Archive for January, 2018

US-Russia flare up

Posted: January 11, 2018 in Uncategorized

President Trump approved the sales of lethal weapon to Ukraine.

This was an highly contentious issues as the previous sales were always non-lethal military technology.

This will provoke Russia to answer. It could be a flare up in Ukraine or somewhere else (Russia always plays asymmetric warfare – so something could happen in Syria).

Also in Syria there has been a coordinated 13 drones attack with advanced capability (radius of more than 50kms). While nobody can blame anybody, IS never showed such a capacity (max radius 2kms) and there was a US Poseidon intelligence aircraft in the area.

The Russians already hinted to a potential US involvement as excluding IS, there is only the US backed Syria free alliance.

Unfortunately it fits with my newsletter article on the next Syrian war.

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China announced they could decreasing the US Treasuries purchases.

This is BIG, if true.

It is quite complicated, but I try to summarize.

Trump said that he will really start to target trade restrictions towards different country.

China, biggest holding of US Treasury, might be saying…pay attention – if you target us – we target you.

In effect one of the best bond manager, Bill Gross, said the demand for the current 10 -year auction was incredibly strong.

In effect I think a China  message to the US.

But what if Trump follow up and China respond in kind?

It would be a market game changer.

The US Tax Bill increases the US Debt trillions. If there are lesser buyers the yield (price the US pays for you to buy the Treasuries) will spike.

This Treasury yield has a lot of consequences.

-All the stock market valuation is correct at the current price valuation. As the market is stretched a yield increase will provoke a market repricing with an easy correction  -10% at least.

-All mortgages (also in Australia) will have to be increased as the cost of money will increase (real estate price will fall)

-Bond market (the fixed rate one, not floating or inflation) will fall

-As the cost of money increases, the chances of inflation will increase provoking the Federal Reserve to increase rate and further markets falls.

At this point I think it is just scare mongering, but this is to be watched!

Market Euphoria

Posted: January 10, 2018 in Uncategorized

The market is going really good. Is there a too good option. Well YES.

The relative strength of the entire US index is over 80. More than 2007 or 2000.

 

The market cannot last with this strength forever. The issue is timing.

In year 2000 he RSI went over 70 the 30 April 98 and started cracking mid September 2000.

In Year 2007 it went over 70 in October 2006 and than cracked in October 2007.

In 2017 the RSI went over 70 in March 2016. So the first natural point of control are March 2017 and October 2017.

Euphoria is always the sign of the End.

Party like 2007 – hard but with a parachute ready.