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

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

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

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

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.

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