Archive for February, 2014

Russia is tensing is military might over Crimea and the one with good memory will remember the small, but savage war between Russia and Georgia a few year ago.

The Russian military exercise is a clear warning to the West. We can and we will do it again. And with the military exercise already on the go, the possibility of a surprise attack is real and feasible.

This is a message from Putin to the West saying we better start negotiating.

And the West will negotiate. As Georgia shows, the West can do very little around this confrontation – yes the Russian forces are a shadow of the USSR military might, but still a force to be reckon with – and would you imagine the issue…..can’t even think about it…too reminiscent of the avoided Third World War.

So, there will be negotiations.

There are some troubling signs in China and from currencies- I attach some graphs for who is more trading oriented. But this could be the trigger of the bull trap in the next month or so.

Usually currencies and commodities are Early Warning Systems for market changes.

The Chinese Yuan had a break up (RISK AVERSION)

The Iron Ore had a Break DOWN (also the all important Steel)

The AUD JPY in reversal

Capture AUD JPCapture iron oreCapture CNH

 

 

A “coldish” war

Posted: February 26, 2014 in Uncategorized

The battle for Ukraine has been won…now the West will target other Russian periphery (Georgia, Moldova etc).

Please do not start thinking about the evil imperialistic USA. It is just politics as usual.

Those countries after the II World War fell under the USSR.

After the fall of the USSR, the US took them over (Colours Revolutions).

As the US was bogged down in the Middle East they were taken back by Russia.

With the Middle East disengagement the US is taking them back (Russia has the moment has a big voice, but it is very weak).

When they will finish it, they will concentrate on China – if necessary.

Every person that antagonize the US, should always think of what supposedly(as the real word have not be recorded) Admiral Isoroku Yamamoto, the greatest 2 World War Japanese strategist behind Pearl Harbour.

When congratulated by the Emperor, apparently he said something on the like of  “I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve” (from the movie Tora Tora Tora) or the more likely version from a letter “I can run wild for six months … after that, I have no expectation of success” (great strategist the downfall of Japan started in the Battle of Midway, exactly 6 month after Pearl Harbour)

Yamamoto was killed in his airplane by a P38 Lightning of the US Air force on April 1943.

Politics as usual.

S&P 500 Blow Off Top

Posted: February 25, 2014 in Uncategorized
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The S&P rally is continuing and the SP500 made an intraday top of 1,858.

The market could easily make a blow off top to 1,900 – but it is weakening – so pay attention.

My feeling is that now we are at the end of the mega rally started in 2009 and so it “needs” to suck in all the last minute investor before capitulating….so it can go on like this until April.

In reality now it is the time to start putting into the bank your profits, without caring to get the last 5% performance. No hurry, no drama….just bit by bit

Ukraine is one of the first emerging market to go in flame. As often I told you the economic crisis can easily become a revolution.

How did it start.

The start actually is quite a few year ago when Russia, taking advantage of the US being bogged down in the Middle East, re-conquered (politically this time) the ex USSR countries that had been swayed towards the West in the 1990s.

The came the US  disengagement from the Middle East and the famous President Obama speech Pacific Pivot Strategy. What President Obama did not clearly tell is that more than a Pacific Pivot…in reality the US was doing an Old Enemies Pivot, Russia and China.

Ukraine,  substantially,  is a punishment to Russia for the Syria affront when Putin shamed Obama into not following up on its threat (by the way, as only 4% of the nerve gas has been destroyed till now, there is quite a substantial US deployment in Jordan). Now Russia 1 US 1. This  has been shown to us from an intercepted call published by a German newspaper (guess what…not only the US spy!)

The issue is that the demonstrations are going beyond the original intent, as the economic condition are ripe for a proper revolution. They are actually getting more than they bargained for. Tonight there are news of police switching side to to the protesters.

This is actually the third phase of the Global Financial Crisis. First Share Markets. then economic crisis and last one, revolution in the weakest country. I was waiting for Greece…got it wrong. As of now we have Ukraine and Thailand on the brink.

The shale and gas oil revolution is already shaping the new economic and warfare battleground of this century.

Middle East is getting abandoned and the new places are North/East/South Africa (US, France, China, Japan, Germany mainly), the Antarctic (US, Russia, China, Canada, Norway and Sweden mainly) and South Pacific (China, USA, Japan, Russia, South and North Korea, Philippines, Vietnam, Indonesia, India mainly).

There are some flashpoint where shale gas is at sea (Falkland again and the piece of sea between Cyprus and Turkey/Israel, mainly)

The deflation threat

Posted: February 17, 2014 in Uncategorized
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Everybody says that there is no contagion effect between the issues in the Emerging Markets and the developed economy.

In reality there is a potential deflationary effect – but nobody will alert you as nobody knows the cure.

Japan went in deflation in the early 1990s and it is trying now to get out of it. Still the stock market index overs around 60% less of what it was in the ’90s (40,000 points!).

Deflation essentially occurs when you do not spend today, as you know that items will be cheaper tomorrow.

Europe is naturally the place at deflation risk. The main issue, in my opinion, is that while billions of euros have been pumped into the banks by the ECB and government…the banks definitely forgot to pump it into the real economy!

At an inflation rate of 0.7% it is in disinflation (prices are still growing, but at a lower rate) and could be easily tilted into deflation…by the Emerging Markets. That is the real potential contagion effect.

In deflation protection is very hard to come by. The classic (real estate, commodities, gold) do  not work. Cash, long term bonds, guaranteed investment certificates, US Dollars.

Short equities (unless with growing dividends or technology), real estate. Avoid debt at all cost.

A very bad scenario indeed

Just one more things to worry about….

The news is the US, UN, France and Germany is sending troops to pacify DRC.

Again it is a bunch a African rebels against the all powerful  Syrian Army….that is why.

Wrong again!

DRC have some of the largest reserves of Cobalt (alloys for jet and gas turbine), tantalum (jet engines, nuclear bombs and missiles) , tungsten (electronics, missiles and ammunition).

Old story, sadly boring! realpolitik at its worst for you!

By the way, also North Korea, since it found the largest reserves of rare earth (weapons, electronics) after China  , is having close talk with South Korea (and US) and soon I bet will see a realignment towards the West (the executed famous uncle of the North Korea President was China best ally).

PS that is also why China is so interested in Africa. No space for good men

China long game

Posted: February 13, 2014 in Uncategorized
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China is keeping on stirring up the situation with raising tension with Japan, then the Philippines , then Vietnam and India and so on.

One trait of these flair ups is that every time the US starts to get interested….they move to another area.

It looks like the Chinese political class is more interested in an old political strategy than real war: when there are issue at home, create an enemy to distract the masses.

This has been done over and over, the latest and biggest was the USSR strategy.

It is a smart strategy (as long as it does not create an actual war) – but it shows the amount of strain induced by the economic change from export economy to consumer driven economy there is for real in China.

A smarter strategy for China would be to be silent until the army is ready and then pounce on the neighbourhood country when ready. They know it as they have one of the smartest political class, but evidently they worry much more about the level of discontent within the Chinese people than anything else.

A word about the military situation.

The super advanced weapons that supposedly China has, in reality are 80% in development or just being tested. For example,  the aircraft carrier will start to be operative in 2017/20 (first against so many of the US – and its an USSR old design – Kiev Aircraft Carrier)) and the stealth aircraft (again a first generation, while the American are studying the 4th generation unmmaned) again will be deployed in 2020.

And a naval battle requires a level of Air-Sea coordination that currently only the US, and maybe Japan and UK can achieve.

The real danger will come around 2020 when China will match is verbal aggressiveness with military power.

Why you hear about it so much is actually again a old USSR American strategy – they boast so much the enemies capability so they can get funds for new weapon systems.

Current developments (that I know of) under the “Chinese attack scenario” are hypersonic missiles and strategic bombers (hypersonic means that they practically fly in low orbit until they re enter the atmosphere – practically a 2 hours flight to go anywhere and nearly impossible to intercept), a stealth warship and , the funkiest, a sound wave pulse that disable the enemy electronics.

So practically back to the Cold War scenario as previously mentioned.

 

The rotation of the US military strategy is almost concluded.

At the start of Obama Presidency the US was bogged down in the Middle East. This was causing a major geopolitical headache as the US could not concentrate on its real enemies, Russia and China.

China and Russia profiteer of this condition. Russia practically turned back all the “colour revolution” in the ex USSR state and China became very assertive over the Sendaku/Diaoyudao and Spratley islands.

Now the insurrection in Ukraine (the intercepted, by the Germans, mobile conversation between US Assistant Secretary of State  Nuland and the US Ambassador in Ukraine leaves no doubt) is clearly sponsored by the US and the weaponisation of Japan and other US countries in Asia make it clear that the “pivot” is almost complete.

Middle East is not forgotten, but it is now a “capture or kill” area for SEAL and various special forces hunting territory.

Welcome back to the Cold war scenario (OK, not so cold now)