Archive for July, 2017

Electrical cars issues

Posted: July 27, 2017 in Uncategorized

Now we are starting hearing that France and the UK are banning petrol and diesel cars.

As usual the statement is vague as politicians are out of touch.

Apart the good idea, issues are everywhere. Even in a quick take

1. everywhere (including Australia) we have an electrical grid that cannot cope already now due to air conditioners, imagine cars.

2. The government should roll out a number of fast charging high power charging points for thousands of cars.

3. The government will have to change the tax system as a large part of tax receipt comes from fuel ( here comes the talk of pay by kilometer rego).

Even the definition of EV vehicles is quite confusing (hybrid).

2040 is quite far, but if you think how many years and money it is needed to re do the national electricity grid…it is not so far. And imagine the electricity bills….

So…exam failed, back to study the matter.


Middle East battlelines

Posted: July 21, 2017 in Uncategorized

Middle East is as usual the most complicated part to decypher as there are a lot of frenemies (friend in one side and enemies of the other).

But the last moves almost draw a battle lines similar to the cold war in Europe with actual war zones (thick red).

Qatar rift – the CIA released prove that the issue (which started from 2014 at least) was sperked by a cyberattack from the UAE. It looks again (with Yemen, still at war) that the Saudi have bitten more than they can chew as it pushed Qatar straight into the arms of Iran and Turkey. Qatar is a supporter of Palestinian interest against Israel and as soon Israel and Saudi Arabia announced mutual cooperation…attacks start in Israel.

In Syria the US stopped supporting Anti Assad rebels, de facto accepting the Syrian Government. This is a major move.

Israel keeps on hitting weapons convoys to Hezbollah. In these years Israel has succeeded to be “out of sight out of mind” by the various quagmires…but it is slowly being dragged in.

Turkey is moving more and more towards Russia. It accepted Russian air missile defence systems, it has a rift with Germany and a Turkish newspaper released all the US bases in Syria embedded with the Kurdish. A pro Russian Turkey is a strategic nightmare due to the Black Sea access. Also an alignment Iran – Turkey is quite a shift (as it would be Turkey, Syria, Iran and Iraq, Lebanon Qatar ) vs Saudi Arabia, Egypt, UAE, Kuwait, Libya, Bahrain.

Iran is recruiting for a potential fight in Iraq in case the Iraq Kurds announce a Kurd State (which probably will be not liked also by Turkey – even if Turkey is more enemy with the Syrian Kurds the the Iraqi Kurds). Also there are increasing tension between Iran and the Gulf State (too many to mention).Capture battlelines

Everybody reads Game of Thrones…but there is a much more interesting and scary closer to reality. And while not in the news is still there. In 2 weeks the NK is preparing a new ICBM launch (font CIA) and the current new CIA estimates North Korea will have an operational nuclear ICBM capable of reaching the US main cities in 8 to 12 month (April to June 2018). After that US will have to live with a North Korean nuclear threat.

The players

The Kingdom of the North is in this case North Korea (how matching!!).

North Korea has been an issue from the Korean war of the 1950s. From there there is a fear of the Americans as they annihilated at least 10% of the population and dropped more bombs that the entire Pacific world war campaign.

Before Kim Yong Un, since 1994, there were quite a few attempts of pacifying  the situation as the leader believed that artillery and potential biochemical attacks were enough to scare the US.

The recent US wars of the US against Iraq, Syria and Lybia showed the current leader that the US is not scared to go against a country with bio chemical weapon that cannot hit the US soil. Hence Kim decided that the nuclear ICBM was the only option to protect himself from the US.

China can offer North Korea protection from the US, but Kim is not a trusting person (normally he kills who has too close relationship with China, even his uncle). Also there is quite a bit of hatred towards China due to ancient history – for about 600 years (First to sixth century AC) there was the Kingdom of  Goguryeo and then the Three Kingdom period. As Asia has a long history these ancient issues have still strong influences now.

So there is no turning back from Kim. Nuclear ICBM is his only saviour.

US is the Kingdom of the Rock (House Lannister)

The US does not really want a war (as it sent a message to Kim by leaking a 40 minutes Predator drone video showing Kim close to an ICBM without taking him out), but does not want to accept a nuclear ICBM ready North Korea.

US never intervened as it thought the Yong Un distany could be taken down by an internal coup, but Stalin, Castro, Hitler are showing them that an internal coup against a ruthless dictator is not that easy in reality.

It will need to come to a conclusion this winter. As in House Lannister there are factions that believe Kim is purely defensive, but also more hawkish faction. As usual, the more conservative are actually the military as they know the consequences, while several politicians are much more aggressive. The time is ticking.


China would like to  maintain the status quo. North Korea is an annoying neighbor , but much better than a failed state and potentially a US ally.

So it is playing a double game – looking like helping the US – but without crippling North Korea (stats from the earlier this year shows a 40% trade increase). It is trying to stretch the time up to when North Korea will be not touchable.

South Korea

South Korea always lived with the North Korea threat and just wants to avoid a mega war. In that it is more allying with China than US. So much that in case of war it could do a masterstroke and ally itself with South Korea helping South Korea to disengage from the US alliance.


Again does not want a war that could hit even Tokyo. It is using the situation to present itself as the best US friend in the area and PM Abe is using this issue for pushing Japan out of its pacifist constitution


Russia does not have too much at stake in this game. It wants North Korea to resist just as propaganda tool against the “big bad US”. So it increased fuel export to North Korea by 40% vs 2016.

Other player is Iran (a weapon development partner of North Korea). It can’t do much as it is far removed, but definitely will at least try to help with weapons.

A real game of thrones ….and at least we know when it finishes (still waiting for the last book of GOT!)







Australian real estate

Posted: July 13, 2017 in Uncategorized

The debate about Australian real estate seems to go on forever.

That prices are excessive is a fact, but are we in a bubble and will price to up and up.

The first driver of the pricing is interest rate.

In 2007 you could get a mortgage for circa 9.5%pa and now 50% less at around 4.5%.

If you think about the property in the same period increased of 100%!

As there is a leverage involved you can see the 1:2 correlation.

To see the future, just look at the interest rate movement.

While the Reserve Bank of Australia is still, the bank are all increasing/restricting the lending criteria.

So the answer on the data is that pricing are stabilizing and could go back 5-10%. But no crash.

The potential for real disruption is coming from the Government – that usually overshoot.

The new rules on foreign  owners and vacant property (some data from water usage and census say in Sydney there are approximately 90,000 vacant properties and 88,000 in Melbourne (20% of the housing investor market and 4.7% of the overall market) increase the pressure.

Also some new banking regulations (too long to mention but investor loan have to be reduced from 40% of the bank balance sheet to 30% and other prudential measure.

All the above can increase the pressure on housing to a -20% -30%.

And if in the next election Labor Party wins and they maintain the promise of cutting back the negative gearing that could be the end game.

Could the Government be so silly? Yes it can.

Just look at the gas/electricity price hike. In essence it happened because the Government allowed too much gas to be exported (Rudd-Gillard decision to allow gas export from Queensland to Japan).

Trump Jr. and the markets

Posted: July 12, 2017 in Uncategorized

The latest controversy is a quite damning evidence of Russian meddling in the election and a very immoral behaviour of the Trump family.

It is bad (but the US has an history of meddling with other election, from Italy and Greece in the 70s, to the ’90s Colour revolution and the recent declaration that the US supports regime change in Iran).

Definitely King Trump and his family created a nepotism situation which even the Vatican should be jealous of. And they call it democracy.

Anyway, back to the data.

The market reacted as usual – kind of not cre – a brief 0.5% dip – immediately recovered.

It will be more interesting if the special prosecutor start digging I assume.

Still impeachment or charges are quite far and impossible to account for. They could even come, but in a few months – so we cannot worry about it right now.

But this new development will have some consequences anyway.

As the President gets bogged down in these fights, all the reforms (Tax, Obamacare and any meaningful legislations) will be harder to pass and find consensus.

Also, as uncertainty reigns supreme, also GDP growth will be slower about 2% (vs 3%) and Fed interest rates hikes and QE unwinding lower too.

In the last sentence, you can see why the market is not unhappy about this.

Aside black swan events that by definition cannot be forecasted, a recession in the US has always being provoked by the FED rising interest rate too fast to cool the economy and inflation.

So with lower rates for longer, the market can keep on rallying – unless the king falls.

As an institution you put on some macro trade in case things go wrong and keep investing.

Absolute power

Posted: July 10, 2017 in Uncategorized

Interesting article from Anonymus.

4 companies (Blackrock Vanguard StateStreet and Fidelity) are practically the main shareholders of everything finance.

Even the Fed.

Interesting they are also the major providers of ETF which, as of late, are becoming more and more ‘active’ as shareholders at board level.


Takes on the G-19

Posted: July 10, 2017 in Uncategorized

It is funny how pictures shows more than 1000 words.

From the pictures it seems that Trump is quite isolated and that is why it a  G19.

President Trump and Merkel (Germany) clearly do not like each other (as Junker, EU).

Trump and Putin are quite happy together (as Merkel and Putin).

Trudeau (Canada) and Macron (France) like a lot Merkel.

Turnbull (Australia) does not particularly go with Trump, but likes a lot Macron.

Macron does not like Trump.

Trump and Abe (Japan) are ok with each other and so is Theresa May (UK).

Other weird tales from Hamburg.

Ivanka Trump presided the chair of the President – who said that nepotism was a Vatican prerogative?

As the economy (apparently) is all good for the industrial banking elite….the huge demonstrations and fights on the street show that the “average Joe” is not that happy!!


China and Germany are taking the lead from the US as world leader.

Putin is playing the long game to re enter the correct circle.

The US is fading into isolationist.

The worry is that no dominant super power, in the human history, went into second place without a fight.

Even the first and second world war, in reality, was between a declining British empire and a rising German nation.


Killer ETF

Posted: July 7, 2017 in Uncategorized

While everybody uses and loves the raise of ETF (also I do), if you were if you were to ask me what keeps awake at night I would answer Exchange Traded Funds (ETFs).

The ETF provide instant diversification on any market (also in the not so tradable ones) and the are easy to buy and sell and now represents a large part of the trading on the market.

Something similar happened in early 2000 on commodities.

In the early 2000s investors discovered that commodities were providing good diversification so they started to use commodities swap (which were covering a commodities index from sugar to soy bean to gold).

During the 2008 people in panic and in order to cover the losses of the market started to sell commodities swap. As it was easy and covering an index -all commodities fell by 60% without differentiation.

And contrary to the stock market, most commodities never bounced back.

If panic ensues in the stock market, this time it will be worse than 2008 and it will not recover for a long while. As a chain reaction the market will destroy itself.

Logically, as long as you know it, you can play a different game.

Today North Korea shot an intercontinental ballistic missile that, on normal trajectory, could reach Alaska or Darwin (Australia) with an approximate range of 6500.

A few pointa

The date signal a clear message to the US.

The precious  test was the 14 May with a range of 4,500km.

This represents a 30% performance improvement in little over a month. Probably this also means that the estimates for a full ICBM (8500km+) in 12 to 18 months are wrong. Probably 6 months.

The stakes are suddenly higher 

Madness of war 

Posted: July 3, 2017 in Uncategorized

In the news we all been told what a brutal period this is and how mad President Trump is.

I am reading an historical book (Nemesis from M. Hastings about the last 2 years against Japan). General McArthur, after been kicked out of Philippines,  was really upset and his pride wounded.

So in 1944, instead of isolating Philippines and target Japan…decided to attack Philippines landing in Leyte.

The victory costed (between Americans, Japanese and Filipino) 750,000 lives.

So this time is not so bad and hopefully even Trump knows better.