Archive for January, 2017

US -endgame starting (updated)

Posted: January 31, 2017 in Uncategorized

Just after a week of idyllic period – the decisiveness of Trump policy are start to crack open the “under the surface” American society issues.

The ban on some Muslim immigrant have directly pitched  the internet giant versus the administration and also part of the judiciary systems.

But, if President Trump continues its “dictatorial” (in the sense of without consulting) and specially the war on media….things will soon turn ugly in a fight of everyone against everyone and no winner.

This should be the “wobble” I predicted in December and confirmed to my clients on 18 January 2017…not a market crash yet.

This will be an intense year.

 

Wow…that tarted soon.

President Trump just fired the acting Attorney General for defying his ruling on the immigration ban.

The only other time that something similar was with President Nixon and the Watergate scandal.

The major difference that Yates was just an acting Attorney General – soon the Trump nominee should be selected (Mr. Sessions), but its nomination will become presumably a “referendum” on Trump and the immigration ban.

 

Dow 1,000 -10,000-20,000

Posted: January 30, 2017 in Uncategorized

Every time the Dow surpassed a milestone….there was a big cheer. And always premature.

Dow broke 1,000 the 14 November 1972 and 3 months later went into the bear market and only in 1976 re gained it and definitely cleared it in 1982.

Dow broke 10,000 in 1999 and, after an initial leap, broke it again in 2001 and from 2003 seemed to be safe until the Global Financial Crisis of 2008 and cleared it by 2011.

So history is NOT always right, but on average it took 10 years to clear a milestone

President Trump, walk the walk

Posted: January 28, 2017 in Uncategorized

The first week of President Trump has passed and the first conclusion we can draft is that he means what he says more than any US President.

On this basis a few points we need to keep an eye on.

He is rebuilding the armed forces. In this period of Middle Eastern Wars the US Forces went sideways. Confronted with a sneaky, but not powerful enemy – the US is very battle hardened, but lost the edge in confronting a serious enemy like China or Russia.

He will probably ally itself with Russia in “deleting” Islamic State with a brutality usually seen only from the Russians. Also if this “war on terrorism” will really be brought to the pointy end he will have to confront Saudi Arabia – the main exporter of the Salafist jihadism which at the end is the basis of all Muslim terror. Maybe he will do it directly or , more probably a proxy (Turkey or a pseudo terrorist state run, under the radar, by a friendly like Turkey).

He will have to confront Germany and Merkel. This is an interesting one. He already praised the UK to have left the EU dead experiment and kind of accused Germany to weaken on purpose the Euro to make it more competitive. While this is true, it also is hard to prove as the EU, theoretically, is not under German dominion. However it will play it, this will further weaken the EU and bring it more to the brink of collapse. Specially if then the UK-USA trade agreement is good and of fast implementation.

China is the big one – definitely there will be a re think of the relationship between US and China. A trade war is possible, but could damage seriously both countries as the relationship export/import are very deep ( practically there are more imports in US – but they are mostly low price imports (toys, clothing, base electronics) which will hit more the middle -low income US population). A conflict is more possible, also for error. China army focus a lot on “face saving” and could radar paint aggressively US warships (it already happened, but the US response was always soft). President Trump could order a real retaliation.

The last one are trade wars. There are multiple examples in history that trade wars  do not work…even if since at  least 2015 world trade is actually decreasing (also to structural forces as China driving its consumption inwards). The main issue that a lot of items are manufactured in multiple country (even the Mexican imports have on average a 40% Made in US components). In a sense it feels like one of the populist candidates typical of South America.

But a world of warning about all the above from political economy (game theory applied to socioeconomics):

A president can accelerate or decelerate the economic path…but the path is already established.

A few examples.

As I said world trade is decreasing since 2014 (data IMF).

Europe is disintegrating since 2011.

Deflation is set by the fact that the developing nation population is growing older.Yes this year there will be spike…but a spike is not a trend.

Oil is becoming less and less efficient as an energy source compared with other advancing technologies.

Western societies are becoming less and less democratic (eg Europe is not governed by the unelected commissioners as the anti Europe party say (the commissioners have a lot of power and are not elected, but they do not govern Europe), but clearly Germany steers the inner workings of the EU as it is the major wealth contributor and does what it wants – as it invited 1 million migrants to Germany…in reality it invited a million refugees to Europe since there are no borders).

A US/China confrontation is inevitable as nowhere in history of mankind an old empire left the baton to the new empire (and it is not said that the new empire will be China/US. The 2 World War was the old empire Britain against the new one Germany…and the US won).
So Trump walking the walk merely accelerate what is going to happen anyway. Just tighten your seat belts.

 

Market forces

Posted: January 24, 2017 in Uncategorized

Quite funny how the market behaves. By technical analysis the market (SP500) has a straight target circa 2,400 and it is stubbornly trying to achieve that notwithstanding all the news out of President Trump.

Very hard to predict the outcome, but, looking at the past, it could still achieve it (so a plus 5% between now and April) before rolling over.

Interesting battle.

So why should President Obama would want to give President Trump an increase power.

Practically there are two theories possible

  1. The US defense lobby is super powerful (no need to tell you with all those massacre and not a low passed against owning guns). Jack Ma, Chinese billionaire founder of Alibaba, accused the US of spending more than USD14 trillion in the last 30 years in wars. And mainly the weakening US economy is propped up by the military industry.The military lobby logically do not care if Obama, Clinton, Trump are Presidents and just needs new wars (hello hello…Trump just hinted that the US should invade Iraq again).  So the increase  of the powers suits the lobbies that have a “shadow hand” behind the US Government
  2. President Obama gave rationally pore power to President Trump so the new President would be too tempted not to use and probably would end up impeached. This could be a scary strategy as it could easily backfire as Trump already outsmarted the Clinton/Obama election strategy and could be the end of the US democracy (if it ever was a democracy)

President Obama is leaving a scary legacy that could make President Trump the last America democratically elected US President.

Under President Obama the Presidential powers got terribly expanded.

Apart an almost unaccountable hunter killer drone program..a few other pieces of legislation.

Lybia…Obama introduced the possibility of attack for humanitarian reason (not defence from.potential attack as before) and bypassed the 3 months limit (before having to ask permission from Congress)  as air strikes (over 7000) were not defined as war.

He attacked Islamic State even if Islamic State did not threaten the US ( under the Terror act after 9/11 anti terror attack were allowed, without Congressional approval, only against imminent terror attack). 

And the above are not the only one.

But what worries me most is that in the 15 days before President Trump takes over President Obama signs a law against fake news (could CNN be a fake news producer? For President Trump definitely yes) and  a law that allows the NSA sharing information with a multitude of US agencies.

A movie could be made of a conspiracy theory of a good President paving the way for bad President…..  

Thanks to Mohamed El -Erian (Allianz Chief Economic Advisor)(highlights by me)

 

<<From Davos, Switzerland, where all the almighty Central Bankers and Government are meeting a scary decision

Jon Hilsenrath (WSJ correspondent in Davos

in the Wall Street Journal: “An epoch of exceptional monetary stimulus is drawing to a close. Central banks have exhausted themselves in their efforts to spur economic growth with low—even negative—short-term interest rates and bond-purchase programs meant to drive financial-asset prices higher.”>>

Which mean that the Guardian Angel that oversaw the last 9 years of rally and made the SP500 grow  over 240%…just went AWOL.

In a study Deutsche Bank said that the Central bankers intervention was responsible for 40% of this rally (the paper was from last year…which mean that by their calculations SP500 minus Fed would be somewhere around 1,600…).

Reserve Bank intervention usually hits the top 20/top 50 company for each index (due to the volume needed) which means…INDEXING IS FINISHED.

By the way all the large financial planning companies and Private Banks are mostly doing…indexing