Small Business Optimism Continues Historic Trend
The Index fell slightly from August’s survey record breaking high of 108.8 to 107.9. Six of the ten Index components declined, three advanced and one was unchanged, exactly reversing last month’s gain. Most of the decline came in the “hard” components of the Index (down 14 points) but still registered as the second highest reading since 1998, partially offset by some improvement in the expectations components (up 3 points). (…)
- Flattening sales against rising expectations:
- Record boom in job openings:
- Accelerating comps at already high level:
- Typical margin squeeze…
- …more to come:
Source: Pantheon Macroeconomics (via The Daily Shot)
- …offset by tax cuts, this year:
- Flat capex at not so high level:
IMF Warns of Possible Emerging-Markets Crisis A new IMF study projects emerging economies will muddle through recent market turbulence without a severe shock to their financial systems, but flags an outside chance of a crisis.
(…) While all three countries face vastly different challenges, their crises share a common element: the flip side of a strengthening dollar has been a weakening of their currencies. Capital has flooded out of their economies, and into the U.S., enticed in part by the Federal Reserve’s campaign of rising interest rates. (…)
Though the scenario isn’t inevitable, vulnerabilities are high. The IMF’s measure of government-debt distress—in part a function of overall borrowing—is rising. Over 45% of low-income countries were at high risk of debt distress or already experiencing it, the IMF said, compared with only about 25% five years ago. (…)
Meanwhile, China is busy trying to protect its economy from the trade war with America which also aims at breaking up the complex China-centered supply chain web. Chinese entrepreneurs are understandably investing in other Asian countries to reduce their business risk. Meanwhile, Beijing has allowed its currency to decline against most other currencies to counter tariffs but it also seeks to control the outflow of money. How these interacting trends will eventually play out throughout the various emerging markets is anybody’s guess at this point. Beware of the known unknowns, but also of the unknown unknowns.
(…) The CKGSB Business Conditions Index, compiled by the Cheung Kong Graduate School of Business, dropped to the lowest level in its seven-year history in September as the U.S. and Chinese governments imposed new rounds of tariffs on each other’s exports, escalating the trade war. (…) The respondents represent around 300 privately-owned small and mid-sized enterprises across several sectors of the economy. (…)
Probably reflecting conditions for smaller businesses.
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Signs Suggest China May Tolerate Yuan Weakening Past 7 Per Dollar
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Mnuchin warns China on currency devaluations US Treasury secretary says in interview he wants issue raised in trade talks
Pence Unloaded on China; Here’s Why That’s Important Vice president’s blunt speech could be inflection point in Washington-Beijing relations
(…) In surprisingly blunt terms, Mr. Pence accused China of abusing its economic power, stealing American technology, bullying the very American companies that have helped in its economic rise, intimidating its neighbors, militarizing the South China Sea and persecuting religious believers at home.
“America had hoped that economic liberalization would bring China into a greater partnership with us and with the world,” Mr. Pence said. “Instead, China has chosen economic aggression, which has in turn emboldened its growing military.”
In his most headline-grabbing assertion, he also charged that China is attempting to interfere in the 2018 midterm elections and laying the groundwork to try to defeat President Trump’s quest for re-election. (…)
He asserted that the Chinese have embarked on a governmentwide effort to “interfere in the domestic policies of this country.” In this concerted program, he charged, China seems to expand its influence by “rewarding or coercing American businesses, movie studios, universities, think tanks, scholars, journalists, and local, state, and federal officials.”
This isn’t a casual accusation. For months, a team of national-security officials has been compiling a study on the many ways China uses money, power and rewards to affect the way it is viewed in the U.S. The study was intended in part, say those familiar with it, to shame American institutions that the administration believes are being used by China.
In a key passage, Mr. Pence declared: “Beijing provides generous funding to universities, think tanks, and scholars, with the understanding that they will avoid ideas that the Communist Party finds dangerous or offensive. China experts in particular know that their visas will be delayed or denied if their research contradicts Beijing’s talking points.” (…)
The Trump administration sees Chinese practices not merely as an attempt to gain an economic upper hand, but as a part of a kind of broad struggle over global dominance, in which the Chinese are pulling every lever at their disposal in a quest to prevail. (…)
Unlike during the Cold War, when the U.S. and the Soviet Union had few economic ties to bind them together, the U.S. and China still are in an economic embrace that gives both sides ample reason to coexist peacefully.
Still, Mr. Pence has signaled that the coexistence is, and may remain, a tense one.
China’s Huawei Seeks to Chip Away at Silicon Valley’s AI Supremacy Huawei unveiled two new computing chips aimed at powering artificial-intelligence applications, marking the Chinese telecommunications giant’s first major push into high-end technology dominated by U.S. chip giants.
(…) With the AI chips, Huawei, the world’s biggest maker of telecommunications equipment and a major smartphone vendor, is challenging American companies like Nvidia Corp. , Intel Inc. and Qualcomm Inc.
The new components align with broader efforts by China to reduce its dependence on advanced U.S. technologies and develop such products domestically. Under Beijing’s Made in China 2025 development plan, semiconductors and AI have emerged as key areas that authorities want to develop at home. (…)
Last month, e-commerce giant Alibaba Holdings Ltd. announced plans to launch an AI chip next year, while Chinese startups like Bitmain Technologies Ltd and Cambricon Technologies Corp. are also working on such components. (…)
The AI effort follows success for Huawei in its mobile-phone business, which earlier this year overtook Apple Inc. as the world’s No. 2 vendor of smartphones after Samsung Technologies Co.
At the same time, Huawei is weathering increased scrutiny this year from authorities in the U.S., where its telecom gear has been banned due to security concerns. Such fears led Australia to bar Huawei from its fifth-generation wireless rollout, while officials in Japan are studying similar moves. Huawei has long said it isn’t a security threat and that it is owned by its employees and operates independently of Beijing.
The big wake-up call for Beijing was when the U.S. denied access to American chips to ZTE earlier this year. More recently, the Administration said it was considering “enhanced” export controls to limit China’s access to U.S. chips and chip making tools in order to protect the U.S. supremacy on technology and slow down China’s growth in electronics which remains highly dependent on imported chips.
China got the message and is speeding up efforts to reduce its vulnerability, making huge sums of money available to the industry to invest and attract foreign engineers. China has long been the center of production for semiconductor-based goods. It has also become the center of consumption (AMERICA CURSED) and the scale and know-how of its domestic manufacturers make it inevitable that it will rapidly develop a highly competitive semi business.
The race to smaller and smaller chips can be an elusive challenge for China but some experts say that future demand growth will be driven by less sophisticated chips thanks to the “internet of things” market which will not require the most advanced chips to easily and effectively connect to the coming 5G mobile standards.
The Battery Boom Has Created a New Lithium Superpower in China
Ganfeng and Tianqi, both Chinese, now control 29% of the lithium market. Ganfeng’s 17% share of the total market underrepresent its 25% share of “battery-grade lithium hydroxide, the material that’s now most sought after by automakers, the researcher’s data shows.”
German government cuts growth forecasts for 2018 and 2019 – document The German government has cut its forecasts for growth this year and next in Europe’s largest economy and sees an escalation in the global trade dispute as the main risk for the future, a document seen by Reuters on Wednesday showed.
(…) The government – due to present its updated forecasts on Thursday – slashed its 2018 and 2019 growth forecasts to 1.8 percent, compared with its previous predictions of 2.3 percent and 2.1 percent respectively, the document showed. (…)
Hmmm…
Source: @Not_Jim_Cramer (via The Daily Shot)
BTW, the MSCI China Index is down 28% since January 26. The Emerging Markets Asian Index Fund is down 22%. The Core MSCI Europe: –14%. The S&P 500 is up 1.0%.
Watch these:
Selling the less liquid stocks first?
McDonald’s Franchisees Weigh Push on Profit, Cash Flow McDonald’s franchisees are considering making a push to urge the company to help improve profit and cash flow at their restaurants.
(…) One franchisee said his cash flow is shrinking while he is also taking on debt to remodel restaurants in line with new specifications from McDonald’s executives. (…)
KKR’s McVey on Trade Wars, Tech Wars, and Margins
I like Henry McVey. He knows China and he is a one-handed economist with concise reasoning. He also understands that tariffs are boosting the U.S. and Chinese economies in Q3 and that very strong profits have been driving U.S. equity markets this year. A lot of things will change in 2019, not necessarily for the better. Click on headline for the 10 min. video.
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