Thursday, June 30, 2016

TBT

TBT stands for "The Bottom Trade".

We may be at a bottom in interest rates. There may be a period of change, but I think we are in the first stages of a world inflation. Most of the talking heads do not recognize that this is what is going on.

The negative interest rates in Europe is driving money to U.S. higher yields. This at a time when the U.S. economy is doing well. The Fed has no control over interest rates. They can not raise short term for fear of crashing the banks as long term rates are much too low. All this supports the US Dollar, paradoxically. As soon as it is recognized that there is a turnaround in Europe, the money flows will reverse and crash the Dollar and may well change the reserve currency status of USD. This will inflate the world. Probably a couple years off. In the mean time the U.S. markets will enjoy an increasingly hotter economy. Real Estate is already booming and no one is noticing.... Silver and Gold holding up very well as Brexit fears subside... China is starting to support the Yuan.....

TBT:

gh

Monday, June 27, 2016

Economics of Populism


If there is one idea that comes to mind when I think of the populist wave washing across the western world it is fiscal stimulus. The populists won't say it that way of course, but wherever populists win government they will be under pressure to put the dissatisfied voters back to work. And they won't wait for normal market forces to make that happen.

At long last fiscal stimulus is in the making.

Roads, bridges, and airports in bad need of work in this country for sure.

I like iron.

control risk,
gh

Friday, June 24, 2016

Post Brexit Fed

British voters have decided to leave the Eurozone.

Markets in disarray today. Down sharply on the open.

Bonds rally, yields historically low.

People have been saying that the U.S. Federal reserve "is itching to raise rates".

I doubt they will be 'itching' so much now.

It is easy to draw parallels between the "Leave" movement in Britain and the Donald Trump campaign in the U.S., with Trumps xenophobia and protectionism much the same as the Brexit.

Greenspan on CNBC this morning with a very gloomy view of world economies.

So who thinks the Fed will be in a hurry to raise interest rates before the U.S. election?

Not I.

Control risk,

gh

Monday, June 20, 2016

Triple Top Bottoms in Chart Reading

I have said that I love triple tops. I love it whenever the price chart shows that a "high price" has been reached three times. The reason I like these setups is that usually, if the price pulls back on lower volume then it will move up and sharply through the "top". It is easy to trade these. I know when I am right and I know when I am wrong. And they usually turn out good from a speculative point of view.
In the context of a bottom they are particularly powerful as they signal to most participants that a bottom has been formed and there is a change of trend to contend with. In a stock that has a large short interest there can be amazing rallies as the shorts scramble to cover.

There is a triple top bottom in the British Pound as we wait for the Brexit vote next Friday. This strong Pound move coupled with a strong Yen has made the US Dollar weak.  At some point this weakness will become a trend. Emerging markets love a weak dollar. And US exporters love a weak dollar, for the same reason Chinese and Japanese and just about every other exporter loves a weak domestic currency. And that is why we have a currency war going on and nearly every country in the world wants a weak domestic currency.

In my opinion the WORLD needs a weak US Dollar due to the amount of debt that is denominated in US Dollars. I know that it will rob from the fixed income people, but I think it will finally scare the money out of the bond market, perhaps to be put to good use.

control risk,
gh

Monday, June 6, 2016

Yellen's View

As evidenced by todays speech I do not think Chair Yellen expects inflation.

I, and the market, are saying she is wrong.

I think inflation is just around the corner.

Time will tell.

She is an expert economist after all.

Friday, June 3, 2016

High Altitude Low Opening

There goes the dollar.

Big little number in the jobs report this morning.

Fed on hold for longer?

Emerging markets like the weak dollar.

Here is a recap of a chart from a few posts back. This may be the breakout bottom for the VNM index.

Gold and silver not doing so bad today either.

Looking at Potash and Mosaic to take off. The grains look strong. There are more hungry mouths to feed every day in the world.

Control risk,

gh

Sunday, May 22, 2016

The Dog That Didn't Bark



In one of Sir Arthur Conan Doyle's well known stories, the story of "Silver Blaze", there is the famous line about the dog that didn't bark in the night. A racehorse had disappeared and a man had been killed. But the dog didn't bark during this incident. Holmes was sure this indicated that no stranger had been at the scene. The dog didn't bark because there was nothing to bark about.

The above thought came to me as I watched another in a long line of talking heads on one of the business channels talking about the great swoon yet to come in the stock markets of the world when the Federal Reserve raised interest rates. The recurring theme over the last few months has been that the "market has not priced in" the raising of interest rates by the U.S. Federal Reserve Bank.

Yet, everywhere I turn I am hearing about the imminent raising of interest rates or how the stock markets of the world will sell off in the consumation of this radical deed that will unsettle the world's financial arrangements.

But the dog is not barking. The S&P is perhaps 3% off of the all time highs and has been in a range for over one year. Yet is at the high end of this range. When will the dog bark?

The stock markets are forward looking. And after several sharp selloffs over the last few years, including the "Taper Tantrum" of a few years ago and the "flash crash" of more recent, I would think that the responsible money out there has found a safer way to invest, or at least, the intestinal fortitude to withstand a 1/4 point interest rate rise.

Much depends on the actual state of the world economy. Much of the world has been in slow recovery for several years. The recovery, according to most accounts, is agonizingly slow and has dissappointed all who long for the good old days of debt creation and GDP growth above 2%. However, as I stated recently, the consumer is coming back due to a period of savings growth, or at least debt reduction, and coming back also due to a strengthening of wages. The cost of energy seems to be stabilizing at a lower level and this will give some confidence. On a personal level, just watching what is going on around me, I see the traffic on the freeway going stronger than ever, the slow lanes filled with trucks carrying goods, and vacationers on the highway in numbers. I see people changing jobs with the confidence that they will find another and survive the change. And the ranks of the retirees are swelling and younger workers are taking the reins. This makes me optimistic about the dynamism of the world and in particular the U.S. economic situation.

How the markets react to any raise in short term interest rates is anyone's guess but I am guessing that the dog has not barked for a reason and that the markets will survive a strong economy, despite their own worst fantasies.

There may be a knee jerk reaction when and if the dreaded day of an interest rate increase arrives, but this amateur thinks that reaction will be the twitching of algos whose instructions are in need of a paradigm change driven rewrite.

Time will tell.

Control your risk,

gh

 

Tuesday, May 17, 2016

Confirmation

We all know about 'confirmation bias'. That tendency for humans to look for information and opinion that supports their own beliefs or opinions. Sometimes that bias is just that, a bias that leads one astray. And sometimes one is right in ones beliefs and the signs of confirmation are just that. Confirmation of a trend or event.

The numbers on consumer spending and prices came out today and showed surprising strength.

This is the first strong sign of possible inflation because when consumers pay higher prices they can afford to pay higher prices and higher prices allow further price rises, etc.

Higher prices stimulate production which requires money and money is credit, etc...

And all of this together means the money tends to circulate faster....

The gold bugs may be right again.

Keep an eye on the U.S. Dollar. The next question will be 'when is the Fed going to raise rates to control this inflation?'.  My answer is that the Fed is in no hurry to nip this delightful prospect of inflation, and a weakening U.S. Dollar, in the bud. I think they will want this economy to regain some money velocity so they will drag their heels on raises.
The "bond vigilantes" have been neutered. They are licking their wounds so this counterbalance is a long ways off, not to say that bonds may not work their way down some....

If I had to pick one day to spot a trend change in the disinflationary trend of the last years this would be it.

Time will tell.

Consumer price news today

Keep an eye on the Baltic Dry Index...

Control risk,

gh

Monday, May 9, 2016

Dollar Rally Over?

I am seeing some cracks in the U.S. Dollar today. The slide may continue soon.

The selloff in the indices of the last few days is tepid, and I saw no sign of serious selling.
That could change with time of course but for now it doesn't appear to be worrisome.

Check your static lines, prepare to exit the aircraft.



The dollar will descend, emerging markets will rise, and banks will finally see some light at the end of the tunnel.


Is that clear?
Control risk,
gh

Tuesday, May 3, 2016

A New Idea!

With a lull in the action over the last few days I cast around for new ideas for trades or investments.

This chart jumped out at me.

Time will tell if Vietnam takes off like it has in the past. The volume is a bit low on this latest rally. But in keeping with the constant ebb and flow of money around the globe......


Much will depend on the appetite for risk in the stock markets. I feel we are running out of buyers. The volume near the top of the S&P here seems weak. Feeling a bit bearish here. We'll see...

Control risk,

gh