News Items.
29 August 2019. By John Ellis.
1. MIT engineers have developed a magnetically steerable, thread-like robot that can actively glide through narrow, winding pathways, such as the labrynthine vasculature of the brain. In the future, this robotic thread may be paired with existing endovascular technologies, enabling doctors to remotely guide the robot through a patient’s brain vessels to quickly treat blockages and lesions, such as those that occur in aneurysms and stroke.
2. China has sent more troops to Hong Kong, sparking fears of a military crackdown on pro-democracy protesters. CCTV footage showed armored vehicles and a patrol boat crossing the border from Shenzhen at night in what Beijing said was an “annual normal routine”. The People’s Liberation Army has a garrison in Hong Kong with 10,000 troops. Last night Hong Kong police rejected a request for a protest rally on Saturday. Hours later an activist from the Civil Human Rights Front, which had been trying to organise the demonstration, was attacked. Jimmy Sham and a friend were injured after two masked men charged at them with a baseball bat and a knife, the group reported on Facebook.
3. Treasury Secretary Steven Mnuchin said issuing ultra-long U.S. bonds is “under very serious consideration” in the Trump administration, possibly setting up a move that would mark a historic revamp of the $16 trillion Treasuries market. “If the conditions are right, then I would anticipate we’ll take advantage of long-term borrowing and execute on that,” Mnuchin said Wednesday in a Bloomberg interview in Washington. Mr. Mnuchin said that the Trump administration doesn’t intend to intervene in the dollar market right now, but signaled he’d prefer any future move be coordinated with the Federal Reserve and global allies.
4. President Trump on Wednesday leveled a new attack against the Federal Reserve, charging that the central bank is “mentally” unfit to foster a competitive edge for the United States in the global economy. “Our Federal Reserve cannot ‘mentally’ keep up with the competition - other countries. At the G-7 in France, all of the other Leaders were giddy about how low their Interest Costs have gone,” Trump tweeted. “Germany is actually ‘getting paid’ to borrow money - ZERO INTEREST PLUS! No Clue Fed!”
5. It’s not just that yields on global sovereign bonds continued their relentless march lower, with those on 30-year bonds issued by Italy falling to a record 2.01% from as high as 2.35% on Tuesday — a remarkable feat for a country with perpetual political risk. But even more shocking, those yields are well below the high end of the U.S. Federal Reserve’s 2% to 2.25% target for the overnight federal funds rate. In other words, the Fed now controls the highest interest rate anywhere in the developed world, according to Bianco Research, an unprecedented development in global markets. This raises the question of whether bond traders have gone crazy or whether the world’s most important central bank has fallen hopelessly behind the curve
6. August has often seen the start of major debt crises. The Latin American crisis began on August 12, 1982. The Asian crisis began with Thailand’s IMF rescue on August 11, 1997. The Russian crisis began on August 17, 1998. We fear that the renminbi’s fall below Rmb7 per dollar on August 5 will act as just such a catalyst — this time, for the onset of a global debt crisis that has long been in the category of an accident waiting to happen.
7. Argentina’s embattled government will ask its creditors including the IMF for more time to pay off $101 billion of debts, as the country struggles to avoid a ninth sovereign default. The Latin American country was plunged back into crisis this month after reformist president Mauricio Macri suffered an unexpectedly heavy defeat in a nationwide primary election, which all but wiped out his chances of re-election in October.
8. There’s no winner in a trade war -- what matters for the U.S. and China is who loses least. Bloomberg Economics’ analysis of 700,000 trade data points shows that, in one important respect, the U.S. is the biggest loser. China was the dominant supplier of many tariffed products, meaning U.S. importers are scrambling -- and failing -- to find replacements. With China sourcing from a wider variety of countries, its firms face smaller supply disruptions.
9. China indicated that it wouldn’t immediately retaliate against the latest U.S. tariff increase announced by President Donald Trump last week, emphasizing the need to discuss ways to deescalate the trade war between the world’s two largest economies. “China has ample means for retaliation, but thinks the question that should be discussed now is about removing the new tariffs to prevent escalation of the trade war,” Ministry of Commerce spokesman Gao Feng told reporters in Beijing on Thursday. “China is lodging solemn representations with the U.S. on the matter.”
10. Boris Johnson pushed Britain to the brink of a constitutional crisis yesterday after asking the Queen to suspend parliament in a move that could thwart attempts to stop a no-deal Brexit. The prime minister surprised Tory rebels and opposition parties by announcing plans to prorogue parliament for a month before a Queen’s Speech on October 14, the longest suspension for more than 40 years.
11. Eurointelligence: "Perhaps the most interesting news story yesterday - amid a torrent of noisy outrage - was a story in Die Welt according to which Germany and the EU - for the first time - now actually believe that a no-deal Brexit is possible. We have been pointing out for the last three years that Germans in particular did not believe that Brexit would happen. The German media have been obsessed with the second referendum campaign and reported on little else. It also has been the overwhelming experience of the EU that the other side always blinks first. What yesterday’s decision did was to make it absolutely clear to the EU that the UK parliament won’t stop a no-deal Brexit."
12. With elections taking place on 1 September in the eastern states of Brandenburg and Saxony, the AfD looks poised to surpass Germany’s governing parties – Angela Merkel’s Christian Democrats (CDU) and the SPD – as the strongest party on a state level for the first time in its history. The AfD is currently leading the polls in Brandenburg and is almost level with the CDU in Saxony. On 27 October, another eastern state, Thuringia, will vote in what the government fears could be a sweeping win for the far right. These elections are a litmus test for Merkel’s tenuous coalition.
13. Is Germany's future being decided on the left and not on the far right? The Atlantic reports: "The emergence of the Greens as an influential player in eastern Germany is an overlooked subplot. In past elections, the party was happy if it scraped over the 5 percent threshold needed to make it into the regional parliament. Now, following a dizzying rise in national polls that has put the Greens nearly level with Merkel’s conservatives, the party is aiming higher. Its new leadership duo, Robert Habeck and Annalena Baerbock, have been hitting the campaign trail with abandon, holding town halls and open-air events in eastern cities that are drawing record crowds."
14. Italy’s Giuseppe Conte will be given the go-ahead to form a new government, a senior government official said Wednesday evening, ending days of bickering between the anti-establishment Five Star Movement and the center-left Democratic Party. The news caps a remarkable week for Conte, who was ousted as premier in the outgoing populist administration when League party leader Matteo Salvini set off an unprecedented mid-summer government crisis earlier this month. The euro was steady overnight.
15. Ambrose Evans-Pritchard: "Be careful what you wish for in Italian politics. The exile of the volcanic Matteo Salvini is a Faustian Bargain for the EU establishment and the defenders of the euro project. There must be a high chance that the Lega strongman - and de facto leader of the Continent’s anti-EU rebellion - will sweep back into power with an overwhelming majority next year or soon after. He may then be strong enough to push revolutionary changes through the Italian constitutional system that would be impossible sooner: a New Deal spending blitz backed by a politically-controlled Bank of Italy and a parallel "minibot" currency that neutralizes the enforcement tools of the European Central Bank."
16. South Korea's highest court ordered the retrial of Samsung Electronics Vice Chairman Jay Y. Lee over bribery charges, reviving legal uncertainties around the country's largest company just as it's navigating global trade turmoil. The Supreme Court voided an earlier decision to suspend Lee's 2.5-year prison sentence and is sending the case back to the lower court. Lee may end up going to prison again.
17. A secret cyberattack against Iran in June wiped out a critical database used by Iran’s paramilitary arm to plot attacks against oil tankers and degraded Tehran’s ability to covertly target shipping traffic in the Persian Gulf, at least temporarily, according to senior American officials. Iran is still trying to recover information destroyed in the June 20 attack and restart some of the computer systems — including military communications networks — taken offline, the officials said.
18. Israel has carried out a series of attacks across the Middle East in recent weeks to prevent Iran from equipping its Arab allies with precision-guided missiles, drones and other sophisticated weapons that could challenge Israel’s defenses. The attacks represent a new escalation in the shadow war between Iran and Israel, which has broken into the open and threatens to set off a wider confrontation.
19. Europe should either ask Washington to restore sanctions waivers for buyers of Iran's oil or provide a credit line to the Islamic Republic if it wants to save the nuclear deal, the country's Deputy Foreign Minister Abbas Araghchi said on state TV. Iran will come back to full compliance with the accord's terms once it can sell oil and have full access to its revenues, he said.
20. Tom Edsall: Two political scientists have found that the common assumption that the contemporary Republican Party has become crucially dependent on the white working class — defined as whites without college degrees — is overly simplistic. Instead, they find that the surge of whites into the Republican Party has been led by whites with relatively high incomes — in the top two quintiles of the income distribution — but without college degrees, a constituency that is now decisively committed to the Republican Party. Read the whole thing.
21. Quinnipiac pollster Mary Snow: “In hypothetical matchups between President Trump and the top five Democratic presidential candidates, one key number is 40. It’s the ceiling of support for Trump, no matter the candidate. It hovers close to his job approval rating, which has stayed in a tight range since being elected.” That said, as Nate Cohn pointed out in The New York Times a couple of weeks ago, "(Mr. Trump's) advantage in the Electoral College, relative to the national popular vote, may be even larger than it was in 2016." The full Quinnipiac poll results are here.
22. Widows and orphans were right! Robeco Asset Management: "High-risk stocks do not have higher returns than low-risk stocks in all major stock markets. This paper provides a comprehensive overview of this low-risk effect, from the earliest asset pricing studies in the nineteen seventies to the most recent empirical findings and interpretations since. Volatility appears to be the main driver of the anomaly, which is highly persistent over time and across markets, and which cannot be explained by other factors such as value, profitability, or exposure to interest rate changes. From a practical perspective we argue that low-risk investing requires little turnover, that volatilities are more important than correlations, that low-risk indices are suboptimal and vulnerable to overcrowding, and that other factors can be efficiently integrated into a low-risk strategy. Finally, we find little evidence that the low-risk effect is being arbitraged away, as many investors are either neutrally positioned, or even on the other side of the low-risk trade." Read the whole thing. John Authers column on this subject here.
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Quick Links: The World Artificial Intelligence Conference (WAIC) opened today in Shanghai. China's Xi Jinping to deliver major speech to "motivate and mobilize the whole party, the whole military, and all of the people." China's slowdown deepened in August. China warns US warship sailing through South China Sea. Treasury Secretary Mnuchin says China trade meeting will happen but won't say when. Mr. Mnuchin says US doesn't intend to intervene on dollar for now. South Korea’s government unveiled a huge stimulus package in its budget. Emerging market assets across Asia show effects of gathering gloom. Argentina seeks to restructure $101 billion of debt. Huawei's next flagship phone poised to sink without Google apps. British car industry suffers worst period of decline since 2001. Michael Burry sees a bubble in passive investing. Robots could lead us to a 12-hour work week, Alibaba's Jack Ma believes. Demand for water could outstrip supply by 2035 in parts of northern England. Trump Administration intends to sharply curtail the regulation of methane emissions. A chip made with carbon nanotubes, not silicon, marks a computing milestone. The prototype is described in the new issue of Nature. Stunning ancient skull shakes up human family tree. How your brain senses an itch. Scientist explains how a fire tornado forms. MIT’s fleet of autonomous boats can now shapeshift. A heretical approach to chemotherapy is extending cancer patients’ lives. Try to cheat your body out of a full night’s sleep and you’ll suffer the consequences....unless you happen to carry a rare genetic mutation.
Political Links: Brexit latest: Ruth Davidson resigns as Scottish Tory leader. Sunday's state election preview: Why east and west Germany are drifting apart. Two polling methods, two views of President Trump's re-election chances. Trump lags in Michigan. Biden leads Democratic field in two new polls. Gillibrand ends bid for 2020 Democratic nomination. Sen. Martha McSally (R-AZ) has a wealthy primary challenger. Sen. Johnny Isakson (R-GA) stepping down from office at the end of 2019. His surprise resignation jolts battle for the US Senate. Stacey Abrams rules out bid for Isakson's Senate seat. Jon Ossoff is "seriously considering" it. President Trump, GOP fret loss in bellwether House special election. Trump: "I’m the best thing that’s ever happened to Puerto Rico!” Trump says Fox News "“isn’t working for us anymore.” Sorry about that!: MSNBC’s Lawrence O’Donnell retracts report on Trump finances.