Archive for September, 2013

The return of the political risk

Posted: September 29, 2013 in Uncategorized
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Well, September there was a lot of political risk (Syria, US Fed Tapering etc) and we passed through it unscathed!

Second time lucky? Maybe not.

The US Government Shutdown (by Wednesday! probably solved) and the US Debt Ceiling debate (17 October, but then the real date is somewhat later) combined with a weakened President due to the Syrian debacle – make a scary combination.

Plus we have the Italian Government in crisis as Berlusconi’ s party chose the hard line (walk out if Berlusconi is expelled) that can rekindle the European crisis (already the Italian bond are up 8%).

Plus there are some few brewing things: in Greece the head of the Golden Dawn neo-nazi party has been arrested. Even, if I do not like them I always get a bit eerie when the head of party that anyway had 14% vote of the population in a Democratic Republic get so easily arrested. And the Government refuses snap election for fear of backlash (the polls suggests otherwise – a plunge from 14% to 6.7%…but polls are polls…I never been interviewed for a poll all my life nor met anyone who had been).

On the share market the SP500 has lost its first support at 1698 and it is also losing its 1692…..is in sight 1,655 – it could re touch the 1,627 pretty shortly

The Geopolitical series: The Future AD 2023

Posted: September 26, 2013 in Uncategorized
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At the start of the year I did a forecast in my previous blog (ferromacroforecasts.blogspot.com) on how the world will be shaped in the medium distant future.

Naturally the forecast will not be 100% correct, but a vision can help make the correct investment decisions.

I am retouching this issue as the decision of President Obama could have the collateral effect to bring forward this scenario much faster.

The point were

1. The US will be more and more self-centered. The current will of the population, the shale and robotic revolution makes the US strategically independent by the world. It will help create mini powers that checkmate each other (Saudi Arabia, Iran, Israel/ Japan/China) –  but it will not be anymore the world policemen. Or at least it will try not to.

2. In the Middle East the rivalry between Saudis and Iranians will grow. Turkey will try to be the third superpower of the Middle East. Israel is a big incognito. Alone against a Muslim world, it will have to make hard choices. Pre-emptively attack the enemy or looking for another main advocate (it did happen before – Stalinist USSR was an Israel patron 1944-1948 and  France was the main Israel supporter till 1962). My theory is that Russia will become the new patron.

3 Europe, having survived the Economic crisis – it will not survive the social consequences of the crisis. Already now we can see the divisions. The PIIGS population hate Germany. Germany is tending towards Russia (Energy Supply and northern countries), France is instead opting for a Mediterranean focus (it has been the main advocate for intervention in Libya, Mali and it was ready for Syria).

4 Russia, although in a weakened state, will try to be a new USSR. It will be a bluff, but there will be no one to call the bluff.

5. Japan will rise and be the containment line of China

6. China will remain quite strong, but, after a pretty serious crisis (long story, but the sign are all there corruption, fake data, one child policy consequences will catch up with them) it will be more inwardly focused and not challenge the US

7 All the ASEAN nations (Vietnam, Indonesia, Malaysia etc) will grow and will become militarily aggressive looking for more resources

8 In South America, Brazil will become the power nation and try to get more international recognition.

9 In Africa there will be part of it that could become the next growth zone of the world, unless they fall to Islamic terrorist

But the real power will reside in the international corporation as Phil K. Dick (author, between many others, of the book that create the famous movie Sci Fi predicted long time before me).

I wish I had more time to explain and reason. The main consequences of this vision as that there will also be more regional wars as the “mini” regional superpowers  will try to carve their share of wealth.

Nobody will directly challenge the US. As Japanese Admiral Yamamoto (the admiral that attacked and destroyed Pearl harbor) knew very well – you do not challenge seriously the US and survive for more than 6 month.

 

Australian Real Estate

Posted: September 25, 2013 in Uncategorized
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The RBA is lashing against the SMSF pushing the property price up (5% in a few months in Sydney and Melbourne).

Yes that is a cause. But  there is another cause more politically incorrect that pushes the house prices up and actually threatens even to disrupt the Australian life as we know it.

I saw a survey of CSLA (an Asian Research House Specialized in trends) that surveyed the Chinese middle class (350 millions) and analyzing the survey it looks like a large part of them (circa 45%) plan to emigrate in the next decade for various reason (environment, children, security etc). Going through the numbers it looks like 17 millions are thinking Australia ( Sydney first, then Melbourne) as destination of choice (first is Canada). Australia now stands at about 22 millions people.

You can see the issue. This has clear impact not only on real estate, but on Australia in general.

I am not racist, nor I have any particular issues with Chinese- actually I have quite good Chinese friends – but such large population changes should be of extreme importance to our politicians.

Naturally this change will also influence investments, airports, casinos and betting, shopping centers, A-REIT specialised in apartments ,  schools – linked investment, hospitals and pathology labs.

 

The American Empire defeat

Posted: September 24, 2013 in Uncategorized
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President Obama is falling on his sword as I predicted. Without even firing a gun. Outclassed in a battle of wit.

Syria’s Assad is stronger than ever.

Russia victory is allowing Vladimir to boost his USSR revival in the ex Soviet countries (already there are indication that Ukraine, Belarus are going back under the Russian umbrella) and expanding in Libya and South America.

Now also Iran is predicating how good they are in the Washington Post, temporarily forgetting that the current President Rohani was at the head of the 1999 Student Uprising repression and he is responsible to have sent the Revolutionary Guards and Hezbollah to Syria.

And now, in this weakness position, he has to confront the Republican in the US Debt Ceiling Debate.

NYSE: A dangerous play

Posted: September 23, 2013 in Uncategorized
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My fonts in the US registered something very weird on the NYSE.

As you should know while the close of the Stock Exchange closes at 4pm, you can still pass a few order for a few minutes.

On Friday, at 4:02 NY time, someone passed (mainly sale 4:1 ratio) an order close to to 39% (not an typo) of the entire volume of the previous day. And logically it id not register in the index.

I asked and it is not linked to the quadruple witching option expiry day. 

We do not why.

The available explanations are

– an error

– a big fund that needed to divest a large position and has been “asked” not to influence the market

– an institutions that knows something and is jumping ship before it sinks.

 

Gentlemen…make your choice!

The Next Federal Reserve Chairman

Posted: September 20, 2013 in Uncategorized
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Well, now that Summers is out – it looks like Yellen is the candidate number one.

Yellen, 67 born in Brooklyn New York, is an academic (Harvard, London School of Economics) that had several position within the FED and as an economic adviser under Clinton.

She would be well accepted by the market due to her dovish position towards quantitative easing and her attitude of looking through the numbers of unemployment (she does not look just at the unemployment, but also at the employment participation rates).

There are few questions, looking at her history, that could rise a few doubts in regards to her dovishness as she, in various positions she was presiding in the past, she looked very committed to an inflation target of 2%, not a cent lower or higher.

And for sure inflation is starting to appear through the numbers.

But still it is not a done deal. It was her supporters that killed the candidacy of Larry Summers, President Obama’s man. So President Obama backers will not be happy with her.

Plus the Republicans see her too dovish for the job, but they should not have too much of a say (Chair election, apart the President, it is on the US Senate who has a Democratic slim majority (52 DEMOCRATIC vs 46 REPUBLICAN – 2 INDEPENDENT (but elected in the DEMOCRATIC Caucus)).

So there is still quite a chance of a Dark Horse (unexpected Chairman) getting elected. The time frame of the announcement, statistically, should be October – probably late as there are few thorny issues around that time (US Debt Ceiling). The market, on average, displays increased volatility around this period.

FED Reserve Surprise!!

Posted: September 18, 2013 in Uncategorized
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Wow! That was a market surprise. The Fed did not start tapering!

The main issue has been the spikes in yields and consequences on the mortgage. Already there were some signs of decrease mortgages sign up and so the fed evidently got worried of stalling the feeble recovery.

So this data – point signals that, in reality, the US recovery is much more feeble than before.

This fact anyway clear another obstacle to the massive rally. The SP500 is by any mean overstretched and should pull back a little (3-5%), but this market is more an emotional black/red gamble than a technical market.

The Red/Black Casino style events still on the path are

US Debt Ceiling – unless they decide again to postpone/stopgap the issue

German election – it should be uneventful as PM Merkel is solidly ahead in the polls

Berlusconi – even if thrown out he should not make the Government fail otherwise he will have a polls backlash

Syria – 21 September first deadline of the Russian/US bluff/deal

Update:

Institutional Investors are in neutral

Last days rally had been driven mainly by short covering position (shares. AUD, Oil, Gold)

The Mutual Fund Survey (US) is showing retail investor clearly going bullish.

Markets is priced to perfection. Any tail risk will have great consequences

Syria: consequences

Posted: September 17, 2013 in Uncategorized
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The political consequences of President Obama debacle are great and not to be underestimated.

I think there are two issues.

One internal. Now President Obama looks weak and the first sacrifice he had to concede has been Summers (his candidate of choice fro the US FED Chair position). We will see how will go the looming Debt Ceiling battle.

One External. All the countries that depended on the strength of the US to cling to their independence (Poland, Baltic countries, Azerbaijan, Ukraine, Georgia) or Russian energy dependent (Turkey, Chzech  Republic) will be swayed towards Russia.

Even Germany, already leaning towards Russia for energy, will be swayed.

The Middle East US allies (Israel and Saudi plus Turkey) are now fully alarmed that President Obama will also give in to Iran (there have been already opening letters between Obama and the new president of Iran).

I almost sound as a warmonger, but really President Obama in a single move set back the US geopolitical power as much as President Carter did in its whole mandate.

Syria: the deadlines are very strict and a missing step could start a limited punitive strike now that President Obama is trying to save face.

The 21 September, President Assad has to deliver the full list of chemical weapons (how to verify it?).

By November President Assad has to grant full access to the inspectors ( by the way the UN estimates require  2000 inspectors and a protective force given by Assad (if you trust him and fully targeted by the rebels, specially the Al Qaeda backed ones)  or provided by the UN of up to 75,000 soldiers (mmmhh…no boots on the ground?) in the midst of a civil war.

And the task has to be completed by mid 2014 (I remind you that there are estimated 1,000 tons of chemical weapon and the best clean up machine cleans approx 25 ton a day 

Lawrence Summers withdraws from consideration for Fed Chairman

Posted: September 15, 2013 in Uncategorized
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Summers, one of the candidates as new Fed Chairman for January, has retired from the nomination panel.

This is a positive for the market as he has been seen a disruptive character and enemy of Quantitative Easing.

This also signal the weakness of President Obama after the Syrian failure and put him in an awkward position in the incoming US Debt Ceiling debate.

Syria and Russia scored a great victory against the US.

Syria has hailed as a victory (as it is – tehre is not even an agreement on the consequences in case of infringement) and Secret Service confirms that the special unit 450 has already started dispersing the chemical weapons in secure facilities also in Lebanon and Iraq.

Russia stands to gain a major influence in the ex Soviet States and achieved a psychological win both for Russia as alternative Superpower (which is not) and also distract the attention from the current Russian economic woes.

Unfortunately President Obama in this round reminded me of President Carter….and then came President Reagan. Let’s hope.

Syria – reloaded

Posted: September 11, 2013 in Uncategorized
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Be wary into believing that the Syrian Conflict scenario has waned.

As an investor, not a punter, you should leave these days of profit to day trader as everything can become the biggest trap the market constructed. Or not. But losing your capital is a no go zone – and you do not have to risk everything for a fistful of dollars.

As I see Obama is cornered. But he is an astute President. He knows that the same people that hails is democratic process can literally impeach him as a lame President in a fortnight.

The Russian bluff, up till now worked. In exchange Putin is basking in the former USSR glory. The prize are all the Baltic region state ex USSR. And it depends if Obama thinks the price to pay is too much – also in light of the current alignment of interest between Germany and Russia.

The UN resolution is completely a waste of time: they cannot decide the consequence of a breach by the Assad regime – go figure when they have to decide which country technician and troops have to go in 50 sites in the midst of a civil war with an heavy involvement of Al-Qaeda – a sitting duck scenario.

I always thought that that the most logical side that conduct the gas attack is or a rogue side of the Syrian Army or some Saudi sponsored terrorist (spies?). I am pretty sure of my conclusion – but that conclusions bring an extra layer of uncertainty as we do not know what they will do at this point. The Saudi and affiliates states even offered the US to pay for the bill of teh war (US Army as mercenaries!)

On Assad’s side it seem that the attack on the Syrian Christian town of Maaloula has been let happen by the regime to pressure the US Tea Party against Obama.

And, on top of that, there are some parts of the Assad’s regime that are pretty sure that the US will find an excuse to attack

anyway and they want a preemptive strike on US interest (for example, Syrian Minister for the Reconciliation Haidar))!

The Chinese are pretty much involved in fixing their own economy. They have a slight interest aligned to Syria/Russia/Iran as they sell weapons to them. I bet they would love a US limited strike…it takes the eyes of the world off what happens between them and Japan (yes still going on – as of two days ago two Chinese warship went in Japanese sea) and plus they would battle test some radar they sold to Syria. But they are not pro-active.

This is not about Syria. This about Geopolitical World War 3 after the Global Financial Crisis –  the shaping of the new world.

Pay attention who read this as the end of the US….during the Global Financial Crisis lots of commentators where seeing the GFC as the demise of the US. As you see it now, it was more the demise of the rest of the world in an economical sense. Pearl Harbor should teach us something.

So even if there is a BUY signal in the market the risk are extremely high.

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