INVESTORS CONTINUE SWITCHING FROM STOCKS INTO BONDS

Back in April, I published a piece on how money is being pulled from stocks and put into bonds, mainly short-term Treasuries and municipal bonds.*

Now on July 28, the WSJ has published another article on Stock Outflows Swell in Flight For Safety (page B 11). Of greatest interest to me, however, is the figure from the front page of the Journal showing the trend in two-year Treasuries this year.

(Click on figure to enlarge.  Figure from the Wall Street Journal, July 27, 2018)



One thing that is spooking the stock markets is the American Global War of tariffs America has initiated.  Incidentally, this climb in interest on two-year treasuries is not repeated for the 10-year Treasuries, which have remained flat at just under 3%.  This has caused a flattening of the yield curve that is sometimes a forerunner of a stock-market correction.

The current article in the WSJ includes a paragraph:
Nearly $20 billion was pulled from long-term mutual funds and exchange-traded funds focused on large-cap stocks in June, handing those funds their biggest month of outflows in at least a decade, according to data provider Morningstar LLC. Outflows across the stock market have continued into July, though the pace has slowed.  (I have been unable to find this article online either by Googling it or searching for it in the WSJ online.  This quote is taken from the facsimile edition of the July 28, 2018, WSJ)

* http://stopcontinentaldrift.blogspot.com/2018/04/investors-are-changing-from-stocks-to.html

LATEST NEWS ON AUTONOMOUS VEHICLES -July 2018

While autonomous vehicles are a hot topic, new regular cars are drifting toward automation.  My daughter-in-law bought a Honda Accord a few months ago and in country driving, you can take your hands off the steering wheel on roads where there is a center line and the car will stay in the center of your lane (Lane Keeping Assist System).  If you steer the car a bit off center, it will correct to the proper place.  It will also adjust if approaching a slow or stopped vehicle (Collision Mitigation Braking System).

A big problem with current autonomous vehicles is roads that are unmarked and without detailed maps.  Therefore the concentration on development, for now, is on cities where there are detailed maps.  But the problems of driving on unmarked roads are being worked on.*  This is using GPS location and road recognition.

In contrast, MapLite uses sensors for all aspects of navigation, relying on GPS data only to obtain a rough estimate of the car’s location. The system first sets both a final destination and what researchers call a “local navigation goal,” which has to be within view of the car. Its perception sensors then generate a path to get to that point, using LIDAR to estimate the location of the road’s edges. MapLite can do this without physical road markings by making basic assumptions about how the road will be relatively more flat than the surrounding areas.*

I think all the major automobile companies and some not so well known ones have plans for autonomous driving.**

Most advanced seems to be Alphabet Inc. Waymo.

(Reuters) - Alphabet Inc’s Waymo is starting trials to ferry shoppers to Walmart Inc’s stores in Phoenix, Arizona, the company said on Wednesday.
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Having worked on self-driving cars since 2009 and with 5 million miles (8 million km) driven on public roads under its belt, Waymo is generally considered to be ahead of rivals in the development of autonomous vehicle technology.**

Uber, which appeared to be advanced until the death of a pedestrian is scheduling to restart tests according to a July 24th article by Aarian Marshall in Wired.

Until today, when self-driving chief Eric Meyhofer announced in a blog post that Uber would return its self-driving cars to the roads in Pittsburgh. With a catch. For now, the vehicles will stay in manual (human-driven) mode, simply collecting data for training and mapping purposes. To prep for the tech’s return to the public space, Uber has undertaken a wholesale “safety review”, with the help of former National Transportation Safety Board chair and aviation expert Christopher Hart.

* http://news.mit.edu/2018/self-driving-cars-for-country-roads-mit-csail-0507
** https://www.wsj.com/articles/ford-consolidates-self-driving-activities-plans-to-invest-4-billion-1532448641
*** https://www.reuters.com/article/us-waymo-walmart/waymo-self-driving-cars-to-ferry-walmart-shoppers-in-arizona-trial-idUSKBN1KF1OB

https://www.wired.com/story/self-driving-crash-uber-revamps-testing/

NOT ALL TARIFFS ARE BAD FOR AMERICAN CONSUMERS

The disaster for the American soybean farmers is well known.  Because of tariffs enacted by China, the price of American grown soybeans has plummeted* so if you love soybeans, this is your chance to eat heartily at little cost.

Less well known is the effect of record production and tariffs on American grown meat of all kinds.  The figure shows that American produced meats in storage are at an all-time high, more than 2.5 billion pounds.**  Both China (now 68% tariff) and Mexico (20% tariff) have put duties on pork but the figure seems to show the width of the pork band in the figure to be pretty constant.  Some weeks the USDA reports zero exports of pork.  Chickens, however, in storage are definitely higher.  The width of the beef band is also increasing.  Turkey in storage bounces around greatly but currently is near an all-time high.

(Click on figure to enlarge)

For now, American cold storage facilities are trying to find ways to store more meat including building new facilities.  I conclude we should start seeing some very good deals on meats at the supermarkets.

* http://stopcontinentaldrift.blogspot.com/2018/07/economy-tariffs-and-stock-markets.html
** https://www.wsj.com/articles/meat-piles-up-as-production-grows-and-exports-slow-1532268000?mod=searchresults&page=1&pos=2

WHAT HAPPENED TO OUR ALPHA-MALE PRESIDENT?

At first, I wondered what all the fuss was about President's regarding Donald Trump's obsequious behavior toward President Putin because I thought he only said things he had been saying for some time.

I guess the reason was that people were expecting someone who pretends to be an alpha-male around women - like Theresa May and Angela Merkel (who lived in East Germany during the Soviet occupation) - to put up a strong front with Putin at Helsinki on an international stage.

Those who admire Trump will say, I suppose, that he is only trying to make friends with Putin and point to some strong stances he has taken against Russia like arms for Ukraine and expelling a lot of Russian employees from the U.S.  They also give him credit for a number of sanctions; however, these were passed by Congress, and he was slow to apply the round since he became president.  At any rate, Trump cannot repeal Congressionally passed sanctions by himself.

I don't know what is the proper thing to do in Ukraine.  Obama didn't want to arm them because he thought that Russia could escalate the war to match them.  So this war has dragged on.  I don't know if arming the Ukrainians changes things much.  I guess the idea is that if the Ukrainians are armed more, Russia will not want to pay the price.  We will see.  The politics of Ukraine is so corrupt, that I doubt they deserve to remain a nation.*

At any rate, I have nothing against President Trump trying to have friendly relations with Putin.  After all, others have tried (such as Secretary of State Hillary Clinton in the Obama administration) to do so.  I don't know how you can go about this after so many failures (Most of the 1970s were called a detente with the Soviet Union.  They even awarded me a science prize.).  My own impression is that the Russians and particularly Putin admire strength.  A trick might be for our president to show strength in a friendly way.  It doesn't seem like our President Trump can find the way.

* http://stopcontinentaldrift.blogspot.com/2014/03/ukraine-failed-state.html
http://stopcontinentaldrift.blogspot.com/2014/03/ukraine-politics.html
http://stopcontinentaldrift.blogspot.com/2014/03/the-breadbasket-of-europe-is-now-basket.html

DOES THE AMERICAN TRANSLATOR AT HELSINKI HAVE PROTECTION?

After the Helsinki meeting between President Trump and President Putin, I feared for the life of the American translator who was the only other American in the room with Trump, Putin, and the Russian translator.  I hoped she was under some protection.

It turns out, however, that these translators make a report based on their notes and memory and present it to the president, so there is some sort of record of the meeting.  As the American translator no doubt has already made the report, perhaps there is some cover for her.

ANOTHER ONE FOR AMERICA

A while back, I wrote a piece on My Republican Hero*  I've decided to add another one - Dan Coasts.  As our President continues his obsequious attention to Vladimir Putin, Dan Coats, Director of National Intelligence, has kept the record straight and doesn't pussyfoot around.  Now he is in trouble because he laughed when told at Aspen that President Trump had invited Putin to the Oval Office.

I'm also giving Christopher Wray an Honorable Mention at this time and will probably upgrade him later

Wray has stood up to pressure to fire senior FBI officials and refused to hand over some information related to the federal probe into Russian interference in the 2016 election.

"I think if we start exposing sources and methods, we are setting a dangerous precedent," Wray said.

*  http://stopcontinentaldrift.blogspot.com/2018/06/my-hero.html

** https://www.nbcnews.com/news/us-news/fbi-director-wray-hints-he-considered-resigning-restates-belief-russian-n892631

TRUMP: DICTATOR OF THE WORLD

In his role as Global Dictator Trump, he loves to use the words (all caps) IMMEDIATELY and DEMAND.  remember that we (U.S.). were to discontinue naval maneuvers off North Korea IMMEDIATELY and "I DEMAND an investigation into the FBI infiltration into his run for president?   Well, he is at it again:

Trump Tweet July 11, 2018:
What good is NATO if Germany is paying Russia billions of dollars for gas and energy? Why are there only 5 out of 29 countries that have met their commitment? The U.S. is paying for Europe’s protection, then loses billions on Trade. Must pay 2% of GDP IMMEDIATELY, not by 2025* (underlining mine)

Actually, the Russian pipeline is a matter of some concern as it was so in the Obama Administration, although I am surprised that Trump mentioned it.  While it is true that, if you equate all the gas from the pipeline to German consumption, it does become 60-70%; however, the gas is brought all over Western Europe and the amount bought by German companies (not government) is about 20%.**

Unlike the Eastern European countries, Germany has a very diverse energy structure and most of the gas is bought by companies outside of Germany.
Through these pipes, 55 billion cubic meters of Russian gas per year can flow from Russia into Germany. From Vyborg, the gas is sold to utilities, energy companies and chemical manufacturers through Europe’s increasingly interconnected pipeline network to end points across the European Union.**
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This pipeline system, Nord Stream 2, would indeed carry a great deal of gas from Russia to Germany. Trump is, in fact, expressing the American government’s policy of opposition to the pipeline — opposition that his administration shares with the Obama administration, when then-Vice President Joe Biden said: “Nord Stream 2 is a bad deal for Europe.” And, they are, in fact, building a new pipeline.

But, like too many of the president’s pronouncements, what starts with a grain of truth becomes distorted into something else entirely. First, Germany currently receives about half its gas supplies from Russia — if the new pipeline were to replace other sources of gas on a one-to-one basis, it could indeed rise to 60 to 70 percent. However, gas makes up less than 20 percent of Germany’s energy mix for power production, with renewables, coal and nuclear making up the balance.**

* https://www.cnbc.com/2018/07/11/trump-demands-nato-countries-meet-defense-spending-goals-immediately.html
** https://www.politico.com/magazine/story/2018/07/11/what-trump-should-have-told-germany-about-russian-gas-219000