Archive for July, 2016

The establishment is terrified by Trump and pulling all the stops.

I just learnt that Reuters changed is polls question from Trump, Clinton, Neither candidate to Trump, Clinton, Other candidate. This simple change gave a 4% lead back to Clinton, after the historical lead of Trump after the convention.

US Democracy…after disposing of Sanders…now they try to take care of Trump.

One of the unforeseen consequences of the Turkey coup is a re alignment between Turkey and Russia.

Already during the coup, President Erodogan criticised the USA for harboring a suspected mastermind (part of the witch hunt).

As President Erodogan uses the golpe to eliminate all enemies, he knows well that the West will never accept.

So it is turning to Russia and mending ties.

This is very disturbing and probably the nail in the coffin for a disastrous foreign affair policy of Obama/Clinton.

Having lost Syria to the Russia/Iran coalition , now it could lose also Turkey and practically the whole Middle East (also Israel is pivoting to Russia).

If, due to terrorism and immigration, next year in Germany and France the Right wing parties win – we could really see the end of the Great American Empire.

The Australian Dollar has been stubbornly high in these months, as everybody was predicting a weakness. It even went up to 78 cents on the USD.

This situation has been created by the US Fed (which postponed rising rates), the commodity price-spike (but there is still build up of oversupply in the system) and the lack of cutting interest from the Australian Reserve Bank.

Now things are slowly starting to change as the RBA will probably cut rates between now and November, the Fed could be starting to be more hawkish and commodities prices are getting lower again.

This could push the AUD towards 70 cents. To go lower, we would need to see SP cutting the AAA rating due to the Budget Blow out (quite possible). This would tumble the AUD to 68/65 cents.

Interest rates.

Definitely there will be still a few cuts on the cards, but not lower than 1% as the RBA considers cutting to less than 1% ineffective (Quantitative Easing ,beyond that). Personally I think they will stop at 1.25%.

The big surprise for mortgage holders is that, as banks balance are under pressure due to new rules, we could have a few “out of cycle” rate hikes.

It is the German name for the Night of Broken Glasses, 9/10 November 1938 where the Nazi Germany started the persecution of Jews in Germany.

In  that night hundreds of Jewish shops git smashed, over 90 Jews were killed and in the aftermath more  than 30,000 Jews got arrested. It was the start of the Holocaust.

Yesterday a bomb gone off in a German bar….today a knife attack in small French town church, if it is confirmed that is another IS attack the situation becomes perfect for the rise of the Right.

Even the head of the French intelligence is scared that people will start getting matters on their hand. Unfortunately it is just a logical consequence, unless the normal Muslim community starts to patrol itself. In Soviet Russia there were never more 20% of Stalinists and in Germany there were just 25% of full on Nazi. People are scared of this invasion.

And the more IS is under pressure in Syria/Iraq  the more it will  try to leash out to remain relevant.

Next year Alternative for Germany and the French National Party will have the best chance to sweep into power and ir will be a  time to be scared.

If a Muslim Reichscrystallnacht will not start before.

Interesting fact…after that awful night over 300 German Nazi party officers were interviewed by a psychologist….65% were appaled by the violence and condemned racial bias and only 5% approved the violence.

You know how it ended.  

…and Trump takes the lead

Posted: July 26, 2016 in Uncategorized

Latest CNN poll after the Democratic Party scandal Trump 48% vs Clinton 45% (previous week Clinton 49% vs Trump 42%.

Trump momentum is fueled by  independents and Clinton backlash.

3 months to go

Sanders bows to the Party

Posted: July 26, 2016 in Uncategorized

Sanders, after being stabbed by the Party, bowed to the Party supporting Clinton. Not the Chinese Party, the US Democratic Party…if there is much difference.

Punts aside, it shows like in America (and mostly everywhere) candidates are party puppets for the good and the bad.

Even Trump is,  at the end, a Republican Party.

The US has three branches, President, Congress and the Supreme Court to avoid any “coup” temptation (unless you describe a shadow coup the power of the American lobbies).

But the damage has been done. Lots if Sanders voters will vote the Green Presidential candidate  Jill Stein, De facto empowering Trump.

France has been the center of terror attacks from over a year and also Germany had its series of sex assaults (New Year Eve) and really recent terror attack (not all linked to IS, but terror attacks none the less.

And next year there are two important elections in Germany and France.

If this path continues we could easily have the the rise of the Right (Front National in France and Alternative for Germany).

This two parties have something particular in common, they are anti Europe and pro Russia.

Then there is October Italian referendum (which, if it fails could get us to Italexit) and a possible Far Right Austrian President an an anti immigration referendum in Hungary.

If we add to this that Trump could become President and he has a more isolationist position (and less aggressive versus Russia)….we could see a geopolitical revolution with Europe pivoting to the Right and to Russia.

Now there will be people crying wolf, but this are times with no easy way out.

The alternative could be a President Clinton that could really start a major war with Russia.

Definitely I prefer the Right.

 

A client yesterday asked how you make money in this irrational market?

Sometime you just have to listen…and have great investment software that can analyse your ideas.

Please be aware that this is General Advise and the the market already has acted on this idea.

Pokemon Go is storming the world.

Pokemon is owned 32% by Nintendo, Japan…so Nintendo is the main beneficiary  (and it it did +98%!) and second beneficiary is the Japan (but Nintendo is just little more than 1.5% of the exchange traded funds in Japan).

Digging inside the rest of Pokemon is backed by Venture Capitalist…from Niantic – partially backed by Alphabet (Google).

If you then look at the sales, Apple stands to make 2 billion dollars from Appstore.

If you look further afield McDonald jumped 10% on the news it will sell Pokemon figurines in Japan.

But this will shake up the whole of the Virtual Reality scene, Google, KKR Alibaba have invested a lot in VR (Magic Leap, a company specialized in VR headset, in particular).

Then you could down to who will sell these headset on the net (Ebay, Amazon) or in store.

So a simple idea can give you investment propositions that go beyond the market jitters.

 

From Reuters: a senior Turkish officer confirmed that two rebels jet fighters F16 locked in radar target on Erdogan (Turkish President) plane and did not fire.

Now the witchhunt has started with mass arrest of over 6,000 critics of President Erdogan

This is a reissue of my newsletter, the original has been sent in early July, if you want it please subscribe via my website http://www.scalaprivate.com

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Welcome to the newsletter of Scala Private Wealth called ‘Beyond the News’ where you will gain some insight into what is really behind the news that could impact your investments.

The new year has start and so the Scala Private website www.scalaprivate.com

Macroeconomics

Europe

Brexit did happen! The British Pound took a beating and it is down – but the rest of the market recovered all the losses in a week. The funny cartoon above explains it better than me. The markets believe that there will be plenty of “friends with benefits” to save the markets – from accommodative stances of the EU powers to Reserve Banks interventions. If this will happen for real, it is a different story.

While the Reserve Banks always saved the markets, the politicians are quite successful in making a mess. Good recipe for volatility.

The worst market post Brexit has been Italy, especially its banking sector, so let’s keep our eyes open.

The main volatility has been in currencies (or pseudo currencies such as gold and silver).

The main issue is that a good outcome for the UK, is a bad outcome for Europe and vice versa. And the EuroSkeptic parties are emboldened.

 

Not at the centre of attention, Austria is going back to election (with the risk of having the first right wing President, in the birth country of Adolf Hitler!) as the previous election have been proven to be rigged as I had picked up immediately in my blog…in the middle of the European democracy!

United States of America

All the talks of the Reserve Bank rising interest rates went literally off the window with Brexit -provoking a boom in gold, infrastructure and US Dollars Vs Euro. Meanwhile the economy is performing quite good. 

Asia

Asia again has been off the focus of attention. Japan has been severely damaged by Brexit as the Yen soared as a ‘risk off’ refuge. There are several call of the Bank of Japan to intervene. The Chinese Yuan devalued, but eyes were pointed somewhere else – so. a present in disguise for the People Bank of China. Still nothing changed and there are starting to be calls for a massive Chinese banks bailout within two years.

Australia

Astralia had practically a vote of NON-Confidence against both Liberals and Labor Parties. Most probably we will have a hung Parliament with 3 years of paralysis – in a world where we should be fast and nimble. A negative watch and then downgrade of our AAA rating is almost sure with consequences in the interest rate (going up, possibly counterbalanced by the Reserve Bank in August) and Australian Dollar (going down).

 

Rest of the World

In my previous newsletter I warned of a potential terror attack from IS – and correctly came in the form of an attack to the main Turkish Airport, Ataturk (3rd Europe largest airport). This attack and a few facts before it, are changing the dynamic in Syria with a realignment of the great powers – Turkey, USA, Russia and Israel. Once the realignment will be completed the Syrian war will finish (factions will still fight, but the main war will be over) and Syria will be probably split in zones of influence.

 

Markets where we are now

 

We went from oversold to almost overbought in a flash. This week, helped by the 4 July Independence Day, the market will take stock of what happened. The Brexit consequences are so far and large that no model can capture everything. The markets are now watching if really the Reserve banks will come to the rescue. We will do the same for a short while.

 

Our Key Investment Changes – Why?

 

Before and just after Brexit, we bought gold and, for sophisticated investors only, a few exporters in the UK. The strategy paid handsomely as we are up +10% on a few positions. Time will tell, but the selected businesses are, in the long term, winning businesses so we are just happy to have got them at a good price.

 

On the Australian side, our old acquaintance RCG (Athlete shoes franchise) increased of another 17% due to a new premium shoes store acquisition (Hype chain).

 

Insurance fact

 

Income protection pays you a monthly amount directly to you while you are unable to produce an income due to illness or injury. Many policies will cover up to 75% of your salary if you are totally or partially disabled. By replacing your regular income, Income Protection payments can help you and your family maintain a level of financial normality. It seems easy, but there are a few traps inside it, so always best at least to talk to a specialist advisor. Scala does not do insurance, but we have the right connections for your need.
AND FOR SOME FUN….

 

Sporting fact

 

Wimbledon is the only Grand Slam event to be played on grass courts. The grass is tended to year-round. And during the event, it’s cut to a height of exactly 8 mm. It is currently mid swing with final match on July 12, 2015.

 

Curiosity

Google has been acquiring, on average, more than one company per week since 2010.

 

 

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The information contained in this newsletter is general advice only.  It does not take into consideration your personal financial situation, goals or needs. You must consider the appropriateness of the advice prior to acting on this information. Please seek advice from us or your financial adviser and read the Product Disclosure Statement/Financial Services Guide of the product you are considering prior to investing in that product