The consumer sentiment numbers out this morning show a populace that is increasingly optimistic about the future. Despite weakness in the markets the sentiment remains high.
The Federal Reserve has recapitalized the banks. They have money to lend. So far there has been little demand for credit. I think that will change as the sentiment stays strong. It is debt creation that is the actual money printing of a fractional reserve system.
When the sentiment changed in the Reagan years the money printing took off along with the debt.
Can we debase this currency? You bet we can! We are Americans!
The bottom is in in gold and silver. Buy'em boys!
http://www.bloomberg.com/news/2013-06-28/u-s-stock-futures-advance-pfizer-gains-as-nike-declines.html
"Business activity in the U.S. cooled more than projected in June, a regional report showed. The MNI Chicago Report’s business barometer dropped to 51.6 from 58.7 in May, which was the highest in more than a year. A reading of 50 is the dividing line between expansion and contraction. The median forecast of 55 economists surveyed by Bloomberg was 55.
Consumer sentiment fell less than forecast in June from an almost six-year high a month earlier. The Thomson Reuters/University of Michigan said its final index of confidence eased to 84.1 this month from 84.5 at the end of May, which was the highest since July 2007. The median forecast in a Bloomberg survey of economists called for 83 in the gauge after a preliminary reading of 82.7.
Japan’s economy strengthened in May as industrial output increased by the most since December 2011 and retail sales climbed, data showed today, bolstering Prime Minister Shinzo Abe’s push to end deflation. "
Control your risk,
gh
Oh, by the way, did I mention that the Baltic Dry Index is up again today?!!
gh
Friday, June 28, 2013
Thursday, June 27, 2013
beady eye up again
Oh, by the way, did I mention that the Baltic Dry Index is up another couple percent again today. How many days in a row now??
Here
DSX, GNK, EGLE looking strong............
Control your risk,
gh
Here
DSX, GNK, EGLE looking strong............
Control your risk,
gh
Wednesday, June 26, 2013
Tuesday, June 25, 2013
Beady eye still up
Monday, June 24, 2013
inequality in the good old U.S. of A.
I ran into this video over at "Hullabaloo" and found it to be a great graphic illustration of the state of wealth inequality in this country. I have heard the 1% numbers before and when I talk to people I am constantly amazed at what people think "rich" means. Most people don't have any concept of the vast sums of money that are controlled by the few.
gh
Friday, June 21, 2013
This is Distribution
A couple of charts in this post that show the correlation between the spike in interest rates in Japan and the selling in the U.S. Markets. I show the U.S. smallcaps just because I saw a pattern in the price that is seeming to repeat. So far....
But the world stock markets have acted worse for the most part. Emerging markets have been hit particularly hard on the prospect of rising interest rates. Initially the U.S. dollar went down as this started to unfold and I think that is the natural move for the dollar if it is indeed the Japanese carry trade that is unwinding. A weak U.S. dollar would be bad for the natural resource exporters around the world, and better for our exporters.
But the flight to safety has taken hold over the last couple of days and the dollar has been strong.
Whether the stock markets will be higher is dependant on the currency values in my mind. The world has been engaged in an undeclared currency war for years, with most countries around the world trying to devalue their own currencies to stimulate exports for themselves. But the fact is that everyone can not be a net exporter. China has been the biggest manipulator for decades and this has hit Japan particularly hard. Interest rates have been rising in China lately putting pressure on their currency to rise.
I don't know how things will go in the short term. But in the long term there must be a move away from the U.S. dollar as THE reserve currency of the world. This should give the U.S. a push to become a manufacturer and net exporter again. Particularly true if the natural gas glut holds up.
But in the nearer term I am cautious.
gh
But the world stock markets have acted worse for the most part. Emerging markets have been hit particularly hard on the prospect of rising interest rates. Initially the U.S. dollar went down as this started to unfold and I think that is the natural move for the dollar if it is indeed the Japanese carry trade that is unwinding. A weak U.S. dollar would be bad for the natural resource exporters around the world, and better for our exporters.
But the flight to safety has taken hold over the last couple of days and the dollar has been strong.
Whether the stock markets will be higher is dependant on the currency values in my mind. The world has been engaged in an undeclared currency war for years, with most countries around the world trying to devalue their own currencies to stimulate exports for themselves. But the fact is that everyone can not be a net exporter. China has been the biggest manipulator for decades and this has hit Japan particularly hard. Interest rates have been rising in China lately putting pressure on their currency to rise.
I don't know how things will go in the short term. But in the long term there must be a move away from the U.S. dollar as THE reserve currency of the world. This should give the U.S. a push to become a manufacturer and net exporter again. Particularly true if the natural gas glut holds up.
But in the nearer term I am cautious.
Thursday, June 20, 2013
Endgame?
The more constraints one imposes, the more one frees one's self. And the arbitrariness of the constraint serves only to obtain precision of execution.
Igor Stravinsky
If one thinks about the above statement in the context of interest rates for the last 30 years one would have to conclude that our economy has been without restraint for quite some time. And the conclusion would have to be that we, our country, has grown flabby as a result, the last four years not withstanding.
I've been re-reading John Mauldin's "Endgame, The End of the Debt Supercycle". I highly recommend it. He wrote it a couple years ago. The main take away for me on the first read was the peril of Japanese debt and what could/would happen to the world if interest rates rose.
Perhaps we are in the endgame. I have noticed over the years that there are times when nothing makes sense in the markets. By that I mean that usually when bonds go down the stock market goes up. Or, when the dollar goes down, gold goes up. Or when oil goes up, gold and silver go up.
Not lately. There seems to be no correlations. This I have come to understand is when all assets are being sold. Often due to margin call or other forced selling. This means there is no where to hide and that money is being destroyed. At least paper is being destroyed.
The dollar is strong the last couple days as bonds and stocks and gold and silver, not to mention all of the same for all markets around the world.
It is time to take cover. Don't worry about "buying the dips". When you are buying dips you are hoping to get in on a rally that you missed. I am going to just wait for awhile. Quite awhile. When everything is moving up for some time again that is the time to step back in the markets.
I am long only volatility. And U.S. Dollars. Well, there are those PM's....
gh
Igor Stravinsky
If one thinks about the above statement in the context of interest rates for the last 30 years one would have to conclude that our economy has been without restraint for quite some time. And the conclusion would have to be that we, our country, has grown flabby as a result, the last four years not withstanding.
I've been re-reading John Mauldin's "Endgame, The End of the Debt Supercycle". I highly recommend it. He wrote it a couple years ago. The main take away for me on the first read was the peril of Japanese debt and what could/would happen to the world if interest rates rose.
Perhaps we are in the endgame. I have noticed over the years that there are times when nothing makes sense in the markets. By that I mean that usually when bonds go down the stock market goes up. Or, when the dollar goes down, gold goes up. Or when oil goes up, gold and silver go up.
Not lately. There seems to be no correlations. This I have come to understand is when all assets are being sold. Often due to margin call or other forced selling. This means there is no where to hide and that money is being destroyed. At least paper is being destroyed.
The dollar is strong the last couple days as bonds and stocks and gold and silver, not to mention all of the same for all markets around the world.
It is time to take cover. Don't worry about "buying the dips". When you are buying dips you are hoping to get in on a rally that you missed. I am going to just wait for awhile. Quite awhile. When everything is moving up for some time again that is the time to step back in the markets.
I am long only volatility. And U.S. Dollars. Well, there are those PM's....
gh
Tuesday, June 18, 2013
Beady Eye
I've been keeping an eye on the "Beady Eye" lately. (BDI)
The Baltic Dry index has made the strongest move up that I've seen in several weeks.
The latest headline from Bloomberg: .Ship Rates Extend Surge as Brazil-China Ore Cargoes Seen Gaining
Iron-ore shipping rates extended a nine-day surge amid speculation that bookings are climbing for vessels to deliver Brazilian cargoes to China
, the world’s largest importer of the commodity used in steel. Rates for Capesizes carrying about 160,000 metric tons jumped 13 percent to $9,360 a day, according to the Baltic Exchange in London today. They rallied 59 percent in the preceding eight trading days, according to the shipping bourse publishing freight prices on more than 50 maritime trade routes.
Chinese iron-ore inventories at ports and mills are the lowest in 2 1/2 years at 20 days of demand, London-based JPMorgan Cazenove analyst Dominic O’Kane said June 13. Miners, traders and steel mills booked more than two Capesizes a day for Brazil-to-China since then, more than double the pace about three weeks ago, Dominic Meredith Hardy, an analyst at Galbraith’s Ltd., a London-based shipbroker, said by e-mail today.
"We’ve seen a fairly strong pick up," he said, adding the charters from Brazil
fixtures are lengthening demand as measured by multiplying cargo volumes by distances.
And the chart:
My guess is that this is a weak dollar play.
gh
The Baltic Dry index has made the strongest move up that I've seen in several weeks.
The latest headline from Bloomberg: .Ship Rates Extend Surge as Brazil-China Ore Cargoes Seen Gaining
Iron-ore shipping rates extended a nine-day surge amid speculation that bookings are climbing for vessels to deliver Brazilian cargoes to China
, the world’s largest importer of the commodity used in steel. Rates for Capesizes carrying about 160,000 metric tons jumped 13 percent to $9,360 a day, according to the Baltic Exchange in London today. They rallied 59 percent in the preceding eight trading days, according to the shipping bourse publishing freight prices on more than 50 maritime trade routes.
Chinese iron-ore inventories at ports and mills are the lowest in 2 1/2 years at 20 days of demand, London-based JPMorgan Cazenove analyst Dominic O’Kane said June 13. Miners, traders and steel mills booked more than two Capesizes a day for Brazil-to-China since then, more than double the pace about three weeks ago, Dominic Meredith Hardy, an analyst at Galbraith’s Ltd., a London-based shipbroker, said by e-mail today.
"We’ve seen a fairly strong pick up," he said, adding the charters from Brazil
fixtures are lengthening demand as measured by multiplying cargo volumes by distances.
And the chart:
gh
Friday, June 14, 2013
The Beady Eye is Looking Up
Several days in a row now of gains in the Baltic Dry index. We should see a rise in the shippers sometime....
Shippers include: DSX, EGLE,GNK
gh
gh
Thursday, June 13, 2013
Wednesday, June 12, 2013
"No More Competitive Devaluation"
This quote/article from Israel's central banker Stanley Fischer may be the shot across the bow that U.S. dollar holders around the world should pay attention to.
He is saying that the competitive devaluation that the world, and mostly Asia, has been engaging in for years if not decades may be ending. Competitive devaluation has often meant selling the local currency and buying U.S. dollars. The U.S. is the largest consumer in the world and the U.S. currency is the reserve currency of the world. The Dollar has been artificially held high for years to stimulate U.S. consumption of the world goods. To the benefit of China, Australia and the Emerging markets in general. And the U.S. has the debt to prove it. We have been on a "low inflation" induced low interest rate borrowing binge for decades. And WE have the bubbles to prove it. Stocks, real estate and bonds. This has been the result of the carry trade that originated out of Japan and who was the first to engage in competitive devaluation since the 1980's.
How long does it take for a trend that has been going on for 30 years to reverse? The answer is probably longer than most of us think. Bond yields have been declining for that long and much of the reason for declining interest rates has been the carry trade and the effects of competitive devaluation.
In a nutshell, if countries around the world abandon devaluation, or at least do not pursue the tactic with as much zeal, the U.S. dollar should assume the fair value that the policies and the economy of the U.S. warrants. And that will probably be much lower than where we are.......
And do you remember the "bond vigilantes"?
They were co-opted by the lure of the carry trade! They're back!
And they are looking to the future of a world with a rapidly declining reserve currency.
Cheers,
gh
And furthermore:
He is saying that the competitive devaluation that the world, and mostly Asia, has been engaging in for years if not decades may be ending. Competitive devaluation has often meant selling the local currency and buying U.S. dollars. The U.S. is the largest consumer in the world and the U.S. currency is the reserve currency of the world. The Dollar has been artificially held high for years to stimulate U.S. consumption of the world goods. To the benefit of China, Australia and the Emerging markets in general. And the U.S. has the debt to prove it. We have been on a "low inflation" induced low interest rate borrowing binge for decades. And WE have the bubbles to prove it. Stocks, real estate and bonds. This has been the result of the carry trade that originated out of Japan and who was the first to engage in competitive devaluation since the 1980's.
How long does it take for a trend that has been going on for 30 years to reverse? The answer is probably longer than most of us think. Bond yields have been declining for that long and much of the reason for declining interest rates has been the carry trade and the effects of competitive devaluation.
In a nutshell, if countries around the world abandon devaluation, or at least do not pursue the tactic with as much zeal, the U.S. dollar should assume the fair value that the policies and the economy of the U.S. warrants. And that will probably be much lower than where we are.......
They were co-opted by the lure of the carry trade! They're back!
And they are looking to the future of a world with a rapidly declining reserve currency.
gh
And furthermore:
Tuesday, June 11, 2013
Watching the Beady Eye
Every day I take a look at the Baltic Dry Index (BDI). Today is the third day in a row that it is up.
I haven't seen that in a month or so. And that at the same time that the stock indexes and the currencies are heating up, and trying to go down....
And interest rates are going up.....
Here is the link.
gh
I haven't seen that in a month or so. And that at the same time that the stock indexes and the currencies are heating up, and trying to go down....
And interest rates are going up.....
Here is the link.
gh
Friday, June 7, 2013
ad nauseum?
I don't intend to belabor this point but I will.
I think that the US dollar weakness is going to be the next big story. Finally.
It is of continuing surprise that gold and silver continue to be so weak. It must be the interest rate changes. Higher rates are hard on gold. My point is that rates will start to lag the monetary depreciation and thus the inflationary effect of a weak dollar.
Time will tell.
gh
I think that the US dollar weakness is going to be the next big story. Finally.
Time will tell.
gh
Thursday, June 6, 2013
Why currency values matter
This is why I watch the value of the U.S. Dollar and try to keep in mind where the trends have been going, should have went or may go if the paradigm changes.....
A quote from Wikipedia:
"Economist Paul Samuelson
and others (including, at his death, Milton Friedman) have maintained that the overseas demand for dollars allows the United States to maintain persistent trade deficits without causing the value of the currency to depreciate or the flow of trade to readjust. But Samuelson stated in 2005 that at some uncertain future period these pressures would precipitate a run against the U.S. dollar with serious global financial consequences.[1]"
And the link.
gh
A quote from Wikipedia:
"Economist Paul Samuelson
and others (including, at his death, Milton Friedman) have maintained that the overseas demand for dollars allows the United States to maintain persistent trade deficits without causing the value of the currency to depreciate or the flow of trade to readjust. But Samuelson stated in 2005 that at some uncertain future period these pressures would precipitate a run against the U.S. dollar with serious global financial consequences.[1]"
And the link.
gh
Weak U.S. Dollar??
WTF.
The talking heads aren't talking about this on the blather financial shows yet....
That makes it real.
Keep your eyes peeled.
gh
That makes it real.
Keep your eyes peeled.
gh
Wednesday, June 5, 2013
Dr. Cu
The stocks are weak and there is talk of major upheaval in world markets but copper stays relatively strong......
gh
Tuesday, June 4, 2013
El Arian via MHFT
Every now and then I swing by the Mad Hedge Fund Trader's blog to get a handle on what he is watching. I have noted that we seem to think alike in the stocks and markets that we trade, even though he went all subscription some time ago.... and I don't pay for advice.....
Here is MHFT on a talk with Mohammed El Arian, the co-head of PIMCO. Pacific Investment Management Co. home of Bill Gross, aka "The Bond King". Those bond guys know their macro shit!
El Arian's comments are in tune with my recent take on the world. I humbly present:
Mohammed El Arian
gh
Here is MHFT on a talk with Mohammed El Arian, the co-head of PIMCO. Pacific Investment Management Co. home of Bill Gross, aka "The Bond King". Those bond guys know their macro shit!
El Arian's comments are in tune with my recent take on the world. I humbly present:
Mohammed El Arian
gh
If the carry trade ends
Since the late 1980's the Japanese economy has languished. The govt. of Japan has continually used a steady low grade stimulus of keeping their interest rates low. It has not helped except to keep the Japanese Yen weak.
At the start of this year Prime Minister Abe of Japan announced an effort to intentionally devalue the Yen by 100%. ie, to cut the value of a yen in half. The Japanese stock market took off as the investors thought that this would be great for Japanese exporters.
However, lately the holders of the Japanese Govt Bonds have been sellers. This has raised the prospect of higher interest rates for the debt of the Japanese Govt. Their debt to GDP is over 200%!
Japanese Debt to GDP
For many years it was possible for big money to borrow in Japan at essentially 0% and take those borrowed Yen, convert them to US dollars and buy US treasurys or US stocks with those dollars.
This has the effect of keeping the yen artificially lower and the US dollar artificially higher.
If Japan cannot keep their interest rates low they will default on their debt. If you were a holder of a Japanese Govt. bond you would be getting nervous now.
And if the massive carry trade of the last decades starts to unwind the USD would finally see the weakness that it deserves. It has been the strength of the USD over the last decades that has hollowed out the manufacturing in this country. China has also been complicit in holding the USD artificially higher. We also liked it as it kept our interest rates low.
This can reverse.
Gold will be a good place to be in this scenario.
charts:
Lately the Japanese bonds have seen selling.
And lately on the days that the Yen is higher, the US dollar is lower.
If this yen thing unravels the US dollar can go down. Dramatically.
This could be how the hyperinflationary scenario occurs. Caused not directly by Mr. Bernanke but by our cozy relationship with Japan and our preference for easy money without regard of its origin.....
cheers,
gh
At the start of this year Prime Minister Abe of Japan announced an effort to intentionally devalue the Yen by 100%. ie, to cut the value of a yen in half. The Japanese stock market took off as the investors thought that this would be great for Japanese exporters.
However, lately the holders of the Japanese Govt Bonds have been sellers. This has raised the prospect of higher interest rates for the debt of the Japanese Govt. Their debt to GDP is over 200%!
Japanese Debt to GDP
For many years it was possible for big money to borrow in Japan at essentially 0% and take those borrowed Yen, convert them to US dollars and buy US treasurys or US stocks with those dollars.
This has the effect of keeping the yen artificially lower and the US dollar artificially higher.
If Japan cannot keep their interest rates low they will default on their debt. If you were a holder of a Japanese Govt. bond you would be getting nervous now.
And if the massive carry trade of the last decades starts to unwind the USD would finally see the weakness that it deserves. It has been the strength of the USD over the last decades that has hollowed out the manufacturing in this country. China has also been complicit in holding the USD artificially higher. We also liked it as it kept our interest rates low.
This can reverse.
Gold will be a good place to be in this scenario.
charts:
Lately the Japanese bonds have seen selling.
And lately on the days that the Yen is higher, the US dollar is lower.
If this yen thing unravels the US dollar can go down. Dramatically.
This could be how the hyperinflationary scenario occurs. Caused not directly by Mr. Bernanke but by our cozy relationship with Japan and our preference for easy money without regard of its origin.....
cheers,
gh
Monday, June 3, 2013
PM bid for real???
Milton Freidman famouly said that inflation is "always and everywhere a monetary phenomenon".
By this I presume that he meant that inflation is caused by the creation of fiat money which drives prices up and thus becomes inflation. Such as recently happened in the housing market, if recently can be construed as the last 15 years or so.
There has been a bid in gold and silver lately. Particularly in the gold and silver stocks. There is talk of a large short position that has accumulated in the gold market so buying in the stocks may be on the hope of a large short covering rally. Or, maybe the buyers are longer term holders who think the chances of inflation occurring are rising. Certainly the official numbers show no increase in inflation and if one considers rising long term interest rates one would consider that to be a headwind to inflation. I don't consider 2.5% 10yr rates as high and it may be that they are trying to normalize.
We who watch and trade the markets are fond of thinking of markets as predictive systems. Of course this is only true when they actually seem to be right in retrospect. With that said I want to redirect my attention to the energy situation.
If the relatively low prices of natural gas persist into the future this nation will have a strong "comparative advantage". And I, contrary to common "wisdom" think that low energy prices, or more accurately, plentiful energy leads to inflation. This is due to the role that energy plays in a modern economy. Plentiful energy that is relatively cheap allows an economy to grow. Energy is the primary input that lets people engage in activities. It allows people to drive a long way to their jobs. It allows retirees to travel in their motor homes. It allows and encourages the production of items that consumers want, in that way it is counter inflationary, but in the process contributes jobs to the economy. But basically by making it less expensive to engage in business, low energy prices allow bankers to have faith in the businesses that they lend to. And it is money creation through the fractional reserve banking system that creates the money that creates inflation. And it is "comparative advantage" that allows a country to prosper in a world economy.
The bid may be for real in the gold and silver stocks. It is about time, for Gods sake!!
Control risk,
gh
By this I presume that he meant that inflation is caused by the creation of fiat money which drives prices up and thus becomes inflation. Such as recently happened in the housing market, if recently can be construed as the last 15 years or so.
There has been a bid in gold and silver lately. Particularly in the gold and silver stocks. There is talk of a large short position that has accumulated in the gold market so buying in the stocks may be on the hope of a large short covering rally. Or, maybe the buyers are longer term holders who think the chances of inflation occurring are rising. Certainly the official numbers show no increase in inflation and if one considers rising long term interest rates one would consider that to be a headwind to inflation. I don't consider 2.5% 10yr rates as high and it may be that they are trying to normalize.
We who watch and trade the markets are fond of thinking of markets as predictive systems. Of course this is only true when they actually seem to be right in retrospect. With that said I want to redirect my attention to the energy situation.
If the relatively low prices of natural gas persist into the future this nation will have a strong "comparative advantage". And I, contrary to common "wisdom" think that low energy prices, or more accurately, plentiful energy leads to inflation. This is due to the role that energy plays in a modern economy. Plentiful energy that is relatively cheap allows an economy to grow. Energy is the primary input that lets people engage in activities. It allows people to drive a long way to their jobs. It allows retirees to travel in their motor homes. It allows and encourages the production of items that consumers want, in that way it is counter inflationary, but in the process contributes jobs to the economy. But basically by making it less expensive to engage in business, low energy prices allow bankers to have faith in the businesses that they lend to. And it is money creation through the fractional reserve banking system that creates the money that creates inflation. And it is "comparative advantage" that allows a country to prosper in a world economy.
The bid may be for real in the gold and silver stocks. It is about time, for Gods sake!!
Control risk,
gh
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