Archive for June, 2016

I just learnt that a Chinese bank CITIC launched a lawsuit in Canada (Vancouver)  to seize three properties from a Chinese citizen that escaped with irregular money.

Naturally such an international lawsuit has the backing of the government.

If it is a pattern you could see similar situations in Australia.

http://www.theglobeandmail.com/real-estate/the-market/chinas-citic-bank-tries-to-seize-real-estate-assets-in-canada/article30637786/

Well, technically speaking not yet.

As I forecasted the algo trade machine they stop after 3 days as  technically we are in oversold. The ramifications of Brexit will be felt for a while.

Some key support have been broken.

There are also some positives. USD declined and some good data out of the US. But what lifted the shares was talk (as usual) of potential market intervention. Which was not confirmed and the Reserve Banks will never intervene that early. Only if the SP500 will go to 1920/1820  they will intervene.

Still there are some bargains out there specially looking at currencies. But is a play not for the small investor.

30 June update

The market is still in UP condition with a high stress level. We now reached the first serious resistance (SP500 2,070) and we need to watch very careful. The oversold conditions have been neutralized so a new game starts now (as in previous post these days have been mostly driven by algo-machines).  There has been a serious breach both on the SP500 and the VIX. The markets and inflows of liquidity are still in uptrend, but it is mainly caused by a larger than usual pension fund re balance. Be watchful.

A note: this positive market with repeated breaches  is historically consistent with the early stages of a Bear Market. Considering the Fed intervention and the US Presidential elections the market could still go up until November – but at that point, unless the economy really turns around things could turn nasty.

Brexit has been a momentous event. Even if there are still voices that Brexit could be undone (and it will be like that until Article 50 is invoked) – let’s assume that Brexit is done.

This is history in the making – like the fall of the Berlin Wall or the 9/11 terror attack.

It will shape the world to be.

First of all, this resembles a Bear Sterns moment – not a Lehman moment.

For the non financial expert the Bear Sterns moment happened in March 2008 ..a big fall, but everything was recovered by June 2008. But it did contain the seeds that made a Lehman Brothers fall. not that I predict the same, but be wary.

This looks similar and we could recover everything by September, but it could contain a Lehman Brothers moment somewhere in the future.

Brexit has consequences all over the world and you (or your adviser) needs to understand that.

Just a few examples:

China has over 15.6% of its total export to the UK!

Oil recovery could have been cut short.

The South European economies will be on even more strain – not only the financial markets. The UK now is 10% cheaper – competing for tourist and UK tourist will have to reconsider their holidays.

Japan is in deep trouble as the Yen is a safety currency. It has not much export to the UK, but it is indirectly exposed via Asian exports (specially Vietnam, Malaysia and Thailand)

Australia has a low direct exposure, but it is exposed via China.

The European bloc has been based on the power equilibrium UK-Germany-France. Now that UK is gone, Germany and French will grow tenser.

Apart the various nations asking for referendum (France and Austria), there could be talk of a Nordic alliance (UK, Norway, Denmark, Sweden). And also the Eastern bloc Europe was counting on the UK counterbalance to Germany.

Russia has a mixed blessing. A crisis of the EU is bad for export, but definitely the EU will not think of Ukraine or the Russian issue – leaving it to the USA.

Europe in all will lose power as world power.

The US rate hikes (in the bond market) have already been postponed to …2018!

Ad the UK? The UK, if managed well, could even fare better than the rest as Europe was not exactly a free trade market and had a lot of red tape. The fall of the Sterling will be great for exporters and tourism. Unfortunately squabbles between politicians will most likely prevent that.

Other countries directly affected are South Africa, Nigeria, Venezuela, Brasil and (bit less) Argentina.

This is the event that I was waiting for. It is not been pessimistic – just statistics …we avoided a thousand issues between US Government spending closures and Greek bailouts…it was just bound to happen sometime. And it does not change my view or investments – it is just an acceleration on the trajectory designed (by stupidity or else) by our politicians after the Great Financial Crisis. While the Reserve Banks did a great job – the politicians just squabbled and pushed austerity (even if no economic model supports the theory that austerity solves a crisis).

In effect it feels very 1938. If you do not believe  me go and watch the 2015 beautiful and scary German Top Box Office movie “Look who’s Back”

https://en.wikipedia.org/wiki/Look_Who%27s_Back

Brexit was not forecasted by the market or billionaires.

Bloomberg data says that the 400 richest men on earth lost a combined over USD127 billion of their fortune and circa 3.2% of their fortunes in a day (Bill Gates lost over a billion). And the 15 wealthiest Brits lost over USD5.5 billion.

Funny they did not see it. In my posts I noted that polls and even bet odds were not correct.

Well as  the financial elites says…Brexit made you (or them?) poorer!

After Brexit: stock market

Posted: June 25, 2016 in Uncategorized

Now what will happen?

Well the next 3 days the quantitative algho trading funds will dominate the scene. A bit like the terminators…when they attack. Run, resistance is futile. They will be buying volatility and selling SP500 and anything in sight (apart gold). The SP 500 will get to 1920 or 1820 and the Asx 200 will revisit 4800/4600. Gold will try to make it for 1500.

After that we can fight back, buy beware of the China/Yuan/USD connection

After that

Brexit effect on Australia

Posted: June 24, 2016 in Uncategorized

I am reading a lot of  news but nobody made this connection yet.

The issue with China are linked a lot by the Yuan strength. The Yuan is pegged to the US Dollar.

In  time of risk on, the US Dollar goes up and so the Yuan. If the USD stays high the Chinese will have to devaluate the Yuan sparking consequences similar to August 2015.

UK greatest democracy ever

Posted: June 24, 2016 in Uncategorized

I just heard PM Cameron speech.

A real democracy. My compliments.

Brexit: Independence Day 2

Posted: June 24, 2016 in Uncategorized

Well the first was even more scary…Battle of Britain in 1940….not much about stocks..but real lives.

Germany rules Europe via an un elected European Commission dominated by Germany

This is just the continuation of the rise of populism as the political class failed the people.

It is the same of the rise of Trump and all the euroskeptic movements.

The establishment loves Europe…the people suffer and protest.

The UK referendum is not binding and there are already pro Euro MPs that are trying to stop the referendum (well it already happened in Greece), but I believe that England has a history of democracy.

If not…stop complaining of Russia and China!

I warned the last days that the polls and even bets were not predictable.

Yes there will be stock market consequences, but even more political fallout.

Scotland and Northern Ireland were almost totally pro Euro (another referendum to spilt the UK?). The Danish are already contemplating DEexit. The 26 June the Spanish are voting.

The power inside Europe also wills shift as France was using the UK to counterbalance Germany in the battle for Europe.

Also with the UK Pound drop the exporters will have a boom and UK properties are 10% cheaper. If Brexit is well managed, it could set an example.

But initially there is a crisis. The SP 500 have an old target in mind first 1920 and then 1820. But let’s see what the Reserve Banks pull out of their hats.

As Mao Tse-tung said

“A revolution is not a dinner party, or writing an essay, or painting a picture, or doing embroidery; it cannot be so refined, so leisurely and gentle, so temperate, kind, courteous, restrained and magnanimous. A revolution is an insurrection, an act of violence by which one class overthrows another.”

A Brexit Game -part 1

Posted: June 24, 2016 in Uncategorized

Such a nail biter!

The race is so tight that will be a negative event in any case.

Now (1.08PM, Australia East Coast) Brexit is in lead and you can see the effect on the Pound (-8.% vs USD!! lowest since 1985), gold +3.57% and futures indicate a UK open at -6%.

The consequences could be far fetched for the entire Europe and spell the end of German dominance…just like the Battle for Britain in 1940 – the entire power play in Europe would be compromised.

Let’s see

I wrote about this new cold war and how it worries for quite a while, but now even Morgan Stanley is on to it…so I feel I need to refresh the concept – even if the conclusions are so bad that even I do not like to write it.

After the Great Financial Crisis, we are in a similar situation to the 1930s – high debt, deflation, slow growth and lower yields are all too common.

In 1930s the Federal Reserve misstep tightening too quickly and the world re entered the recession in 1937/38 that was solved with the second war world because there was a crazy madmen like Hitler.

The Federal Reserve is again fiddling with tightening (and sometime just talking about tightening is tightening).

You would say ..thank God there is no Hitler. Unfortunately I am not so sure.

The US is definitely not Germany and thank God for that…but there are strange things going on.

The US is ratcheting a huge amount on Russia.

Before you switch off saying…he is crazy…think about.

At the end of Cold War Russia agreed to dismantle the USSR Army both as it ran out of cash, but also on the premises that NATO would not expand East.

In the last 20 years NATO did nothing else than expanding EAST.

Russia has been encircled by the US forces everywhere. Yes Russia attacked Ukraine, but an intercepted conversation from the German Secret Service  of Victoria Nuland ( Assistant Secretary of State -US) showed that the revolution was organized by the CIA (this is history – not conspiracy theory).

Even last week 50 US Congressman sent a letter asking to attack the Syrian Government (to which Russia responded that it would considered a direct attack on an ally).

There are sign of this everywhere. Even in psycho- war arena with Russian Country (not just athletes) banned, Eurovision (Ukraine vs Russia).

Why doing it?

  • the US weapon lobby would be happy
  • The US has to confront Russia before tackling China, as world superpower (it cannot confront both of them at the same time
  • It would solve the economic crisis (after 1945 there had been a boom)

How could it start?

Probably with a false flag operation or by cornering too much Russia – some historical (no conspiracy) fact

  • The US entered the First War World after the cruiseliner Lusitania was attacked. The UK or US provided no escort and the Germans affirmed that it was used to smuggle weapon – in 1982 a salvage operation of the relict showed that the Lusitania carried weapons for real
  • Japan attacked Pearl Harbor – apart various conspiracy theory – Japan had to attack the US as the US was cutting off all oil transit avenue in the South China Sea (ops…yes that is why China is so aggressive in that sea)
  • Vietnam – the US entered officially the war after the “Tonkin Bay Incident” where US cruiser where almost sank by North Vietnam torpedoes. The attack in reality never happened…it was not clear if it was a human error or a lie (as Former US Secretary of Defense McNamara said)
  •  In 2014 a document released under the Freedom of Information act declared that the “weapon of mass destruction” were not existent and the defector that presented the evidence Rafid Ahmed Alwan al-Janab admitted <<Maybe I was right, maybe I was not right,” he said. “They (gave me this chance. I had the chance to fabricate something to topple the regime. I and my sons are proud of that and we are proud that we were the reason to give Iraq the margin of democracy.”>>. Who is THEY? Logically it would be the CIA/NSA I think.

How does it end?

In a nuclear fireball and mass cyber attack that gets us back to the stone age.

Russia already “leaked” a war plan in which clearly says that Russia will not have the capacity to resist a mass US/NATO attack and will retaliate with nuclear weapon.

Also it is aligning more and more with China (it is selling part of the crown jewel ROSFNAET to the Chinese) to make it harder to be attacked alone.

Plus Russian cyberwarfare capacity are the best in the world.

What you (American citizen) can do? Don’t vote Clinton. I know that Trump is not likable…but the alternative is frankly scary.