Archive for April, 2015

A Chinese bubble

Posted: April 21, 2015 in Uncategorized

The Chinese market is going up like a rocketship and another megabubble will form.

China cut the lending requirement freeing up over USD 200 billion to help the economy.

With crackdown on corruption and shadow banking, failing steel enterprises and crashing real estate developers (Kaisa Group Holding is one of the first big developers to go bust)…the only way to go is gearing in the stock market.

And so it creates another bubble…probably one of the biggest ever as Chinese like gambling.

The regulator knows, but seems not to be able to set the pace (they do not want to burst the bubble, but they do not want to rise too fast) and its confusion can be seen in its action.

Last week CSRC (the regulator) warned against betting in the stock market and at the same time introduced the short selling capability and tightening rules on margin lending.

In the week ending 10 April mainland investors opened accounts at the fastest ever (3.2 million new accounts on top of the 4 million in March).

And now China has cut the lending requirement freeing up 200 billion.

The are creating not a strong bull….but a raging mad cow!

Again a just created bubble will not explode for a while (unless some  other events trigger it), but this is again another “Black Swan Event” randomly released…..there are so many now that we would need a Ticonderoga class destroyer (the most sophisticated anti missile US Navy ship) to get them all

And directly from China a “say it all picture….I hope they are joking – I can’t read Chinese….it is scarily funny!Capture china

Greece keeps on making the small headlines….but the issue is bubbling along.

Somewhere between May and August there will be Judgment Day.

And the first showdown is the 11 May.

I have a negative view on this as the positions are not sustainable in the long term.

Syriza has been elected with the double mandate of improving the life standard of Greece (renegotiating the debt) and remaining in the Eurozone.

This two goals are not achievable at the same time. So probably there will be some barter between UE and Greece, but at the end Syriza will have to call or a referendum or an election.

Similarly Germany is a similar position.

Angela Merkel knows that it must keep Greece in Europe as all the wealth of his export economy is based on the European Union (and Greece could be start of a movement of European exit), but on the other side it has the mandate to limit the amount given to Greece.

So they will negotiate and barter, but there are only two ways out

1. A Grexit.

2. A technical default of Greece (meaning a Greece default that only the professionals will understand…for example making the Greek debt in perpetuity (AKA interest only)).

3. A political coup/ revolution (1967 Greece had a military coup d’etat which lasted till 1974 when it returned to democracy…so it is not that far fetched)

But the Greek economy is not sustainable in any case

News of today: the Central Greek Government is seizing the local municipalities assets otehrwise it would not be able to make the IMF European loans and the pensions/salaries!

Oil breakout?

Posted: April 17, 2015 in Uncategorized

I did some research. It is actually to early to call.

The pattern is that of broadening wedge which is pretty much a not too reliable signal. We need to see what happens at the base of USD55 (WTI)  to understand

Capture Oil

This is quite funny…one of the most acclaimed democracies of the Western world will most likely a potentially very democratic election next year:

House of Clinton (Hillary Clinton, wife of President Bill Clinton) VS House of Bush (Jeb Bush, son of President Bush Senior and President George Bush)!

It is quite fascinating to see the similarity between Game of Thrones and the Middle East.

What is happening in Yemen helps clarify the situation of who sides with

Saudi Arabia (AKA the Lannisters in the Game of Thrones) and the vassal Gulf States (apart Oman) are actually paying Sudan and Egypt to wage their war. And they are trying to call in their credits to Pakistan too.

Iran is helping (not as much as they want you to believe) the Houthis in Yemen and other parts reported by the media (Syria) or not  (not reported by the media there has been some terror attacks in Medina, Saudi Arabia) – it is trying to assuage the US (US nuclear deal is actually quite favourable to Iranians if you look at the details….that is because the US wants to disentangle itself from the Game of Thrones).

Saudis are reciprocating (a terror attack from Pakistan killed 8 Iranian border guards), but lightly as Iranian militarily is much stronger.

Turkey needs to seen helping the Saudis, but in reality is wary both of Iranians and Saudis.

Oman is kind of watching who is winning – technically siding with Egypt, but neutral.

Israel is siding with the Saudis as they offered an airspace canal to bomb Iran, if they want to (with a strange ally of Azerbaijan).

Islamic State and Al Qaeda are proxies went crazy.

As they would say in the Game of Thrones: Valar Morgulis (“every man must die” in Game of Thrones)

We are now in April 2015, the US is keeping on bouncing around 2,000 – 2,100 – so where we are at – now.

In the short term (say this month) we are still Bullish/ lateral positive trending – but weaknesses are constantly increasing.

There is a definite disconnection between real economy / markets – and professional investors never been so bullish because of the new mantra “the Reserve Banks will save the day”.

Apart being wary of the herd mentality, the stock markets is showing some signs of real weakness and May to July  usually is a weak period, anyway.

Apart these “sensations”, we have also some technical indicators that are flashing red, specially one in the US market that went in RED ALERT on the US Market (never done like that since 2011).

No indicator is fail prood, but on 115 of US Data it failed only 4 times (91% accuracy).

This indicator does not distinguish normal crashes (10% to 20%) from super crash – but it is better be wary when also market guru are quite wary  (Bond King El Eryan, ex manager of PIMCO has most of his assets in cash – Perma Bull Jim Paulesens of Wells Fargo is greatly alarmed by the bullishness of the professional investors).

The biggest common thread that I find unite these expert is this (which I subscribe to).

After 2008, the politician did not move – but the Reserve Banks saved the day.

Their theory was Quantitative Easing to the max. This will create a “wealth effect” (you see your savings goes up so you will spend more and restart the economy).

This did not happen in large scale as you need savings in the share market to see your savings go up. On a large world scale people savings were zeroed (in US 80% of the Stock Market is owned by a 20% of the population – in 2010 The Survey of Consumer Finances (USA) showed that less than 16% of US families held stocks, moreover the highest quintile of wealth population held 50% of stocks – while just the second highest quintile t held a mere 9%!!).

So practically the Quantitative Easing stimulated supply (new products), but not demand (buyers) – hence the constant chatter of deflation (more items to be sold – less people to buy it).

Still the politicians would be the one with the real power to make a difference – but they are just going along.

So the idea behind the “crash predictor” is that when the masses (so the media) will realize that the Reserve banks got it wrong…everything will crash (apart gold and a few other things).

Please note that I am not predicting that this will happen (a mega crash – a correction in May is pretty much warranted).

After 2008 different powers became really good at manipulating the media. It is simply something that we need to keep constantly in mind.