Further to last week’s post;
Here’s a follow on to the deflationary contraction in raw materials pricing, plus the input of two others. First, Marc Chandler makes note of the massive Japanese Carry Trade unwind, the key underpinning of the whole financialization of commodity pricing, negative rates make every forward priced commodity (Contango) an ATM just waiting to be tapped. On the Chinese actions and strength, he might be missing a bit of information that I’ll get to in the second part.
Here’s Marc Chandler on Foreign Exchange moves, he’s really one of the best: http://www.marctomarket.com/2019/08/china-strikes-back.html
However, because of the quality of the global financial press, private sources of information are all the rage, despite our interconnectivity.
Hedge Fund managers pay a LOT of attention to their sources of data, since all pricing is based on as complete a picture of information as one can collect. @jkylebass is just one of the better managers, and notes that he sees that the Chinese banking system has sold some $450 Billion (US$) of their US$ holdings forward, meaning they’ve already sold their US$ holdings and now have none, or close to none on hand.
Mix those two together and you have some challenging days ahead.
For the corrupt part of the Chinese financial system, and they like to use Hong Kong as their outlet pipe to the world.
So. yes, it’s all related, IMO. Big things coming, it seems.
Not my area of expertise, so have at it in the comments.
That said, the Kyle Bass twitter feed is worth a look.
“The Canadian economy is among the strongest of the high-income countries. It is one of the few not considering easier monetary policy. It has already absorbed a shock from antagonizing China. The Canadian dollar may offer an alternative to those international investors seeking to diversify away from the US dollar…”
I stopped reading Chandler right there. Someone’s offering you hot tips at the racetrack.
Yes, Wall Street have realized blowing up America’s banking system to get Trump will be counterproductive while the Squad remain in control of the Democratic party.
Their main concern, however, is keeping China growing at any price.
The globalists lent the Soviet Union money at below-market rates for decades, most of which was never repaid. They don’t care. They print it all.
China is the globalists’ last chance to destroy western civilization, and Israel and the Christian faith with it. They’ll support China to the bitter end. And so will Wall Street, and so will the Fed.
I don’t understand the love affair with China. Thailand, Vietnam, Malaysia, Indonesia, and the Philippines can provide the cheap fall-apart Walmart goods that China provides. Just make them play fair. Then there’s India, a great democracy where wages are still low enough to provide a major economic advantage. I say keep raising tariffs on China until they capitulate or become irrelevant. Simply, who needs the grief they offer?
The globalist elite love the communists in China, they hitched their wagon to the “China uber alles” gambit long ago. Our own PM True-Dope-ia “admires their dictatorship”.
The globalist elite will sell you the Chinese rope with which to hang you.
That is why the globalist camp absolutely abhor and hate Trump, as he is changing the supply chain away from China. It was always about the MONEY…If Trump was on board with the money grubbing globalists he would be the “Greatest Guy Evah!”.
https://www.zerohedge.com/news/2019-08-04/snyder-china-extremely-angry-and-now-considers-united-states-be-enemy-1
And Chinese Foreign Ministry spokesperson Hua Chunying said similar things when she addressed reporters on Friday…
“China will not accept any form of pressure, intimidation or deception,” Chinese Foreign Ministry spokesperson Hua Chunying said at a press conference Friday.
China‘s Ministry of Commerce released a statement that said Beijing would impose countermeasures.
“The U.S. has to bear all the consequences,” the statement said. “China believes there will be no winners of this trade war and does not want to fight. But we are not afraid to fight and will fight if necessary.”
The chinese yuan just collapsed to below the nadir of 2016, as the Chinese leadership are flailing about attempting to ‘reinflate’ their economy. (see full article cited above)
This also explains a lot about the situation in Hong Kong; as heretofore that was the financial gateway to global trade. Notably, the Chinese economy has shed 5 million manufacturing jobs. But the globalists moved manufacturing jobs to ‘greater China’ back in 1970s through to the 1990s. It was all good when millions of Americans lost their jobs due to ‘outsourcing to China’ and turned the northeast states into the “rust belt” beacons like Detroit.
But now its the ‘evil Americans’ who are “stirring the sh*t”.
Unfortunately, the globalist cabal are having a hard time eating their self concocted “poop sandwich”. Hence all the wailing, flailing, whining and crying, because “poop sandwiches” taste so “yuan-tastic”!
Cheers
Hans Rupprecht, Commander in Chief
1st Saint Nicolaas Army
Army Group “True North”
” But the globalists moved manufacturing jobs to ‘greater China’ back in 1970s through to the 1990s. It was all good when millions of Americans lost their jobs due to ‘outsourcing to China’ and turned the northeast states into the “rust belt” beacons like Detroit.”
Boo hoo Rust Belt America couldn’t compete and wants a bailout now. Too bad so sad the jobs are gone forever.
” Just make them play fair.”
WTF does that even mean?
” I say keep raising tariffs on China until they capitulate or become irrelevant. ”
I say keep your goddamn hand out of my pocket you parasite. Oh and you don’t have the power to tariff countries into irrelevancy, especially not the billion person country that holds a large number of USTs.
A few problems I have with this impending crash scenario (and no math examples – just 1 graph):
1. The Chinese have sold $450 billion of US currency and that is supposedly a huge issue. But China sells the US about $200 billion worth of goods EACH MONTH so they will have lots of US dollars on hand. Even considering only the trade deficit, $450 billion is less than 1 year of trade deficit. Not a big thing.
2. Remember the Baltic Dry Index (BDI) that was supposed to be a proxy for recession? That correlation broke down so economists went to some other index – there is always another index. The BDI is just off a high (meaning sunny ways my friends).
3. Kyle Bass is an investment adviser / manager. He gets paid to sell you financial stuff. He also clearly has an axe to grind with China. Not an impartial follower of the facts – that guy.
4. China is about to do something stupid in Hong Kong. This could be a Tienanmen Square moment for Hong Kong – and that would rock the markets.
5. Remember the Shanghai Composite that was about to crash a few years ago? It’s been treading water for 3 years – no crash.
If Kyle Bass really knew things he would be tweeting from his estate in the Cayman Islands. Instead he posted a graph of the CHN with a very enlarged vertical scale and no annotation on the horizontal scale (so the graph means nothing). Then he screams FIRE. The CHN was 8.29 to the USD back in 2004. Things are getting so bad the Chinese Yuan might end up back there in 2019. OMG! And Kyle Bass’ fishing boat is a 20′ aluminum POS. Just sayin…
It’s interesting to compare the Canadian dollar to the Chinese Yuan. 5.26 : 1 in Aug 2014. 5.23 : 1 in Aug 2019. In other words the Chinese Yuan today is stronger than the Canadian dollar. Thanks to Trump.
Kyle’s “talking his book”, of course, but it’s a really, really big book. He’s not selling you squat, unless he’s willing to accept your signature on a management contract. China WAS selling at $200B a month, but know pays the US Treasury for the privilege to do much less. The smaller pile of dollars they do collect are pre-committed to those earlier sales, called “Forwards”, for just that reason. Kyle only cares to talk his book when poor information, like looking at the BDI as an economic indicator, is rampant and as a result bad pricing happens and may impact his very, very large clients. It’s what you pay a manager to do, and that’s manage the account. Secondly, BDI is a commodity contract, and as such is subject to the same financialization that any other commodity may suffer. Thus, the shorts having to cover their sales, might look to most as an impending recovery, when in fact the open interest in the contract is decreasing as it goes up, the textbook definition of a short cover.
Kyle Bass trades from his offices outside of Dallas, pays his taxes, and stands up for his customers, and doesn’t hide anything except the actual trades. The way it should work.
Unlike the work disclosed in the Panama Papers.
It looks like Vancouver will be seeing a decline in the number of empty mansions soon while the ugly face of communism will remind the people of Hong Kong that they were much better off under the minimalist British rule. Trump is still a loose cannon populist with a real estate developer’s perspective on interest rates and mercantilist’s perspective on trade. The Chicom leader is a Stalinist playing the long game at any cost. Gold, Gold stocks, and Silver (for the third time in the last 45 year) are best bets over the next few years while the equities are correcting in a whipsaw that will allow the last of the bull market to play out over the next couple of years before the “big one”. Oh, and Canada is still a com-dol economy despite The Spawn and Butts new green deal.
Hong Kong is the poster child for captialist, and British, liberalism and also of corrupt socialist barabarity. It appears that Xi is a hard-line communist intent on enforcing and growing party control. I suspec the is also corrupt, using many of the corrup[tion show trials to avail himself of the property of others. But, controlling the media through the CP machine, there will be no mention of this. Thankyou Google for all the assistance you and your ilk have given to the CCP .
And of course the Down plunges 850…
https://www.cnbc.com/2019/08/05/us-futures-amid-trade-turmoil-between-beijing-and-washington.html
Of course re-“orienting” (pun intended) the supply chain will have some hiccups. This doesn’t mean the overall global economy shrinks; despite localized disruptive effects. The short term market is always running around with their hair on fire…
Enjoy!
Cheers
Hans Rupprecht, Commander in Chief
1st Saint Nicolaas Army
Army Group “True North”
” This doesn’t mean the overall global economy shrinks”
Yes it does. It did in 1930 and it will again.
What’s “The Corzine Rule”?
Today is a lazy holiday in New Brunswick. My wife is at a small ladies church retreat, and dogsitting as I am, I watched hours of CNBC business news. It’s pretty bad in world markets. I have a fairly defensive portfolio — 10% cash, 20% bonds and 70% REITs and utilities — all in Canada, but even then I am worried. We could have a North American recession.
Wall Street have figured out that Trump is serious about insisting that Americans finally get an honest day’s pay for an honest day’s work.
They’re not happy about that.
They spent the last 40 years going all in on China. They are not looking forward to losing every cent—much less ending their days on the plantation, hired out by the federal prison system to do the hard farm work they used to insist white people wouldn’t do in lieu of coughing up the proceeds of forty years of tax evasion.
There’s not going to be a recession—not in the US anyway. If you still proudly produce goods in the United States, happy days are here again. If you’re in the business of marking up garbage made by slave labour in China, you’re in big trouble.
Long bond yields are dropping, in joyful expectation of rate cuts, yes, but the Fed is not cutting interest rates to support the American economy. They’re doing it to prop up China’s for as long as possible.
” If you still proudly produce goods in the United States, happy days are here again. ”
LOL no you’re getting replaced by a robot.
The short term market is always running around with their hair on fire…
Which is why I pay less attention to zerohefge these days. Always a panic, precipice, cliff edge, too late but the world refuses to conform.
“I would love to be able to bring back our country into a great form of unity,” Trump said. “Without a major event where people pull together, that’s hard to do. But I would like to do it without that major event because usually that major event is not a good thing.”
https://www.youtube.com/watch?v=p1aLKzNAz9Y
Trump Is Laying The Groundwork For A New World Order
I’ve been an investor long enough to know that such prognostications should be taken with a grain of salt.
For example, during the mid-1980s, one such market “wizard”, Robert Prechter, made his prophecies based on Elliot Wave Theory and, quite likely, made his money by selling subscriptions to his newsletter. He predicted an impending horn of plenty because of the new high levels reached by the DJIA. My father’s broker at the time was a follower and gave investment advice accordingly.
And then came Black Monday when the Dow dropped around 25% in a single day, followed by Prechter’s reputation vaporizing. The Dow did eventually recover and went on to even higher levels. Prechter’s still around but he hasn’t done a whole lot since that day.