Archive for February, 2018

Last week a Russian jet was shot down by a portable shoulder missile. Naturally Russia retaliated with violence and killed all the unit responsible.

The issue is that the weapons have been given to them by the US 2018 National Defense Authorization Act signed by President trump)to the Free Syrian Army, specifically HTS (Al Qaeda re branded).

Now, they really do not understand that a portable shoulder missile in the hands of the “now friendly” Al Qaeda can be easily sent too Europe close to a civilian airport?

When it happens, don’t blame the Russians please.


State of the Markets

Posted: February 7, 2018 in Uncategorized

A day of reprieve today.

Serious damage has been done and, aside today, a period of consolidation will be needed.

Moreover it is an harbinger of things to come.

In the last year Wall Street introduced (a bit like 2006) a lot of new and strange product.

Gamma trades (bet on low volatility), all sort of ETF (robotic trading, factor, ultrashort, leveraged and so on), algorithmic trading, volatility selling).

Always in bull market they find a way to make more money and the regulator just watch.

This products significantly will produce more swings and we will need to get used to it.

And yes…soon or later something will go really wrong. Well at least the Fed now knows it.



My November newsletter was aptly name the Rise of the Machines.

And last Wednesday was Early Warning.

In essence I wrote the new algorithmic  trading and ETF will wreak havoc once they decide to attack.

And they decided provoking immense and rapid losses.

From JP Morgan quant desk (today, not over 3 months ago)

<<JPMorgan’s quant strategist Kolanovic said spike in market volatility will probably trigger some $100B of outflows from US stocks by funds following so-called systemic approaches. Said selling from trend-following strategies contributed to Monday afternoon’s selloff on Wall Street and unwinding of positions betting on continued low volatility — known as index-option gamma hedging, short-volatility trades and volatility-targeting strategies — were also behind the outflows. However, noted recent selloff will likely draw fundamental investors and even trigger pension fund rebalances. ” In a separate article, Bloomberg discussed how momentum-chasing quants were actually ready for the sell-off with Commodity Trend Advisers’ (CTAs) reducing their equity exposure from a three-year peak on 24-Jan while raising their commodity exposure to a six-year high.>>

Moreover I must add that it is clear that ETF (exchange Traded Fund) are selling under robotic advice parameter.

For my clients only, I also explained how to fight the machines. Very similar to the movie, indeed – the future of stock market war is here.

Australia at best is just flat and 2018 could get worse.

After the massacre of every sector starting with manufacturing, we remain only with tourism (very expensive), education and immigration to save the country.

Commodities are completely dependent on China. China saved Australia as they had the all important election Congress – but this year they will really need to reduce leverage in the system. We have a bit of protection from the fact that our iron ore is less polluting than the Chinese one – but do not expect growth there.

Housing indicators are turning south and building activity has slowed down.

Spending is down with zero wage growth and rising costs.

Infrastructure spending is underway – but meant to soften the blow – not enough to avoid it.

In general the earning growth in the ASX200 is subdued (driven by banks), but there are positive patches and in general valuation re expensive, dragged up by the US valuations.

Confronted with this PM Turnbull starts thinking about the defeat in 2019.

His response has been a…..”Trump lite” reform.

-promising a tax cut reduction (oh my…..a Trump-tax lite reform).

-Pushing the defense industry (let’s call it as it is weapon-selling) industry to be one of the largest exporters by 2020. It could have been health or education or superannuation.

And before you accuse just PM Turnbull of incompetence, let’s remind ourselvesthat the high energy bills comes to some errors due to Rudd-Gillard Government.

But also before that the Australian politics have been riddled of policy mistakes (electricity prices already skyrocketed +72% between 2003 and 3013 – font Australian Bureau of Statistics).

What is the issue? Apart the incompetency of our government, it is our election cycle.

Three years election cycles make that no-long term policies can be created and implemented.

You can see with PM Turnbull – it is turning to the next election so it does not care anymore about the scaremongering Budget Debt (which is not – well much better than almost every other country) and think about…tax cuts!!