Tag: news

A new, shocking report by researchers at Carnegie Mellon University’s Department of Engineering and Public Policy (EPP), Harvard University, and the University of California San Diego School of Global Policy and Strategy discovered that the US nuclear power industry could be on the verge of a collapse — a reality that many have yet to realize.

Published in Proceedings of the National Academy of Science (PNAS), “US nuclear power: The vanishing low-carbon wedge” examined 99 nuclear power reactors in 30 states, operated by 30 different power companies. As of 2017, there are two new reactors under construction, but 34 reactors have been permanently shut down as many plants reach the end of their lifespan.

“We’re asleep at the wheel on a very dangerous highway,” said Ahmed Abdulla, co-author and fellow at the School of Global Policy and Strategy at UC San Diego. “We really need to open our eyes and study the situation.”

For more than three decades, approximately 20 percent of U.S. power generation has come from light water nuclear reactors (LWRs). These plants are now aging, and the cost to service or upgrade them along with fierce competition from Trump’s economic order to prop up failing coal and heavily indebted shale oil/gas companies make nuclear power less competitive in today’s power markets.

In return, the American shale boom could trigger a significant number of US nuclear power plant closures in the years ahead, the researchers warned. The country is now at a critical crossroad that it must abandon nuclear power altogether or embrace the next generation of miniature, more cost-effective reactors.

The researchers noted that small modular reactors might play a significant role in US energy markets in the next few decades. This new design would effectively swap out the current aging, LWRs that the Atomic Energy Commission allowed to rapidly expand across the country in the 1960s and after. The researchers described several scenarios where new nuclear power plants could be used to back up wind and solar, produce heat for industrial processes, or serve military bases.

Given the current market structure and policy dynamics, the researchers were not convinced that nuclear power would be competitive in the future power market.

While efforts continue to advance batteries for storing electricity from solar and wind, utilities have made an impressive push into natural gas. As of 2018, fossil fuel now produces nearly 32 percent of US power.

Given the impending collapse of the nuclear industry, the researchers questioned whether renewable energy would be enough to offset losses from retiring nuclear power plants.

“The reality is you cannot actually replace 20 percent of the need with wind and solar, unless you want to wallpaper every square inch of many states,” said Christian Back, vice-president of nuclear technologies and materials at General Atomics. “It’s not efficient enough.”

Back said with the right political support, nuclear reactors operating today could be retrofitted to increase safety and lifespan, while smaller, more cost-effective ones could be strategically placed on the grid.

“This is a situation like Nasa when you’re putting someone on the moon where the government needs to recognize the long-term benefit and investment that’s required and help support that,” Back added. “This is where political will matters.”

Researchers also suggested that many civilians overlook nuclear energy and do not realize the urgency of the situation.

In the article’s conclusion, the researchers warn, “It should be a source of profound concern for all who care about climate change that, for entirely predictable and resolvable reasons, the United States appears set to virtually lose nuclear power, and thus a wedge of reliable and low-carbon energy, over the next few decades.”

Is the Era of Nuclear Power Coming to an End? 

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Authored by Nicholas Colas via DataTrekResearch.com,

Last week’s rally in US stocks may just be the effect of a light volume/holiday week melt up, but the numbers were impressive and set the posts for last week’s action:

• S&P 500 +1.52% last 5 days
• Tech sector in S&P: +2.29%
• Russell 2000: +3.10%
• S&P Small Cap: +3.31%
• All of which roundly beat “Rest of world” equities, up only 0.70% (MSCI All Country Ex-US)

Although Friday’s Goldilocks-style Jobs Report played a role, this strong performance stands in notable contradiction to market concerns over global trade disputes. Given these have been brewing for months, they should now be bitter enough to make for a less appetizing US stock market. The tape respectfully disagrees.

All of which got us to thinking: what is the bear case for US stocks missing with respect to trade wars? A few thoughts:

#1. Investor uncertainty is keeping a lid on long-term Treasury rates. This helps support US equity valuations and also buffers stock prices from any incremental uncertainty over corporate earnings. Yes, trade wars should be inflationary as the price of imported goods rises. But as with equity price action, the market disagrees with this concern. A few numbers:

• Current 10-year Treasury Yield: 2.82%. The last time it was over 3% was May 17th. In fact, the benchmark Treasury has only closed +3% 10 days in 2018.

• 10-Year Treasury breakevens (a measure of expected long run inflation) have been stable at 2.0-2.1% since the start of the year.

#2. Global interest rates are playing a supporting role here. While not enough to help overseas equity markets (All World Ex-US down 4.74% YTD), low yields elsewhere do seem to be putting a cap on US rates. For example:

• Japanese 10-Year yields at 0.029% are closer to their 2018 lows (0.010%) than their highs (0.092%).

• German 10-Years yield 0.294%. This is very close to the 2018 lows of 0.278% while the high water mark was 0.764%.

• UK 10-Years hold to the same pattern. Current yields are 1.268%. The 2018 low close was 1.190%, and the high was 1.645%.

#3. Worries over the economic spillover of trade disputes give investors some hope that the Federal Reserve will slow the pace of rate increases in the back half of 2018. Data from the Fed Funds Futures market December 2018 contracts:

• While the odds of 2 more increases this year crept up last week, they remain just below 50% (49.3%)

• The odds of just one more bump in 2018 are still relatively high at 40.4%.

#4. So goes Tech, so goes US large caps, and these companies have less exposure to US trade policy than most sectors. Facebook and Google are banned in China, and Amazon/Netflix have minimal presences. In Europe, the first two do face regulatory threats, but these predate trade war chatter. And Apple, the biggest Tech company of them all, seems naturally hedged by being a large employer in China and a systematically important part of the US equity market.

Bottom line: if Industrials (-4.6% YTD) were the largest weighting in the S&P 500, US market performance would look a lot more like the rest of the world. But Tech holds that spot, and its 26% weighting is enough to support the S&P 500.

Summing up: we aren’t trying to whistle past the graveyard on the tariff topic, but rather frame the discussion in a way that respects market action.There are two sides to every coin. You likely have read enough “Tails, you lose” about the effects of trade wars on equity prices. But so far US stocks are coming up “Heads”, and there are some logical reasons for that.

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Authored by Mike Brest via The Daily Caller,

Wrestler turned actor Dwayne “The Rock” Johnson said he is considering a run for political office on The Late Show with Stephen Colbert Wednesday night.

WATCH:

“I know you’re not particularly a political person, but people have talked to you about whether you would run for political office yourself,” Colbert said. “Do you actually take that possibility seriously?”

“I absolutely do, yes,” Johnson responded.

Johnson then explained that a Washington Post article suggested that if he ran, he would have a shot at winning, and that’s where the hype began.

“So when that started picking up — of course when I’m asked — yes, I have incredible respect for our American people and our country, so I said, ‘Yes, I would consider it,’” Johnson added.

“But at the same time, Stephen — I mean, look, I’m not delusional at all. Like I feel like I … you know what it is? I need that thing … oh, experience.”

America, I hear you.

Tune in TONIGHT for our season finale of @nbcsnl for suprises and big laughs. #SNLFinale #5xHost #2020 🔥💪🏾🇺🇸 pic.twitter.com/EdEgDwXX4V

— Dwayne Johnson (@TheRock) May 20, 2017

Johnson is one of many celebrities that have suggested or been rumored to consider a political run now that the president has blazed the trial. Other celebrities that have been rumored include Mark Cuban, Howard Shultz and Kanye West.

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While the June employment report had its pros (payrolls) and cons (wages), one number attracted attention: the increase in the labor force participation rate, which rose from 62.7 to 62.9, as more people returned to the labor force, in the process sending the number of unemployed workers higher by half a million.

That said, the move was modest, and as Goldman writes in a Q&A note looking at the participation rate, month-to-month changes in the participation rate are quite noisy, with the standard deviation at 0.14pp over the last 10 years.

the participation rate simply moved up in June near the top end of the 62.3%-63.0% range that has prevailed since early 2014. Over this period, the cyclical participation tailwinds have offset the impact of the structural headwinds, of which a ¼pp trend decline due to aging is the most important contributor.

Whatever the reason behind the monthly increase, a more troubling trend is the ongoing secular decline in the participation rate, especially in the context of other developed economies, where despite economic difficulties, the number of people who end up in the labor force has been rising, a stark contrast with the US. Here is GOldman’s view on what is going on here:

Q: The prime-age participation rate is still well below pre-crisis levels. How unusual is the US performance over the last decade from an international perspective?

A: Pretty unusual, especially for prime-age women. The female prime-age participation is still 0.4pp below the 2007Q1 level in the US while it has actually risen in all the other large advanced economies in our sample and by 4.3pp on average (Exhibit 2, left panel).[1] It appears that the social trend of rising female participation in the US came to an end in the 1990s but is probably still ongoing elsewhere (see here for an analysis of the rise in German female participation). As a result, the US female prime-age participation rate is now 4.5pp below the weighted ex-US average and only trailed by Italy’s. Our forecast incorporates a continued moderate cyclical increase in female prime-age participation in 2018H2 and 2019.

Despite a recent pick-up, the male prime-age participation rate has fallen 2.2pp since 2007Q1 in the US vs. only 1.0pp on average in the other DMs (Exhibit 2, right panel). The US male prime-age participation rate is now more than 3pp below the weighted average and nearly 7pp below the Japanese rate.

Of course, regular readers are familiar with this phenomenon which we have covered for the better part of the past decade. But what remains elusive is the answer to the question why is this taking place?

According to Goldman the answer is two-fold: junkies and prisoners, or as Goldman puts it, “the US opioid and incarceration issues … each explain roughly one-sixth of the US prime-age male participation underperformance, or one-third combined”, or in other words, a third of the US participation problem is the result of increasingly more males becoming opioid addicts and ending up in prison as a result, or independently.

Here is Goldman’s full discussion on this troubling issue, which as much as the FBI would like, can not be blamed on Putin or Russia.

Q: What drives the long-run decline in US prime-age participation?

A: Both global as well as US-specific demand and supply factors. Global demand-based factors, especially the impact of technology and trade on less-educated workers, have arguably played an important role. Global supply factors, including increases in family income (from work or transfers), have likely also lowered labor supply across many DMs.

But the US stands out along three other supply dimensions. First, higher rates of painkiller use, including opioids, and middle-age mortality suggest that more severe health and drug-related problems have contributed to lower US participation (Exhibit 3, left panel). Second, the US incarcerates a much larger share of its population, and people with criminal records face severe challenges in re-entering the workforce (Exhibit 3, right panel). Third, while exposure to trade and technology was likely similar to other developed economies, a weaker US policy response—namely, less supportive retraining and job-search assistance—might have made the impact on participation more costly.

Q: The US prime-age male participation rate is now more than 3pp below the average in other DMs. How important are the US opioid and incarceration issues quantitatively in explaining the US gap?

A: Quite important, but not sufficient on their own. Our literature review implies that the two issues each explain roughly one-sixth of the US prime-age male participation underperformance, or one-third combined.

Using estimates of the causal impact of incarceration on employment from Mueller-Smith, we estimate that around 0.5pp of the 3pp US prime-age male gap results from the relatively high share of the population with a felony record.

Using the estimated cross-county relationship between opioid prescription rates and prime age participation rates from Krueger and the assumption that two-thirds of the regional variation in prescription rates reflects local medical supply factors rather than labor market conditions, we estimate that the relatively high US opioid use rate also drives roughly 0.5pp of the 3pp US male prime-age gap.

Q: The incarceration and prescription opioid rates have declined modestly in recent years. Does this imply that the drag from these issues on labor force participation has peaked?

Probably not, because the labor market effects likely operate with important lags. While the incarceration rate peaked 10 years ago, it will likely take many years before we see a corresponding decrease in the number of former prisoners, mostly because prisoners tend to be young, with a median age in the mid-30s.

Prescription opioid rates have also declined modestly since 2012 according to CDC data. However, CDC data also show a shift to heroin and other illegal opioids and a continued rise in the number of drug-related deaths (Exhibit 4, right panel).

While a discussion of whether the phenomenon of the depressed participation rate due to a voluntary exit from the labor force, whether through incarceration or developing an addiction is far beyond the scope of this article, it brings up an ominous point: all those mostly young workers who exit the labor force and become institutionalized wards of the state in some capacity, effectively relinquish any hope for a viable, lucrative and satisfying career. This is also perhaps the primary reason behind the chronic US productivity problem, which has prevented the US economy from growing at capacity, and resulted in stagnant wages for the past decade.

Which reminds us of another perversion of the welfare state where an incentive quirk pushes more people to end up in a lower income – and productivity – bracket instead of motivating them to strive for proper middle class status: recall that as we described in “When Work Is Punished: The Tragedy Of America’s Welfare State“, the net take home between wages and welfare for most minimum wage Americans is as high as that of an ordinary household making $69,000.

This means, that once many Americans fall into the comfortable “welfare trap” that encourages lower wages, it holds back many otherwise ambitious workers from pursuing more productive work that results in higher wages. A similar trap is sprung on those Americans who, for one reason or another, end up in jail or as drug addicts, in both cases preventing them from returning as productive members of society.

Unfortunately, until there is an honest discussion about either the perverse motivations of the US welfare state, or what it is that forces so many Americans to resort to behavior that lands them in prison, or become addicted – and by an honest discussion we do not mean blaming Putin – the US participation problem will only get worse.

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While all eyes have been on the longer-end of the yield curve – as it collapses ever closer to recessionary-signaling inversion – traders have, for the first time since the financial crisis, inverted the eurodollar curve – implying a rate cut is more likely than a rate hike in 2020.

Most investors have grown used to watching the ‘2s10s’ or ‘5s30s’ curves which have collapsed in the face of an endless barrage of global synchronous growth ‘goldilocks’ bullshit narrative…

 

But, as Bloomberg notes, the spread between December 2019 and December 2020 eurodollar contracts fell below zero Wednesday for the first time, suggesting short-end traders don’t expect the central bank to raise interest rates at all after next year.. and in fact, are pricing in a higher probability of a rate cut.

 

The spread’s dip into negative territory is the culmination of a trend months in the making as investors bring forward their expectations for when America’s economic expansion — and therefore the Fed’s tightening cycle — will end.

It contrasts with the most recent summary of economic projections, which shows that a majority of officials expect to hike rates once or twice in 2020 as the gap between The Fed’s hopes and The Market’s reality has never been wider…

The divergence between trader and policy maker expectations is partly a product of contrasting views on whether productivity gains are set to drive further growth, according to TD Securities rates strategist Gennadiy Goldberg.

“The Fed expects productivity to pick up gradually in the coming years, raising the neutral rate,” said Goldberg. “The market appears to be taking an ‘I’ll believe it when I see it’ approach.”

Finally, we reminder readers that as the short-end of the market inverts, suggesting the end of the tightening cycle is appreciably sooner than The Fed ‘no recession in sight’ hopes would assume, bond speculators are still convinced that higher rates are coming and have never been more bearish of bonds…

 

Maybe Dr.Copper is on to something after all…

The Eurodollar curve is shouting loud that a recessionary impulse is coming soon and The Fed will have to admit it failed again.

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UK Prime Minister has been accused of violating “constitutional norms” during the preparation of the Brexit White Paper that was released this morning after reports surfaced that May ran the text of the paper by German Chancellor Angela Merkel before sharing it with her own MPs.

According to Express, when asked about possible alterations to the Brexit blueprint, May is said to have responded “no that’s not possible”. When asked why, May said “because I’ve already cleared the existing text with Mrs. Merkel.”

Sources inside 10 Downing Street reportedly refuted the claims, but May flew to Berlin last Thursday, the day before her Brexit cabinet approved the controversial Chequers agreement, for a meeting with Merkel.

Tory MP Jacob Rees-Mogg said it would unconstitutional for May to discuss British policy with EU leaders before her own Cabinet: “I think they might have been taken to Brussels and to Berlin before they were presented at Chequers which is a serious question.”

“And there’s another question about how they were drawn up because they were drawn up in secret without telling the Secretary of State for leaving the European Union David Davis what was going on, whilst his department was working on a White Paper.”

“I don’t think it has been handled in a proper governmental system and in accordance with our constitutional norms.”

Brexit Secretary David Davis and Foreign Secretary Boris Johnson have already resigned over their displeasure with the Chequers agreement. 

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