Posts Tagged ‘Markets’

What a devastating weekend for Greece. The very-similar-to what-the-Troika-proposed-conditions (which made me wonder why the referendum in the first place*) got rejected as “there is no trust” and they are still working on a deal till Wednesday.

Let me clarify for you, as it gets more complicated by each minute you read about them.

If the Germans were Americans all the media would say that they are trying to organize a financial coup d’etat (takeover of a state by violent/political/financial mean) in a democratic country.

Since Germany has a dark part, the media are embellishing the proposition.

But I do not know how to define it otherwise.

Greece would place EU50 billion of Greek State assets (ports, railways etc)  in an independent (from Greece, but dependent from the Troika)  company as a guarantee for the loans provided.

To make it clear it would be a Luxembourg based company which would be managed by Greece under the supervision of the European Commission (EG Germany).

Otherwise Greece can take a 5 year EU membership suspension to fix its own problems, with some humanitarian aid.

Now PM Tsipras has to negate all of its promises and more, becoming a German puppet government or resign (which has been always the Germany objective).

I really hope that the Greeks will finally say OXI (NO) and get the hell out of Euro, EU and NATO.

Probably the Greek Government will try to say YES and stay in the circle (and find a way around to go back on its promises).

This is clearly a financial oligopoly which do not care of people or democracy.

The markets will remain jitter prone. Still at the moment there is no contagion risk as the market goes (politically can be different)

Two interesting side – thoughts – but of extreme geopolitical instance that appeared in this round of negotiation

There is a clear “hard split” between South Europe (France, Austria, Italy) and North Europe (Germany, Finland, Slovakia).

And this was “in motion” from several years.

The most surprising (and scary) thing is that Germany, for the first time since the defeat in World War 2, completely disobeyed a US request (the US is here represented by the IMF) to negotiate with Greece for geopolitical reason.

This is most important as it means that Germany wants to rise its status as a new power (apart USA, China and Russia) within (or without) the EU.

This message will not be lost on the US (nor to Russia and China) and this shift which could have  far and reaching consequences – much more than Greece itself.

Some people believe in patterns some not. I just watch and be aware of them.

SP500 looks like a 3 five year wave higher highs/lower. Gold USD is resting on a 20 years support

.Sp Monthly Long GOLD MONTHLY

And then you add what institutional money are doing now

Capture Smart Money

And then make up your mind.

Markets: US Fed to the rescue

Posted: April 10, 2014 in Uncategorized
Tags: ,

As usual, as soon as the markets seemed to fall off a cliff the US Federal Reserve came to the rescue pumping liquidity and talking dovish on interest rate (not on tapering the taper).

So nothing changed. We still have 2 out 3 indicator in red alert and the FED intervention results gets weaker by the day. As suggested probably it will go on until end of April (next week is Easter).

So nothing really new. The ominous signs are still there.

Last Friday, in the US market, apparently nothing major happened. But in reality something very strange happened.

There has been a spike in volume of buying and selling at the same time.

Very unusual, like if someone wants to hide something (you can actually dump Nasdaq growth share and buy protective healthcare share if you do not want to spook the market).

Nasdaq is showing more weakness than other indexes.

Conclusion: it looks more and more like a suckers rally, we a probability for a final move up before something really bad happens.

 

 

I always warned to pay attention to the markets: all these new market strategies (Eg Quantitative Easing) invented and introduced by the Central Banks and Government really saved us from financial destruction in 2008. But they also introduced potential black swan events that in many case can be “potentially seen”, but that can never be forecasted. A bit like land mines. You know they are there….but you will never know if or when you hit them

For example last year in Japan for 2 days the Japanese bond market went haywire until the Bank of Japan intervened.

And there are quite a few other risks, as these few days showed. What happened?

In  two days the SP500 fell almost 3% going to oversold and now sitting on the last defence (DSMA 75 days – at the break of that it would aim for the SMA 200 – 1710). We have been somewhat sheltered by the Australia Day holiday.

On news/media analysis all was sparked by the PMI reading in China. This acted as a contagion fear as Emerging Markets are on a verge of a high inflation/ debt default (specially we find that Brazil, Argentina, Thailand, Indonesia,Turkey, Ukraine are under stress).

Delving on the matter this is one of the unintended consequences of the tapering of the US Federal Reserve stimulus (the Fed is holding a 2 days meeting now):

– The Federal Reserve Quantitative Easing flooded the emerging market with easy money that fuelled growth, but also growth. Now that capital repatriates to the US.

-Emerging Markets Government, in the face of slowing Western consumer demand, did their own style of quantitative easing increasing the debt size.

– China is restructuring – Bank of China always use the Chinese Spring Festival period. In this case the POBC used buy-back purchase of 21 days reverse REPOs to restrict liquidity during the Spring Festival (which automatically will unwind in 21 days). Liquidity issues and credit liberalisation will be the focus of  2014.

Investment scenario:

Thursday was the start of the crash. There was some unidentified (FED probably) support at the end of the day that limited the damage.

Friday the support was taken off and even market intervention did not save the day.

Monday was a day of stabilisation and ended off the lows – a few minutes from the final bell it still ended in slight negative territoriy – but it wasn’t a crash.

The market does not look in panic mode, but the big decider will be the big corporate earning situation in the US (Apple , Amazon and Google ) and outcome of FED. We are tethering on the edge.

I think this is a warning shot of things to come. We are not in crash status and this healthy correction could also make the Fed (currently in meeting) rethink its bond purchase program. So in the end , the rally could resume into March.

But a warning shot is a warning shot. Usually another, harder, will follow when you do not expect it

I am trying to examine who is the Tea Party as now there is a real battle within the Republican Party of the normal Republicans and the Tea Party.

Why it is important to you? If they had won, the US would have gone over the Debt Ceiling and the market would have crashed possibly creating a 2008 scenario.

So the battle between the normal Republicans and the Tea Party Republicans is important as the next Government closure/Debt Limit is 15 Jan 2014 and 7 February 2014. And any evolution of this battle will be felt immediately on the stock market – possibly even end of November 2013.

The Tea Party historical foundation lay in 1773 in the Boston Tea Party (the Americans refused to pay the tax of tea to the English and defied what was, at the time, the largest world superpower). Rhetoric apart, the first recent activities are to be found in 2001 and the movement started to support its own candidates from 2009.

The Tea Party is essentially a decentralized party based on Judeo-Christian values  without an uniform agenda.It is labeled conservative, libertarian and populist with teh aim to return to the basic USA (Founding Fathers Documents).

A series of non-negotiable points are

1. Illegal aliens are here illegally.
2. Pro-domestic employment is indispensable.
3. A strong military is essential.
4. Special interests must be eliminated.
5. Gun ownership is sacred.
6. Government must be downsized.
7. The national budget must be balanced.
8. Deficit spending must end.
9. Bailout and stimulus plans are illegal.
10. Reducing personal income taxes is a must.
11. Reducing business income taxes is mandatory.
12. Political offices must be available to average citizens.
13. Intrusive government must be stopped.
14. English as our core language is required.
15. Traditional family values are encouraged.

How they are fairing in the election

Loosely speaking they seem to be in a “declining pattern”, but in April 2012 approximately 44% of Americans (including ex US Chairman Greenspan loosely agreed with their view). Declining, but still a force to be recon with.

2010 mid term election NBC identified 138 Republicans Tea Party (129 Senate and 9 House – 32% won). It was in general a big win.

In 2012 election they were still a considerable force, but not anymore as a new storming political force.

Current Situation

Speaker of the House Boehner has been seem to be bending too much to the “loud, but still a minority” Tea Party and that he needs to stand against the Tea Party (specially Texan Senator Cruz – held as an hero on his return to Texas). He will be tested on new issues soon (immigration, farming bill and  budget) and show the Republican Party direction.

The Tea Party is also not too much concerned with the Presidency of the US, so they can play hard ball, but also they are raising powerful enemies such as the US Chamber of Commerce and the American Trucking Industry Association.

The outcome of this very American battle will shape the markets in the very near future.  My forecast that a defeat of the US Tea Party could trigger a massive “blow off” rally by year end.

This is a graph of the Institutional Index. This is not a real index, but the SP500 cleaned from retail and Fed intervention. It tells you in reality what the institutions are thinking. It is daily. It went under support around the 25 Sept.Image

China resurgence

Posted: September 11, 2013 in Uncategorized
Tags: ,

The Chinese market formed a nice bottom in August and now everybody starts jumping on the boat….which will be very fast for the next 6 months.

The new political class now it is in charge and will have to show that they are great and wonderful…with a lot of fake data.

The funniest example is the jump in retail sale is great….but in China is accounted as number of units that left the factory…….can I repeat…not sales! Just how much increase of production.

Then in six months (after the Chinese New Year) there will be a lot of unsold items and factories winding down production and the evaporation of the miracle.

The issue is that the Chinese issues are much more deeper and a lot of them are social:

– the Chinese are some of the biggest savers in the world

– the Chinese “saving face” is extremely important. Even the Government does not know if the figures from the various region are correct (well they are not).

The GDP growth is 7.5%pa (in reality will be 5.5%pa if my calculus is correct)

But until everyone believes everyone else all will go all right. Enjoy a rally at least until end of the year (probably after October, I mean)

It feels a bit like the movie “Inception”.

The first bluff was Obama’s Red Line on gas attack (by the way everyone forgot that Saddam, with Reagan approval, gassed 1,000s of Kurds and Iranians in the ’80s…but that was a cold war).

The second bluff is Putin saying that the UN could secure 50 sites with over a 1000 tons of gas in the midst of a civil war.

The third bluff is Assad agreeing in the destruction of gas which he knows nobody can do thoroughly (well one point….nobody knows 100% where all the stockpiles are)  

The fourth bluff is the discussion in the UN that they cannot even agree on the consequences of Syria not respecting the destruction of gas (imagine when they will have to discuss which troop to send to do the job, who pays the bill etc)

The fifth bluff is the market, now it will look like heading into a new rally (it was hard to see a crash from 1,630 – some technical would not have permitted it) going towards the top SPX 1,710.

In case anyone forgot the 18th September there is still the Fed meeting on tapering.

No one can predict the market…I just say that I feel like being on the Titanic. You could avoid all icebergs…or not.

PS and the poor Syrians?….well they keep on dying. It has never been about them. It is US and Russia litigiousness (Russia is still upset about Serbia/Kosovo and Ukraine), it is between Saudi and Iranian Middle Eastern supremacy and – well you should have guessed it – a project of an oil pipeline Iran/Iraq/Syria.

As I say in this blog often…shadows of grey