Well, the Fed has decided to let the current interest rate stay but continue to talk up the US$. As soon as the news was released, precious metals have a smacked down as the they were shorted, pushing the price of gold by almost US$10 and silver by more than 20 cents. The precious metals recovered by the end of the day and managed to sustain its gain for the day. The mining stocks and related ETFs (precious metals and mining) held firm with some small gains.
Despite being the heavy short selling every time gold or silver moved up in price, it can be seen that it is case of higher lows each time they were shorted heavily. Not too long ago the main resistance were US$1,200 for gold and US$16 for silver. Look where they are now today.
It is frustrating if you are on the side of the precious metals. However it is advisable that you hedge your position by buying the miners and related ETFs.
My favourite pick is still ABX for gold and PAAS for silver. As for ETFs it is GDX for gold and SLV for silver. For some heavy leverage, I also bought AGQ (though it remains a risky bet by all standards)
Despite the recent gains, they are still an attractive buy as they remain severely discounted from their historic high.
Why do I make a reference to the historic price target? This is because things are much worse now than they were in 2008:
1. Despite the NIRP. ZIRP, and QE, the world is seeing extremely low growth. Central banks have pumped in trillion of dollars yet have almost nothing to show for it. The PMI is collapsing, GDP is falling, sales to inventories at its highest levels, consumer and business sentiment is falling, unemployment is farce. Almost 50 million of Americans are on food stamps and almost 100 million of employable age are not working. All these points to a coming crisis much worse than 2008 because since then the world have pumped in trillions of dollars into the economy. In the US, the Fed have pumped in almost 4 trillion dollars (5x the amount in 2008).
Incredulously, central banks are using the stock market as a gauge for a sound economy. And that is the reason why the the Plunge Protection Team continue to boost the US market, The ECB and BOJ continue to buy back corporate bonds (and ETFs in the case of the BOJ), and PBOC, suggesting that NPLs are turned into equity. THEY ARE DESTROYING THE FREE MARKET ECONOMY.
It is almost laughable when Bloomberg reported that the BOJ is the TOP TEN holder of 90% of stocks on the Nikkei.
This market intervention by the central banks are also destroying good corporate governance.
2. Global debt continues to grow. China alone has increased its debt form 282% of GDP in 2014 to 350% this year. Japan's total debt is 517% of its GDP. The US is almost 330% its GDP. How are these debt ever going to be repaid? The world IS facing a debt crisis of epic proportions. The amount of debt required to generate US$1 of GDP is escalating exponentially.
How much was China's debt when it was growing at 10% a year? How much now with 6.5% growth? China and Japan will be the ticking time bombs that will set off a global debt crisis. It's just a case who will be the first to do so.
3. EU is in crisis. The migrant and banking crises will challenge the EU and Euro. This summer we will revisit the same debt crisis in Greece as the ECB and IMF began their tit for tat on what's good for Greece. Italy too is facing a banking crisis. It recently secured a 5B Euro loan to stem its 360B Euro of NPLs. ARE YOU KIDDING ME?!
The emergence of far right parties in the EU will challenge the very foundation of the EU in the coming months. And yeah, throw in a potential BREXIT and we have a series of summer events which could change the face of the EU.
4. Then we have all the countries which are on the brink of severe recession or depression due to the collapse of commodities. Canada, Brazil (the Olympics could be at risk here), South Africa, Nigeria, Ecuador and Venezuela. Even the Middle East is facing tremendous challenge in their budget deficit.
So with so much potential crises at every turn, it will be a series of collapse and this time the world have no major economy superpower to bail it out.
If history is of any guide, we will see a Great Depression similar if not much worse than the one in 1929 - 1939.
Wednesday, April 27, 2016
Saturday, April 23, 2016
THE S&P IS OVERVALUED vs EARNINGS
S&P500 continue to defy gravity despite a host of negative news (The DOHA debacle and earnings recession in the S&P500 just to name two) and poor economic data coming out from the US.
This has led many to believe that the Plunge Protection Team (PPT) is supporting the market. Otherwise how can one explain this?
Source: Zero Hedge
This is not surprising given that all data points to a potential recession - if one is not already happening. But the Fed has to give the impression that all is good with the economy. How else but to talk up the economy and support it by pushing the S&P500 higher? Aren't the stock market reflective of the economy health? Well NO! Earnings in the S&P500 has been going down for four consecutive months! That is not an indication of a good economy. But the Fed and their cheerleading supporters continue to give misleading picture as to the health of the economy.
In reality, the Fed has really no more arsenal, short of another massive QE. So what more could they do?
That is why I believe there will be no more interest rates hike this year and a possible QE in the next few months.Should the Fed raise interest rates, then it is economic suicide pure and simple. Non-financial companies have borrowed massively to fund their dividends and buybacks, and what have they got to show for it? Nothing! EPS beats are all manufactured by lowering the forecast and massive buybacks. How can that be a signal for positive growth?
The S&P500 is now trading at an astounding 24x times earnings! As earnings continue to disappoint the PE ratio will widen and put the risk of collapse even more severe.
The only stocks that I am invested in now are the mining stocks and related precious metals ETFs which I think have room for further upside. They are the best hedge against the eventual collapse of the economy and a major debt crisis.
This has led many to believe that the Plunge Protection Team (PPT) is supporting the market. Otherwise how can one explain this?
Source: Zero Hedge
This is not surprising given that all data points to a potential recession - if one is not already happening. But the Fed has to give the impression that all is good with the economy. How else but to talk up the economy and support it by pushing the S&P500 higher? Aren't the stock market reflective of the economy health? Well NO! Earnings in the S&P500 has been going down for four consecutive months! That is not an indication of a good economy. But the Fed and their cheerleading supporters continue to give misleading picture as to the health of the economy.
In reality, the Fed has really no more arsenal, short of another massive QE. So what more could they do?
That is why I believe there will be no more interest rates hike this year and a possible QE in the next few months.Should the Fed raise interest rates, then it is economic suicide pure and simple. Non-financial companies have borrowed massively to fund their dividends and buybacks, and what have they got to show for it? Nothing! EPS beats are all manufactured by lowering the forecast and massive buybacks. How can that be a signal for positive growth?
The S&P500 is now trading at an astounding 24x times earnings! As earnings continue to disappoint the PE ratio will widen and put the risk of collapse even more severe.
The only stocks that I am invested in now are the mining stocks and related precious metals ETFs which I think have room for further upside. They are the best hedge against the eventual collapse of the economy and a major debt crisis.
OIL AFTER DOHA
Well DOHA came and showed it has always been a smoke and mirrors game. After the debacle, oil suffered a decline but towards the closing of the week roared back to trade at US$43.75 per barrel much higher than it was prior to the DOHA meeting.
This has dumbfounded speculators, traders and investors as all news point to a supply glut with Russia, Saudi Arabia and Iran promising to produce more after the DOHA talks ended in failure to reach any consensus.
Perhaps this could be explained by the following, where metals and oil commodities were subject to speculation by none other than the Chinese traders and speculators who jumped into the commodity market boom in China as the recent PMI data suggested that China's economy is roaring back to life as the government pours money into infrastructure.
Source: Zero Hedge
However, like any speculation it has gone ahead of the demand, and with the glut in the supply of oil and steel products, could end pretty costly for the Chinese traders and speculators. Remember how it ended badly for the Shanghai Stock Exchange in the summer of 2015?
I do believe that oil will face tremendous resistant at US$45 per barrel as the supply glut is still an issue.
I will also avoid buying into the oil companies as the I see more misery in earnings. Both Halliburton and Schlumberger reported earnings that were disappointing to say the least, and on top of that, saw massive jobs cut, with the former cutting 8,000 jobs, and the latter, a third of its work force.
The above is just my opinion. You are encouraged to do your own research.
This has dumbfounded speculators, traders and investors as all news point to a supply glut with Russia, Saudi Arabia and Iran promising to produce more after the DOHA talks ended in failure to reach any consensus.
Perhaps this could be explained by the following, where metals and oil commodities were subject to speculation by none other than the Chinese traders and speculators who jumped into the commodity market boom in China as the recent PMI data suggested that China's economy is roaring back to life as the government pours money into infrastructure.
Source: Zero Hedge
However, like any speculation it has gone ahead of the demand, and with the glut in the supply of oil and steel products, could end pretty costly for the Chinese traders and speculators. Remember how it ended badly for the Shanghai Stock Exchange in the summer of 2015?
I do believe that oil will face tremendous resistant at US$45 per barrel as the supply glut is still an issue.
I will also avoid buying into the oil companies as the I see more misery in earnings. Both Halliburton and Schlumberger reported earnings that were disappointing to say the least, and on top of that, saw massive jobs cut, with the former cutting 8,000 jobs, and the latter, a third of its work force.
The above is just my opinion. You are encouraged to do your own research.
Saturday, April 16, 2016
DOHA TALK IN JEOPARDY OF REACHING AN AGREEMENT?
No sooner than the Deputy Crown Prince of Saudi Arabia insisted that Saudi Arabia would only freeze its production provided all that attended the talk also freeze theirs, including Iran,the latter today dropped another bombshell when it (Iran) announced that it will not attend the Doha meeting.
The so called "Production Freeeze" meeting is now turning into a farce.
I think we could expect a heavy sell of in crude once the market opens on Monday unless Russia plays the role of a mediator to bring the two countries to reconcile, which seems unlikely at this eleventh hour.
The S&P is expected to take a hit too as the oilies will bear the brunt of any sell off.
This is just my opinion. You are encouraged to do your own research.
The so called "Production Freeeze" meeting is now turning into a farce.
I think we could expect a heavy sell of in crude once the market opens on Monday unless Russia plays the role of a mediator to bring the two countries to reconcile, which seems unlikely at this eleventh hour.
The S&P is expected to take a hit too as the oilies will bear the brunt of any sell off.
This is just my opinion. You are encouraged to do your own research.
Thursday, April 14, 2016
WILL IT OPEN A CAN OF WORMS?
Deutsche Bank Confirms Silver Market Manipulation In Legal Settlement, Agrees To Expose Other Banks
The headline perhaps say it all. As reported by Zero Hedge, in what many as dismissed as a no-win situation, the confirmation by Deutsche Bank could open a can of worms.
Precious metals bugs have all along been suspecting of this manipulation, so it is indeed a hard worn victory for those who took legal action against such a manipulation.
And what has the CFTC been doing, dismissing the case in 2013 after investigating against precious metals manipulation since 2008?
Oh! It was run by another ex-Goldman banker - enough said!
WHY THE NEXT FEW DAYS WILL BE CRUCIAL
Earnings season aside, we will have two crucial events in the next few days.
The number one event will be the outcome of the OPEC "Production Freeze" meeting in Doha on 17 April. So far what we have is a constant recycling of the news and rumours to prop up the oil price. Investors who bought oil stocks and oil futures will soon know if their faith in them will return a handsome profit.
Not to pour cold water on the parade, but chances are slim that a disunited OPEC could do much. Nevermind the fact that Russia just increased it production to its highest in March. So if a production freeze does happen, so what? All were already producing at their record highs!
Iran has said that it won't join in the freeze but will continue to ramp its production. So while other have frozen their output, there still more oil coming into the market!
Possibly, irregardless of the result of the meeting, I believe it will be buy the rumour sell the news event. And it could cost those who placed their hopes on OPEC and Russia dearly.
The second event could be a game changer for gold.
According to various online news, China will launch a Yuan fix on gold on 19 April. Many have touted it as a changer and will eventually shift the gold trade from the COMEX and LBMA to the SGE. Why? Becuase unlike the over-leveraged COMEX and LBMA where paper gold is traded, the SGE will deal only in physical gold. So price discovery that is based on physical supply and demand will be allowed to happen, not the rinse and repeat commercial short and long trades in the COMEX and LBMA.
It is also a sign that China, being the world's largest gold producer and having the world's largest physical gold trade is surely exerting itself in the market.
Will it happen on time as reported on 19 April. Do be warned that this event has been postponed twice. I of course hope it will happen because the current gold trade in the COMEX and LBMA is a farce!
The above is entirely my opinion of course.
The number one event will be the outcome of the OPEC "Production Freeze" meeting in Doha on 17 April. So far what we have is a constant recycling of the news and rumours to prop up the oil price. Investors who bought oil stocks and oil futures will soon know if their faith in them will return a handsome profit.
Not to pour cold water on the parade, but chances are slim that a disunited OPEC could do much. Nevermind the fact that Russia just increased it production to its highest in March. So if a production freeze does happen, so what? All were already producing at their record highs!
Iran has said that it won't join in the freeze but will continue to ramp its production. So while other have frozen their output, there still more oil coming into the market!
Possibly, irregardless of the result of the meeting, I believe it will be buy the rumour sell the news event. And it could cost those who placed their hopes on OPEC and Russia dearly.
The second event could be a game changer for gold.
According to various online news, China will launch a Yuan fix on gold on 19 April. Many have touted it as a changer and will eventually shift the gold trade from the COMEX and LBMA to the SGE. Why? Becuase unlike the over-leveraged COMEX and LBMA where paper gold is traded, the SGE will deal only in physical gold. So price discovery that is based on physical supply and demand will be allowed to happen, not the rinse and repeat commercial short and long trades in the COMEX and LBMA.
It is also a sign that China, being the world's largest gold producer and having the world's largest physical gold trade is surely exerting itself in the market.
Will it happen on time as reported on 19 April. Do be warned that this event has been postponed twice. I of course hope it will happen because the current gold trade in the COMEX and LBMA is a farce!
The above is entirely my opinion of course.
Monday, April 11, 2016
LEG UP 250% SINCE MY BUY RECOMMENDATION
Since my BUY recommendation of LEG on September 22, 2014, LEG closed at 0.35 pence, 0.25 pence above my BUY price at 0.10 pence. That's a 250% profit.
I have exited LEG to buy another stock, the Ultra Silver AGQ which is leveraged 3x - 4x the price movement of silver. Silver is near breaking the important US$16 per oz.
However AGQ is extremely high risk as you could see heavy losses if silver trends down again. However the rewards could be tremendous if silver returns to its previous highs.
The gloomy economic picture out there looks likely to support continuous price increase in precious metals, but I encouraged you to do your own research.
Where AGQ is concerned, be warned of the risky nature of such an investment.
I have exited LEG to buy another stock, the Ultra Silver AGQ which is leveraged 3x - 4x the price movement of silver. Silver is near breaking the important US$16 per oz.
However AGQ is extremely high risk as you could see heavy losses if silver trends down again. However the rewards could be tremendous if silver returns to its previous highs.
The gloomy economic picture out there looks likely to support continuous price increase in precious metals, but I encouraged you to do your own research.
Where AGQ is concerned, be warned of the risky nature of such an investment.
Friday, April 8, 2016
FED WILL HAVE AN URGENT MEETING ON MONDAY ARPIL 11
The Fed has just issued an urgent notice to discuss about rates on Monday, April 11. Here's the notice:
The last time it happened was in November 2015 and we had our 25 basis point increase in December 2015.
This notice came on the heels of the latest revision of the GDP by the Atlanta Fed. The GDP for Q1 2016 has been revised down to +0.1% on April 8. Three days earlier (April 5) the Atlanta Fed put the revised GDP at +0.4% after a string of disappointed data. Just two months ago the Fed was optimistic that the Q1 2016 GDP could reach 2.7%.
The above is an indication that the US economy is unraveling fast.
What could transpire in the meeting?
If the Fed cuts the interest rate by 25 basis point then we can expect the US$ to weaken, putting pressure on both the ECB and BOJ. The recent NIRP and expansive QE by ECB and BOJ had nothing to show other than the economies of Europe and Japan being back where they were before both central banks unleashed their "highly touted and cheered" (pun intended) policies.
So we can expect the Euro and Japan to strengthen, which will be detrimental to both the EU and Japan economies. The market may cheer the Fed and stock markets will move up as they did often times whenever a central bank becomes dovish, but reality will set in and the EU and Nikkei indices will likely to trend lower in the ensuing weeks as the exports from EU and Japan fall. So will ECB and BOJ cuts interest into deeper territory and even more QE? Can't anyone see that this is a vicious circle that sees no end?
If the US$ does weaken, we could see commodities and precious metal prices rise. Oil will rise as an immediate response. I will therefore exit any short positions in oil, oil related counters and ETFs on Monday (better be safe than be sorry)
Physical gold and silver and related ETFs as well as miners and miners ETF could trend higher as a result of any interest rate cut.
Financials could take a hit as lower interest rates means lower income form loans and mortgages.
What is more concerned is another wave of borrowing binge as companies and individuals extend their leverage beyond their ability to pay. No matter how they play it, a recession will ultimately be the outcome. The economy cannot be on an "up" trajectory forever.
If the Fed surprised everyone and increase interest rates, then we know they are departing from the norm of the ECB and BOJ. The US$ will strengthen in this scenario. This could provide support to the ECB and BOJ's policies. However, China, which is on the verge of a debt crisis, will definitely devalue the Yuan, thus putting the US in a quandary.
All this will create greater global uncertainties and as long as uncertainties and fear of risks prevail, precious metals could thrive.
Forget about the media linking the US$ and gold as being inversely related. When the Fed was raising interest rates to the double digits from 1976 to 1980, US$ strengthened but gold also went up an astounding 325%! So you see there is no clear co-relation between the two.
The above is just my opinion. You are encouraged to do your own research and analysis.
This notice came on the heels of the latest revision of the GDP by the Atlanta Fed. The GDP for Q1 2016 has been revised down to +0.1% on April 8. Three days earlier (April 5) the Atlanta Fed put the revised GDP at +0.4% after a string of disappointed data. Just two months ago the Fed was optimistic that the Q1 2016 GDP could reach 2.7%.
The above is an indication that the US economy is unraveling fast.
What could transpire in the meeting?
If the Fed cuts the interest rate by 25 basis point then we can expect the US$ to weaken, putting pressure on both the ECB and BOJ. The recent NIRP and expansive QE by ECB and BOJ had nothing to show other than the economies of Europe and Japan being back where they were before both central banks unleashed their "highly touted and cheered" (pun intended) policies.
So we can expect the Euro and Japan to strengthen, which will be detrimental to both the EU and Japan economies. The market may cheer the Fed and stock markets will move up as they did often times whenever a central bank becomes dovish, but reality will set in and the EU and Nikkei indices will likely to trend lower in the ensuing weeks as the exports from EU and Japan fall. So will ECB and BOJ cuts interest into deeper territory and even more QE? Can't anyone see that this is a vicious circle that sees no end?
If the US$ does weaken, we could see commodities and precious metal prices rise. Oil will rise as an immediate response. I will therefore exit any short positions in oil, oil related counters and ETFs on Monday (better be safe than be sorry)
Physical gold and silver and related ETFs as well as miners and miners ETF could trend higher as a result of any interest rate cut.
Financials could take a hit as lower interest rates means lower income form loans and mortgages.
What is more concerned is another wave of borrowing binge as companies and individuals extend their leverage beyond their ability to pay. No matter how they play it, a recession will ultimately be the outcome. The economy cannot be on an "up" trajectory forever.
If the Fed surprised everyone and increase interest rates, then we know they are departing from the norm of the ECB and BOJ. The US$ will strengthen in this scenario. This could provide support to the ECB and BOJ's policies. However, China, which is on the verge of a debt crisis, will definitely devalue the Yuan, thus putting the US in a quandary.
All this will create greater global uncertainties and as long as uncertainties and fear of risks prevail, precious metals could thrive.
Forget about the media linking the US$ and gold as being inversely related. When the Fed was raising interest rates to the double digits from 1976 to 1980, US$ strengthened but gold also went up an astounding 325%! So you see there is no clear co-relation between the two.
The above is just my opinion. You are encouraged to do your own research and analysis.
Thursday, April 7, 2016
THE YEN IS NOW TRADING AT 109 YEN TO THE US DOLLAR
The Yen has continued to gain strength despite BOJ's Kuroda's NIRP and expansive QE programme. The original intention of the BOJ is to make the Yen weaker but it has backfired somehow. Instead of becoming weaker the Yen has gained in strength.
A strong Yen will impact Japan's exports, thus hurting Japanese companies in the process. The BOJ has hoped that a weak Yen would help boost corporate profits and encourage wage growth, and therefore consumption and then inflation. All these are not happening now.
Because of this, the Nikkei has fallen below the crucial 16,000 mark, prompting consumers to be wary of spending their money which in turn will depress the economy further. The public in general have been withdrawing their money and keeping them safe at home.
Will BOJ deepen the rate cut or will there be more QE? The BOJ's balance sheet is already at a dangerous level as shown in the chart below (Source: St Louis Fed, Zero Hedge):
Another worrying trend is that a stronger Yen will weaken the US$. A weaker US$ will lead to a stronger Euro. So will the ECB embark on more QE to weaken the Euro?
It is a vicious circle which sees no end. It is a race to the bottom.
That is why I continue to favour gold, silver, gold, gold and silver ETFs and silver miners and miners ETF,
Remember to always do your own due diligence.
A strong Yen will impact Japan's exports, thus hurting Japanese companies in the process. The BOJ has hoped that a weak Yen would help boost corporate profits and encourage wage growth, and therefore consumption and then inflation. All these are not happening now.
Because of this, the Nikkei has fallen below the crucial 16,000 mark, prompting consumers to be wary of spending their money which in turn will depress the economy further. The public in general have been withdrawing their money and keeping them safe at home.
Will BOJ deepen the rate cut or will there be more QE? The BOJ's balance sheet is already at a dangerous level as shown in the chart below (Source: St Louis Fed, Zero Hedge):
Another worrying trend is that a stronger Yen will weaken the US$. A weaker US$ will lead to a stronger Euro. So will the ECB embark on more QE to weaken the Euro?
It is a vicious circle which sees no end. It is a race to the bottom.
That is why I continue to favour gold, silver, gold, gold and silver ETFs and silver miners and miners ETF,
Remember to always do your own due diligence.
Wednesday, April 6, 2016
BIGGEST REDUCTION IN OIL INVENTORIES SINCE FIRST WEEK OF JANUARY
Well, the data from the EIA confirmed the huge draw in oil inventories and oil spiked above 5%.
This is where it gets interesting.
Total drawn: 4.949M
Expectations : 2.300M
Beat expectations by: 2.649M
But gasoline increased by 1.438M and distillate increased by 1.799M, which put the total figure of increase of both gasoline and distillate inventories at 3.237M
Increase of gasoline and distillate inventories of 3.237M vs beat in expectations of 2.649M.
This is a case where the rally is headline driven with lesser attention paid to the details.
This is where it gets interesting.
Total drawn: 4.949M
Expectations : 2.300M
Beat expectations by: 2.649M
But gasoline increased by 1.438M and distillate increased by 1.799M, which put the total figure of increase of both gasoline and distillate inventories at 3.237M
Increase of gasoline and distillate inventories of 3.237M vs beat in expectations of 2.649M.
This is a case where the rally is headline driven with lesser attention paid to the details.
Monday, April 4, 2016
OIL IS TANKING AND THE S&P IS SHOWING SOME WEAKNESS
On February 19 I wrote that that the proposed oil production freeze (based on January output) between OPEC and Russia is just a smoke and mirrors game. And true enough the Crown Prince of Saudi Arabia said that there would would be no freeze unless Iran also will freeze its production. Iran of course replied "NO" and what ensued is crude oil falling back into the mid US$30s.
Incidentally, Russia's production just reached its highest ever in March (there's no deal yet, so might as well produce to the max).
A production freeze is meaningless when production is at its highest record. So I think oil will continue to trend downwards.
The Q1 2016 earnings expectation has been revised downwards to -9.5%. yes you read that right -9.5%. This is the fourth quarter that earnings growth expectation is in negative territory. But the disconnect continues on as the S&P 500 trades at 24x earnings.
Weakness is showing in the S&P 500 and the rally is likely to falter.
What would I do? These are some examples of my trades:
I am short the SPY (the ETF that tracks the S&P 500)
I am long RWM (the ETF that tracks inversely to the Russell 2000)
I am long DOG (the ETF that tracks inversely to the Dow)
I am long GDX (the ETF that tracks the gold miners)
There are other ETFs that one can consider:
SH (the ETF that tracks inversely to the S&P 500)
SEF (the ETF that tracks inversely to the financials)
DDG (the ETF that track inversely to the oil and gas sector)
The above are my own opinion only. You are encouraged to do your own research as our risk appetite differs. There is no guarantee that any investment/trade can yield a profit so exercise your own due diligence.
Incidentally, Russia's production just reached its highest ever in March (there's no deal yet, so might as well produce to the max).
A production freeze is meaningless when production is at its highest record. So I think oil will continue to trend downwards.
The Q1 2016 earnings expectation has been revised downwards to -9.5%. yes you read that right -9.5%. This is the fourth quarter that earnings growth expectation is in negative territory. But the disconnect continues on as the S&P 500 trades at 24x earnings.
Weakness is showing in the S&P 500 and the rally is likely to falter.
What would I do? These are some examples of my trades:
I am short the SPY (the ETF that tracks the S&P 500)
I am long RWM (the ETF that tracks inversely to the Russell 2000)
I am long DOG (the ETF that tracks inversely to the Dow)
I am long GDX (the ETF that tracks the gold miners)
There are other ETFs that one can consider:
SH (the ETF that tracks inversely to the S&P 500)
SEF (the ETF that tracks inversely to the financials)
DDG (the ETF that track inversely to the oil and gas sector)
The above are my own opinion only. You are encouraged to do your own research as our risk appetite differs. There is no guarantee that any investment/trade can yield a profit so exercise your own due diligence.
CHINA TO CONSIDER ISSUING BONDS DENOMINATED IN SDR
According to the WSJ, the PBOC may consider issuing bonds denominated in the IMF's SDR, to curb the reliance on US$ denominated bonds.
Should this happen, it could impact upon the US$ value.
It is interesting that this coincides with reports coming out from China that up to 30 countries are waiting to join the AIIB (Asia Infrastructure Investment Bank) adding to its list of 57 founding members (Source: Reuters). As part of China's push to promote the Yuan, China will also encourage the AIIB to issue Yuan denominated loans.
Various news are also reporting that China will implement a Yuan fix on gold on April 19.
Even Russia has agreed to settle its oil trade with China in Yuan.
All the above point to a reduced dependence on the role of US$ to settle international trades and loans. What are the implications?
The value US$ could fall, the result of which will drive the price of commodities higher. This could benefit gold, silver and other commodities in the energy, agriculture and mining sectors and related stocks, although I believe energy stocks are best to be avoided until the weak companies default or go into bankruptcy.
Should the value of the US$ falls further it could push investors into the safe haven assets such as gold and silver. In a low interest environment, such a fall could also affect the demand for US Treasuries, and increasingly put the US at risk as investors park their money elsewhere. The US government debt has reached US$19T and much depends on the successful sale of US Treasuries to finance the government.
A falling dollar could also mean more expensive goods to the consumers as the cost of imports rises. Consumers drive the US economy, and should consumption fall due to rising prices, it could have a very negative effect on the economy.
Import of raw materials too will become costly, and companies could see their bottom lines being affected by the rising costs. As a result earnings could fall.
In the ensuing months, we could see major shifts in currencies. The immediate focus is on the Fed, the ECB, BOJ, PBOC and yes, even the IMF- what they say or do.
Should this happen, it could impact upon the US$ value.
It is interesting that this coincides with reports coming out from China that up to 30 countries are waiting to join the AIIB (Asia Infrastructure Investment Bank) adding to its list of 57 founding members (Source: Reuters). As part of China's push to promote the Yuan, China will also encourage the AIIB to issue Yuan denominated loans.
Various news are also reporting that China will implement a Yuan fix on gold on April 19.
Even Russia has agreed to settle its oil trade with China in Yuan.
All the above point to a reduced dependence on the role of US$ to settle international trades and loans. What are the implications?
The value US$ could fall, the result of which will drive the price of commodities higher. This could benefit gold, silver and other commodities in the energy, agriculture and mining sectors and related stocks, although I believe energy stocks are best to be avoided until the weak companies default or go into bankruptcy.
Should the value of the US$ falls further it could push investors into the safe haven assets such as gold and silver. In a low interest environment, such a fall could also affect the demand for US Treasuries, and increasingly put the US at risk as investors park their money elsewhere. The US government debt has reached US$19T and much depends on the successful sale of US Treasuries to finance the government.
A falling dollar could also mean more expensive goods to the consumers as the cost of imports rises. Consumers drive the US economy, and should consumption fall due to rising prices, it could have a very negative effect on the economy.
Import of raw materials too will become costly, and companies could see their bottom lines being affected by the rising costs. As a result earnings could fall.
In the ensuing months, we could see major shifts in currencies. The immediate focus is on the Fed, the ECB, BOJ, PBOC and yes, even the IMF- what they say or do.
Saturday, April 2, 2016
WIKILEAKS REVEAL THE IMF "SUGGESTING" A CREDIT EVENT TO FORCE GREECE INTO SUBMISSION
The discussion centred around the imposition of drastic reforms in Greece, including overhauling the country's pension scheme. The discussion was held at the Athens Hilton between the top two officials in charge of the Greek debt crisis- Poul Thomsen, the head of the IMF's European Department, and Delia Velkouleskou, the IMF Mission Chief for Greece.
Below is the transcript:
THOMSEN: Well, I don't know. But this is... I think about it differently. What is going to bring it all to a decision point? In the past there has been only one time when the decision has been made and then that was when they were about to run out of money seriously and to default. Right?
Paul Mason form the Guardian puts it most eloquently:
The International Monetary Fundhas been caught red handed, plotting to stage a "credit event" that forces Greece to the edge of bankruptcy using the pretext of the Brexit referrendum.
Below is the transcript:
THOMSEN: Well, I don't know. But this is... I think about it differently. What is going to bring it all to a decision point? In the past there has been only one time when the decision has been made and then that was when they were about to run out of money seriously and to default. Right?
VELKOULESKOU: Right!
THOMSEN: And possibly this is what is going to happen again. In that case, it drags on until July, and clearly the Europeans are not going to have any discussions for a month before the Brexits and so, at some stage they will want to take a break and then they want to start again after the European referendum.
VELKOULESKOU: That's right.
THOMSEN: That is one possibility. Another possibility is one that I thought would have happened already and I am surprised that it has not happened, is that, because of the refugee situation, they take a decision... that they want to come to a conclusion. Ok? And the Germans raise the issue of the management... and basically we at that time say "Look, you Mrs. Merkel you face a question, you have to think about what is more costly: to go ahead without the IMF, would the Bundestag say 'The IMF is not on board'? or to pick the debt relief that we think that Greece needs in order to keep us on board?" Right? That is really the issue.
VELKOULESKOU: I agree that we need an event, but I don't know what that will be. But I think Dijsselbloem is trying not to generate an event, but to jump start this discussion somehow on debt, that essentially is about us being on board or not at the end of the day.
THOMSEN: Yeah, but you know, that discussion of the measures and the discussion of the debt can go on forever, until some high up.. until they hit the July payment or until the leaders decide that we need to come to an agreement. But there is nothing in there that otherwise is going to force a compromise. Right? It is going to go on forever
And here's how the various parties interpreted it:
Bloomberg: "the leak shows officials linking Greek issue with U.K. referendum risking general political destabilization in Europe."
Zero Hedge: "The leaked transcript reveals how the IMF plans to use Greece as a pawn in its ongoing negotiation with Germany's chancelleor in order to achieve the desired Greek debt reduction which Germany has been pointedly against: in the leak we learn about the intention of IMF to threaten German Chancellor Angela Merkel to force her to accept the IMF's demands at a critical point."
The International Monetary Fundhas been caught red handed, plotting to stage a "credit event" that forces Greece to the edge of bankruptcy using the pretext of the Brexit referrendum.
YUAN FIX ON GOLD
There are many news circulating in the internet that China could start a Yuan fix on gold on April 19. The Shanghai Gold Exchange is the world's largest physical gold exchange.
If true, the fix could have a major impact on the price of gold and maybe even the US$.
Still, as with all things in China, it remains to be seen,
If true, the fix could have a major impact on the price of gold and maybe even the US$.
Still, as with all things in China, it remains to be seen,
MARCH JOBS REPORT - LOOKING BENEATH THE SURFACE
Here's the breakdown from Zero Hedge.
Again minimum wage jobs stole the limelight, representing 64.6% of the overall jobs growth:
1) Education and Health 51,000
2) Retail and Trade 48,000
3) leisure and Hospitality 40,000
On the other hand higher paid manufacturing and mining jobs continued too fall, registering -29,000 and -12,000 jobs respectively. However, construction jobs gained, offset the fall with a gain of 37,000 jobs
Source: Zero Hedge
Attention needs to be drawn to the retail jobs as several hundred malls across the country will be closed in the ensuing months. I would expect the retails jobs growth to fall in the near future as retail sales has been far from impressive, as shown by this chart:
Source: www.tradingeconomic.com
As can be seen form the chart, retails sales have fallen since achieving a high in April 2015.
Retail sales and other forms of consumer consumption will likely to deteriorate in the future as income growth expectations have fallen, according to the University of Michigan survey (see chart below):
Source: Zero Hedge
So having growth in minimum wage jobs while on the surface looks good, will do little to boost consumption as majority of the income form minimum wage earners goes to healthcare and rent, the costs of which have risen lately.
The economic picture does not seem bright at this junction and it pays to follow the development of several key data such the PMI for manufacturing and services, sales to inventories and durable goods order orders for positive indications.
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