As we enter into the final quarter of 2016, here are all the things which could cause tectonic shift in the global markets:
1) China's Yuan admission into the IMF SDR currencies. Will it impact on the US$ as China readies itself for more use of the Yuan in global trade? China has several Yuan swap facilities in US and EU and has developed a CIPS code similar to the SWIFT code. To that extend, China has also developed 168 super computers. China has also one of the largest group of miners of bitcoin. Is China's Yuan ready to take on the US$ as an alternate trade settlement?
2) November. This is case of a double witching. November will be the US presidential election. But lately Hilary's emails scandal and poor health has put Trump in the lead. Between now and then, a pullout by Hilary could cause a tremor in the US market. There are talks that the election may be postponed, which could be disastrous for the US. Either party wins will be terrible for the US$. Trumps wants to increase debt to spend more to make America great again, while cutting taxes (so who's going to pay the difference?) while Hilary will hike taxes for the rich which could impact the economy and more welfare which means more spending. Hilary's win could also mean greater world tension as she has Russia in her sight.
Meanwhile Italy could have have a referendum in the same month as the people vote whether they want to remain in the EU. If Italy votes to leave, then that's another nail to the Euro's coffin
3) Deutsche bank and Monte dei Paschi, both of which are major banks in the EU, are in dire straits. DB share price is in historic lows after being slapped with a US$14B fine by the US while MP is having severe liquidity problems. In fact many EU banks are saddled with tremendous amount NPLs. A banking crisis in EU is in the horizon. Stay away form banks and the Euro.
It will be interesting to see how these events unwind in the coming months. I will stay long in gold, silver, miners and related ETFs.
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