2020-09-30
Market Exit Back to Neutral
2020-09-29
One Chart to Rule Them All
ZH: Yale Economist Warns Of Looming Dollar Collapse
The first bit is from dollar permabear Peter Schiff:
With the federal budget deficit exploding towards 16% of gross domestic product this financial year, according to the Congressional Budget Office, the savings plunge is only a hint of what lies ahead. This will trigger a collapse in the US current-account deficit. Lacking savings and wanting to invest and grow, the US must import surplus savings and run massive external deficits to attract foreign capital.”Basically the same thesis that every dollar bear has peddled for the past 40 years. Here's the thing about cyclical markets though: broken clocks get to be right once in a awhile. In this case, about about once every 18 years.
Back in 1985 and in 2002, the U.S. dollar began precipitious declines that lasted for 2 to 3 years. In both cases, the DXY fell through its 6-year moving average like a hot knife through butter and kept on falling with little to no countertrend rallies.
How much does Stephen Roach say the U.S. dollar will fall? 35 percent. Or almost the exactly same target you would get from looking at the DXY chart for a few minutes. Where's my Yale PhD?
Below I highlight the measured moves in the DXY after it broke through its 6-year moving average. The final two charts show possible targets for DXY nexy year assuming similar declines and Roach's forecast.
Unless Roach is claiming the dollar will break long-term support next year, he's predicting it will proceed within its 40-year cycle. I believe a dollar bear market is possible because it is time based on the prior two cycles. Additionally, this would be a healthy decline for the U.S. dollar and the global economy. It would not threaten the U.S. dollar. Break support and then we can talk about dollar doom.A bear market isn't guaranteed though, at least not yet. Right now the U.S. Dollar Index is testing its breakdown. Neither the 1985 nor 2002 bear markets looked back after slicing though their 6-year moving average. A reversal this time would catch many traders off guard and open the possibility of the dollar breaking above its long-term resistance again. It would be historically significant, albeit within a sample set of three.
The important area is the blue horizontal at 95.95, call it 96. Below this line, the dollar bear scenario is in play. Below 88 on the DXY and I would throw nearly all caution to the wind in forecasting a bear market. Above 96 and we might soon be saying "Goodnight Gracie" to the dollar bear forecasts.
Trump Melt-Up
On to the election. For this post, I only want to discuss broad market outcomes. My expectation right now is a Trump win causes a melt-up in the markets, broadly speaking. Gold, equities, you name it. A big reason there has been no infrastructure bill over the past 4 years was Russiagate and internal opposition from the GOP. If Trump wins, the opposition will wilt on this issue, particularly because the economy looks like it will crumble without stimulus. More imminently, if Biden were to implode tonight, the Democrats might quickly agree on a stimulus bill because their re-election chances will take a hit.
If Biden does well tonight or is seen as the destined winner, I suspect stocks will sell-off in October because wealthier investors will lock in this year's lower capital gains tax rate. Traders and investors positioned in "Trump trades" will shift out of them. After the election, and if the Democrats take control of the Senate, the spending floodgates will open. The dollar will likely sell off hard on a Biden win and various trades related to U.S. trade war with China would reverse.
Finally, stocks should rally if either candidate wins a clear victory on election night.
Sector performance remains mixed. Weakness in cannabis is the clearest sign (if we can take any of this as indicating election outcomes) that the market doesn't yet expect a Democrat sweep. Solar's move is good for Biden. Gun stocks might no longer be a good signal with Trump getting another SCOTUS nominee. Unless Barrett turns out like Souter, it looks like gun rights are secure for now.
ZH: "Crash-Up Risk": What If The Election Is Not The "Doomsday Event" The VIX Expects It To Be
Kraken Rising
Scotgold Keeps Running
I expect Scotgold will make a short- or intermediate-term top around the time they make their first pour. I may or may not add depending on how much it consolidates. Not worth chasing here. There are many similar charts still in their basing pattern.
2020-09-28
O3, O4, O5
Taking Profit to Hang Ten
PGE is exploring in the Stillwater area. I think there's greater potential for stock-specific news flow in PGE in the near term. As shown below, both stocks have traded similarly in the recent past. PGE has performed much better over the long-term. PGE looks like it could encounter resistance up to 50 cents before breaking out of its massive base.
Update: Aurania Going For It
Prior: If the stock has some company specific catalysts ahead, a significant breakout could be underway. There's a gap 11 percent lower at $4.49 that will want to get filled on a broader pullback in the miners.
If The Market Is Going Down
Digital Currency Completes the Last Mile for Payment Apps
Although from the perspective of user experience, Mu Changchun also said frankly, “For ordinary people, the boundary between electronic payment and central bank digital currency for basic payment functions is actually relatively blurred.” But it is worth noting that this The experience result is based on the network environment and payment environment that have certain conditions. If it is in a scene where online payment is not available in subways, airplanes, remote areas, etc., the digital renminbi can exhibit characteristics superior to those of Alipay.Hao Yi said that there is basically no difference between the use of digital renminbi and Alipay in big cities. The difference between the two is not at the scene level, but in the technology, that is, dual offline payment technology. In other words, digital renminbi can complete transactions without the Internet, and it also promotes the expansion of transaction scenarios.
"If WeChat Pay and Alipay must do dual offline payments, it should be possible." Dong Ximiao, deputy dean of the Chongyang Institute of Finance, Renmin University of China, also believes that the cost is too high due to the multi-party technical transformation and the requirements for equipment. Enterprises have no motivation if the input-output ratio is too low, and now they have a huge number of users.
A reporter from 21st Century Business Herald conducted an offline payment test on WeChat Pay and Alipay and found that one party must be online to complete the transaction. Currently, the dual offline payment that the digital renminbi intends to achieve cannot be realized.
2020-09-27
A Yen For Trouble
A rising yen could accmopany a weaker U.S. dollar or the yen could rise against a strengthening dollar during a bout of risk aversion.
Investment Banks Say Buy Buy Buy Evergrande
Let's take a look at the views of these top big players:Deutsche Bank: Evergrande’s large, high-quality land bank and strong execution will ensure that it completes its 800 billion internal control sales target. It is expected that at least half of the 130 billion war investment will continue to cooperate. This adjustment brings a good opportunity to increase its holdings.
Lyon: Evergrande has formulated a clear three-year debt reduction plan. Coupled with the separation and financing of properties and automobiles, it is believed that the effect of debt reduction will far exceed market expectations. The stock price adjustment has brought investors a good opportunity to buy bottom.
JPMorgan Chase: The market has overreacted to the rumors. It is expected that Evergrande will reach a consensus with strategic investors for an extension. The current valuation is very attractive.
DBS: The sharp correction in the stock price is mainly due to short selling. Evergrande’s strong sales performance, coupled with the potential benefit of renegotiation with strategic investment, will trigger short covering and a sharp rebound in the stock price.
Galaxy Lianchang: The separation and listing of Evergrande properties and automobiles will drive the net debt ratio to drop by 50%. Coupled with strict control of land acquisition, it is expected that Evergrande's net debt ratio will drop significantly below 100% in 2021.
Huatai Securities: Evergrande’s strong sales and collection performance, the spin-off and listing of automobiles and properties are expected to bring about 50 billion cash flow, and the financial status will be further protected.
2020-09-26
Long-Term Stock to Bond Ratio
U.S. Dollar Threatens Reversal
September 2018: It's 1998
At the low in 2018: What a Tantrum, Is 1998 in Play?
March 2020: About That 1998 Analog and Y2K Scenario
April 2020: 1998 Again: The Greatest Bubble in History
Most recently looking at a similarity between Nasdaq 3/2000 and Nasdaq 9/2020: Nasdaq Reversion Getting Mean
Aurania Battling for Breakout
Copper Miner Reversal Or Doom
2020-09-25
Market Exit Signal: Missed a Fakeout
I prefer using this as a long-term signal, combining it with other signals to confirm a top is underway or even past.
Evergrande Under the Radar
FT: Evergrande bond trading halted on reports of cash crunch
Trading in onshore bonds of China Evergrande, the world’s most indebted developer, was halted after reports it was seeking government help to stave off a cash crunch caused the price of its shares and debt to tumble.I searched and saw a link broken for news, but this came up from Sina: 中国恒大集团:截至2020年6月30日现金余额人民币2046亿元Shanghai’s stock exchange suspended trading in Evergrande bonds for half an hour on Friday morning, citing “abnormal fluctuations”. Their prices plunged from just under Rmb90 ($13.19) to finish trading at Rmb74, compared to their par value of Rmb100.
Evergrande’s shares and debt prices dropped after a letter, purportedly from the company, circulated on Chinese social media on Thursday requesting support for a previously planned reorganisation from the provincial government in Guangdong, where Evergrande is based.
China Evergrande Group: As of June 30, 2020, the cash balance is RMB 204.6 billionReuters: Evergrande's too-big-to-fail bind comes to a head
Evergrande beseeched officials in its home province of Guangdong for assistance with a so-called back-door listing, according to a copy of the Aug. 24 letter, whose authenticity was confirmed by Reuters sources. The idea, first proposed as part of an October 2016 restructuring, was for subsidiary Hengda to combine with a publicly traded state developer. If the deal doesn’t happen by January 2021, a group of investors can demand repayment of some 144 billion yuan, or about $21 billion, all of Evergrande’s cash as of June 30.The letter suggests a private sense of concern that Evergrande rarely exhibits in public. Chairman Hui Ka Yan often provides a helping hand to Beijing, supporting national goals such as poverty alleviation, even as its own debt load has surpassed $100 billion. Evergrande shares tumbled by as much as 6% on the news. S&P Global cut its outlook on the credit rating to negative from stable. The Shanghai Stock Exchange temporarily suspended trading in two of the company’s bonds on Friday.
Kalu
Time to Dust of the Shorts List
Aurania Possible Breakout
Mianmi Herald: Have these men found a forgotten road to lost Spanish gold mines in Ecuador?
The two mines, Logroño de los Caballeros and Sevilla de Oro, were established around 1562 and abandoned 40 years later after a smallpox epidemic killed the indigenous workforce and the Spaniards came under prolonged attack from local tribes. At one point the conquistadors who owned the mine appealed to the Spanish crown to send African slaves to keep the enterprises alive, but by that point the empire was bankrupt. As the jungle reclaimed the area, the mines themselves were lost to history — last pinpointed on maps in about 1650. Barron’s obsession with the South American mines began almost by chance.