Archive for February, 2016

What happened to oil?over +10%!

Posted: February 13, 2016 in Uncategorized

What happened? Well I was in the same bandwagon of what the heck?

There is no huge news (yes rig count decreased again and the usual talks of OPEC discussing).

So why?

The reality is that DWTI, a triple inverse ETF with NAV running at a deep discount from the current price) has been liquidated.

A triple inverse ETF means that is 3 times short. So to liquidate it the manager of DWTI had to buy 3 times long.

And here the spikes. From December these action happens as very tradable ETF trade quite illiquid markets.

Syria. Islamic State side show

Posted: February 12, 2016 in Uncategorized

In Syria the war against Islamic State is really a side show.

Quite funny if it was not so tragic.

Turkey supports the so called Western Rebel (close to al Qaeda) and Islamic State and fights mainly the Kurds and the Syrian State.

The US supports the Kurds and now is trying to wash their hands of the Western Rebel and bomb Islamic state.

Saudi sustain the Turks but do not have any issue with the Kurds and bomb Islamic state for the media.

Iran Russia Iraq and Hezbollah kill anything that is not Syrian army or US/Israeli.

Israeli take out of the equation whatever they  think is a threat avoiding the Russian.

The Saudi now they want to enter the fray against specially the Hezbollah and Iranian. This is scary as the latter two are the only middle eastern armies that even Israel could not entirely defeat. It could really spark a middle east war that would end with the end of Kingdom of Saudi Arabia.

Ps imagine oil in this scenario…go buy an electric car!

John Kerry (US Secretary of State) is having quite a few meetings with Sergei Lavrov, Russian Foreign Minister.

The actual content is top secret, but 2 things are clearly in sight.

– a final settlement on Ukraine since the Ukraine (pro Europe) government is on the verge of collapse under the weight of corruption and bribery scandals.

– a more important settlement on Syria.

The second is really important. There is a clear push from Turkey and Saudi Arabia to intervene in Syria in order to create a buffer zone.
The US does not want it as Syria already declared that it  would consider it an invasion.
The big worry of the US is that the move would put Turkish and Saudi warplanes clearly in the target zone of the very sophisticated Russian anti air denial system. And being Turkey a NATO member an engagement in such a context could be easily morph in a world war 3 scenario.

Unfortunately in history there is a stark reminder. After the Great Depression of 1929 the Fed decided to rise the rates in 1937 triggering another crash and contributing to the start of of the second world war (you need a mad man as Hitler to start…but we have a few. Well until 1933 Hitler was actually quite admired from a lot of person’s even in the UK and USA (his party received a lot of financial support from the Ford Corporation for example)

And war is one “politically easy way out” from an economic crisis.

So let’s hope that John Kerry and the USA will save the world.

Election Battle: Trump and Sanders

Posted: February 10, 2016 in Uncategorized

Trump (Rep) and Sanders (Dem) won New Hampshire.

This is how I see the real battle for the US Presidency, unless Bloomberg jumps in the fray.

 

Market: first target achieved

Posted: February 9, 2016 in Uncategorized

Well my first target has been achieved with the market fall.

Stocks and US junk bond finally converged.

Now we are in uncharted territory for real.

My idea is that there is more to the downside as oil has not bottomed yet and I stay with my initial theory disclosed to the public early January.

Markets will move fast.

The battle for Aleppo is technically the endgame of the Syrian war.

Practically you have Russia/Syria/Iran (and Hezbollah)/ Iraq forces against the rebels supported by Turkey, the Gulf states led by Saudi Arabia and the US.

The Geneve talk are in disarray (a bit like the Vietcong never wanted really negotiate) as if Aleppo falls…there is no more opposition (in effect there is still opposition..but it will be more a clean up operation than a war).

The dire state of affair for the opposition is actually made clear by the political chatter from Saudi and Turkey of being prepared for a ground invasion.

But as bluntly as John Kerry (US Secretary of State) put it…this would be tantamount to go to war against Russia. Russia is not anymore the USSR, but still an extremely powerful enemy.

Once Aleppo falls, the opposition (and the 5 year dream of Turkey and Saudi Arabia) is finished as it cuts the supply lines from Turkey.

Soon after they will “clean up” Is and Syria will be back to reconstruct phase.

The US clearly stated that it is not interested in a war on a ground or versus Russia (that just deployed the last generation Su34 Gen 4++ jet fighter.

And if Turkey and Saudi decide to go in anyway, it is a Middle East War complete (and Iranian are superior). It is very improbable (and quite suicidal for turkey and Saudi Arabia).

Now you understand why Putin let the SU24 be shot down.

Endgame.

In the next 5 years there will be a series of disruptive technologies that will disrupt your life and your portfolios.

You need to be aware as they can make you (or lose you) a lot of money and your own job.

Some examples:

Virtual and Augmented reality. This is a big change that will pass first via games and then all the rest. It is the next big thing in consumer electronics

Blockchain: it is a new technology quite sophisticated to explain, but practically dispense the fact of having a unique data center and allows you to have multiple data centers. Easier to make an example: the banks transfer currently use a Reserve Banks for transfers making any procedure cumbersome, slow and admin heavy. In the future the banks will use “diffuse data centers” which will allow faster and less admin heavy transactions. ASX settlements will be practically instantly instead of the current three days.

Lithium: after the Volkswagen debacle everyone is pushing electrical cars. In a few years the hybrid electric cars will substitute the turbo diesel. This could again save Australia as lucky country (but we are running out of luck). And not only cars! Houses are the next big thing!

Robotic advice: robo advice will conquer the cheap end of advise of easy strategy and indexing and banks will reap benefits. So the market will change a bit like the medical industry….a generalist financial adviser “robotic” and a specialist human adviser for very complex financial strategies and complex investment strategies.

Autonomous cars: we are almost there. Have a think of the consequences not only for taxi services, but transport in general (trucks, shipping)

Shopping: in the US Amazon is becoming like a super market. People in the big cities are using it for everything, apart fruit and veggies.

Medical industry: we are quite close to medical breakthroughs with amazing consequences.

These are just a few example and already you can see that a revolution is coming as a lot of these techs will be integrated.

 

Paraphrasing the famous sentence of Game of Thrones seems correct this year.

These are difficult times for the markets

If your adviser does not understand it (or if the institution that advises you has a care towards shareholders, not client) you  are a lamb brought to the slaughterhouse.

If instead you understand it…there are really interesting occasions.

Make your choices correct, or ask me if you are in doubt.

As previously written, this year volatility will reign!

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Oil

Posted: February 6, 2016 in Uncategorized

The other day I was checking the inflows in oil ETF.

Specially in the US there seems to be  a frenzy in the investors to enter the oil trade as they think it is so low it can go only up.

As crowded trades do not work…oil is still far from the bottom ($20-$26, or lower in panic).

 

China capital outflows

Posted: February 5, 2016 in china, Uncategorized

An article on Bloomberg shows how big the China issue is.

In 2014 China had reserves of almost USD4 trillions and that was why China was considered unbreakable.

Fast forward one year and in January 2016 the reserves USD3.2 trillion.

And mind you the capital outflow started in July/August 2015.

January was the worst month on record (estimated USD$118 billion versus the second worst, December 2015 – USD108 billion).

China has still three times the second largest holder of reserves (Japan), but  it is pattern that is not sustainable. It is practically USD600 billion in the last 6 months!

Probably it will even get worst before it at least plateau (technical analysis for the Shangai Composite is 2,400)

So, apart a medium range buying pressure, the market is still in downtrend as I keep repeating.

Also, this is not the death of China. It is just a transition and the share market investors in China are really few in relation to the overall population (well the US survived the 1929 crash, the 1970s with Watergate and debacles in Vietnam and Iran etc) and transition are brutal even in controlled environment. The only thing that could really cause an issue is mass unemployment.