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Daily Intelligence Briefing – October 3, 2016

Featured Topic: Energy and the Environment

  • Solar – The Cost of Solar Power Has Fallen 25% in Only 5 Months
  • Wind – The One and Only Texas Wind Boom
  • Nuclear – Small Modular Nuclear Reactors Could Run in the U.K. by 2030
  • Monsoon 2016 ends with 3% less than normal rains;
  • Iceland raises aviation alert due to Katla volcano activity

Other Highlights:

  • Markets: Money Markets Are Facing the Most Tumultuous Quarter-End Since Financial Crisis; Saudi Stocks Plunge to Multi-Year Lows on Austerity
  • Economics: China – China’s Yuan Just Joined An Elite Club Of IMF Reserve Currencies; China – China Inc Sells Unpaid Bills to Banks as Debt Web Spreads; Venezuela – China is cutting off cash to Venezuela; U.S. – How The Internet Economy Killed Inflation
  • Politics: Elections – Gallup: U.S. support for divided government lowest in 15 years; Elections – France’s Hollande Failed on Unemployment, Shouldn’t Run Again Poll Shows; Defense – China’s military spending surges as regional tensions rise; Defense – China and Russia launch joint naval drills in South China Sea; Internet – The U.S. government no longer controls the internet
  • Finance: Banking – Global M&A drops in third quarter, companies wary of overpaying; Banking – Global IPOs fall by a third amid volatility and uncertainty; Wealth – Allianz global wealth report says the best years are over; Bitcoin – Bitcoin Fintech Unocoin Sets $1.5M VC Indian Investment Record
  • Labor & Demographics: U.K. – Wealth of people in their 30s has ‘halved in a decade’; E.U. – Population tipping point in the UK & EU as older people outnumber children; U.S. – Homelessness In NYC Hits Record High With Nearly 60,000 People In Shelters
  • Technology:  Drones – Delivery Option: Drone. Arrival Estimate: 2020
  • Commodities: Oil – Asian Imports Of Iranian Oil Soar 81 Percent Yearly In August; Oil – Iran oil exports hit pre-sanctions high on run-up in condensate shipments; Oil – U.S. oil demand falls for first time in six months in July: EIA
  • Biotech:  HIV – Scientists testing HIV cure report ‘remarkable’ progress after patient breakthrough; Influenza – Universal flu vaccine designed by scientists

About the DIBs: MRP focuses on identifying transformational change in the global economy and offering an investment thesis whenever an opportunity arises that has not yet been recognized by the market. The DIBs are MRP’s compilation of articles and data from multiple sources on subjects reflecting disruptive change that have potential investment implications for an industry or group of securities. We share these with our clients who may already have or may be considering exposure in the industries affected. The subjects change daily and constitute an excellent update on featured topics. Every day, the DIBs also include links to MRP’s MARKET VIEWPOINT, THEME TRACKER and MACRO MONITOR. On many days, the DIBS will also include NEW DATA & THEME DEVELOPMENTS for active themes.

   MAJOR DATA POINTS Top

United States: Construction Spending: -0.7% from prior 0.0%
United States: ISM Manufacturing Index: 51.5 from prior 49.4

   MARKETS Top

Money Markets Are Facing the Most Tumultuous Quarter-End Since Financial Crisis

Quarter-end is often a tumultuous period. Banks typically rein in collateral lending as they shore up balance sheets, driving up rates on repurchase agreements. When banks curb repo activity, money funds — the key cash providers in the transactions — need alternative places to invest. In the past few years, one option they’ve turned to is directing more money into the Fed’s reverse repos, the tool the central bank uses to put a floor under its target for overnight rates.  But this quarter, the movements are out of the ordinary, partly because of the looming Oct. 14 deadline for the overhaul of rules governing money funds. Treasury repo rates have touched the highest since 2008. Meanwhile, the amount piling into the Fed’s overnight reverse repos reached $413 billion, a level surpassed only once since officials began testing the program in 2013. B

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Saudi Stocks Plunge to Multi-Year Lows on Austerity

Saudi Arabia’s stock market plunged to its lowest close since March 2011 on Sunday because of fears the government could introduce more austerity measures to curb a big budget deficit caused by low oil prices.  The Saudi index edged up in early trade but fell steadily through the afternoon to close 3.1% lower at 5,448 points in thin trade… A monthly Reuters poll, published on Thursday, found Middle East fund managers had turned negative on balance towards Saudi Arabian equities for the next three months because of the austerity policies. Fortune

 

   ECONOMICS Top

China – China’s Yuan Just Joined An Elite Club Of IMF Reserve Currencies

China’s yuan joins the International Monetary Fund’s basket of reserve currencies on Saturday in a milestone for the government’s campaign for recognition as a global economic power.  The yuan joins the U.S. dollar, the euro, the yen and British pound in the IMF’s special drawing rights (SDR) basket, which determines currencies that countries can receive as part of IMF loans. It marks the first time a new currency has been added since the euro was launched in 1999… Critics argue that the move is largely symbolic and the yuan does not fully meet IMF reserve currency criteria of being freely usable, or widely used to settle trade or widely traded in financial markets. Fortune

China – China Inc Sells Unpaid Bills to Banks as Debt Web Spreads

More and more Chinese factories are selling unpaid customer bills to financial firms, amid record payment delays. Resorting to a method of raising cash faster known as factoring… While selling receivables can be a useful tool to smooth out seasonal fluctuations in cash flow, in China’s case it coincides with a prolonged period of payment delays amid the slowest growth in a quarter century. Corporate bankruptcies in China jumped 24 percent last year and will likely rise 20 percent this year B

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Venezuela – China is cutting off cash to Venezuela

After pouring billions into Venezuela over the last decade, China is cutting off new loans to the Latin American nation. It’s a major reversal of relations between the two nations, experts say. It also comes at the worst time for Venezuela, which is spiraling into an economic and humanitarian crisis… Since 2007, China’s state banks loaned Venezuela $60 billion… That’s more that it loaned to any other Latin American country. China is considered Venezuela’s most important creditor. Of that, Venezuela still owes China approximately $20 billion, experts say, and there’s no sign that it can pay back the amount amid its crisis. Venezuela pays back the vast majority of its loans to China with oil shipments. CNN

U.S. – How The Internet Economy Killed Inflation

Technologies and the subsequent innovations they inspired have combined to hold down inflation by putting pressure on wages, increasing productivity, and encouraging competition… the U.S. has become radically more productive over the past several decades… Machines have automated many low skilled tasks… Improvements in communication technology have led to a more rapid transmission of ideas and reduced many of the frictions that impeded productivity growth and innovation… The rise of big data has yielded insights into ways to improve processes and weed out inefficiencies. Forbes

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  POLITICS & FISCAL POLICY Top

Elections – Gallup: U.S. support for divided government lowest in 15 years

After six years of divided government under Barack Obama, who’d have guessed that voters would want a change? Gallup polls on this question go back fifteen years, and the result this week shows the biggest gap in the series between support for divided government and single-party control… One in five Americans believe it is best for the president to be from one political party and for Congress to be controlled by another HotAir

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Elections – France’s Hollande Failed on Unemployment, Shouldn’t Run Again Poll Shows

President Francois Hollande should not run for a second term as he failed to tackle France’s unemployment problem, according to 80 percent of the respondents in a poll… French jobless claims jumped in August to the highest this year, with the government blaming a lack of summer hiring among hoteliers and restauranteurs. The labor market has been erratic all year, showing job losses in four months and gains in four. B

Defense – China’s military spending surges as regional tensions rise

There is no doubt that the main motivation behind China’s military modernisation and spending is the strategic imperatives in the East and South China seas. An official Chinese white paper from 2015 made clear the country’s aim to transform itself into a “maritime power”… The DoD puts total military-related spending in 2015 at $180bn while China announced a $141.5bn military budget FT

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Defense – China and Russia launch joint naval drills in South China Sea

China and Russia began eight days of naval drills in the South China Sea… a sign of increasingly tight links between the world’s second and third largest militaries as they seek to counter US influence in the region. The latest Chinese-Russian exercises, dubbed “Joint Sea-2016”, are the largest joint operations ever by the two navies… The manoeuvres the fifth Sino-Russian joint naval exercises in various regions since 2012 come at a time of increasing tension in the South China Sea. China claims 85 per cent of the contested waters while Vietnam, Philippines, Malaysia, Brunei and Taiwan have competing claims. FT

Internet – The U.S. government no longer controls the internet

The U.S. government just relinquished control over one very large entity the internet. As of Saturday, October 1, the federal National Telecommunications and Information Administration no longer exercises control over the Internet Corporation for Assigned Names and Numbers (ICANN), which has long been the manager of internet domain names… Instead, as an autonomous not for profit organization, ICANN will now answer to international stakeholders across the internet community, including a governmental advisory committee, a technical committee, industry committee, internet users, and telecommunications experts. Digital Trends

There is much more to this report! McAlinden Research Partners offers Hedge Connection members weekly access to the Daily Intelligence Briefing research for free – click here to view. (You must be logged in first). Not a member? Join today.

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