Archive for March, 2017

Obamacare was the first real failure of President Trump.

While this is not crippling for the stock market – it is indeed a strong signal.

It was not part of the pro growth economic agenda that the market loves – and also President Trump always considered as a “favour” to the establishment.

But also not President Trump is on watch and cannot fail gain. It also emboldened a part of the Republican party clearly against Trump. And also put a dent in the idea that he is a great negotiator. He bluffed and lost.

So he is on the rope now.

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Market update

Posted: March 23, 2017 in Uncategorized

Yesterday we saw the first serious fall after President Trump election…and a wideset panic.

First…a bit of contest. It has been really a long time since we had a -1% fall in the US Market. In itself, that is quite incredible.

As forecast go, there is a bottoming process on course. As the damage has been relevant it will take circa 9 days tom”repair” the Bull market – if it can be repaired.

If it cannot  be repaired  there is at least a 5-7% pain.

Most probably we will have our answer much sooner. Thursday (US time) there is the big test for Trump on Trumpcare.

But it is also the first test of all Trump proposals as the tax reforms.

SEAL Ryan Owen, American hero

Posted: March 22, 2017 in Uncategorized

In February there was a not so perfect American navy SEAL operation in Yemen.

It resulted in SEAL Team 6 Williams “Ryan” Owen and wounding of other 3 in an operation against Al Qaeda in Yemen. But a trove of documents had been found.

Everybody accused President Trump of give it a go to a bad operation (already approved by President Obama) or accusing the SEAL themselves.

Unfortunately the SEAL cannot tell us what they found.

But if you connect the dots…after less than a month there is a strict ban of electronics on airlines from the Arabic regions.

The news said that Al Qaeda in Yemen wanted to plant bombs in the batteries of laptops in flights from the Middle East (UAE, Kuwait, Saudi Arabia, Turkey, jordan, Lebanon, Morocco, Egypt and Algeria) – yes also Emirates Airlines etc so dear to Australians.

We will never know, but most likely Owen and his team saved 300 people from being blown from the sky.

Thank you

Trump and 26 Little Indians

Posted: March 22, 2017 in Uncategorized

As in the Agatha Christie’ thriller 10 Little Indians….26 Republican Congressmen are opposing Trumpcare.

And Trumpcare is an essential ingredient to the Trump policies and Rally…

Will they kill the Bull Market?

Or their fired?

Volatility

Posted: March 21, 2017 in Uncategorized

The media at large tells you that there is no volatility.

There are two gauges of volatility based on the option pricing on the market.

The first one is the commomnly used VIX that indicates the day to day volatility.

This stands since December around 11. It is an inverse indicator, the lower tye better, and indicates a positive setting for the stock market.

The other one, less known, is the SKEW.

It indicates the possibility of a one off sirprise catastrophic event.

This now stands close to 155 over the maximim reached during the GFC and practically on par with the Nasdaq 2000 bubble.

So there are a lot of institutions freakishly scared. Be warned.

This is the most important question at the moment (aside all the macro issue).

Is really inflation coming?

Well inflation is driven by commodities price ramping up because of increased economic activity or due to wage growth.

The current inflation spike has been driven by commodities price spikes.

This has weak foundation. The current spike in commodities has been driven by

  • OIL  – An OPEC agreement that is already showing signs of ending in crumble (as per usual OPEC) plus the usual shale oil issue
  • A commodities price turnaround driven by Chinese policies (cutting a very long story short, falling commodities price in 2012 created a drop in Chinese prices that spurred the world to buy more Chinese product. Commodities prices stabilized last year and so inflation started to appear in China in August 2016 (before Trump!).

The hiccup is that without wage pressure the buyer will not be able to buy the more expensive products and inflation will fall again.

Now let’s look at wage pressure…the real culprit of inflation.

Around the world there is no sign of wage pressure from Europe, to Japan and to Australia. China has a bit of inflation, but driven by the factors mentioned before – so demand driven.

In US there is the start of real wage pressure and it will increase if at least part of the Trump policies pass.

So we could find again in a world where the Central Banks policies diverge.

The last time it happened was December 2015, when we had the January 16 crisis in China and Italian banking crisis.

So your view on inflation is the most important point as the market will find the weak spot  of the moment and hit it (it could be even an Australian real estate issue).

 

Updates from US and Europe

Posted: March 17, 2017 in Uncategorized

USA

The Federal Reserve finally hiked, but remain “dovish” for the future. The markets loved it and then calmed down.

It is all good, but several expert commented that the FED is risking inflating the bubble and falling behind the curve with future nasty surprises (faster rising of rates in the future).

While I do agree, I think the FED is still trying to understand what President Trump is doing and keeps its cards to its chest. Still dangerous.

President Trump had a full backlash on Obamacare and now also its Budget preview to be presented the next day seems almost “Dead on Arrival” (as some Republican said).

We are coming into the times when the President has to deal with Congress and usually the President has very strong powers in foreign policy, but quite weak one for internal affair. Dangerous weeks ahead as the rally is based on the idea that President Trump can deliver his promises.

Europe

The populists did not win in Netherlands (one of the most diverse and international European country)  and Europe is cheering.

A deeper analysis shows that the pattern from 2012 has not changed (the government won but lost 7 seats and the populists lost, but won 8).

In the last days also we had a very good performance of the establishment government in dealing with Turkey and quite bad performance of the populist Wilders with a confrontation with his brother.

Even more interesting, the ruling party had to move to the right to fight the populist wave.

Definitely lessons will be learned from this election for France, Germany and maybe Italy.

In essence in Europe the elites can take a breather and be happy that there is no Adolf Hitler* in sight.

*Note to be not misunderstood. We all know that Hitler was the father of all evil. But at the start of his political career he succeeded as he was a political genius. Evil, but genius – it took the entire world to stop him.