2020-01-16

If This Be a Melt-Up

The ratio of SPDR Technology (XLK) to the SPDR S&P 500 Index (SPY) is about where it was in 1998. That spike on the chart took place over the course of 15 months, when the Nasdaq more than tripled from its 1998 correction low. The first part of this rally isn't on the chart because XLK didn't exist yet. SPY is currently about $330 and XLK is $95, call it a ratio of 0.30. The ratio peaked at 0.49, call it 0.50. Assuming the S&P 500 Index would gain around 20 percent in this scenario (SPX 4,000 anyone?), SPY would rally towards $400 per share. XLK would rally to $200, a 100 percent increase. AAPL could trade at $800, Amazon $5000, Google $3000, Facebook $1000, Tesla $1000, maybe AMD $500 assuming one or more stocks end up rallying 10 fold like the eventually dotbombs of the late 1990s. (Amazon was one of those dotbombs by the way).

This is not a forecast, but it is what a repeat of the 1999 market melt-up would look like.

2020-01-15

Bitcoin, Bonds and Gold

Gold and now Bitcoin has a positive correlation with long-term treasury bonds. Bond prices typically rise when the economy is weakening or there's panic in the air, it heralds more monetary intervention down the road. A breakout in Bitcoin will
A breakout in Bitcoin would be positive for the entire cryptocurrency space, but it needs to clear $10,000 for a really bullish picture to emerge.
BitcoinSV, which claims to be the true vision of digital money envisioned by Satoshi Nakamoto, experienced a breakout versus Bitcoin yesterday. A successful test of the 0.03 area would confirm the breakout.
Gold remains in a basing pattern. It could decline without wrecking the basing pattern. It is also looking potentially bullish in the short-term though. The junior miner ETF GDXJ needs to rally about 25 percent from here to complete its basing pattern.

2020-01-14

Oil Glut Expanding to Refined Products

Oil experts can put this into better context, but the 30,000 ft view is China doing what China does, building up massive overcapacity and exporting it to global market.

Caixin: China’s Growing Oil-Refining Overcapacity to Fuel Surge in Exports
China’s total refining capacity will grow by 27 million tons to reach 887 million tons in 2020, helping push exports up 18% to 64.5 million tons from last year’s 54.66 million tons, the CNPC Economics & Technology Research Institute (ETRI) said in a report on Monday, putting China on a path to overtake South Korea as the largest oil exporter in the Asia-Pacific region.

...The rise in excess capacity also comes as growth in domestic demand slows.

...Continued growth of refining capacity is largely a function of local government support in an effort to boost economic development, said Wang Lining, head of oil market research at the CNPC ETRI.

2020-01-09

Falling Pork Prices Save China from a 5pc CPI Print

iFeng: 猪肉降价了!结束环比6连涨,带动鸡肉鸭肉下跌…商务部:加大投放力度
Under the combined action of a series of measures, there has been a positive change in pig production. The latest National CPI (Consumer Consumer Price Index) released by the National Bureau of Statistics in December shows that food price inflation has eased, especially the end of the 6-month sequential increase in pork prices. The year-on-year increase in pork prices also dropped 13.2 percentage points from November. Market analysis believes that the coming of the Spring Festival will continue to drive food prices up. It is expected that there will still be inflationary pressures in early 2020, but pork prices will have downward pressure after the Spring Festival.

It is worth noting that structural inflation has been repaired. Food prices in December 2019 increased by 17.4%, a decrease of 1.7 percentage points from the previous month; non-food CPI rose by 1.3% year-on-year, 0.3 percentage points higher than the previous value. Analysis believes that in the next stage, it is necessary to focus on the advent of the Spring Festival, which may continue to drive up food prices, and still need to continue to pay attention to the rise in oil prices caused by the unstable and uncertain international environment.
NBS: 2019年12月份居民消费价格同比上涨4.5%

2020-01-04

National Socialist Greens in Austria

The Hitler coalition of nationalists, socialists and greens is back on in Austria.

Guardian: Austria's Greens vote to enter government with People's party
Members of Austria’s Green party voted on Saturday to join a new government led by the conservative former chancellor Sebastian Kurz, clearing the final hurdle for an untested national left-right alliance.

The coalition pact approved by their party leadership and Kurz’s People’s party earlier this week was backed by 93% of Green delegates . Out of 264 delegates, only 15 voted against or abstained.
Populism is a roulette wheel. Every country is spinning the wheel. Anglo countries have "first past the post" electoral systems that temper volatility, while European countries with proportional representation can produce some interesting mixes. The media has told us for years that the Austrian populists are Nazis or far-right extremists. The alliance with Greens cements the comparison. They don't seem panicked though, almost as if their years of panic was total bullshit.

2020-01-03

The Song Remains the Same in China

Caixin: Major City Land Sales Break Record as Local Governments Fill Budget Gaps
Land sales in major Chinese cities hit a record high in 2019 as officials struggled to fill budget gaps left by tax and fee cuts that have bitten into their fiscal revenue.

Land sales revenue in 50 cities last year grew to a record 4.2 trillion yuan ($601.6 billion) as of Dec. 26, marking a jump of 17.6% from the same period in 2018, according to data provided by a research center of Hong Kong-based Centaline Property Agency Ltd.

“It is the first time that the land sales revenue of the 50 cities surpassed 4 trillion yuan,” said Zhang Dawei, chief analyst at the Centaline research center.
Land sales fund infrastructure investment which makes land valuable. The economy is dependent on this relationship for GDP growth. China has wanted to escape this "trap" for more than 5 years and finds itself more dependent than ever.