PBoC Turning Hawkish on Asset Prices

Everyone betting on inflation and emerging market growth lifted by Chinese demand... Straits Times: China asset-bubble warning halts stock frenzy in Hong Kong
Hong Kong's Hang Seng Index slid 2 per cent from its highest level since June 2018, led by a 5 per cent plunge in Tencent Holdings. Futures on Chinese government bonds due in a decade were poised for the biggest decline since August, while the seven-day repurchase rate jumped 29 basis points to 2.72 per cent, the highest level in a year.

The People's Bank of China withdrew a net 78 billion yuan (S$16 billion) via open-market operations on Tuesday. PBOC advisor Ma Jun told local media risks of asset bubbles - such as in the stock or property market - will remain if China doesn't shift its focus toward job growth and inflation management instead.

If they follow through...
For more see yesterday's post: Here We Go Again: Less Stimulus, China Tightening


Socionomics Alert: Civil War! In Netherlands

The headline is a little overblown, but outside of Eastern Europe which recently decommunized, the West is fracturing into pieces. Civil war, secession or failed states (unabel to enforce laws) are possible all over. The catch-22 for governments is will they impose strict rules that threaten breakdowns or back off and allow more liberty for the public. Whereever they choose more force, there is a risk of a permanent fracturing of the politics, either a longer-term polarization or a literal fracture into smaller or autonomous polities. NL Times: MPs denounce curfew riots; "Heading for civil war," Eindhoven mayor says
Mayor John Jorritsma of Eindhoven, where the riot police resorted to tear gas and water cannons to disperse rioters after an illegal protest on Sunday, called it "bizarre" what happened in his city's center. He is worried about the coming days, he said to NOS. "That's how we're heading for civil war,' he said.

For the first time, the Security Council meeting will happen in the afternoon instead of the evening, so that attendees can be home by curfew. Minister Ferdinand Grapperhaus of Justice and Security will also attend. He called the riots "simply criminal behavior", speaking to RTL Nieuws.

Far-right party FvD responded to the riots, but initially did not explicitly condemn the violence. "This is the second night that Rutte had the Netherlands locked up. More and more people are turning against the curfew. Only together can we regain our freedom," the party tweeted. When NOS published the tweet, the FvD responded with this tweet: "Another example of fake news from the NOS. FvD Naturally condemns the violence used in the protests." A spokesperson added to the broadcaster: "We thought that condemnation spoke for itself."

The illegal protests in Eindhoven and Amsterdam, arson at the Covid-19 test center in Urk, and riots elsewhere in the country had left-wing GroenLinks leader Jesse Klaver and right-wing PVV leader Geert Wilders lashing out at each other.

"Unacceptable what is currently happening in Eindhoven, in Amsterdam and especially what happened yesterday in Urk," Klaver tweeted on Sunday. "Do not forget that PVV Urk incited this violence. Unacceptable, undemocratic, and downright dangerous, intervene Geert Wilders!"

With that Klaver referred to a statement by the PVV faction in Urk last week. The faction is vehemently against the curfew and said it "will do everything in its power to ensure it is not enforced in Urk". The PVV Urk leader did call on locals to not break the law on Sunday, according to NOS.

Wilders tweeted that people must "stop it" with the violence in Eindhoven, Urk and Amsterdam. "And that of course also applies to Jesse Klaver's fur-collar friends from the Schilderswijk: get out!"

Here We Go Again: Less Stimulus, China Tightening

The post-2008 bull trap may be springing again.

We've seen this movie several times before. I started blogging heavily in 2014 because the Western financial media was touting Chinese stimulus plans, but Chinese officials repeatedly said they would not repeat the mistakes of 2008. Many commodity producers were banking on endless Chinese demand. Meanwhile, Chinese officials explicity said they wanted to change the development model. Here we are in 2021 with China still in the same development model. Each time they restrict credit in this export-heavy, commodity-dependent infrastrucure and industrial production model, there are big downturns in global markets starting in commodities. They're doing it again. At the same time, excessive stimulus hopes are being squashed in the USA.

ZH: Beware Bursting Bubbles: JPM Now Sees Only $900BN Biden Bill Passing

SIZE – given the push back from the GOP on doing another stimulus bill in this close proximity of the December $900bn package may mean that the pathway forward is via Reconciliation. This would be that a final bill would like be materially smaller than the proposed $1.9T. JPM current estimate is $900bn.

COMPOSITION – one critical aspect of the US economy is the volume of people at/near financial distress.

Consider renters, where ~20% of all renters are behind on payments. The average renters owes $5,600 (CNBC). For reference, US median household income is~$63k and with a 25% withholding means ~$2k per pay period in take home pay. Combined, there is about $57bn in back rent owned by more than 10mm renters.

Consider homeowners, where about 2.7mm homeowners, or ~5.5% of all mortgages, have their mortgage payment in forbearance (WSJ).

The federal eviction moratorium was extended to March 31 by Biden’s Executive Order. An eviction ban does not create jobs nor clear that backlog of debt. If we have millions of people put through an eviction process, it is unlikely that states have the funds to service the increase homelessness.

ZH: China Repo Rates Soar To 15 Month High After PBOC Warns Of Asset Bubbles, Drains Liquidity
It wasn't just the PBOC's liquidity drain however: the rate spike was also catalyzed by a stark warning from PBOC adviser Ma Jun, who spoke at a wealth management forum where according to the 21st Century Business Herald said bubbles have formed in the stock and property markets, and he proposed a shift in monetary policy.

"Whether this situation will intensify in the future depends on whether monetary policy is appropriately changed this year,” he said. He added that if not, such problems would “certainly continue” and lead to “greater economic and financial risks in the medium- and long-term."

ET Realty: China tells big cities to cool overheating property market
China's deputy housing minister has urged authorities in major cities to take steps to curb property market speculation following a recent surge in residential real estate prices, state media Xinhua reported on Tuesday.

During a visit to Shanghai and Shenzhen to inspect property markets, Ni Hong said city governments should uphold the principle that "homes are for living in, not for speculation", and not use the real estate sector as a short-term stimulus for economic growth, Xinhua quoted him as saying.

Cities should act promptly and take targeted measures to guide expectations and curb property market speculations, Ni said, adding they should take the initiative more, and be more creative, in ensuring market stability.

China's bigger cities saw a resurgence in home prices and transactions last year, fuelled by an influx of people and cheap credit.

I don't know how many posts I've done on this, but every single time China loosens credit I say the same thing. China has not shown it can grow credit without real estate. If the planners push credit supply, home prices take off. If they restrict credit supplied to real estate, overall credit growth slows and recession signals start popping up.

Macro factors take awhile to show up in markets. China started openly tightening in October 2017 and I discussed it on this blog. One post was: 19th National Congress: Deleveraging Will Have No Negative Effect on GDP. I only made two brief comments on that article: "Set your watches!' and in response to

We insist on actively and steadily deleveraging, adhere to multi-pronged approach, a variety of measures of deleveraging, and properly handle the relationship between steady growth and deleveraging, to ensure that deleveraging does not adversely affect the economic growth. Currently, deleveraging has achieved initial results, no significant tightening effect on the economy.
, I wrote "There hasn't been much of an effect because China isn't deleveraging..."

That month, I also posted: China Topping

For the past 18 months or so, I've said the rally in commodities is the best sign of an inflationary recovery. If prices keep moving higher, it doesn't matter if its real demand or global currency devaluation, it will signal an exit from the post-2008 low growth environment. However, I still believe this is a massive topping process.
I have been thnking the same thing now. The best sign of inflation is coming from markets. They tend to lead the economy and are a good early signal. That said, markets are also driven by psychology and they have been wrong before. Every commodities rally over the past decade was a bear market rally. This time is slightly different., downtrends were broken. Respecting those charts, the next downturn will be met by extreme reactions by governments and central banks. Extreme compared to March 2020. That's how I can reconcile a breakout with a potentially brutal bear market that causes huge losses in commodities, but doesn't invalidate the charts. Or, it's possible this is all hopium and the worst deflationary depression since the 1920s is still ahead. Yuan devaluation is still a threat if the U.S. dollar bull market hasn't ended. The green former resistance line on the last chart below shows that breaking resistance isn't a guarantee of blue skies ahead.

Lots of great charts in the commodities space with incredible targets if this is a multi-year bull market. On the flip side, things went south quickly, commodities started sliding a few months after China went all in on deleveraging. Below is the Global X Copper ETF (COPX).

The yellow box goes from October 2017 to January 2018. If I didn't know there was a pandemic, that plunge looks like a normal breakdown.

The current rally took out long-term resistance, but the chart is also pausing after having gapped above the July 2014 peak. The U.S. dollar bull market started in June 2014 and it peaked during the pandemic, an inverse of the high-to-low move in COPX. The direction of the dollar is a very important factor for commodities. To circle back to what I said above, if a dollar bear market has started, the 2020 lows in commodities should hold and long-term investors may do well holding through a bear market or using tactical hedging. However, whether a bear market rally or something more, a reversal in the dollar here would take commodities down. Also of note, there was optimsim in 2014, as I stated above, people thought China was growing again. But one of the first big posts I did in that "era" was in April 2014: Rumored Mass Death of Companies in Xiaoshan District of Hangzhou If Banks Collect on Debts; Government Tells Banks to Sit Tight or Leave. Today, small businesses are being crushed by lockdown policies around the world. The assumption is opening the economy will be like waving a magic wand, that businesses will simply bounce back. The risk is that government stimulus and bailouts have masked and delayed business closures and defaults.

The time for caution has arrived. I have mostly focused on long gold and commodities since April. For myself, I still see a lot of good charts ready for breakouts if there's more upside ahead, but I have been adding some hedges via volatility derivatives. The spike in stocks of late, the squeezes in stocks like GameStop (GME) make me worry a reversal or at least a volatility blow-up could come sooner rather than later. The U.S. dollar could also reverse in the short-term. If a larger bear move is coming, commodity-related funds such as COPX should top soon or peak by May. The most important signal for a major bear market is the U.S. Dollar Index. It must break above 96 to open up the possibility that this is a bull market correction for the dollar and not the start of a dollar bear market. I remain bearish in general on equities because I expect the technology sector will suffer with inflationary growth, and the major indexes are heavily overweight tech. Putting it together, I've only sold leveraged positions (options) in commodities and shfited some of that to volatility hedges. Unless I decide a major deflationary bear market is likely, I'd rather sit through potentially major declines in small-cap miners, and use the cash generated by put options to buy more in a decline as I did in March and April.

Update: Prerequisite Capital Quarterly Briefing. Lots of charts and graphs making a similar point. Link opens a PDF.



Didn't touch this, but noticed the move today hit the highest fib extension off the base.


The Dollar in Time

The lines on this chart are drawn 67 months apart, slightly over 6.5 years. The US Dollar Index doesn't work on a cycle that precise, generally it's 5 to 6 years for each of three phases: bull, bear, consolidaton.


2008 Yield Curve Analog: If History Repeats, Stocks Top in the Next Month

Last time the 2s10s crossed 1 percent, and the last time it climbed 1 percent from its low, was in November 2007. The stock market topped at the end of October 2008.

Every example from the past 40 years occurred withing a bond bull market. Maybe this time is different. Maybe things aren't different, but can go on longer. Maybe.

For the very short-term, VIX looks like it is ready for a move higher.


Bulls Rope-A-Doped Again, It's 2011, 2014, 2018 All Over Again

Preface to all that follows: I haven't sold any gold mining shares and do not plan to, but will use options for hedging or net long exposure on the short-side, but with a focus on technology and other overvalued sectors.

Can it happen all over again? Is the economy still trapped in the accretion disk waiting to cross the event horizon?

Reuters: China's economy picks up speed in fourth quarter, ends 2020 in solid shape after COVID-19 shock

Gross domestic product grew 2.3% in 2020, official data showed on Monday, making China the only major economy in the world to avoid a contraction last year as many nations struggled to contain the COVID-19 pandemic. And China is expected to continue to power ahead of its peers this year, with GDP set to expand at the fastest pace in a decade at 8.4%, according to a Reuters poll.

The world’s second-largest economy has surprised many with the speed of its recovery from the coronavirus jolt, especially as policymakers have also had to navigate tense U.S.-China relations on trade and other fronts.

Sounds good right? Except how did China achieve this "growth?" By pumping sectors such as steel that were the cause of prior slowdowns. They're already talking about cutting support:
GDP expanded 6.5% year-on-year in the fourth quarter, data from the National Bureau of Statistics showed, quicker than the 6.1% forecast by economists in a Reuters poll, and followed the third quarter’s solid 4.9% growth.

“The higher-than-expected GDP number indicates that growth has stepped into the expansionary zone, although some sectors remain in recovery,” said Xing Zhaopeng, economist at ANZ in Shanghai.

“Policy exiting will pose counter-cyclical pressures on 2021 growth.”

With stimulus measures, pumping value-destroying sectors and behaving as if the virus was gone produced normal levels of GDP growth. Now they will pull back the stimulus. Aside from the spike into 2011 on inflation hysteria and also the extreme move lower in the yen following the 2011 tsunami, copper has tracked with euro/yen. Relationships can always end, but if the economy hasn't exited the post-2008 credit trap, then it looks like inflation trades will be turning lower soon.


Bull or Bear: EuroYen

Prior rejections of euro/yen were bearish signals for global markets. The support line was tested in June 2016 and May 2020, both bullish for global markets.


Using Bitcoin for Censorship Resistant Communication

Bitcoin is a powerful technology when it is not hobbled. When most people hear Bitcoin they think of BTC, the digital asset now trading at $41,000 as I type this. BTC is often called ditigal gold and that is what it is, an expensive asset that is expensive to move. While it is easier to move BTC across borders, it is limited by high transaction costs and wait times. In short, it really is like a digital form of gold because it is mainly used as a reserve, not a spendable asset.

Developers have done major forks of Bitcoin twice, effectively copying it with changes in the protocol. One is Bitcoin Cash or BCH and the other is Bitcoin Satoshi Vision or BSV, sometimes written as BCHSV. The latter is being developed as something closer to what can truly be called a digital money. China makes headlines with its digital yuan rollout, but all they're doing is making a digital version of the yuan. This will presumably allow for microtransactions, but it is still a fiat currency controlled by a central bank. The value of digital yuan will likely be highly influenced by central bank policy over the long-term.

BSV as properly understood is the medium of exchange. What gets exchanged between parties is inforation. For a simple example, I can send BSV to someone's wallet right now, and within 1 minute they will receive it. No matter how much I send, be it one cent or one million dollars, they will receive it at the same speed. In both cases, I will pay about 1 cent in mining fees to move the money.

Tokens can be built on BSV. I'm not predicting this will happen (yet?), but it would be possible for every government in the world to make tokens of their fiat currencies and issue them on the blockchain. They don't need to create their own digital networks if they don't want. Similarly, you can mint tokens too and use them for whatever you want, for instance concert tickets.

The protocol can do much more...but for this post I want to focus on censorship resistance communication. There is an app called Twetch that is an interface with the blockchain. When you spend Bitcoins, the transactions are mined into the blockchain along with whatever data you attach to it. This creates a permanent record of the data, long term storage. If for some reason the Twetch app ceased to exist in the future, you could access your information from the blockchain for as long as the blockchain survives. If at some point it ceased operation, a record of it could still be saved on storage.

Twetch is also a different way of doing social media. Instead of ads and manipulated engagement to keep you watching more ads, the developers earn money from your posts. It costs about 2 cents to post a message, 1 cent for mining fees and 1 cent to the app. Images and videos cost more. Trolls can be taxed on the app. If you put a troll tax on a user, they have to pay it to communicate with you. Users can pay other uses tips right in the app. Likes and reTwetches cost money, but the poster gets paid most of the money. If you are adept at social media, you can earn money from your posting. Spam users and trolls will be driven off the site because it will be a money sink for them.

I have looked into mining Bitcoin on and off over the years and didn't find it a compelling business model, yet, because right now it is mostly like playing the lottery. There are high capital outlays and Bitcoin are earned from mining rewards. These decline at scheduled "halvings" though and will cease in 2140. But when Bitcoin was at its lows last year, it was uneconomic to mine already unless your business plan was continually adding capital to acquire coins or you had the cheapest electricity in the world. It made more sense to buy coins with your capital and hold them.

Currently the reward for mining a block is 6.25. That's a whopping $240,000 plus in BTC, but only about $1000 in BSV. Since miners can use their machines on either coin, there's constant arbitrage of mining power. Essentially, mining BTC or BSV is about as profitable because the difficulty (competition) rises and falls with price. This changes if transactions start rising. Right now blocks are mined every 10 minutes. BTC blocks are limited in size, which is why it is expensive and slow (and why BTC is expensive and functions like a reserve asset for now). BSV blocks are unlimited. If we use the 1 cent fee as the baseline and hold the price of 1 BSV constant (such that the same amount of BSV is being paid in fees each time), BSV's profitability to miners will double when they hit about 100,000 transactions every 10 minutes, or 10,000 per minute. Credit card networks process around 5,000 transactions every minute. But how many Tweets are sent on Twitter each minute? 350,000.

If you want to see what the future is going to look like, you can try out BSV and Twetch. There are three good wallets for interfacing with Twetch. They are RelayX, Money Button and Dot Wallet. If you already have some crypto accounts and have USDC, you can buy BSV directly through the RelayX wallet. Handcash is testing Twetch right now so a fourth wallet will be available soon. If you want to try Twetch, you can use this invite code. After joining, I will get a message that you joined, and I will follow you, and you'll receive a payment from me for following you.

As you'll see when you sign up for a wallet, there are other apps available. Developers who understand the power of the Bitcoin protocol are working on BSV because it has the potential for far greater uses than being "digital gold." BTC's blockchain was crippled intentionally to function as a "digital gold" reserve asset. BSV is what Bitcoin was meant to be, a native digital money, a way of monetizing, storing and trasferring information. Computers are exchanging information all the time across the Internet. Bitcoin is a way of monetizing some of this information and signaling that it is more important. I don't want to get too deep into it because I'm still learning, but the potential here is far greater than the digital gold and speculative fever around BTC. Startup companies can displace Mastercard and Visa in a few years, or a smaller company could carve off a niche market and compete head-to-head with them because they will have the backing of the entire Bitcoin network behind them. And money is almost a trivial problem with more regulatory issues than technical ones at this point. Bitcoin will inventually disrupt advertising, cloud computing and more. Something real and world changing is being developed under the radar, and there's still plenty of time to be an early adopter.

Deflation Still a Threat: Not Enough Stimulus

In order to grow nominal GDP, the economy must create enough credit. The government, private business or a comination of both must borrow. Total credit market debt outstanding (TCMDO) is more than $80 trillion, or about 400 percent of GDP. TCMDO spiked to 10 percent growth in the second quarter, or $7.5 trillion. Credit growth is already slowing though. The $10 trillion total loans and leases in the private market is growing slower than it did at any time during the Trump administration. It looks like stimulus will fall to the federal government, at least as long as they're locking down the American economy. Now President Biden is saying the $2,000 check is the $600 from end of 2020 plus a $1,400 check this year. His $1.9 trillion stimulus proposal is less than expected. Deficit-hawk Dems in the House and Senate make it unlikely Congress will exceed Biden's propsed stimulus. It is still possible the next budget is much higher than expected, but the deficit hawks must be won over. For credit growth to rise, the private economy needs confidence in the future. Lockdowns do not inspire confidence. In conclusion, it is possible credit growth will take off and drive growth, but it hasn't materialized yet. The incoming regime has signaled it won't create "enough" stimulus if the private economy doesn't rebound. I put enough in quotes because stimulus will destroy the currency and encourage more bad investments, pushing out the day of reckoning.


Taco Wednesday

I've been accumulating calls on taco energy again. My timing is always terrible, but if it goes, I think it will go big. Natural gas hasn't experience the volatility of other sectors yet and it is still uncorrelated with other financial assets. It can go wild even if everything else is being hit. Charts here: On the Cusp


China 2021: Inflation Up and Fertility Down

Updated below with English articles. Last week the Xibei CEO made waves online by saying people should work 15 hours a day, 7 days a week.

Now a former executive zinged the company by saying their recent price increase means anyone earning less than 5,000 yuan per month, or 95 percent of netizens, cannot afford to eat there.

Sina: 月收入5000以下不该吃西贝?馒头、花卷都是19元一个

In response to the hotly discussed price increase in Xibei, Yu Xin said that the price of restaurant dishes changes with the price of raw materials. Because Xibei is very strict in the selection of dishes, the restaurant does incur high costs in terms of selection, transportation, and materials.  

 "The price issue is actually a common topic. There may be some stories about the ingredients behind it, and maybe we still lack the consumer's knowledge (of Xibei)." Yu Xin said.   

Will Xibei increase prices in the short term? Yu Xin responded that the restaurant does not currently have a new price increase plan, but if the price changes, it must be strictly approved at the headquarters.

iFeng: 西贝一个馒头21元,生菜49元,月薪5千以下真吃不起!
Some netizens said that a plate of Liangpi used to be more than 30 yuan, but now the price has risen to 49 yuan.

Judging from the description of the above-mentioned dishes, the raw materials are not too "tall".

For example, for 46 yuan lettuce, the raw material is lettuce; the main ingredients of cold skin are gluten, cucumber shreds, diced celery, and purple cabbage; the main ingredients of large flower rolls are flour; and the main ingredients of chopped noodle buns are flour, water and milk.

In order to verify whether these Xibei dishes are worth such a high price, Sanyan Finance specially ordered a lettuce, a steamed bun, and a large flower roll.

This may be the most expensive takeaway that Sanyan Finance has ever eaten. Even if the platform offers a discount of 20 yuan, buying a dish, a steamed bun and a flower roll at a price of nearly 90 yuan is really distressing. The "hand-made choking buns", which had been cut into slices in advance when they were delivered. The serving size of a steamed bun is really big, and the length of the sliced state even exceeds that of a mobile phone.
Next is the "Xibei Big Flower Roll". This one is really big. Using the iPhone 11 Pro Max as a reference, the phone is 16 cm long and the length of the flower roll is close to the length of the phone.
This 46 yuan "scallion romaine lettuce", one serving of two, is not too large; the color is indeed full, but even so, the 46 yuan still feels a loss;
Comparing the choking noodle steamed buns with the small milk fragrant steamed buns sold in ordinary restaurants for a few bucks, one choking steamed bun is equivalent to four small steamed buns. But in terms of taste, although Xibei choking noodle steamed buns are filled with a milky scent, which is different from ordinary steamed buns, they do not have a special feeling besides being more chewy.

One point is that the amount of chopped noodle steamed buns and large flower rolls is indeed larger. Especially choking noodles steamed buns, which are almost equivalent to four small steamed buns and 2 ordinary steamed buns, and Xibei choking noodles steamed buns are indeed more porcelain.

But to be honest, spending 20 to 30 yuan to buy such a steamed bun and hantou, compared to a few bucks or even a few cents in other restaurants and snack bars, is still too cost-effective.

Especially in terms of taste, the choking steamed buns are not much different from ordinary steamed buns.

On to fertility: 总和生育率已跌破警戒线!如果“放开三胎”,你愿意生吗?
At present, the population situation is getting worse and the willingness of Chinese people to have children continues to weaken. Even the Minister of Civil Affairs wrote an article to remind:

"At present, due to many influences, my country's population of the right age has low willingness to give birth, and the total fertility rate has fallen below the warning line, and population development has entered a critical turning period.

In this context, the recent proposal of "letting go of three children" has been frequently mentioned, which has also set off wave after wave of discussions on the Internet. However, can letting go of three births really "promotes birth"? I’m afraid it’s not necessarily true—it’s important to know that this young people’s dislike of having babies is definitely not just a reason for fertility.

In today's society, whether or not to have a baby has long been a rational choice for the majority of young people. It is neither based on enthusiasm, nor is it as simple as "multiple pairs of chopsticks and multiple bowls" in the past.

To sum up, there are three main reasons why young people do not love having babies:

The three reasons are no surprise to readers here: economic pressure, culture shift away from big families and female independence. The latter is interesting because the CCP recently championed its liberation of women in Xinjiang using the same techniques it considers a problem for overall fertility:
Third, modern women have awakened their independent consciousness.

Nowadays, the proportion of professional women and intellectual women in our country is expanding. They admire to be economically independent, independent in life, and have a certain status and dignity in society. They like to design and plan by themselves to seek their ideal life instead of doing it all their lives. The traditional housewife who is dependent on her husband financially and whose main business is childbirth and housekeeping. At this time, childbirth has become an obstacle and burden. More and more modern women choose to have fewer or no children. Otherwise, once they take maternity leave or are forced to invest a lot of energy in caring for children, they may affect themselves. Promotion, salary increase and career development.

In the final analysis, the problem of fertility is by no means a problem of fertility. It is far from enough to "give birth" by letting go of three children.

The best idea they have is a "three child" policy encouraging people to have more children. Of course it won't work because nothing works in the face of the above pressures. There are two successful policies. One is expanded aid for families, but this tends to stop the decline in fertility rather than reverse it. For higher fertility, the best prescription is higher religiousity, deurbanization or anti-feminism, the opposite of the CCP's agenda. Moreover, their economic policy drives inflation higher and fertility lower. The trap will not be escaped. Fertility will converge with that of Singapore, Hong Kong and Taiwan.

Update: I came across this article in English making all the same points: Born and raised

Also: Proactive response to going gray

Short Spec: Alibaba

Internaitonal Business Times: China CCP to Nationalize Jack Ma's Alibaba and Ant Group - Report

Could be bullshit, but lets go to the chart.

I highly doubt the government would pay the market price in a nationalization. Whatever they offer, if anything, is what you get. They'll also probably hit the company with massive fines or crimes such that they can knock the price down.

No opinion on this happening, in fact I'm a skeptical of the claim. Out of the money put looks like the best way to play. I don't think it would happen before Spring Festival, so a March put would be the earliest. I'd wait to time it as close to the news as possible unless I was generally bearish on tech shares.

A Monument to Good Dealmaking

MMY MMTMF selling a property in a deal worth more than the company's market cap. It is still selling for less than the value of the deal. Chart is ready for a breakout if it holds gains today.

2021: The Tragic Year

1931 was the tragic year because everyone thought the depression was over, but it was getting ready to enter its collapse phase. Similarly, the global economy isn't out of the woods yet. New lockdowns could permacripple growth for years as millions must retrain for new jobs or "retire early" at age forty. Massive credit bubbles around the world are still in place. Japan tried doing stimulus in the 1990s, China in 2008, the U.S. in 2009, 2020, it has never delivered sustained growth. Economic growth keeps slowing. Interest rates keep going lower. The assumption behind inflation trades is "something different" (mostly political) will happen now. Maybe it will, and maybe it won't. Either way, 2021 probably will be tragic in some understanding of the word. My expectation is 2021 will be much worse than 2020. It will be like March 2020 in financial markets, but won't stop if the dollar breaks. If the dollar declines, at least foreign markets, commodities and crypto will catch a bid.

Here's the DXY in the prior bear market 18 years ago. The purple line is the 6-year moving average. DXY fell for 6 months after breaking that line, from mid-December 2002 to mid-June 2003. It then rallied about 9 percent over two months.

Here is the DXY now. It broke the same moving average on July 21, almost 6 months ago. A two-monht 9 percent rally would take it above the blue horizontal I have drawn, to near 98.
However, a rally of this magnitude would also take DXY above its 6-year moving average, something that didn't happen in either of the two previous dollar bear markets. The DXY has only fallen about 7 percent this time, rather than more than 12 percent last time it broke the 6-year MA.


A break below 88.50 is the bear market signal. Go "all in" on DXY short and all related trades, not necessarily at that moment, but as a structural orientation over the next couple of years.

"Bear market is still on": as the dollar decline from the 6-year MA was smaller, so the rebound will be smaller. DXY won't bounce enough to be meaningful for the dollar, but the very overextended moves in solar, pot, crypto, Tesla etc. will be hit hard in the coming correction. DXY will not retake the 6-year MA.

Bear market is still on, but everyone is about to get wrecked: DXY rallies back to resistance at 98. Everything inflation related gets taken to the woodshed in a massive correction. It could, as in February 2018, trigger a volatility event or similar blowup because of unforeseen risk because a move of this magnitude in DXY will put the dollar bear market in question.

Dollar bear, stock market bull holocaust: DXY hasn't hit its cycle peak yet. The 2020 decline in the dollar is an unprecedented (in the past 50 years of floating dollar) bear trap. Retaking the 6-year MA signals the bull market is still on. This time really is different. DXY is headed for 120+


BSV Breaks Out

Earlier this week I sold all my Bitcoin and Ethereum and went back into almost 100 percent BSV. I started moving cash in midweek. I made my final purchases today with the breakout underway.

For the moment, I am skeptical. It is probably a pump. Cryptocurrency is unregulated and large investors can move from coin to coin setting up pump-and-dumps without running afoul of regulators.

Having said that, Bitcoin is highly useful. I am 100 percent in it because I believe it could eventually surpass BTC in price or at the very least, go far higher. If there is a phase change for BSV where the market recognizes a new higher value for it, the relevant prices are around $1100 and $2000 for BTC at $40,000.
To learn more about what Bitcoin (BSV) is capable of, see Only on Bitcoin


Alibaba: A Serious Threat?

Jack Ma is a threat because he is a folk hero and a symbol of the New China. If this is a legitimate anti-trust action, the government fears bad press. If this is more of an unjust prosecution, the goverment may fear triggering capital flight, human more than financial.

ZH: Beijing Orders "Severe And Unusual" Media Censorship Of Alibaba Anti-Trust Probe


China Crushed Xinjiang With...Progressivism

This is too rich.

China Daily: Eradication of extremism has given Xinjiang women more autonomy, says report

The report on population change in Xinjiang published by the Xinjiang Development Research Center said extremism had incited people to resist family planning and its eradication had given Uygur women more autonomy when deciding whether to have children.

The changes were not caused by "forced sterilization" of the Uygur population, as repeatedly claimed by some Western scholars and politicians, it said.

In a research report released last year, Adrian Zenz, a German scholar, said there had been a significant drop in the natural population growth rate in southern Xinjiang in 2018 and claimed that proved China was trying to control the size of the Uygur population.

For a period of time, the penetration of religious extremism made implementing family planning policy in southern Xinjiang, including Kashgar and Hotan prefectures, particularly difficult, the research center's report said. That had led to rapid population growth in those areas as some extremists incited locals to resist family planning policy, resulting in the prevalence of early marriage and bigamy, and frequent unplanned births.

In the process of eradicating extremism, the minds of Uygur women were emancipated and gender equality and reproductive health were promoted, making them no long baby-making machines, it said. Women have since been striving to become healthy, confident and independent.

I've said that China policy in Xinjiang was similar to USG's policy in the USA. Turns out it was exactly like U.S. policy in Afghanistan, aside from the claims of slave labor.

Wuhan Initiates Soft Lockdown Rules

Wuhan is reimposing lockdown policies. Nowhere near as severe as in March, but similar to U.S. policies, albeit with less stringent rules on small business. The poster below is telling people to avoid non-essential travel.

Sina: 武汉疾控中心:上个月19日以来石家庄邢台来返人员集中隔离

1. Since December 19, 2020, people from Shijiazhuang City and Xingtai City, Hebei Province who came to Han and returned to Han have implemented centralized quarantine medical observation until they left the local area for 14 days, and cooperated with the investigation, nucleic acid testing, and centralized quarantine medicine of the epidemic prevention and control headquarters in each district Observe and other prevention and control measures.

2. Since December 19, 2020, people returning to Han from other areas of Hebei Province except Shijiazhuang City and Xingtai City will be subject to home quarantine medical observation for 14 days, and cooperate with the investigation, nucleic acid testing, and home quarantine medical observation of the epidemic prevention and control headquarters in each district And other prevention and control measures.

3. People who have traveled and lived in Hebei Province since December 19, 2020, who have left Hebei Province for 14 days are included in the community health management, and they will receive 1 new coronavirus nucleic acid test and 1 antibody test for free.

4. In the near future, the general public should not go to Hebei Province if there are no special circumstances; those who return to Wuhan from Hebei Province should take the initiative to report relevant information to the community (village) and unit where they are located 24 hours in advance.

5. The general public should improve their awareness of disease prevention, continue to maintain good hygiene habits such as wearing masks scientifically (especially in public transportation or crowded places), washing hands frequently, keeping ventilation, and maintaining a social distance of more than 1 meter, and actively advocate healthy and civilized lifestyle.

6. If the general public has symptoms such as fever, cough, diarrhea, fatigue, etc., they should wear disposable medical surgical masks, go to the nearest fever clinic for diagnosis and treatment in time, and avoid public transportation as much as possible during medical treatment.

7. Actively cooperate with the government to implement normalized prevention and control measures, actively provide health codes when entering key places, and cooperate with protective measures such as temperature screening, scientific wearing of masks, and hand hygiene.

Sina: 武汉市委书记王忠林:绝不让市民吃二遍苦、受二茬罪
Original title: Wang Zhonglin, Secretary of the Wuhan Municipal Party Committee: Never let citizens suffer twice and suffer the second crime   

On January 7, according to "Changjiang Daily" news: On January 6, Wang Zhonglin, member of the Standing Committee of the Hubei Provincial Party Committee and Secretary of the Wuhan Municipal Party Committee, hosted a video dispatch meeting of the City's New Crown Pneumonia Epidemic Prevention and Control Headquarters, requiring all levels of party committees and governments to effectively fulfill their territorial responsibilities , Regarding epidemic prevention and control as the current top priority, maintaining a high degree of vigilance, increasing awareness of danger, guarding against death, guarding against rebounds, and never letting citizens suffer twice and suffering twice, so as to ensure the sustained and stable development of Wuhan's economy and society.

At present, the global epidemic of new crown pneumonia is accelerating, and the local epidemic in my country is intertwined with sporadic and locally clustered epidemics. The prevention and control situation is severe and complex. Wang Zhonglin emphasized that leading cadres at all levels must adhere to the idea of strictly preventing backlash, tighten the string of epidemic prevention and control, take the lead in hearing about the "epidemic" and quickly deal with it, so as to be responsible and responsible for the soil; The first-level headquarters must quickly enter an all-weather operation state, prepare four teams for inspection, flow adjustment, management and control, and rescue, and make good use of the big data platform to ensure that the professional force is strong and powerful, and the intelligent epidemic prevention is effective and effective.   

"It's better to be stricter than to leave loopholes." Wang Zhonglin emphasized that we must strictly implement personnel control and not relax, and we must fully close-loop management and physical isolation of personnel coming to Han from overseas, strengthen the disinfection and disinfection of isolation points, and staff protection , Do a good job in community entry and exit temperature measurement, code scanning, registration of outsiders, etc., and guard the community gate. Strictly implement food and article control and not relax, and resolutely achieve full coverage of cold chain goods sampling, full sample testing, full packaging, full traceability, and full management of personnel, strengthen the inspection and elimination of transportation links, and increase foreign goods in Han Sampling intensity. Strictly implement the "sentinel" early warning and monitoring, implement closed-loop management of fever clinics, and do a good job in the overall control of fever patients. Strictly implement the prevention and control of hospital infection, maintain a high degree of vigilance, strengthen district management, and do a good job in the protection of medical personnel and the management and control of hospital admissions to minimize the concentration of personnel.   

As the Spring Festival approaches, the flow of people has intensified. Wang Zhonglin requires strict implementation of the normalized prevention and control of public places, and full implementation of prevention and control guidelines. All large supermarkets and personnel gathering places must install electronic temperature measurement doors and other facilities; increase the prevention and control of key places such as nursing homes and large-scale events Efforts: make proper arrangements in advance for students to leave school and return to school, and staff mobility during holidays. Strict social publicity, education and guidance. Through various forms such as new media and mobile phone messages, citizens can grasp and understand authoritative information and scientific prevention and control knowledge in the first time, and guide everyone to wear masks, wash hands frequently, and 1 meter noodles. Healthy living habits, enhance awareness and awareness of prevention and control; combat rumors in accordance with laws and regulations.



Rio Too

Looks like Rio is ready to go. I had been planning to build it into a full position in my portfolio, and I did that today.


The Dow in 1973

The Dow Jones Industrial Average made a new all-time high in early 1973. A new nominal high wouldn't come until neraly a decade later in late 1982. The gold bull market was getting started. An anti-establishment populist politician elected amid waves of riots in urban centers was hugely popular, but would be removed by his own weakness and a media-political-deep state conspiracy against him.

Taco, Soon

Keep coming back to this one. I swapped some First Majestic calls (AG) for calls on this. I expect it will quickly run towards $5 once it gets past $4 again. Natural gas is highly volatile once it gets going too. Timing is everything when dealing with options though, but the market is not looking for a spike here, similar to how AG calls were cheap three weeks ago. I still have a lot of calls on AG too because that's similarly on the verge of a major breakout.


A Junior Gold Miner to Own in Early 2021

I'm coming into 2021 with about 45 positions in the precious metals mining and roaylty sector, in addtion to copper, nickel, vanadium, rare earth and uranium stocks. Many are small flier positions on speculative stocks.

Which are the best prospects in 2021? Depends! CEO.ca has a stock picking contest. My picks for that contest are RYO, platinum PGE and uranium STND (all TSXV). I didn't pick copper CPL.V because it is below 5 cents (anything below starts the contest at 5 cents). Gold explorer TAJ.V didn't make it because RYO covered silver/gold, and I'm not sure when results might hit. Plus, I wanted diversification across different commodities. I own all of these stocks, but I picked them as long-shots that could pop in 2021. If there was repeated play in the contest (compounding returns over time), I would haven chosen different stocks with higher confidence rather than higher potential price gains.

I entered the stock picking contest for the first time last year. For the 2020 contest, I am in the middle, my picks were INOV -1.70% SVE.V 102.70% NCP.TO 38.89% Total return 46.63% through December 27.

For the summer contest, I was in the top quarter with NCAU.V 64.44% SVE.V 61.36% FFOX.V 45.00% Total Return 56.94%. The only one I don't own (yet?) is FFOX, it popped before I put my position on.

A Pick For 2021

There are many flavors of speculative gold mining shares: some are extreme speculations on a possible discovery, some are explorers with a decent discovery but prices came down, some are great bullish setups, some are moving towards production. I own lots of miners for different reasons. In light of this, one early 2021 pick hits a few buy factors: it is moving towards production, it is very undervalued based on expected cash flow and the chart tells me the price could rise about 150 percent before hitting resistance. If I put all my speculative holdings on a spectrum, the least speculative are miners heading for production. This one is more specualtive because of management's track record, a step below Rio2 (RIO) which is advancing towards production in 2022 (One to own later in 2021 if going by news flow, although the chart is close to breaking out. I have a significant position in RIO and am comfortable waiting.) I have a small position in the one below, but will expand it as 2021 gets underway.

Gowest Gold (GWA). They are aiming for near 100,000 oz on their project that has about 1.2 million ounces in the ground, giving them a conservative mine life of 10 years, but they're starting smaller at 40,000 oz per year to keep capital expeditures lower. GoWest closed 2020 with a market cap of $27 million. I think they will eventually earn more money in a single year when production ramps up. Slap a multiple on those earnings and there's quite a bit of upside for stock at higher gold prices. Importantly, once they get into production they should be able to self-finance capex or borrow at reasonable interest rates and avoid dilution.

There's traffic on the chart up to the 80 cent area, beyond that is where the stock could rapidly advance. Even if it doesn't make it beyond, it is 135 percent gain if it can hit 80 cents. The market is holding here because financing for the mine is unknown. Management hasn't been great with protecting shareholders and there's risk of a dilutive deal or one that gives away far too much of the upside. Having said that, the price reflects most of this risk. I think the stock will breakout on any news of a financing deal.
The Company also notes that it is working with interested parties and reviewing both short- and long-term financing opportunities required to raise sufficient funds to complete the bulk sample and advance Bradshaw towards commercial production, targeted for 2021.
The above is from the December 9 news release: Gowest Gold: First Bradshaw Gold Ore Being Processed. I like the risk/reward.
I previously posted GWA in early November. It was a potential breakout at 45 cents, but quickly went back into consolidation. The larger picture remains bullish.

Precious Metals and Copper vs Money Supply

I have the charts in terms of both M2 and TOTLL (Total Loans and Leases at commercial banks). I have M2 divided by the commodity because it makes the ratio larger than 1. I have tossed in SPY and QQQ to show how they are opposite to commodities and nearing peaks in terms of money supply. The Nasdaq should fall approximately 80 percent versus M2, a return to the peak ratio of M2/QQQ points to $60 at current M2.

The best looking chart to me is copper vs TOTLL. Held the pattern.

I calculated the implied price of every commodity assuming it reverts to the ratio peak vs M2 or if there's a trendline, tags support (for M2 divded by commodity price). These are conservative targets because it does not assume any growth in M2 and assumes no pattern break. For trendlines, I went out to Dec 2026 (6 years), that's simply my default setting for charts. Not suggesting a timeframe. IF it gets there sooner on a trendline, the price would be higher.

Gold $2525

Silver $67

Palladium $4084

Platinum $4570

Copper $10.88

Caveat to all: ratios can be broken, as the palladium chart shows.