2017-05-26

Trading Bolivars Based on Socialist Party Logo = 100pc Success

It's took bad the market for bolivars is difficult to trade because the socialist party of Venezuela put out an excellent trading guide with their logo. Just trace out their logo to know the future USDVEF exchange rate.

Here's the first chart I posted on May 22, 2015. Winner!
Here's the second chart I posted on July 17, 2015. Another winner!

Here's the third chart I posted on March 15, 2016. Yet another winner!
Could they do it again? They did!

Why Don't You Just Tell Me the Price of the Yuan?

Keep raising those long-term USDCNY targets.

ZH: China Unexpectedly Changes Yuan Fixing Mechanism Sparking Confusion, Concern
Today, it was finally unveiled that the sharp moves in the Yuan were in preparation for today's announcement of a new CNY fixing mechanism. Under the new reference rate formula unveiled by the PBOC, institutions that provide quotes for the fixing will now add an intangible counter-cyclical factor to their existing models, which take into account the previous day’s official closing price at 4:30 p.m. local time and changes in baskets of currencies. Banks are currently tweaking and testing their models and will start providing quotes using the new system soon, Bloomberg reported.

In an amusing aside, one which may have been taken straight from the worry-list of the Korean central bank, Bloomberg added that "China’s foreign-exchange market can be driven by irrational expectations, resulting in "unreal" supply and demand that increases the risk of overshooting, according to an official statement on Chinamoney.com, which is run by China Foreign Exchange Trade System. The counter-cyclical factor may ease "herd actions" and help guide investors to pay more attention to economic fundamentals, according to the statement."

In any case, explaining the recent sharp moves, on Friday CFETS said that the recent observed changes in CNY fixings have already reflected the new fixing mechanism, and said that more changes in the fixing and intraday trading patterns are possible in the days ahead.

According to Goldman, in the near term, the authorities might continue to keep CNY relatively strong (as they did in the last two days) to mitigate potential market worries that the mechanism change could be a precursor to the late 2015/early 2016 experience of discretionary currency weakening.

Which of course does not preclude the new regime from becoming the precursor to another deleveraging. Bloomberg points out that for China’s government, the existing market-based fixing system’s downside is that it makes the exchange rate more difficult to control.

...“If the yuan endgame is a free float like the other major currencies, refining the PBOC fixing mechanism is a retrograde step,” Condon said.

Bulls Looking for Yuan Rally

iFeng: 中国警戒做空者 昨天人民币离奇暴涨只是个开始
China warns shorts

Analysts agreed on the possibility of central bank intervention again.

The Chinese Ministry of Commerce on Thursday issued a document of up to 73 pages, the RMB does not exist long-term devaluation basis, I believe that after a shock period will gradually tend to a new equilibrium; China will not engage in currency competitive devaluation, the RMB exchange rate against the US dollar two-way floating Flexibility will be enhanced. In addition, the Chinese central bank's foreign exchange market operation does not belong to the scope of exchange rate manipulation.

Mizuho Bank strategist Zhang Jiantai wrote to clients in the daily commentary, Moody's downgraded China rating, Thursday appeared suspected market intervention behavior, China or to guard the yuan short.

The yuan is probably just a start, the dollar index weakened, G7 currency trend is also very much, the RMB has a stage of appreciation of the foundation, the two main focus on the central bank action, whether there is continued to guide the appreciation of the intention. Especially today (Friday) the central parity, to find policy makers whether the hope that the strong continuation of the yuan signal.

The ANZ report argues that the central bank appears to be bridging the gap between the central parity and the spot by taking the initiative to intervene at the spot rate.

Hefei Home Prices Jump in 2016, Developer Loses Money in 2017

Deleveraging's collateral damage.

Caijing: 去年合肥房价涨幅全球第一 开发商如今却开始亏本
In January this year, by the Hurun Institute and the United States jointly issued by the global housing price index shows that Hefei housing prices rose more than 40%, ranking the first 2016 global house prices rose.

But since the second half of last year, Hefei property market began to strictly control, policies continue to overweight, the city's real estate market and therefore into silence.

Which was involved in this hot torrent of those spending big bucks to win the high prices of housing enterprises, such as Anhui, the only listed housing prices Hefei City Construction, is currently facing a more severe high price dilemma. Not long ago, the company issued a quarterly release in addition to disclosure of the current performance decline, a difficult to be aware of the outside world is even more surprising:

The company expects first half net profit fell 50% to 100%!

...Reporters noted that the Hefei City Construction due to an increase in financial costs in the first quarter of this year, financial costs increased by 52.109 million yuan, an increase of 897.4% year on year, while net profit of 42.858 million yuan, down nearly 40%.

In the face of the upcoming semi-annual report, Hefei City Construction said that its net profit is expected to last year's 70,104,000 yuan down 50% to 100%, which means that the housing business if the worst case of profitability, then may hit the profit and loss critical point.

Hefei City Construction explained that compared with the same period last year, the scale of operating income changed little, but due to increased bank borrowings, financial costs increased, resulting in 2017 first half profit decline more.

Social Mood in China: Maotai Edition

SCMP: Targeted in crackdown, Moutai liquor is once again the toast of the town
The company’s flagship product, Feitian, with 53 per cent alcohol, is in short supply across the country as retailers, wholesalers and even consumers start to hoard bottled Baijiu as an inflation-proof investment - along with gold bars, property and stocks, according to a few dealers.

“Basically there are only buyers and no sellers [of Feitian],” said one dealer in Guangzhou, who had been trading liquor for a few years. In recent months, people have started hoarding the product with the expectation that demand for Moutai will expand again in coming years - when Xi has consolidated his power and the movement to tame public spending on lavish dinners has eased, said the dealer, who declined to be named.

2017-05-25

China's Little Pink Nationalists

SCMP: The rise of the Little Pink: China’s young angry digital warriors
A group of the website users, some of them overseas students, strongly criticised people who published posts on negative news about China or comments deemed to glorify Western countries. They were called the Jinjiang Girl Group Concerned for the Country, or the Little Pink, a reference to the main colour on the front page of the website. The use of the term spread as social media expanded in China.

How did the Little Pink rise to prominence?

The name became widely attached to young nationalists in China through a series of mass campaigns on overseas social media such as Facebook, Instagram and Twitter, which are all officially blocked on the mainland. A key event came in January last year when Chou Tzu-yu, a 17-year-old Taiwanese pop singer, waved the island’s national flag on a television show.

Mainland internet users flooded Chou’s Instagram account and accused her of supporting Taiwan independence. Days later, they flooded the Facebook page of the newly-elected Taiwanese President Tsai Ing-wen, who heads the independence-leaning Democratic Progressive Party. Some Taiwanese media outlets were also targeted.
The larger origin is two-fold. One, China's nationalist education since the 1990s. Second, rising nationalism around the world.

In 20 years, the nationalists will be in charge all over the world.

Amazon's Last Chance to Hit $1000

The tech rally could be ending soon, or at least about to pullback after Gartman turned bullish.

ZH: Gartman Turns Bullish On Tech: "Every Time We Think The Market Is Overbought, It Moves Higher"
We stand in awe of the sheer relentless nature of the global bull market. Unlike the parabolic rise by Bitcoin, for example, the trend from the lower left to the upper right in global equity prices is measured… is reasonable… is relentless and is, in the end, majestic in nature. It will stop when it stops and not a moment before. Every time we think that the market is overbought, it consolidates and moves higher.

It is interesting then to note that the CNN Fear & Greed Index has been “locked” in recent days a few points either side of 50, where 50 is evenly balanced between the bullish and bearish forces at work. When the Index is below 20 and has turned higher, the market is oversold and due for a rally. When it is above 75 or so and turns down, the market’s over-bought and due for weakness. But at 50 it is neutral… utterly and completely… allowing the trend at hand to obtain a while longer and the trend at hand is clearly a bullish trend.

In retrospect we allowed our prosaic, old-guard beliefs in simple things to color our view of the markets; that is, we have tended to err, even when bullish of stocks, to own metals, trains, boats, bearings et al. As always, we’ve wanted to own “The when instead we should have understood the disruptive nature of modern technology and should have been buying the things that are either replacing these simple things or are making these simple things better.

We shall never be able to step into the pharmaceutical equities for we are not able, nor willing, to make implied bets upon whether a drug in place shall meet FDA approvals or not. We’ve not that expertise, nor shall we ever have it. However, we should be able to ascertain what companies will make mining better; what companies will help run railroads run more efficiently; what high-tech companies will replace crews on ships with autonomy et al. That we have to do; that we shall do. The game has changed and so must we.

Another Burst of Optimism Following Burst of Monetary Emissions

After yesterday's news that CBRC would crackdown on trust lending to developers, today the headline is the investigation will be less than expected.

Caijing: 房企融资监管力度或低于预期:银监会目前仅现场检查

USHCNH fell overnight

ZH: RBC Explains What The Hell Is Going On: "Prudent" Fed & Chinese Intervention
A "prudent" Fed (and China's "National Team") have spurred a risk-on rally, as RBC's head of cross-asset strategy Charlie McElligott notes the market's 'Pavolovian' response to Fed's 'dovish hints' contained within the Minutes - despite simultaneously staying ‘on message’ with hiking / tapering commentary - prompts a "QE of old" response: stocks and Treasuries bid, while the USD faded.

China further perpetuates the ‘risk rally’ via apparent market interventions:

1. Intervention in FX markets to strengthen the Yuan overnight, with speculation of a number of Chinese banks selling Dollars in the onshore market overnight which drove the Yuan higher.

2. Chinese “National Team” stock market inventions as well, with sharp-turns higher off of an initially weaker equities opening and again-weaker industrial metals. Major reversals off lows saw nearly all domestic markets close at highs (Shanghai Prop +2.8%), while Hong Kong’s Hang Seng closed at highs since July 2015, with Chinese real estate developers leading.
Initial (and expected) ‘sell the news’ on the snoozer OPEC outcome, as they extend the output cut 9 months per expectations—which disappointed the ‘bullish surprise’ camp which anticipated more OPEC-‘gaming’ of the market, thinking it was possible for a deeper-cut in conjunction with the consensus extension.

This move lower in crude is notable if it were to escalate the current rollover in ‘inflation expectations’ (10Y BE’s below 200dma) which continue to show as the largest price drivers of risk-assets and major rates markets currently per the QI factor PCA model—although should be noted that both SPX and HYG (US HY proxy) are both deeply OUT OF REGIME with low r-squareds / low explanatory power.
Due to my much-discussed “Chinese deleveraging / Fed tightening / ECB pivoting ‘less dovish’” trifecta, we are seeing good buying in cash USTs and receiving in swaps (strong 5Y auction as well) keeping rates pinned despite the ongoing risk-asset rally.