I decided for a easier way to publish my newsletters directly from my blog,

ScalaPrivateW_NEWSLETTER -June 2018

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Gold weakness

Posted: July 23, 2018 in Uncategorized

Gold has been one of the worst performing sector in July what happened?

 

There are several factors at play

  • All the metal conglomerate is under pressure from the potential trade war spill over.
  • June /July are typically weak month for gold and precious metals due to the North Hemisphere summer holidays
  • US Dollar strength (now in doubt as President Trump is looking into currency manipulation – specially the Yuan dropped like a stone).
  • Temporary subdued perceived geopolitical crisis ( I say subdued as satellites show an expansion of North Korea missile program structures and the new Iranian sanctions are due on 4th November).
  • The market has been so good that gold, the classic counter trade, fell. Be wary, crowded trades never worked the last two years.

So – weakness, but not uncommon. Interestingly gold miners are at one of the cheapest level in respect to gold price.

A similar theory applies to all precious metal sector.

Trade wars

Posted: July 12, 2018 in Uncategorized

Ttade wars are ratcheting up and, at least until the November Congress election, they will keep on being with us.

I explore more in detail in my newsletter, but it is a multi_faceted issue.

1 Part show for the mid term election

2. Part real – China 2025 is a direct attack to the US supremacy

3. Overdue as China is attacking the world since 1995.

The issue is that there is no negotiation as until now everybody thought is was a fake trade war.

About the market reaction – it is both bad and good. Why also good? It is one of the few thing that can stop the Fed rising interest. Interest rate, at the end, are the only real killer of bull markets.

On the side, and not talked about, the US Congress is trying its best to take away the tariff power from the President. Not an easy task with ann election pending.

Australian market strenght

Posted: July 2, 2018 in Uncategorized

Recently the Australian market has been on a tear. Notwithstanding lower growth and weak currency.

The reason behind the sudden move is due to the end  of financial year window dressing, but also to the US/China trade wars.

The large share fund with Asia ex Japan area of investment are moving away from the war zone -so exiting the markets more China – dependent to more China independent markets (Australia has a high correlation with China, but less than Hong Kong and Singapore, for example).

I dare to say that all media and commentator got the summit wrong.

A summit, by definition, is an establishment of rapport. There is no winner or loser. It is simply to give power to the real negotiators to negotiate with the full backing of the powers they represent.

Saying it is a North Korea or Chinese win is just an anti-Trump media scoring point. If it was President Obama the media would have already demanded a Nobel peace award).

The summit dispelled 70 years of mistrust and put the basis of serious talks from ground zero.

Yes, we do not know the future and the wording was similar to the 1994 agreement. But that agreement was never backed in person by the Commander in Chief of each nation.

So give to President Trump what is of President Trump. He has done what no US President ever succeeded to do.

Now a new era is open. We do not know if it ill be a success or not.

It could even deliver a blow to China if Kim leans towards the US.

I am quite surprise that with all the mega headline on G7 (or G6+1) the media at large is missing the point.

This is all the strategic battle for Trump not to lose Congress in the mid term election.

The G7 was a failure due to the US tariff against his own friend? No – it was a win for Trump’s electorate – President Trump DELIVERED what he promised – hit the one that undercut (or better said, are perceived to) the US. He delivered for his electorate.

The “peace” with Kim Yong Un. Yes nothing has changed (similar promises were made in 1994)* and potentially President Trump got into a China trap – doing what China wants.

He did not start another major war, the relations are much better than before and less military cost for the US to protect South Korea and Japan – again exactly what he promised the US electorate.

I also have two gripes (and I am not pro-Trump)

-If President Obama had a similar achievement (instead he had wars with Lybia, Ukraine, Syria partially) – the media would have give him already a Nobel prize.

-After 70 years of “at war” status – you cannot pretend a detailed peace prize. It is already very good that they did not left Singapore with the promise of killing each other.

In the middle east, President Trump made some kind of agreement with Israel and Russia to take care of it and repelled the Iran nuclear agreement. Again President Trump DELIVERED to his electorate.

So this is not a new President Trump going mad. It is simply the Republican strategy to hold on to the US Congress in November 2018.

As a strategy it is delivering. The Democrats were hopeful of a “blue wipe-out” (blue is part of the Dem symbol), the last election round instead showed a much more balanced situation.

The battle for the mid term election is started.

Democrats are concentrating on California – atypical Democratic state, but winning more votes is essential and they just enlisted ex President Obama as a spearhead against President Trump.

Do not discount President Trump and his representation on the media. The US economy is better than ever before (even if still has issue) and the fight on tariffs is exactly what President Trump promised his electoral base.

The first election battle on Tuesday (8 states primary election) confirmed not a wipe-out scenario as the media headline would indicate…but quite a balanced outcome.

Democrats need to pick up 23 seats to win the House of Rep. In the Senate they need to pick just 2 seats, but lose none (and they are contested in 26 out of 49)

So no Red Wave (Democrats) or Blue Wave (Republican) at this moment.