Archive for September, 2015

An Australian rout

Posted: September 30, 2015 in Uncategorized

Yesterday all the commodities base countries in particular got wiped out (Australia Canada Brasil Russia…). All out of a Glencore analyst pessimist view in London.
Now commodities are at low and it is no time to panic.

But you can point fingers. In Australia the culprit is wx PM Howard. Why? In the longest commodities boom he just handed over money to tax payers (tax concessions, negative gearing) instead of preparing the country for the after boom. So, for how much I dislike them, do not blame or praise Rudd, Gillard or Abbot for the outcome.

What is worst is that people do not realize the link between commodities banks and real estate.

But PM Howard is not alone. Every politician did the same. Actually in this case President Putin is the worst. As good he is in foreign policies (KGB school), even without the election issue, he failed to use the commodities boom to prepare economically Russia for the US showdown.


US Shutdown and Catalonyan election

Posted: September 26, 2015 in Uncategorized

This weekend there is the Catalonyan (Spain) regional election. If the pro independency parties win they will push in the 18 months for an independent state of Catalonya.

In the US we are again to the US Government  shutdown. …but the media are not making a fuss this time. At the same time Rep Speaker Boher is leaving by October end under pressure of Conservatives and anti establishment.

Per se not big events, but in this negative sentiment period they will help the markets.

Federal Reserve as market hostage?

Posted: September 24, 2015 in Uncategorized

In the last few years we had a market driven by the Fed with its drug (money printing). Now we are in a reverse situation where the drug addict has taken hostage the drug dealer (Fed).

So rate rise can be quite far away. Or the drug addict goes wild. (Not yet there. The US 30 T Bond says not yet) and kill the hostage .

It seems almost  bad joke.

The second band of US trained rebels in Syria entered Syria and…surrendered their weapon to Al Nusra (Al Quaeda).

This time there is not even the pretext of being captured…it was just a scam to get better training and weapon.

The $500 million program to train anti IS rebels looks like being scuttled and General J. Allen will step down.

Massive failure of the Obama Administration.

The VW scandal is creating a big risk for Germany.

Germany is a country based on export and on the reknown quality of their products.

The issue is that what happened to VW is  deliberate cheating and Germany, during the various European crisis, has created a lot of enemies as it wanted to impose the German perfection on everyone.

Now the scandal from the US is spreading everywhere. There are “please explain” questions from Australia, China, South Korea, Italy, France etc.

Moreover one of the major newspaper “Die Welt” just published that the German Government knew about the device and the device is not just used for 4 cylinder turbo diesel engines. Now there are several inquires into it.

And the VW group is massive (VW, Audi, Skoda, Lamborghini, Seat, etc).

Still VW will survive (well it survived being one of Hitler’s pet project…) and, when all is finished, it will be priced perfectly for the share market.

The big hit for VW (and why they did it) is that the US is going to impose a law of fuel consumption of 54.5 miles per gallon by 2025….and Germany wanted to win that race at all cost.

Russia in the Syrian battlespace

Posted: September 23, 2015 in Uncategorized

Russia entered the Syrian battlespace with a splash. It is the only outside power that has committed serious firepower to Syria. And it is showing as yesterday they already killed 38 ISIS fighters.

But why they did it?

It is a master stroke again as it allows Russia to re enter the Middle East for the first time after the fall of the USSR and also opens negotiations channels with various frenemies and enemies. It also helps carving an Alawite (Assad) enclave and securing a negotiating position in case Syria gets settled and divided.

US – US needs to to Russia as its planes are operating in Syria and Russian anti air defence are formidable. Definitely part of negotiation will involve a request to decrease US involvement in Ukraine.

Israel. Again Israeli military advisers are everywhere in Ukraine. Israel and Russia are not friends, but exchange frequent favours. Definitely now Israel cannot think a “do it alone” mission to take the Iranian nuclear facilities, even if they wanted to.

Turkey. Turkey will be upset as their strategy of a Sunni pro Turkey government has been shattered. This is a retaliation to their blocking the Southstrem Russian pipeline and some issues with the pro Moscow Azerbajan (another area with a lot of gas pipelines and subject to various interest and always in semi state of conflict).

The Gulf states, which have warplanes operating in the area, also will have to negotiate – probably on oil pricing.

I did not mention Egypt and Iran as they already have outstanding collaboration with Russia.

The Fed decision

Posted: September 18, 2015 in Uncategorized

The Fed surprised again the market.

Again I think we could be near Quantitative Easing 4 specially if the market reacts badly (which is possible…the massage is …the US economy is not so good). What surprised me is that in the dot chart of future pattern of the interest rate there is now some red dots…negative interest rates like in Germany  (so QE4).
With the US debt at over usd $210 trillion it is not surprising that the Fed cannot lift too much the rates.
Also the probability of a Fed hike in December dropped from 65% to 45%. 2016 anyone?

As I was saying previously…too many people were long USD. And I do stand by my market base 1830 (depending on panic levels) before mid October  (then rally..the Yellen Put will save us).

Directly from The Time polls (57k voters):

Trump 67%
Fiorina 13%
Rubio 5%

Clearly the people is fed up with the system!

It is a few years that there is a debate if the Chinese are snapping the majority of Australian city real estate or not.

The moment of truth is closer then ever!

All goes back to the in-famous devaluation of the Chinese Yuan.

From Reserve Banks fonts I found out that part of the motivation of the devaluation was to bring back Yuan to China without making the Yuan rise.

This is consistent with the idea of China wanting to stop the capital fleeing overseas.

China usually tolerated this. There always been a USD $50,000 limit, but it was easy to circumvent.

One easy way is that friend and family were used to move each $50,000 overseas and the real buyer was paying back the amount.

Now China is tracking overseas accounts that receive more than USD $200,000 within 90 days.

Naturally there are other ways, but when the Chinese authority decide something it is prudent to obey.

Corelogic data RP data already declared that last weekend Sydney market auction results was the lowest for the year and even Melbourne had two weekend with below average data. It is still 75% so nothing to worry yet, we need to monitor the next few months to see if it is really the Chinese propping up the market or not.

Hopefully not as if we have a commodities and real estate bust at the same time, Australia would not be that lucky.


China (Hong Kong) continues its bouncy landing. It is a crash in a multi year rally. The economy is still going and it needs to slow down and transform. There is no transformation without pain, but the path is still there. Reforms are coming in fast (the last is a very important change in the State Enterprise management).

India again is a multi year bull market. There has been a bit  of disappointment as the reforms did not came that quickly, but again the path is clear.

Japan keeps its resurgence. It looks like it finally got out of deflation and investors are changing their mind. Also there are some corporate changes (more dividend/buybacks) which will spur a renaissance.

The rest of Asia is pretty much in not such a nice space (except Philippines).

South America

Brasil is another big commodities casualty. Mexico is the only shining star as it is more and more attached to the US train.

Middle East

The Saudi war in Yemen is not going to plan. Apart the Western media headlines it looks more and more like a Saudi Afghanistan. It is not really surprising as the Houthis had wars going on for the last 20 years.  The biggest issue is not a Houthi victory, but the cost of war for the Saudis. Already they had to tap the international debt market and cut subsidies to the general population.

Syria. The various player are building up their positions in order to take part of the sharing of the spoils of war. In my humble opinion that is the reason of the Russian build up. A position of strength dictate that they will have to be involved in the settlement. Also the push for settlement comes from Europe as part of the immigration crisis.

Iran and US are re aligning. It will take time and Israeli and Saudi are not happy about it.

Turkey is trying to negotiate various forces without imploding.


Economically is improving, but here we have another crisis with immigration. Immigration is not bad per se (the US was built on immigration), but the issue is that usually the Muslim immigrants do not want to integrate.

It just exposes another fault in the European dream. And Sunday there are the new Greek election (probably a more divided parliament will be the outcome

Also the Ukrainian war is looking as settling down.