Archive for March, 2018

President Trump did it again…he really implemented the tariffs against China.

To add insult to injury, he also upgraded relationship with Taiwan (that received a stern warning from Chairman Xi just the day before).

We still lack the details, but the market took it very badly.

Hopefully this is the usual negotiating tactic from Trump. Already with the steel tariff, after the broad salvo, the administration is excluding allies as Canada, Mexico, Australia and EU.

So most likely is a negotiating tactic with China, but it will also depend on how China will respond to the double insult.

Market wise a re test of the February lows is highly likely, as my clients know from quite a while.


Jerome Powell and the Fed

Posted: March 22, 2018 in Uncategorized

The first new chairman speech finally came and did not disappoint.

It kept the “benevolent” scenario by keeping a three times rising approach for the year (not four as many fear) for 2018, but it did increase the trajectory for 2019.

The inflation speech was a bit subdued as the US in March encountered a soft patch of  data.

In all it is a clear continuation of Chairwoman Yellen .

There are also quite a few odd things. Inflation is shown as not growing despite the Fed sees stronger economy and lower unemployment. In reality it should mean that the FED will tolerate some inflation after so many years.

My view

The Fed continues to be dovish, but it downplayed the risk of 4 hikes as there are so many risks to the scenario.

The biggest risk is still the Treasury yields. With so many US issuance to come (to finance tax cuts and infrastructure) – a break of 3% (10 US T bond) is just about when.

On the share side there will be clear winners and losers depending on earning growth (very different from the last 9 years). The era of ETF indexing domination over active management is truly ended (also ETF will have winners and losers).

Of all the really bad Facebook harvesting data saga, one thing is clear.

Facebook rigged the election not the Russians!!

In very few words Cambridge Analytica data highlighted who is Liberal and convinced the person that Hillary Clinton was not a candidate worth voting for (I do agree as I know too much, but I am not trying to change anyone mind).

Facebook share holders

Posted: March 21, 2018 in Uncategorized

Interesting to see who are the biggest supporters of Facebook that has been shown to be the real Big Brother.

Out of the first 5, 3 are ETF providers (Vanguard, Blackrock and State Street). The first Australian presence is, at 26th, one of our superstar manager, Magellan.

But mainly are the big ETF investors that are bearing the brunt.

Red Storm Rising

Posted: March 18, 2018 in Uncategorized

The US and UK are escalating the pressure on Russia.

And Russia is very quick in eacalating back.

UK accused Russia of poisoning an ex Russian agent just giving 1 day to recuse (international law says 10 days from providing a sample).

US started to arm Ukraine with deadly weapon (instead of just protective weapon).

US is accusing Russia of infrastructure cyberattack.

Russia is saying that they see preparation of a fake gas attack to be blame on Syria and warned of retaliation on any asset used to punish Assad.

Russia is showing off the new nukes.

Now we have a scary shift. While before Russia was quite slow and quite low profile, it seems Putin lost all hope of reconciliation.

The immediate expulsion of 23 diplomats from Russia and the closing of a UK/Russia facility signals a different pattern.

Welcome back to the Cold War .2 but without rules of engagement.

Bear Sterns, 10 year on

Posted: March 18, 2018 in Uncategorized

And we have not learnt anything.

The Global Financial Crisis technically started 10 years ago with the failure of Bear Sterns, 16 March 2008.

10 years after we are still in the midst of the experiment (Use 20 trillion dollar injected in the economy since than. And still not retrieving it for real).

Moreover President Trump is winding down the Dodd-Frank regulation which was regulating the banks (avoiding banks to make crazy bets like the Bear Sterns one).

We are still in the magical thinking on how to make money. At the time it was mortgage, now is inverted volatility trades and crypto assets. They do not represent an existential threat as mortgages…but still a threat.

But geopolitics is of a different order of magnitude in respect of 2007.

So it is smart to be on edge. And Jeff Gundlach, CEO of Double Line Capital- ultra respected market guru and the only one who warned about the GFC in 2006- just sees a negative US stock market for the year (not a financial crisis).

The UK is escalating the war of sanctions and expulsion against Russia.

The West is truly back to the cold with with Russia.

Apart the poison used there is no clear indication that the kill has been mandated by the Russian Government.

The only thing sure that, due to the poison used, it is a kill from a Government or afrom someone that has access to Government laboratories (and Russia for the 10 years after the Cold War has been the black market of these items).

In the spy world the first issue is that  “hit” could be from the hostile or simulated by a friendly that wants to show the hostile as bad (false flag operation).

So the accusation against Russia are unsubstantiated.

But if President Putin ordered the hit why could have done? The target was a UK double agent working for the Russian military secret service (GRU) – exchanged with Russian spies over 10 years ago.

The hit, if it was that, would be a message (hence the use of a clearly government sponsored weapon). It says that if you betray Russia we will find you and your family.

No matter time, protection and circumstances.

This is happening as the US and West is doubling down in their anti Russia efforts both political, military and secret operation.

If it was a Western false flag – why would have happened? With the war in Ukraine kind of frozen (even if the US started the delivery of offensive weapon to Ukraine) and the increasing distance between the US and Europe due to President Trump – sanctions would have been lifted pretty soon and a rapprochement Europe-Russia would be starting. Now there is a case of more sanctions (but interestingly both France and Italy want to see the proof).

As you see…real shades of grey. Our kind of traitor is a John Le Carre book

I looked through the 20 main  companies hit by the steel tariff (more than 20% export to the US) and there is not one enemy (the most hit is Taiwan, South Korea and Sweden).

There is also a large number of US company (even the US Government) that will have to pay more from the tariffs as they import more than 20% of steel as input – so it will be an inflationary cost.

Also Government contractors (military) are suffering an increase of cost – as part of the airplanes (specially military) use high grade steel not produced in the US.

Also if the Buy American motto is 100% – the upstream supply chain is likely to have foreign steel.

So while maybe the US steel company will have an advantage, definitely there is an impact on the US industries using steel including the all important US housing.

As price will go up there will be also pressure on consumer.

So it will bring inflation – but for a period. It could even get the US in the next recession give and take 6-12 months to let the “flow on” take effect.

Really incredibly stupid.

The Rise of the Empires

Posted: March 14, 2018 in Uncategorized

In 2018 we see a common trend …the rise of the Empires.

In US President Trump is eliminating all the outsiders (Cohn, Tillerson) and substituting them with loyalist (Navarro and Pompeo – both anti-China). And it seems also Gen McMaster and Mattis are on the way out – as they are too independent thinking.

In China – President Xi is now more powerful than Chairman Mao and can reign supreme until death. Any dissident get arrested or disappears.

In Russia – President Putin is going to towards re-election. Any dissident gets killed.

China and Russia are already made clear they are not a democracy.

The US has very little of Democracy remaining. I wonder when it will be clear to everybody that it is an empire in disguise (just use the media to kill the truth).

The “check and balance” strategy is disappearing. And all the three empires are concentrating in the next generation of war machines.


Posted: March 14, 2018 in Uncategorized

A few days after Trump economic adviser “resigned” also the Secretary of State Tillerson is gone. All the ex corporate CEO are going. Which were quite moderate.

Pompeo, ex CIA director, is an hardliner. He is specially famous for considering China more than Russia as an adversary. And naturally Iran (well everybody in US who understands the Iraq wars is against Iran as most of the IED that blew up Americans were from Iran). Also Pompeo does not believe in Russia meddling with US election.

So in all the changes are towards more an hard line US position.

Also, everybody will praise the first female director of the CIA.

Woman yes, good not. She was in charge of a rendition prison in Thailand (waterboarding etc) and executed an order to destroy evidence before a Congress inquiry).

In all the US is showing its real face (real even with President Obama). Just another Empire coated with a democracy sprinkle.