Monday, July 15, 2019

The Fed's believe they are smarter than the market

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Thursday, July 11, 2019

Monthly Market commentary July 2019

Marc Faber's latest market commentary is out. See below for an excerpt via Gloomboomdoom

Already early in my career, I realized that one of the problems of technical analysis was the interpretation of charts. Nonetheless, I became attracted to the field because I observed that stock, bond and commodity prices would often suddenly move in a direction and investors would scratch their heads as to why these moves occurred. Only much later, would changing fundamentals confirm the validity of the earlier price moves. In other words, prices moved ahead of fundamentals and especially ahead of analysts' projections.

Therefore, I believe that investors can benefit from looking at long- and short-term charts. In particular, investors should pay attention to major up-side or down-side breakout points - especially, when these breakout moves occur against the majority of investors' expectations.

The reason I am discussing break-out moves (up- and down) is that in some cases they are more obvious and relevant because a confluence of both fundamental and technical factors confirm the breakout move. Furthermore, following a breakout move there will usually be a retracement (not always right away) but prices should not move beyond the breakout point in order to confirm the breakout.

Recently, we experienced some breakout moves whose significance we do not yet fully know. The first major upside breakout occurred in the cryptocurrency market when Bitcoin shot up at the beginning of April. 
The second important breakout move occurred in the gold market whereby gold must hold above $1370 for the breakout move to be confirmed. 
Importantly, we need to ask ourselves what the sudden huge upside move in Bitcoin and the upside breakout move in gold might mean?

My readers should remember in the current market context the words of legendary trader Larry Hite who opined that, "Throughout my financial career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you" as well as the words of deep value investor Howard Marks who observed that, "You should invest more when the tickets in the bowl are in your favor. You should invest less when they are against your favor and what determines the mix of the tickets in the bowl largely where we stand in the cycle.”

Thursday, June 27, 2019

Interview with Jason Hartman June 2019

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Topics discussed include

- We have grossly inflated Asset markets

- Asset inflation is making the rich richer and leaving the poor and middle class behind

 - Many millennial's depend on their parents.

 - Deflation scenario 

 - Central banks can buy Assets and also Stocks (in the case of Japan)

- MMT (Modern Monetary Theory)

- Economic problems can be postponed for a very long time. 

Monday, June 10, 2019

How Japan negotiated trade with the US decades ago

China economy still bullish longer term

“Nowadays in China, there is probably a bubble in real estate in some cities, but not necessarily everywhere. In my opinion, there is no bubble in stocks. In the larger scheme of things, China is still in the early stage of development.” 

Japan Trade Negotiations in the past

“In the case of Japan, in the 1970s, the US would send all these ambassadors and negotiators,” Faber recalled. “The Japanese would always bow three times and say ‘yes we’re going to do it’, and what happened was the trade deficit with Japan never really went down.”

via scmp

Tuesday, June 4, 2019

Politicians like to blame foreigners for their difficulties

Marc Faber June 2019 Market commentary via Gloom Boom Doom

Referring to China, Kyle Bass claimed at a recent investment conference that, “Right now, there is no trust and no rule of law. [The Chinese] government lies, cheats, and steals as a national ideology.”

I heard that the audience rewarded his candid statements with applause.

Blaming the Chinese for everything appeals to the Democrats and the Republicans alike, and that is what counts for President Trump ahead of the 2020 elections. In fact, I find the applause following Bass' accusations deeply disturbing given the relatively high social standing and knowledge of the conference attendees. It also reminds me of so many other occasions in history when leaders blamed other people (usually minority groups and foreigners, or whosoever is convenient at the time) for their own shortcomings and failures.

Not long ago, Elaine Chao (the current US Secretary of Transportation) opined that, "Smoot and Hawley ginned up the Tariff Act of 1930 to get America back to work after the Stock Market Crash of ’29. Instead, it destroyed trade so effectively that by 1932, American exports to Europe were just a third of what they had been in 1929. World trade fell two-thirds as other nations retaliated. Jobs evaporated."

I think it is fair to say that the Smoot–Hawley Tariff did not cause the depression (there were numerous other factors at play), but it certainly accelerated the downturn and prolonged the global economic slump as global trade collapsed. Currently, the global economy (including the US) is already weakening badly (many sectors are already in recession) and the trade war will aggravate the economic downturn. US economic weakness is indicated by strengthening US Treasuries. It is also confirmed by the decline in oil and lumber prices. Furthermore, the US Markit manufacturing PMI just dropped by 2 points to a near-recession 50.6 level.

In general, I believe that Wall Street strategists and economists grossly underestimate the downside risk of equities. I concede that the US stock market is becoming near-term oversold and, therefore, could rebound in June and July (traditional summer rally). The US stock market is, however, far from oversold from a longer-term perspective. My advice: Sell the rallies and reduce equity positions.

Finally, remember regarding the constant China bashing that, as Daniel Kahneman observed, “A reliable way to make people believe in falsehoods is frequent repetition, because familiarity is not easily distinguished from truth. Authoritarian institutions and marketers have always known this fact.”