Real Estate

Very early, initial signal of a possible reversal in real estate: the 3x Bearish Real Estate ETF (DRV) broke its downtrend. Some other charts that look interesting in the real estate space. Some are failing at their initial pandemic gaps, some look relatively weak and could be starting meaningful breakdowns if they lose support (assuming a larger bearish move is underway in the market), while others are near pre-pandemic highs.

USDJPY Monster Reversal Pattern Still Extant

Most technical analysts I've seen are looking for the right-triangle pattern to complete with USDJPY tumbling below 100 on its way to potentially new lows. For the biggest dollar bulls out there, this is also a potential 20+ year inverted head and shoulders in the making, heralding a major reversal in the yen. Intuitively, it makes sense when you consider Japan did QE first and to a far more extreme degree. If any developed nation's currency deserves to collapse (based on economic fundamentals) it is the yen. The target would be 175 based on the pattern. A drop of that magnitude would almost certianly pull export competitor currencies such as the euro, yuan and won lower. Or more likely, this move would accompany a global depression or some event far greater than coronavirus. No central bank could bail out Japan. It's unlikely nations would cooperate on a bailout anyway given U.S.-China tensions.

The sloping resistance line is half a percent away. It was briefly pierced in February and March 2020 but didn't hold. Any modest U.S. dollar rally that includes the yen could break resistance again, it could come as soon as Monday if volatility from the end of last week carried over. While many charts have severely damaged the dollar bullish view and the deflation risk, this is one that is close to screaming "hold your horses" to the reflation trades.

Euroyen No Pullback Yet

Euroyen says reflation trades are still risk on, but one to keep an eye on if selling picks up.

UST 10yr Yield Channel Already Negative

This isn't a forecast, but I thought it worth noting the possibility if yields are heading for a test of support rather than a breakout. The long-term support line in the 10-Year U.S. Treasury yield channel is already negative, around negative 0.60 percent presently. The support line in place since 2012 is around 0.20 percent presently. For the inflationists/higher nominal rate crowd, one bullish sign is that the 10-year hasn't come close to that lower support since summer 2012. Another is the brief breakout in 2018 that may herald a trend change.

CNYJPY at March 2020 Gap

"All one market." Reflation is being tested in multiple markets.


Copper-Gold Ratio Calls For 2pc 10yr

Since 2008, the current level of the copper-gold ratio calls for tehr 10-year yield being above 2 percent. At this juncture, the immediate signal is short copper or short the 10-year bond, because either the ratio or the 10-year yield will close this gap. The longer-term bullish/inflationary view is that inflation is indeed coming and rates are still too low. Rates will rise and after an adjustment, the bull rally in various assets will resume. Tech is probably done as a leader though. If copper and interest rates "meet in the middle", that would be bullish for the inflation scenario.

The bearish interpretation says the post-2008 trap is alive and well, copper prices will peak and reverse as they did in 2011, 2014, and 2018, with rates eventually following.

I have bets on both sides right now, I'm long copper juniors and have short-term puts on copper majors.

Copper could retrace more than 10 percent from its high and not dent the uptrend from the March 2020 low.


Biden Skips or Delays State of the Union

The State of the Union speech was scheduled for February 23, but that date has passed. The media is running coverup for the Biden administration: Fact check: No deadline is in place for delivering State of the Union

Probably nothing, but in light of Congressional Democrats trying to take away the nuclear football...

Just When You Thought Selling Was Done...

Yields have pulled back on Friday, easing selling pressure in the stock market, but the U.S. dollar index is rallying back above its 50-day moving average. iShares Mexico (EWW) is below long-term resistance and has a small topping pattern.
FXI is also battling at support/resistance.
Italy right where it has failed every time since 2008. Haven't been watching this one, but if something is differernt this time, Italy should break through. Otherwise...
Steel ETF
The regional bank ETF hit a resistance line yesterday morning that is from the 2008 top and was hit in June 2018.
GDX perfectly hit my suppot line dawn from teh 2016 high. A strong dollar should weaken it, but I like the risk/reward here because it's right at support.

Totalitarianism is Coming Back, Greens Want to Measure How Much Sin is in Each Product

Totalitarianism is coming back via blockchain technology because it gives central planners a new lease on life. A major drawback of central planning (and socialism) is the lack of economic information. If everything is on-chain, however, there's far more information for central planners. In their minds, the information problem may be solved. With body sensors on the way, it's possible for the state to monitor the location of all citizens. If the state says to exercise for 30 minutes per day and you do not, it could punish you. If it has total location data, it could regulate daily interactions. A state like Iran could punish anyone who doesn't go to mosque. A feminist or chivalrous society could fine men who do, or do not, hold the door for a woman. It could get into micromanagement of individual behavior and tax or fine people for violating the state's mandate. These are extreme examples, but many companies are already working on implementing green religion into the economy by tracking the carbon emissions of commodities. This video is cued to the relevant discussion:
Technology can be used for good or ill. It can help Man create or enslave, depending on the laws, religion and customs under which they are governed.

GameStop Humor


Robotic Farm Workers Have Arrived

Low skill farm workers? Not needed anymore.
The USA is sprinting headlong into a political, economic and social crisis.

Island Reversal for MicroStrategy

Island Reversal in Play for MSTR

Previous posts mentioning MSTR are here.

Game Over for Federal Reserve?

On a day when GameStop is ripping higher on a new short-squeeze, it is fitting that today migth also herald game over for the Federal Reserve.

ZH: Treasury Yields Explode After Catastrophic, Tailing 7Y Auction

Ahead of today's closely watched 7Y treasury auction, where the bulk of the recent Treasury rout has been concentrated as traders hammered the belly of the curve, we said that "If the 7Y tails a lot, watch out below" as that would only add insult to today's furious selloff injury. Well, that's precisely what happened, because with the 7Y pricing at 1.195%, this was a whopping 4.1bps tail to the 1.151% When Issued.

The auction was, in a word, catastrophic.

Starting at the top, the bid to cover tumbled from 2.305 to 2.045, the lowest on record, and far, far below the 2.35 recent average.

But if that was ugly, the internals were even worse, with the Indirects plunging from 64.10% to just 38.06%, the lowest since 2014, as no foreigner suddenly wants to even smell US debt!

The article finishes with:
The Fed better do YCC NOW, or else we are about to find out just how much absolute bullshit MMT really is.
I'm not sure the Fed can do yield curve control. First, YCC targets the short-end, it isn't about buying the whole yield curve. See Bloomberg (archive link): Fed’s Yield-Curve Control Isn’t for Taming Long Bonds
Now, to bring up yield-curve control misunderstands how Fed officials, notably Vice Chair Richard Clarida and Governor Lael Brainard, have said they envision carrying out the policy, which remains deep within the central bank’s toolkit. Simply put, yield-curve control has never been about squashing longer-term yields, like those on 10-year notes or 30-year bonds. Instead, it’s a way to make sure bond traders don’t try to strong-arm the Fed into raising short-term interest rates before it’s ready to do so.
Things could change. The assumption in the article is that long-bonds are fine, but that was a couple weeks ago. Today's 7-year auction caused a breakout in the 10-year yield (above 1.50 percent), that it subsequently lost as stocks plunged on the up move. Before the auction, the 2-year Treasury bond yield spiked 40 percent to a high of 0.194 percent.
It's possible this was a selling-climax in the bond market and a correction in stocks, along with inflation trades such as commodities will begin. If not, I'm not sure if YCC would help the stock or bond market. It might calm the market down for a time, but my sense is many investors would see more intervention as inflationary. That would accelerate a sell-off in long bonds, cause panic buying of gold and commodities, and probably trigger a crash in the stock market because "long duration" tech stocks dominate the market. (DJIA beats SPX which beats COMPQ in this scenario.)

I have barely sold any mining stocks, but I am well hedged with a few tactical puts along with a lot of VIX calls.


Democrats Fear Biden With Nukes More Than Trump With Nukes

Many on the right are blackpilled by the election results and believe the election was stolen. Whether it was stolen or manipulated fortified, or even a legitimate election, the reality is the Democrats ran a candidate they knew was unfit for office. He so unfit that Democrats are more afraid of Biden having control over nuclear weapons than they were of Trump having control.

WashTimes: Democrats ask Biden to cede authority on nuclear launches

A group of more than 30 House Democrats is asking President Biden to give up his sole control of U.S. nuclear weapons.

In a letter led by Rep. Jimmy Panetta of California, the Democrats ask that their party’s leader alter the command-and-control structure surrounding America’s nuclear arsenal so that no single person can launch the weapons.

“Vesting one person with this authority entails real risks,” the letter states. “Past presidents have threatened to attack other countries with nuclear weapons or exhibited behavior that caused other officials to express concern about the president’s judgment.”

Also, Trump was right again. He thought the 25th Amendment bill proposed by Pelosi last year was about Biden, not him: Trump says Pelosi’s 25th Amendment bill is about replacing Biden with Harris

These are the types of headlines and stories that I mentally file away into the "U.S. dollar collapse" and "extreme political result" drawers.

Finally, this video needs to be remade with Biden.

A Sign of the Top Hat

Twetch (link to sign up) did something interesting today. The sold a hat tied to a non-fungible token (NFT). NFTs are basically ownership rights fo teh digital world. They create scarcity in an otherwise non-scare environment. There's a lot that can be done with them. However, I'm not going to go into NFTs here. My point today is they sold 100 hats for quite a tidy sum, with the hat numbered #1 sold for $420 worth of BSV. The hats and associated token do have value because they can be redeemed for free Twetches (it costs about 2 cents to post a text only Twetch).

More broadly, we are in the binary moment where the future braches into extermely rapid inflation or we are at the top of a massive bubble. We were here in March 2000 with tech stocks, June 2008 with oil and September 2011 with gold.

The analogy I keep coming back to, because it is the perfect way to think about cryptocurrency, is that Amazon lost more than 90 percent of its value in the early 2000s bear maket despite becoming more successful than even its most delusional bulls could even imagine in the year 2000. Cryptocurrencies are doing amazing things, there are here to stay, and you'll defeintely want to be involved, but I can't shake the feeling that if you set aside some cash to invest, you'll be able to increase your exposure by 10x simply by waiting. Maybe this time is different, or maybe it's history rhyming one more time.

Castles on the Ground

I posted another discounted stock today. Everything going on in the markets says it has more room to run, but chart screams warning for the whole market:
This reminds me of MicroStrategy, which I posted on two weeks ago. When stocks do nothing for years on end and then start spiking like they did in 2000, or 2008 and 2011, I pay attention. What year is the right analog? Commodities feel more like a 2000 situation because of the bear market, but it's also the case that the anticipated growth is wholly artificial. The bulls like myself expect the government will create demand for low carbon and EV transporation. The Austrian-leaning like myself expect it will end in disaster for the economy. What happened to Texas last week will be replicated worldwide, or there will be debilitating inflation to create effectively zero growth once the inflation is netted out in the eventual deflationary collapse. If for some reason these government plans don't come through, if say, the Republicans sweep Congress in 2022 because inflation becomes a problem far more quickly than expected, the plans will be cut short.

The U.S. economy is "growing" only because of stimulus. There have been no cleansing defaults that reduced the cost of capital. Companies didn't go bankrupt, today owned free and clear by new owners. Instead, small businesses were wiped out by lockdowns. Their defaults are in the future if the economy cannot revert back to "normal." If there is a transition to a new economic pattern, it will come with transitory unemployment and recession.

In short, this is not the start of an economic growth cycle unless there are incredibly inflationary policies. The opening of the economy is assumed. The $1.9 trillion is assumed to hit a normalized economy. The market is not discounting the risk that the economy needs far more than $1.9 trillion in stimulus. It isn't considering the risk that the public revolts again, like in 2016, and chooses not to wreck the economy for a green pipe dream. It isn't discounting the risk on the other side of the ledger, that interest rates rise amid soaring inflation. It seems like many people think the Fed can control the whole yield curve and that markets won't break if they try. As if the dollar or oil, or some other assets, won't trigger a recession. The government, central banks, ruling classes and seemingly most investors are more naive than I've seen at anytime in my life.

Pop Goes the Rare Earths

In October I posted: Ace of Base. The stock closed at 87 cents that day. It slowly drifted lower and then today...

America's Tyrants Want Fox News Removed from Cable

ZH: Taibbi: Why Dems Pushing To Censor Fox News Is "An Insanely Stupid Idea"
The movement crested this week with a letter from California House Democrats Anna Eshoo and Jerry McNerney, written to the CEOs of cable providers like Comcast, AT&T, Verizon, Cox, and Dish. They demanded to know if those providers are “planning to continue carrying Fox News, Newsmax, and OANN… beyond any contract renewal date” and “if so, why?”
Expect Fox News to be kicked off cable. Social media is already being retarded by bans and censorship. I deleted my Facebook account almost a decade ago, I stayed off Twitter for a long-time and then ditched that. Censorship will increase exponentially in the years ahead because the ruling class runs on the Narrative, not Truth.Their rule is built on lies, from Russiagate to systemic racism. Their "solutions" and the biggest problems in America. When reality smashes them in the face, they call the Truth disinformation. They are going to lose control of the currency in the coming years. It's possible they will institgate and lose a major war. Crime is already soaring in cities run by the ruling class. Inflation is guaranteed to rip if we don't get lucky (?) with a depression first.

There is alternative social media on Gab.com . Censorship-resistant Twetch where you pay to upload to the Bitcoin (BSV) blockchain and get paid for your posts, or pay others for their good content. A bigger solution to technological totalitarianism is Urbit. I have some stars and will start issuing planets soon...

Tech Favorites Look Vulnerable

Right here, right now. Maybe that changes within minutes or hours.

Tesla Lost 42pc Versus Freeport McMoRan in One Month

If inflation is coming, technology is already rapidly losing ground.


Guangdong Preparing for Maglev Links to Major Cities

ECNS: Guangdong plans ultra-high-speed maglev lines linking its mega cities with Shanghai, Beijing
South China’s Guangdong Province plans to construct two ultra-high-speed maglev lines linking provincial capital city of Guangzhou and another booming city Shenzhen with Shanghai and Beijing, cutting current travel time via high-speed railway by half.

According to the Territorial Special Planning of Guangdong Province (2020-35) released on February 9, Guangdong has formally stated the intention to set aside space in the province for the construction of a high-speed maglev line linking Beijing, Hong Kong and Macao, and another one line linking East China’s Shanghai.

If the plan is realized, it’s estimated that the travel time between Shenzhen, Guangdong and Shanghai will be shortened by half to merely 2.5 hours, while that between Shenzhen and Beijing will be 3.6 hours.

It will be part of the new Chinese high-speed maglev network running from Wuhan to Guangzhou and onwards to Hong Kong.

Operational railways connecting Guangzhou with Shenzhen

Guangzhou – Shenzhen - Hong Kong High-Speed Railway Guangzhou South Station to Shenzhen North Station: 29 mins 350 km/h (217 mph)

Guangzhou – Dongguan - Shenzhen Intercity Railway Xintang Station (Guangzhou) - Shenzhen Airport: 60 mins 200 km/h (124 mph)

Guangzhou - Shenzhen Railway Guangzhou East Station - Shenzhen Station: 74 mins 200 km/h (124 mph)

iFeng: 多地规划预留高速磁悬浮通道,“超级高铁”要来了?
Recently, the Department of Natural Resources of Guangdong Province announced the public consultation version of "Guangdong Province Land and Space Planning (2020-2035)". The plan proposes to reserve six important traffic corridors, including the Beijing-Hong Kong-Macao high-speed magnetic levitation and Shanghai (Shenzhen)-Guangzhou high-speed magnetic levitation. It is also the first time that the high-speed maglev line has been clearly planned.

Prior to this, the world's first high-temperature superconducting high-speed maglev engineering prototype and test line using the original technology of Southwest Jiaotong University was officially opened in Chengdu, Sichuan, which marked a breakthrough in the engineering research of high-temperature superconducting high-speed maglev. Possesses the conditions for engineering test demonstration.

A reporter from China Business News found that some major city clusters have been planning high-speed magnetic levitation in recent years. "Super high-speed rail" is really coming?

Copper Gold Points to Higher Rates or Recession

First, the copper-gold ratio at current levels is associated with a 10-year yield at 2.0 to 3.0 percent. Copper looks like its in a blow-off phase of the current rally though, and that should ease pressure in the bond market. If not, conditions are starting to get crashy. Second, the current level of the copper-gold ratio was associated with recessions before 2008. There is a lot of talk about thinks changing and inflation coming back. If yes, this ratio should climb and bond yields will follow. If no, it's about ready for another repeat of 2011, 2015,2018 and 2020.

Tech vs Financials

Although it doesn't look like it, that red horizontal is from the 2000 peak. The chart is SPDR Technology (XLK) divided by SPDR Financials (XLF). Nice topping pattern.

Everyone Laughed at Dow 36,000, And Then They Bought It

The first chart shows SPY/QQQ versus the 10-year yield. A clear general trend. The next charts are finance and tech ETFs versus SPY. The blue line is TLT/IEI for XLK, and IEI/TLT for XLF. When TLT outperforms IEI, it indicates rates are coming down, which benefits TLT more than IEI because it has greater duration. The reverse is true when rates go up, IEI goes down less than TLT for a given rise in interest rates. If rates have finished going down, the time to exit tech and enter value has arrived, but a major correction has also arrived or will be coming soon.
There remains a deflationary argument for bond yields dropping. We've been here before on rates, remember 2018? The market forced the Fed's hand back then. I mention this because at this juncture, I don't see tech outperforming from here. Whether oil and copper keep rising, or everything sells off, tech is going to get hit.
I've seen some chatter about the market overreacting to higher interest rates, but I don't see an overreaction. I think its an underreaction thus far in tech. Tt isn't an inflation or bond yield issue, but a stock market issue. As interest rates went down, increasing numbers of investors justified higher stock prices based on low interest rates. Once stocks are valued like bonds, they become as volatile as bonds once intrest rates change. Tech stocs are effectively a zero-coupon bond in this model because it has very low divdends and many companies have zero earnings. When rates increase, the tech sector should have, and does have, a highly volatile downward adjustement. The book Dow 36,000 is rightly pilloried for predicting Dow 36,000 in the years after 1999 (it was published 6 months before the market peaked), but the underlying thesis was that stocks are safer than bonds because they grow their earnings. Stocks should be valued like bonds (or even at a premium) and that gave a Dow 36,000 target based on interest rates back then.

For myself, I'm mostly drawn to the volatility index because I think it has support from both bearish and bullish moves (vertical rises in things like BTC).