Rising Yields Beget Inflation?

Price of oil up $10 in the past week and the markets love it. The Saudis have been over producing on purpose for some time, but now that they've invaded Yemen things are better?

The price of oil has been too low to sustain the debt of the high cost producers and many banks were looking at the specter of bankruptcy in the oil patch impacting their loan portfolios. So maybe we just need to pay more for this cheap oil. By "us" I mean us. Then every thing will be fine. LOL.

 Low energy prices have been a major impetus for deflation, perhaps low energy prices will paradoxically cause a rise in interest rates (see junk bond yields) resulting in less oil production leading to higher oil prices, higher inflation, higher interest rates, higher inflation, lower oil production, higher oil prices, higher inflation, higher interest rates..... Oh well, you get the picture....


The recent low prices of oil are largely the result of low interest rates. but the true cost of oil/energy is how much energy it takes to get a barrel of oil out of the ground. There is no doubt that we are working harder to get this energy to consumers. The recent finance has distorted the equation.

There seems to be a shift out of consumer goods and into materials.

Bull Market in Volatility?

Very interesting action in the VXX today. I see steady buying all day regardless of the minor fluctuations in the averages. I get a sense of foreboding when I see these sorts of things. We usually need to retest our recent lows to make them valid. Or to show their tenuousness, as the case may be.
As I post this I see the SPY attempting to rally....

control your risk. It is not necessary to always be IN the market. That is the short term view of a trader. Longer term it is necessary and prudent to be diversified. Paper, tangible assets, and friends are a few diversified categories.

gh

For reference here are charts of the SPY and QQQ.

This is pretty amazing.

gh

"The Banks are Just Fine"

Any question of the health of banks is dismissed by the "experts" today as the averages are down dramatically. Of course early in 2007 no one thought the banks were in trouble either. Except those early sellers. But they weren't telling then either. Please keep in mind that we will not hear the real reasons until after the facts.

All that makes sense is that the emerging markets economies have no end in sight to the commodity depression and they will have trouble paying back dollar denominated debt.  AKA debt default. Who holds the debt? And what will the response of the worlds central banks be? I can only see paper sacrificed on the financial alter to appease the market gods.

control risk,
gh

The Real Deal?

The stories seem to be coming harder and faster lately as the stock averages slide down faster and faster.

China seems to be in the drivers seat.

Free Fallin'

This is my favorite bear market tune.....

It was either this or that picture of the shiny metal again!

Watch out,
gh

Watch Z

I've noticed some unusual activity in Zillow Group. Looks like sudden buying. I have no idea why.

Housing stocks have been perking up lately due to lack of supply, contractor sentiment, and increased purchasing power for workers, and of course the possibility of continues extremely low interest rates.

Perhaps a good opportunity here.

control risk,
gh


Aug. 21, 2015:
This thing is going to make a move.

gh

Deflation?

The talking heads are warning that the Chinese currency devaluation means another round of deflation. On the face of it that would seem true, as China is able to export "cheaper" products and bring prices down in consuming countries. But the markets don't seem to be saying this. The Euro bounces up, the Yen bounces up, and the USD gets weak. The reason for this is that a devaluation by China will make the US Fed reconsider the tightening, or normalization, of interest rates. Whatever "normalization" means these days.

The fact that China devaluation has the potential for a renewal of the decades long currency wars, and the forward looking Fed, despite their protestations of "data dependency", will drag their feet on anything that leads to a stronger US Dollar.  Jobs are part of the data. They may raise short term rates a tiny amount in the short term, but they will be dragging their feet in the longer term. There are still huge debts around the world that must be inflated away or down. Growth is an elusive chimera. I don't believe the world will see the growth that characterized the last 50 years. We are running out of room to grow.  All that is left is for a loss of faith in money. Whatever "money" means these days.....

So I repost that gold picture. It is so shiny!

control your own risk,
gh

Bullion Direct Belly Up

I received this e-mail today:

I tried to get my balance back with no luck. It seems the site is shut down and not transacting in metals. I didn't have much on balance so no big deal. The bigger question is why a gold seller goes bust. And what this means in the larger picture of gold prices. When people go broke, there is usually a bottom in fundamentals near....

MARTINEC, WINN & VICKERS, P.C. The attached Agreed Order (Doc#36) relates to the Debtor's Emergency Motion for Order Limiting Notice and Implementing Notice Procedures CLICK: Agreed Order Granting Debtor's Emergency Motion for Order Limiting Notice and Implementing Certain Notice Procedures

Forward this email This email was sent to ghickey@frontiernet.net by white@mwvmlaw.com |   Update Profile/Email Address | Rapid removal with SafeUnsubscribe™ | About our service provider. Martinec Winn & Vickers P.C. | 919 Congress Avenue, Suite 200 | Austin | TX | 78701

China Devalues Yuan

Well, you heard it hear first....

The news from last night: China changes direction


The next question is what this does to the calculations of the U.S. Federal Reserve and their intents regarding interest rate hikes in the U.S.

Do we want to appreciate our currency and thus enable increased imports of goods from China with the understanding that that means less domestic production.

Do we continue the currency war, or do we unilaterally disarm. I don't sense an attitude of unilateral disarmament in the U.S. these days.....

gh

CNY top?

Here is a link to a 10 yr chart of the Chinese currency.

LOOK OUT BELOW