Wednesday. Analyst Ming-Chi Kuo told CNN he expects the watch faces will have larger screens. We may also see edge-to-edge displays, much like the design of the iPhone X. It’s worth noting that photos of the new watch, tentatively titled the Apple Watch 4, as well as pictures of one of the new phones, leaked last month on 9to5 Mac.

While the iPhones will be the Wednesday’s main attraction, Apple’s growing smartwatch business will see stage time, too. The company plans to introduce new Apple Watches with larger screens that go nearly edge-to-edge, showing the user more information. The upgrades will mark the most-significant changes to the Apple Watch since the product was launched in 2014.

Apple had 17 percent of the smartwatch market in the second quarter of 2018 with 4.7 million units shipped, beating out second place Xiaomi Corp. by half a million units and Fitbit Inc. by 2 million, according to data from IDC. The Apple Watch saw more than 38 percent year-over-year growth, according to IDC.

The leaked pictures can be seen below:

Despite rumors of production cutbacks at some of Apple’s biggest suppliers, the company beat expectations last quarter for both the top- and bottom-lines when it published its latest batch of earnings, sending the stock to what were then all-time highs.

But even if consumers refuse to agree with Warren Buffett about Apple’s products being “enormously underpriced”, investors still have plenty of reason to stay bullish. After all, global ETF demand combined with a buyback-driven shrinking float (which will artificially inflate earnings), Apple will almost certainly leverage its giant cash pile to buttress the share price no matter the cost.

Anybody hoping to watch the event live can find the feed on Apple’s website, though you’ll need an iPhone, iPod, or iPod Touch with Safari on iOS 10 or later. To watch on your desktop, you must use a Mac with Safari on macOS Sierra 10.12 or later, or a PC with Windows 10 and Microsoft Edge.

The event begins at 10 am Pacific Time (or 1 pm ET).

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Once again, ‘hope’ is alive,  as US equities surge higher on headlines claim Washington is seeking a new round of trade-talks with China (just two weeks after the last heralded round of trade talks amounted to a nothing-burger but prompted panic-buying in stocks).

According to The Wall Street Journal, the U.S. is reaching out to China for a new round of trade talks, in an effort to give Beijing another opportunity to address Washington’s concerns over trade issues before the Trump administration implements additional tariffs on Chinese imports, according to people briefed on the matter.

US equities jumped…

WSJ says that senior U.S. officials, led by Treasury Secretary Steven Mnuchin, recently sent an invitation to Chinese counterparts headed by Vice Premier Liu He, proposing another meeting to talk about bilateral trade, the people said. The U.S. side has proposed to have the discussions in the coming weeks, and has asked the Chinese to dispatch a ministerial-level delegation for the talks.

New round of China trade talks = funding secured

— GreekFire23 (@GreekFire23) September 12, 2018

It’s not just U.S. equities.  Chinese stocks are spiking…

And Yuan is also rallying…

The EM stock and currencies indexes are rallying, the dollar has extended declines…

Copper, gold and other commodities are gaining as the report of new trade talks with China purportedly eases concern that new tariffs will be implemented in the near future (we wouldn’t hold our breath).

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While the Dow is hanging by a thread to unchanged, the formerly untouchable Nasdaq is getting hammered again…

… with the FANG block down on the day, but the biggest victims are chip stocks, which are getting crushed after a pair of downgrades by both Goldman and Stifel, which threw in the towel on a variety of names both large and small in the computer memory space, traditionally an advance proxy for the state of the Chinese economy which as we discussed over the weekend is set for a lot of pain as a result of the collapsing credit impulse. Telecom stocks were also among Wednesday’s worst performers.

One of the names hit the most has been former hedge fund darling Micron, the worst performing stock in the S&P, which is down another 6% today to $41, and a whopping 37% from its $64.66 highs set in late May.

The downgrades sent the has the SOX index tumbling as much as 3%, among the worst sector decliners in the early going, and also pushing the index below its 200DMA.

Semis are “a key indicator for the broader technology sector, and for the general stock market going forward,” Miller Tabak’s said. “If the semis do indeed break-down from here as we move through the rest of September, it could/should lead to investors to rotate away from the tech stocks in a more meaningful fashion than they did last week.”

Not everyone is convinced a breakdown is imminent however: Bloomberg’s Andrew Cinko notes that the SOX remains stuck in the sideways range writes that “the reason the SOX’s range-bound trading continues is that the companies with the most influence on the index are in bull mode this year and some of them (QCOM, TSM, AMD) are outperforming the index today.”

• Qualcomm: 10% weighting; +12.7% ytd
• Nvidia: 8.7%; +39%
• Texas Instruments: 7.6%; -0.3%
• Broadcom: 7.4%; -11.4%
• Intel: 6.5%; -3.6%
• AMD: 6%; +191%
• Taiwan Semi: 4.6%; +11.4%

As Cinko adds, to knock the index down substantially, QCOM, NVDA, TXN and AMD are going to have to take substantial hits.

Until that happens, the SOX’s weightings, combined with the individual stock performance, suggest this closely-watched sector will continue to churn.

Elsewhere, in addition to the slump in the information technology and financial sectors, which are the biggest losers in the S&P 500, energy companies and miners are among the biggest winners in the Stoxx Europe 600 Index as the Bloomberg’s Commodity Index rose.

Meanwhile, as noted earlier, the MSCI Asia Pacific Index was on course for a 10th consecutive decline, the longest losing  streak since 2002.

Finally, following today’s unexpectedly weak PPI print, which showed the first monthly decline in 18 months, Treasury yields eased and the dollar turned down, helping crude oil surge.

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Jamie Dimon thinks he could beat Donald Trump in an election, telling a New York audience “I think I could beat Trump… because I’m as tough as he is, I’m smarter than he is,” adding “I can’t beat the liberal side of the Democratic party.” 

The 62-year-old added “And by the way this wealthy New Yorker actually earned his money… It wasn’t a gift from Daddy.” 

Dimon has publicly stated that he wouldn’t run for office, as he’s committed to heading JP Morgan for the next five years. 

When asked in the past if he would run for President, he says that while he would love to run the country, he could never win an election.

Developing…

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There was a lot of anticipation ahead of today’s IPO of NIO, a flashy Chinese start-up called “China’s Tesla”, which predictably hopes to rival Tesla in China, and which planned to raise around $1 billion in its US initial public offering – the first listing by a Chinese electric vehicle maker in the US.

And after pricing its IPO at the low end of the at $6.25-$8.25 range, NIO stock broke for trading at… $6.00 then traded as low at $5.50, prompting fears that the IPO is a dud, and suggesting that investor enthusiasm with the entire electric vehicle sector may be waning, which would be even more bad news for Tesla.

As we reported previously, the company plans to use IPO proceeds on research and development of products, services and technology, marketing and developing sales channels, building manufacturing facilities, rolling out its supply chain, and for general corporate purposes and working capital. Eight investment banks acted as joint bookrunners on the deal: Morgan Stanley, Goldman Sachs, JP Morgan, Bank of America Merrill Lynch, Deutsche Bank, Citigroup, Credit Suisse and UBS.

Before the IPO, Li Bin held a 17.2% stake in the company and Tencent owns 15.2%, according to the S-1 filing.

NIO is a newcomer to the rapidly growing EV market in China. The company, which was founded in 2014 by Li Bin, only launched its first production vehicle ES8 – an all-electric, seven-passenger SUV – in December of last year.

The company claims its cars have similar performances as Tesla’s, but at half the sticker price, the SCMP reports. The ES8 sells at a base price of 448,000 yuan (about US$66,000), while Tesla’s Model X has a base price of more than double that, or 920,000 yuan in China.

While technically a startup, NIO has already delivered 1,381 of ES8s, and has deposit-backed orders for another 15,700, it said. In comparison, Tesla – the biggest-selling electric car maker in the US – sold 17,000 vehicles on the mainland last year, a jump of 51.6% from 2016, according to the China Automobile Dealers Association. Tesla hopes to greatly ramp up that performance, and has said it is setting up its Gigafactory 3 at Lingang near Shanghai’s free-trade zone, with an annual capacity to produce 500,000 electric vehicles (it is unclear whether Musk will be able to obtain the required billions to fund the expansion).

Meanwhile, for those hoping to hit a home run by buying the next Tesla, NIO only started generating revenue this year, with US$7 million for the first six months. But it suffered a net loss of more than US$502 million during the same period. In 2017, it lost US$759 million. Then again, Tesla’s own bottom line isn’t any better.

Just like Tesla, NIO expects to splurge in coming years, and projects its capex will hit US$1.8 billion in the next three years.

And also just like Tesla, buyers of ES8s enjoy subsidies from the Chinese central government and several local governments, although exact amounts were not given. That said, the EV sector is bracing for complete removal of subsidies by 2020.

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