Thursday, August 17, 2017

Thursday, August 17, Morning Global Market Roundup: European Markets Open Lower

-- European markets open lower, U.S. dollar lags.
-- Data from the Office for National Statistics shows the number of EU workers within the U.K. has hit a record high despite Brexit.
-- Vestas and Kingfishersink lower.


CNBC
August 17, 2017

Markets in Europe opened lower Thursday as uncertainty surrounding internal U.S. policy continued to weigh on investor sentiment despite lessening tensions from North Korea.

The pan-European Stoxx 600 started the day lower by 0.15 percent following a day of gains Wednesday. All major bourses fell into the red while sectors traded in mixed territory.

The construction and materials sector was the biggest laggard in early deals led by falls for British home improvement retailer Kingfisher. The business reported a fall in quarterly sales Thursday as it struggled with a slowdown at its B&Q business and weakening demand from France. The results will hurt the company's restructuring plans and caused the stock to dip 3 percent.

Danish wind turbine manufacturer Vestas also fell lower, down 4.6 percent, after reporting lower-than-expected operating profit in its second quarter results released Thursday. Despite this, the company has retained its forecast for 2017.

The worse performer was Swiss toilet maker Geberit, which fell 5.6. percent to hit the bottom of the European benchmark after missing second quarter profit expectations.

On the other end, Gn Store Nord, a Danish manufacturer of hearing instruments, rose 7.2 percent to the top of the rankings on reports that it is to produce over the counter hearing aids in the U.S.

Danish pharmaceutical company Novo Nordisk also moved higher after revealing its new drug had succeeded in tests to reduce glucose levels, paving the way for a new type 2 diabetes therapy. The stock was up 2.4 percent.

Elsewhere, new data released by the British Chambers of Commerce Thursday showed that exporter confidence has softened due to currency fluctuations and a shortage of skilled workers post-Brexit. This comes as Office for National Statistics announced that the number of EU citizens working in the U.K. has hit a record high.

Political Pressures Weigh On The U.S. Dollar


Asian stocks rose higher Thursday as pressure between the U.S. and North Korea showed continued signs of easing, but the U.S. dollar slipped into negative territory as investors lost confidence in the region's pro-growth agenda.

President Donald Trump disbanded two high-profile business advisory councils Wednesday after seeing a mass exodus from chief executives over his response to violence in Charlottesville over the weekend. Meantime, minutes from the Federal Reserve's latest meeting Wednesday showed policymakers divided over their view on inflation and their approach to interest rate hikes.


Article Link To CNBC:

Oil Edges Up On Decline In U.S. Crude Stocks, But High Output Caps Gains

By Henning Gloystein
Reuters
August 17, 2017

Oil prices edged up on Thursday, but the market continued to be weighed down by high production, especially in the United States.

Brent crude futures LCOc1 were at $50.36 per barrel, up 9 cents, or 0.2 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $46.80 a barrel, up just 2 cents.

The slight gains followed a more than 1 percent fall in the previous session.

Energy Information Administration (EIA) data on Wednesday showed that commercial U.S. crude oil stocks C-STK-T-EIA have fallen by almost 13 percent from their peaks in March to 466.5 million barrels. Stocks are now lower than in 2016.

"If inventory declines continue at this pace, stocks will fall back below the five-year average in around two months," said William O'Loughlin, analyst at Australia's Rivkin Securities.

"The pace of the declines indicates that the OPEC production cuts are having an effect, although the current oil price suggests that the market is skeptical about the longer-term prospects for rebalancing of the oil market," he added.

ANZ bank said the market seemed "to focus on the rise in (U.S.) production", which jumped by 79,000 barrels per day (bpd) to 9.5 million bpd last week, its highest level since July 2015, and 12.75 percent above the most recent low in mid-2016. C-OUT-T-EIA

The soaring U.S. output undermines efforts by the Organization of the Petroleum Exporting Countries which, together with non-OPEC producers like Russia, has pledged to restrict output by 1.8 million barrels per day (bpd) between January this year and March 2018.

Brent prices are down by almost 12 percent since the start of the cuts in January.

The subdued market sentiment also has roots on the demand side.

Oil producers have enjoyed years of rocketing demand, fueled largely by China's voracious thirst coming from over 2 million new car sales a month. aCNDSLSAUT

But this boom is coming to an end as its vehicle sales slow in a maturing market, and as cars become more efficient and start using alternative fuels.


"Gasoline consumption growth in China is set to see a marked slowdown over the coming years, due to macroeconomic headwinds, improving fuel economy and competition from alternative fuels," BMI Research said.

"We forecast average annual growth of 1.3 percent over 2017-2021, compared with 9.6 percent seen over 2011-2016," it added.

India, often touted as the 'next China' for oil demand growth, however, only sells around 260,000 cars per month and has not seen significant sales growth in the past years. aINDVEHCAR


Article Link To Reuters:

Is Colin Kaepernick Executing A Trick Play?

He’s been awfully quiet of late, but his supporters’ goal appears to be to sack a conservative institution.


By Jason Whitlock
The Wall Street Journal
August 17, 2017

Former San Francisco 49ers quarterback Colin Kaepernick’s national anthem protest hasn’t done much to change how we discuss criminal justice. It has, however, changed how some Americans view the National Football League, a conservative American television institution that once seemed impervious to criticism.

Professional football is the most popular TV show on five different networks, but the Kaepernick affair has swept the NFL into a racial controversy now entering its second season—and with no end in sight. Film director Spike Lee is promoting an Aug. 23 rally at the league’s New York headquarters protesting Mr. Kaepernick’s inability to convince a team to sign him. A Change.org petition calling for a nationwide boycott of the NFL on behalf of Mr. Kaepernick has gathered more than 150,000 signatures. When the Baltimore Ravens declined to offer Mr. Kaepernick a contract, his girlfriend tweeted a photo comparing the team’s owner to the white slave master played by Leonardo DiCaprio in “Django Unchained.”

Coverage of the Kaepernick saga has migrated from ESPN and FOX Sports 1 to Fox News, CNN and MSNBC. But even on the news channels, the televised debates rarely touch on the underlying issue of relations between police and the black community. They’re almost exclusively focused on whether NFL owners are racist for not signing an average quarterback carrying above-average media baggage.

An American industry that has made millionaires out of thousands of black men now finds itself locked in the progressive racial crosshairs. The NFL markets itself as a colorblind meritocracy, free of victims and aligned with America’s patriotic ideals. The Kaepernick kerfuffle is off-brand.

“Any conversation about bias, especially racial bias, is bad for the NFL,” NBC “ Sunday Night Football ” broadcaster Cris Collinsworth told me last week. “The sad thing is that I always considered sports in general far ahead of the rest of society on racial issues. We live and work together every day. Stereotypes always seem so ridiculous when you actually know the people being stereotyped.”

Mr. Collinsworth is right: Sports do tend to lead society when it comes to race. Jackie Robinson’s integration of Major League Baseball in 1947 predated the civil-rights movement of the 1950s and ’60s. Robinson’s success demonstrated how inclusion of black men enhanced the business of baseball. It created space for the idea that the rest of society could be integrated.

But while Brooklyn Dodgers owner Branch Rickey strategically chose Robinson to break baseball’s color barrier, Mr. Kaepernick’s protest came seemingly out of nowhere. Before the 2016 season, the mixed-race quarterback, who’d been adopted by a suburban white family, was known mainly for his chiseled abs, tattooed body and a touchdown celebration involving him kissing his biceps.

“He is the last guy you would expect to be at the center of this controversy,” a prominent NFL broadcaster told me last week. “We called a lot of his games. We sat down with him maybe 10 times. He’s a nice kid. You never saw this. [Seattle Seahawks cornerback] Richard Sherman, I could see. He always has something to say. He’s comfortable being outspoken.”

Mr. Kaepernick, the activist-athlete being analogized to Muhammad “Louisville Lip” Ali, has remained strangely silent for months. He communicates through tweets, Instagram posts and leaked bits of information to his vast array of media and celebrity surrogates. ESPN NFL reporter Adam Schefter reported in February that sources close to Mr. Kaepernick say he’ll end his national-anthem protest in the coming season. If his goal is to raise awareness around the issue of unfair policing involving black men, he is using a silence tactic no other activist has ever used and, at this point, it’s fair to question the effectiveness of his strategy.

But what if his goal is to drive a discussion focused on NFL ownership treating him in a racist manner? In that case, Mr. Kaepernick is serving as a Trojan Horse for the progressive media’s attack on an iconic institution. The NFL is the highest-rated show on NBC, FOX, CBS , ESPN and the NFL Network. It’s an important cultural force, and a conservative one. Mr. Kaepernick is a pretense to change the way football is discussed. It’s working this NFL offseason.

His impact during the regular season remains to be seen. Broadcasters argue the NFL isn’t likely to suffer any ill effects from the preseason boycotts and protests.

“Fans historically have been able to separate what happens off the field from their love of the game itself,” said Eric Shanks, president and chief operating officer of Fox Sports. Mr. Shanks pointed to previous NFL controversies such as Ray Rice’s domestic-violence incident and Michael Vick’s dogfighting conviction that disappeared when the games began. “We’ll have to wait and see if there is anything we can point to that says this issue is having an impact on viewership.”

NBC broadcaster Bob Costas added: “I don’t think the Kaepernick controversy hurts the NFL. Is it good for it? Probably not. I think it’s great for the debate shows. It’s a legitimate issue and a hot-button question. But I don’t see any discussion of it during the games unless Kaepernick is actually in the game. I think NFL ratings are what they are.”

The NFL and its TV partners will not be the first group surprised by a Trojan horse.


Article Link To The WSJ:

An Eclipse Is Just What The U.S. Power Sector’s Been Waiting For

This eclipse ‘is a little bit like Y2K’: energy software firm; Grid operators, utilities will use event to fine-tune toolkit.


By Naureen S Malik, Chris Martin, and Mark Chediak
Bloomberg
August 17, 2017

Turns out the solar eclipse, set to plunge parts of the U.S. into total darkness on Monday, will offer exactly what the power sector’s been looking for: a completely predictable stage for experiments.

It’s not often that power grid operators, utilities and electricity generators get such precise and advance notice about more than 12,000 megawatts of solar power supplies set to suddenly drop off their systems. And some are looking forward to it -- as a means of testing plants, software and markets refined in recent years in anticipation of the day when renewable energy becomes the world’s dominant source of power.



The way David Shepheard, managing director at consultant Accenture Plc, sees it: The eclipse is the “forecastable dress rehearsal” for the grid of the future. It’ll be the perfect test, he says, “for operating the grid when the sun doesn’t shine and the wind doesn’t blow.”

Here’s a closer look at what utilities, power generators and grid operators will be watching as the eclipse plays out:

Perfecting Forecasting


Charlie Gay, director of the U.S. Energy Department’s SunShot Initiative, expects the eclipse to provide instant validation for power forecasting models being developed. The department is working with the National Renewable Energy Laboratory and grid operators to improve software controls that balance supply and demand as the continent goes dark.

“It gives us a test for the models,” he said. Using satellite data and maps of solar plant locations, the group expects to be able to match forecasts with what actually occurs before, during and after the eclipse.

Grid operators including PJM Interconnection LLC and Southwest Power Pool are similarly using the eclipse to measure exactly how much rooftop solar is on their systems and improve their supply models for the next eclipse in 2024.

Sizing Up Software

The proliferation of so-called smart meters, energy management equipment and software has helped provide power-line operators better data on the homes and businesses they supply. Some utilities can now control their customers’ air conditioners using remote devices, helping them curb demand during extreme weather.

The need for such software and technology has only grown as rooftop solar panels increasingly turn consumers into mini-generators. “Smart” inverters can now help balance the voltage and frequency coming from solar panels.



Grids and utilities “are quite frankly becoming tech companies” in their need to crunch big data to operate more efficiently, and this eclipse “is a little bit like Y2K,” said Austin Whitman, director of regulatory affairs at FirstFuel Software Inc. in Boston.

The event is going to give grid operators a chance to fine-tune their toolkit for dealing with big wind and solar fluctuations, the Energy Department’s Gay said. Battery storage may end up playing a bigger role because it offers more flexibility, Accenture’s Shepheard said.

Backing Up Solar

Utilities including PG&E Corp. and Edison International will also be relying on natural gas-fired power plants and hydropower resources to pick up the slack when the moon blocks the sun and solar power’s wiped out.

The event is coming at an opportune time for California to flex its hydropower muscle. Snow is melting and hydro is plentiful. The flood of quick supplies is what the state is hoping to dispatch to fill a 6,000-megawatt void of solar energy.

In North Carolina, a part of which will see total darkness during the eclipse, Duke Energy Corp. expects about 2,000 megawatts, or 80 percent, of utility-scale solar farms to go offline. The utility will treat it like a “gradual sunset,” said spokeswoman Tammie McGee, estimating that as much as 1,200 megawatts of gas generation will help pick up the slack.

The so-called energy imbalance market, formed by a group of utilities and California’s grid operator to trade power in real-time across much of the western U.S., will also be put to the test. Berkshire Hathaway Energy’s NV Energy utility in Nevada said it’ll rely on this regional system, capable of dispatching power every five minutes, to help balance supply swings and set aside 400 megawatts in reserves.

Power Surge?


Power bulls could meanwhile enjoy a rally in wholesale electricity prices due to solar’s sudden slide. The eclipse will start curbing solar a little after 9 a.m., just when the work week is ramping up and demand is taking off. According to energy data provider Genscape Inc., the event may extend the typical period of high power prices in California by about two hours.

Prices will probably retreat as soon as the moon starts moving past the sun and solar farms return, Genscape said. And the market impact in Texas, the Midwest and the East Coast will be limited because the region’s home to smaller concentrations of solar. 

Voltage Swings


Transmission operators have spent years adapting to growing volumes of renewable power coursing through U.S. power lines. So they’re not anticipating outages as a result of voltage fluctuations. Utilities from California to North Carolina have also been preparing for months to avoid sudden voltage losses.

“One of the advantages of being a national leader in the amount of solar energy connected to the grid is that our operators are experienced with dealing with fluctuations in solar power production due to weather conditions,” said Paul Grigaux, vice president of transmission substations and operations for Edison’s Southern California Edison utility.

And solar’s decline doesn’t just affect high-voltage transmission lines. Utilities in California and New Jersey, where large concentrations of households have installed solar panels on their rooftops, will have to deal with fluctuating voltage levels on local power lines.

While Duke plans to follow the same procedures it always follows during sudden outages, McGee noted that the magnitude of this event “is fairly unprecedented.”


Article Link To Bloomberg:

Trump’s Tariffs Would Kill These American Jobs

The U.S. bicycle industry needed protection once. Now it might be too late.


By Nick Leiber
Bloomberg
August 17, 2017

Donald Trump would love what Arnold Kamler’s doing.

One of the president’s top campaign promises was to bring manufacturing jobs back to the U.S., and Kamler is on a quest to revive a decimated industry: American-made bicycles. Almost all of the roughly 18 million bicycles sold each year in the U.S. come from China and Taiwan.

This year, about 130 workers at Kamler’s new factory in Manning, South Carolina, will assemble 350,000 bikes. In just three years since the 200,000-square-foot factory opened, Kamler’s company, Kent International Inc., has become the biggest U.S. bike maker under its Bicycle Corporation of America brand.

Trump has repeatedly threatened to impose high tariffs on imports from China and Mexico. A similar strategy worked swimmingly for Kamler’s thriving European counterparts: More than half of the 20 million bikes sold in Europe last year were made there, and European bike makers say heavy tariffs protected the industry and jobs. Putting together all those frames, gears, and wheels directly keeps about 45,000 workers busy on shop floors from Portugal to Romania, according to industry estimates.

Kamler’s experience shows why it won’t be as easy in the U.S. as slapping a big tax on a box.

The stark difference goes back to the 1980s, when China began to flood Western stores with cheap bikes. Europe fought back with tariffs. But with U.S. retailers hungry for inexpensive products, American manufacturers moved production overseas.

So Europe never lost its domestic bike industry. The U.S. did.

Kamler’s family has been in the bike business for three generations, long enough to see U.S. manufacturing soar, then wobble and practically disappear. Initially, the family largely served as middlemen, supplying retail stores with bikes either made in America or imported.

By the 1970s, more than 15 million bicycles were produced domestically per year—the biggest modern bike-making boom in the U.S. More than 1 million of those were built in the Chicago factories of Schwinn Bicycles Inc. “Every plant was at or over capacity,” said industry consultant Jay Townley, a former executive at Schwinn.

Schwinn supported tariffs during the 1950s and 1960s, then flipped its position in 1971, arguing against them for the next three decades. The company’s reversal was prompted by its decision to move production overseas, Townley said. Dorel Industries Inc., which acquired Schwinn’s parent company in 2004, didn’t respond to requests for comment.

In 1979, Kent also started producing its own bikes at a factory in New Jersey but couldn’t afford to compete with Chinese-made products. In 1991, the company closed its factory and continued selling imports. That’s still the heart of the business: Kamler expects to import 2.6 million units from China this year for retailers. Kent’s total revenue will reach $230 million this year, up from $215 million in 2016, he said.

Europe’s bike makers were chugging along, making roughly 12 million units annually,
when the threat from China arose. They cried foul, suspecting the Chinese government was providing subsidies such as cheap or free equipment, energy, and property.

“Some of our competitors in China make money on the subsidies,” said Moreno Fioravanti, secretary general of the European Bicycle Manufacturers Association. “They sell product at a loss.”

Countries have long put tariffs on imports, both to protect domestic industries and raise money. But European bike manufacturers wanted more firepower to fight what they saw as unfair trade practices. They pushed the European Commission to use World Trade Organization rules to impose what are known as anti-dumping tariffs—additional levies meant to discourage foreign competitors from flooding markets with underpriced goods.

In 1991, the European Commission investigated and found “considerable price undercutting” by Chinese exporters that “had a major negative impact” on prices and sales for Europe’s producers. Two years later, Europe started charging an additional 30.6 percent anti-dumping tariff on bicycles imported from China—on top of the normal tariffs—steadily increasing it to today’s level of 48.5 percent.

A much different scenario unfolded in the U.S.

Major retailers blocked efforts from bike manufacturers to get U.S. officials to impose anti-dumping tariffs. They loved low-priced imports that lured customers in the door. By 1998, 87 percent of bicycles sold in the U.S. were imported. By 2000, it was up to 98 percent and has stayed around that level, according to industry figures.

These days, Europeans can buy a low-end, made-in-Asia adult model starting at roughly €90 ($106)—slightly less than its Europe-made equivalent. In the U.S., similar versions made in China start at around $80, about 25 percent less than they cost in Europe.

If the president follows through with an across-the-board tariff on all imports
, Kamler said it will undermine his business, making it prohibitively expensive to supply the South Carolina factory.

Each bicycle made in Kent’s South Carolina factory has about 40 parts, all imported from Asia. In his search for domestic suppliers, Kamler has talked to dozens of U.S.-based companies but hasn’t found any with competitive prices—even without costs such as shipping and warehousing. He might end up making the parts himself.

“There is no American bicycle parts industry left,” Kamler said. “My competitors all congratulate me to my face, but behind my back they’re still kind of giggling.”

This is generally true at the lower end of the market; boutique manufacturers such as Chris King Precision Components in Portland, Oregon, and Phil Wood & Co. in San Jose, California, thrive serving the high-end market and by making their own specialty parts.

Kamler isn’t a Trump supporter. “I’m not in favor of barriers to imports,” Kamler said. “The government should help and encourage American companies with more than just rhetoric.”

Within three years, automation could make it just as affordable to manufacture parts in the U.S. as in China, Kamler said.

He points to a blossoming bicycle parts manufacturing center in Portugal as an example of a healthy supply chain.

Occupying a hefty chunk of an industrial park south of Porto, Triangle’s - Cycling Equipments S.A. has built what it says is the world’s first fully automated aluminum bicycle frame maker. The factory is one of dozens producing parts and bikes in the region.

Triangle’s production lines of hulking German robots can help complete a frame in a minute or less—a fraction of the time it takes humans. And unlike Asian competitors with four-month lead times, general manager Luís Pedro said he can deliver frames at a similar price anywhere in Europe a few days after receiving an order.

That’s important to clients such as Spain’s Orbea S. Coop., Germany’s Riese & Müller GmbH, and the Netherlands’ Pon Holdings, which owns premium brands including Cervélo and Santa Cruz. “To speed delivery, having production as close as possible to consumer markets makes sense,” said Jon Fernández, the chief executive officer of 200-employee Orbea, one of Spain’s biggest bicycle makers.

Triangle’s €25 million, almost 200,000-square-foot factory opened in November. Pedro estimates the company will produce 100,000 frames for clients across Europe this year and bring head count to 120 employees next year. “We are in a low-cost country with skilled engineers,” in a location surrounded by other bike companies, aluminum suppliers, and “easy access” to the rest of Europe, said Pedro, noting these factors are crucial for an industry.

“There’s this whole nirvana of ‘We are going to make everything in our country,’” said Will Butler-Adams, managing director of Brompton Bicycle Ltd., which has been making folding bikes in London since its founder hatched the business in his South Kensington apartment in 1975. “It’s not so simple as Mr. Trump makes out.”

Brompton expects to sell 50,000 bikes this year, up from 44,500 in 2016. Last year the 240-employee company spent £1.65 million ($2.1 million) outfitting an 86,000-square-foot factory in West London.

“You’ve got to create the knowledge, the engineers, the demand through the infrastructure,” Butler-Adams said. “Politics is so short-term. And manufacturing, as a sector, is so long-term.”

Kent was able to spend $10 million on its South Carolina plant because it had a ready customer. Wal-Mart Stores Inc. wanted domestic bikes as part of its pledge to buy an additional $250 billion in products made, assembled, or grown in the U.S. by 2023. Wal-Mart bought 220,000 of Kent’s South Carolina-made units last year and will buy 280,000 this year, Kamler said.

A few weeks ago, Kent started making 2,000 bicycles a month for a high-tech bike-rental service and expects to increase that to 10,000 per month in November.

Kamler wants to eventually assemble 1 million bikes annually, making frames and forks in-house, which means more investment in automation and labor. He would grab business from importers, but he needs to get his costs down for it to work. He’s losing money on domestic production now but expects to be in the black next year.

“We’re not counting on the ‘Buy American’ thing,” Kamler said. “We’re not counting on the consumer to say, ‘Oh yeah, I’ll pay more for that product because it was made here.’”


Article Link To Bloomberg:

Coal Makes A Comeback

Trump’s policies and exports to Europe are helping the industry.


By The Editorial Board
The Wall Street Journal
August 17, 2017

Not long ago liberals hailed the demise of coal as inevitable while the Obama Administration strangled the industry with regulation. But don’t look now, Tom Steyer, because coal is showing signs of a revival and breathing economic life into West Virginia and other coal states.

Former Environmental Protection Agency Administrator Gina McCarthy proclaimed in 2015 that coal “is no longer marketable.” She planned to be the lead undertaker. The Obama Administration worked tirelessly to fulfill her mission and may have succeeded had Hillary Clinton become President. “We’re going to put a lot of coal miners and coal companies out of work,” the 2016 Democratic nominee famously promised.

Yet the Trump Presidency seems to have lifted animal spirits and coal. Weekly coal production has increased by 14.5% nationwide over last year with even bigger bumps in West Virginia (19%), Pennsylvania (19.7%) and Wyoming (19.8%). Exports were up 58% during the first quarter from last year. Apparently coal can be marketable if regulators let it be.

***

The Obama Administration first targeted coal consumption with rules on mercury emissions and ash disposal that would have made it next to impossible to build a new coal-burning power plant. Then came the 2015 Clean Power Plan that would have forced the existing fleet of coal plants into early retirement.

Finally, the Obama anti-coal warriors sought to shut down coal’s export potential. Thick-seamed coal on federal land in the Powder River Basin overlying Wyoming and Montana is relatively clean-burning and inexpensive to mine. The Obama Interior Department suspended new coal leases on federal land last winter and then reassessed royalty payments—thereby reducing investment and profitability. In December came the coup de grâce: Interior’s stream rule usurping state authority over permitting.



President Trump has called a cease fire to his predecessor’s “war on coal.” In February he signed a resolution repealing the stream rule under the Congressional Review Act. The Supreme Court stayed the Clean Power Plan in February 2016, and EPA Administrator Scott Pruitt is dismantling the power rule as well as the ash and mercury rules. Interior Secretary Ryan Zinke has re-opened leases and rescinded the royalty revaluation.

Meanwhile, coal is becoming more competitive as a fuel source relative to natural gas, whose price has risen 63% since March 2016 amid an expanding market. The Energy Information Administration says the U.S. will be a net exporter of natural gas this year.

Growing pipeline networks have boosted gas exports to Mexico and are providing new domestic outlets for gas trapped in the Marcellus and Utica Shales. Pipeline export capacity to Mexico is expected to nearly double by 2019. Several interstate pipelines are under review to deliver gas to the Midwest, eastern Canada and Gulf Coast for export. Liquefied natural gas exports have increased six-fold in the last year, and five new terminal projects are expected to be completed within three years. While coal and natural gas compete as electric power fuels, they can both prosper if energy markets expand.

This is all horrifying to the climate-change lobby, but they might note that U.S. coal exports are rising to countries that claim climate-change virtue. Exports to France increased 214% during the first quarter of this year amid a nuclear power plant outage. Other European countries like Germany and the U.K. are utilizing U.S. coal to stabilize unreliable renewable sources and make up for electric capacity lost from the shutdown of nuclear plants. First-quarter coal exports were up 94% to Germany and 282% to the U.K. Et tu, Angela Merkel?

Coking coal used to make steel is also currently a hot commodity, and its price can soar whenever a storm hits Australia and shuts down mines as one did this spring. Metallurgical exports to China rose 357% during the first quarter. As much as Mr. Trump denounces China’s overproduction of steel, U.S. coal miners are benefitting.

***

The bigger story is that there’s still demand for U.S. coal if regulators allow energy markets to work. The Energy Information Administration in June projected that U.S. coal power generation will increase by 13% by 2025 “as the existing fleet of coal-fired generators can be more fully utilized and fewer coal-fired generators are retired.” With the Obama Clean Power Plan, the EIA had forecast a 2% to 16% decline.

Coal production will likely never return to its heyday of decades ago. Recent bankruptcies that have made coal companies leaner and more competitive also mean that fewer workers are needed to produce the same output. But even the current modest rebound is helping coal states.

During the first quarter, West Virginia (3%) ranked second in the nation in GDP growth after Texas (3.9%), according to the Bureau of Economic Analysis. New Mexico, another heavy mining state, came in third (2.8%). Mining resurgences began in West Virginia, Kentucky and New Mexico last summer after the Clean Power Plan was stayed. After plummeting last year, Wyoming and Montana’s mining industries grew during the first quarter.

Two or three quarters of economic data don’t make a long-term trend, but all of this is still good news for coal states that have experienced two years of little or negative growth and years of political assault.


Article Link To The WSJ:

Apple Readies $1 Billion War Chest For Hollywood Programming

Company immediately becomes a considerable competitor in crowded market for original shows.


By Tripp Mickle
The Wall Street Journal
August 17, 2017

Apple Inc. AAPL -0.40% has set a budget of roughly $1 billion to procure and produce original content over the next year, according to people familiar with the matter—a sign of how serious the maker of iPhones is about making a splash in Hollywood.

Combined with the company’s marketing clout and global reach, the step immediately makes Apple a considerable competitor in a crowded market, where both new and traditional media players are vying for original shows. Apple’s budget is about half of what Time Warner Inc.’s HBO spent on content last year, and on par with estimates of what Amazon.com Inc. spent in 2013, one year after it announced its move into original programming.

Apple could acquire and produce as many as 10 television shows, according to the people familiar with the plan, helping fulfill Apple Senior Vice President Eddy Cue’s vision of offering high-quality video, similar to shows such as HBO’s “Game of Thrones,” on its streaming-music service or possibly a new, video-focused service.

Apple declined to comment.

The budget will be in the hands of Hollywood veterans Jamie Erlicht and Zack Van Amburg,poached in June from Sony Corp. to oversee content acquisition and video strategy. They exited their Sony contracts a month early and began work this month from Apple’s Los Angeles offices, where they are taking over programming responsibilities from the Apple Music team, according to the people familiar with the matter.

Apple’s existing video business—movie and TV-show rental via iTunes—has been challenged by the rise of Netflix and other video-subscription services that charge a monthly fee. Last year, iTunes generated an estimated $4.1 billion in revenue, but its share of the movie rental-and-sales market has dropped below 35% from about 50% in 2012.

Apple hopes original video bolsters the appeal of movie rentals and other offerings on iTunes—a critical contributor to its $24.35 billion in annual services revenue. Apple aims to double the business, which also includes App Store sales, Apple Pay and Apple Music, to about $50 billion by 2020.

It won’t be easy to catch up with Amazon and Netflix Inc., which have considerable head starts and far bigger programming budgets. And Apple has to avoid jeopardizing its 15% cut of subscription revenues its app stores take in for services like Netflix and HBO Go—money that is a growing contributor to the services business.

Hollywood has become a battleground as consumers increasingly sever cable subscriptions and transition to streaming services like Netflix or Hulu. The disruption has fueled competition between tech and traditional media companies eager to sell subscriptions or generate ad revenue with new entertainment programming. It has also fueled a major increase in scripted programming, which rose to more than 500 shows during the recently ended 2016-2017 season, nearly double the 2011 total.

In addition to Amazon and Apple, Facebook Inc. has begun acquiring original programming, like a reality show on NBA player Lonzo Ball’s family. Alphabet Inc.’s Google has announced a $35-a-month streaming TV service.

Netflix has aimed to outflank tech rivals by recruiting star TV producers like Shonda Rhimes, who developed ABC hits like “Grey’s Anatomy” and “Scandal.” Meanwhile, Walt Disney Co. announced this month it will pull its movies from Netflix and launch its own streaming service.

David Hill, former senior executive at 21st Century Fox Inc., said Apple’s recent entertainment hires give it a chance to catch up with established players like Netflix and Amazon. But the flood of new scripted shows is making it increasingly hard to attract viewers, he said. “There’s just not enough time” to watch, Mr. Hill said.

Programming costs can range from more than $2 million an episode for a comedy to more than $5 million for a drama. One episode of some high-end shows such as “Game of Thrones” can cost more than $10 million to produce.

When Netflix released its back-to-back successes “House of Cards” and “Orange Is the New Black,” its annual budget for original and acquired programming was about $2 billion. This year it is expected to spend more than $6 billion.

To gain relevance, Apple needs at least one hit, the people familiar with the plan said. Its initial video efforts via Apple Music—“Planet of the Apps” in June, and “Carpool Karaoke” out last week—were criticized by reviewers. But with $215.64 billion in revenue last fiscal year and more than $261 billion in cash on its balance sheet, Apple could quickly ramp up spending on content.

Messrs. Van Amburg and Erlicht have begun meeting with Hollywood agents about shows Apple could acquire, the people familiar said. They have hired Matt Cherniss, former president of cable TV channel WGN America, to oversee development, the people said.

The types of shows Mr. Cherniss made at WGN America have bolstered Hollywood’s expectations that Apple wants high-quality scripted programming—in contrast with Facebook, whose initial programming includes shows about cheese from Business Insider and about dog DNA testing from Mashable.


Article Link To The WSJ:

What Will Kim Do Next? Sixth Nuclear Test Seen Critical For North Korea

By Christine Kim and David Brunnstrom
Reuters
August 17, 2017

North Korea says it has developed intercontinental missiles capable of targeting any place in the United States.

Now comes the hard part of fulfilling the declared goal of its leader Kim Jong Un: perfecting a nuclear device small and light enough to fit on the missile without affecting its range as well as making it capable of surviving re-entry into the earth's atmosphere.

To do that, weapons experts say, the isolated state needs to carry out at least another nuclear test, its sixth, and more tests of long-range missiles.

North Korea's two tests of an intercontinental ballistic missile (ICBM) last month likely carried a payload lighter than any nuclear warhead it is currently able to produce, the experts said.

One way to have a lighter warhead would be to concentrate on developing a thermonuclear device, or hydrogen bomb, which would offer much greater explosive yield relative to size and weight.

Pyongyang claims to have tested a hydrogen bomb, but this has not been proven, said Hans Kristensen, director of the Nuclear Information Program at the Federation of American Scientists.

"Doing so would take several more nuclear tests," he said. "The advantage of a thermonuclear warhead is that it packs a lot more power into less weight."

Choi Jin-wook, a professor of international relations at Japan's Ritsumeikan University and former president of South Korea's state-run Korea Institute for National Unification, said a sixth nuclear test would be essential for North Korea to develop an operational nuclear-tipped ICBM.

"In order to make a nuclear weapon deployable it has to be small and light, but North Korea doesn't seem to have this technology," he said.

South Korea's president said on Thursday Pyongyang would be "crossing a red line" if it put a nuclear warhead on an intercontinental ballistic missile, and U.S. President Donald Trump has warned that North Korea would face "fire and fury" if it threatened the United States.

Kim Must Weigh Risks

North Korea is a highly secretive nation and predictions of what it will do next are often little more than conjecture.

Still, Kim is likely to be carefully weighing the timing of even a new nuclear test because it will antagonize North Korea's sole major ally, China, and could trigger even tougher U.N. economic sanctions than those that followed ICBM tests in July.

A U.S. official, who asked not to be named, said that while periodic activity has been seen at North Korea's Punggye-ri nuclear test site, he had not seen movement there for over a month and there were no current signs of an imminent test.

A second U.S. official added that North Korea has had parts in place for a nuclear launch for months, but no new activity had been seen recently.

Besides developing a miniaturized hydrogen bomb, some experts say it appears Kim's rocket scientists have yet to master the technology to protect a warhead from the extreme heat and pressure of re-entering the earth's atmosphere after an intercontinental flight

South Korea believes North Korea will need at least another one or two more years to obtain that re-entry technology, Seoul's vice defense minister said on Sunday.

"Miniaturization for ballistic missiles is only one of the many challenges of targeting the U.S. with an ICBM," said David Albright, a physicist and founder of the non-profit Institute for Science and International Security in Washington.

"The re-entry vehicle has to survive and the warhead work," he said. "I am skeptical that North Korea has mastered all these steps."

Among North Korea's capabilities in the field, U.S. intelligence officials have said it likely can produce its own missile engines and does not need to rely on imports.

Essential To Survival

After Kim Jong Un ramped up the pace of weapons development last year with numerous missile launches as well as two nuclear tests in January and September 2016, some observers had expected a sixth nuclear test as early as this January.

Instead, Pyongyang has spent most of the year testing various types of missiles. After its first and second ICBM tests in July, it threatened to land missiles in the vicinity of Guam, a U.S. Pacific territory, drawing a stern warning from Trump.

Pyongyang has since said Kim has delayed his decision on Guam.

Pyongyang faces significantly tougher sanctions, including from China, if it conducts another nuclear test, said Moon Chung-in, a special adviser on foreign affairs and national security to South Korean President Moon Jae-in.

"If North Korea carries out a sixth nuclear weapons test, China will likely cut oil supplies to North Korea. I believe China has strongly warned North Korea not to conduct another nuclear test," Moon said.

The Punggye-ri site is just 60 miles (100 km) from the border with China and 125 miles (200 km) from Russia, and past tests have angered both countries and caused them to back increasingly tough U.N. sanctions.

Kim Jong Un, however, sees the ability to threaten the United States as essential to the survival of his personal rule.

"North Korea will conduct a sixth nuclear test in order to bring the United States to negotiations," said Yoo Ho-yeol, professor of unification and diplomacy at Seoul's Korea University.

"I don’t know exactly when (it will happen), but a sixth nuclear test is a less dangerous option for North Korea than firing missiles towards Guam."


Article Link To Reuters:

China Military Criticizes 'Wrong' U.S. Moves On Taiwan, South China Sea

By Ben Blanchard
Reuters
August 17, 2017

The "wrong" actions of the United States on Taiwan, its South China Sea patrols and deployment of an advanced anti-missile system in South Korea have had a large, negative influence on military trust, a senior Chinese officer said on Thursday.

Fan Changlong, a vice chairman of China's powerful Central Military Commission, told Joseph Dunford, chairman of the U.S. Joint Chiefs of Staff, that mutual trust mechanisms between the two militaries had continued to improve, China's defense ministry said.

"But wrong actions on the Taiwan issue, the United States deploying the THAAD system around China, U.S. ships and aircraft's activities in the South China Sea, the United States close-in surveillance in the sea and air near China have had a large, negative influence on bilateral military ties and mutual trust," Fan added.

THAAD is the Terminal High Altitude Area Defence anti-missile system the United States has deployed in South Korea to defend against North Korea.

China says the system affects its own security because of its powerful radar, and will do nothing to ease tension with North Korea.

Fan said China was willing to work with the United States to find more potential for cooperation, handle disputes and sensitive issues appropriately and ensure military cooperation becomes a positive force in relations.

China and the United States, the world's two largest economies, say they are committed to having a stable military-to-military relationship, but there are deep fault lines.

China has been angered by U.S. freedom of navigation patrols near Chinese-controlled islands in the disputed South China Sea and continued U.S. arms sales and support for self-ruled Taiwan, which China claims as a wayward province.

The United States has expressed concern about what it calls unsafe intercepts of U.S. aircraft by the Chinese air force and a lack of transparency in military spending by China, which is in the midst of an ambitious military modernization program.

Speaking later to reporters, Dunford said the main deliverable for his trip was the signing of a framework agreement for a joint staff dialogue mechanism.

Dunford said China and the United States already have capability to do secure video teleconferences between Dunford and Fang Fenghui, chief of the Joint Staff Department of the People's Liberation Army.

The U.S. embassy also has immediate access to China's General Staff, he added.

"We have ways of communicating. What we're looking for is a more responsive 24 hours a day, seven days a week communications link that can actually be used in a crisis. And that's really one of the issues that we will work on."


Article Link To Reuters:

Bank Of England's Caution Is Justified. What Happens When It Isn't?

The textbooks would say to raise interest rates. Mark Carney is going off script.


By Daniel Moss
The Bloomberg View
August 17, 2017

Britain's labor market is powering ahead, and inflation exceeds the Bank of England's target. Is it hot in here? Don't expect Governor Mark Carney to cool things off.

Here's a major economy where price increases have not only picked up, but at 2.6 percent easily top the 2 percent target. Unlike in the U.S., the euro zone and Japan, a strong job picture is accompanied by inflation that would, according to textbooks, provide a great rationale for increasing interest rates.

Yet there's little appetite at the central bank to do that. At their August meeting, only two of eight policy makers voted to tighten credit. At a conference in Portugal at the end of June, Carney was thought to be warning of an impending move. That has not materialized.

The bank's hesitation made Carney an easy target for critics who claim he again walked up to the line and backed away. He's once again being mocked for his mixed messages and lack of follow-through -- like an "unreliable boyfriend," in the 2014 taunt from Pat McFadden of the House of Commons Treasury Select Committee. There's a risk that the epithet could become his epitaph.

Is the taunt justified? More importantly, is the textbook case for a rate increase really justified by not just the economic numbers, but also the velocity of the change in the numbers? How should the central bank consider the reasons the numbers look the way they do?

Britain's unemployment rate fell to 4.4 percent last quarter, the lowest since 1975, the Office of National Statistics said this week. Brexit was supposed to presage economic catastrophe. We aren't seeing it in the employment data.

Look a little closer, though, and some of the sheen comes off. The same figures also show wages rose at an annual pace of 2.1 percent. With inflation at 2.6 percent, workers not only aren't pocketing the gains, but are in fact paying for the gains out of their own pockets.

For officials sitting around the table at the BOE, that doesn't look great for consumer spending, the lifeblood of Britain's economy. Then there is inflation itself, which has been rising steadily since the vote last summer to leave the European Union. Carney & Co. caught a break when the government also reported this week that consumer price gains were steady at 2.6 percent. In other words: above target but not spiraling out of control.

The reason inflation is above target is getting some scrutiny at the bank. There's a view that it's solely a result of the slide in the pound that followed the Brexit vote. If that's true, a rate increase is not yet entirely warranted, and could hurt domestic economic behavior.

For all his signaling challenges, Carney has consistently been the adult in the room during these trying times in U.K. politics and policy. His allies say that anyone grading Carney should watch BOE actions and their results -- not engage in central bank Kremlinology.

Fair enough. The question, then, is what will happen when a rate increase truly is needed. Will the boyfriend prove reliable?


Article Link To The Bloomberg View: