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About Me

Darren Winters is a self made investment multi-millionaire and successful entrepreneur. Amongst
his many businesses he owns the number 1 investment training company in the UK and Europe.
This company provides training courses in stock market, forex and property investing and since
the year 2000 has successfully trained over 250,000 people.

Wednesday, 15 March 2017

Dysfunctional markets and democracies

There are so many similarities with the late 1920s and today that it is eerie.
Back then there was popular discontent with the status quo and trade wars were looming. Stocks today are almost as expensive (using the price-earnings ratio as a gauge) as they were on the eve of the 1929 crash.

What's more, the Fed (as they did prior the 1929 stock market crash) also raised the Fed fund rates into a lacklustre economy.

But what is unusual about the financial markets today is that we see government bond prices and stock prices moving downwards in tandem, in other words, capital outflows from both bond and equities. Typically, when investors sell bonds (say due to an improvement in the economic outlook) capital tends to rotate into risk assets, equities which provide potentially higher dividends in good times.

However, this inverse relationship between bond and equity price no longer holds water and this could be telling investors/traders something. In short, today's financial markets have become somewhat dysfunctional.
When asset prices fall together (bonds, equities) this could be a withdrawal symptom of hyper-inflationary quantitative easing (QE) policy of the central bank unwinding. Asset prices today are not determined by equilibrium fair market price instead, they have become a function of the central bank's liquidity.
But when the central banks withdraws monetary stimulus, in other words, moves towards interest rate normalisation policy and winds back QE the market becomes unstable.

So a period of dysfunctional markets and democracies lies ahead.
Indeed, the trickle up wealth effect of abusive monetary policy has facilitated unprecedented wealth distribution from the middle to the top of the food chain and that is slowly killing the golden goose-household consumption.
Zero nothing economic growth, peak debt and lacklustre consumption have become the new norm. So retailers are struggling to break-even, cutting cost and closing down brick and mortar stores. The proliferation of ghost shopping malls
Malls to become ghost towns, Jim Cramer says -
Malls are likely to become "ghost towns" as more consumers shift to online alternatives, CNBC's Jim Cramer said on Friday. On Friday, J.C. Penny told investors that ...
and empty commercial real estate with late reminder payment mail piling up on the doorstep is again appearing on the high street. The list of retailers filing for bankruptcy in 2017 is a red flag for investors/traders.
From a risk-of-bankruptcy standpoint, the retail business ...
American Apparel is among a clutch of retail chains to have already given up the ghost and filed for bankruptcy protection. Move over, oil and gas. Retail is set to ...
So if households are struggling to make ends meet in the new gig economy that means retail sales are declining too. If retail inventory is rising that also means that manufacturers' order books are also in decline.
German manufacturing order dropped 7.4% in January.

Meanwhile, the revolving doors between government and the major commercial banks ensure that the elites continue to syphon off their undeserving wealth for doing absolutely nothing.
George Osborne, former UK chancellor, cocaine user
George Osborne off his face on cocaine again?
Remember him in the Commons? Away with the fairies! Check his performance out here. Listen to his tone and look at his eyes. This guy the next PM off his tits on ...
and history graduate (let's face it the finest intellects don't read history at university) is earning £650,000 a year for working one day a week at the world’s largest investment manager.

But we live in a something for nothing culture and the higher up the food chain you are the bigger that something is.
So the dimwit western policy makers (mainly history graduates from elite universities) have now come up with what they believe to be a brilliant solution to this dying economy (better known as a “weak economic recovery”) scrap benefits and pay everyone a universal basic income (UBI).
Hooray for UBI! What a socialist utopia, it must have been dreamt up in a pot smoking session.

Here is a sobering thought. If everyone consumes and nobody produces we all starve. This something for nothing culture at both extreme ends of the food chain is likely to collapse the western system and it is probably why we have reached peak debt (peak madness, peak agro) today.

Speaking about those who produce the food, the farmers how are they feeling these days? Are the farmers rattled by the trickle up wealth effect policies of the government and the extend and pretend debt that is bleeding their nation dry?

As we can see in Greece unsustainabledebt, followed by harsh austerity is a catalyst for massive civil unrest.

Anyone who believes that we are not currently in a crisis is living in denial.
Markets become dysfunctional in a crisis, the price mechanism breaksdown and so too do democracies.
Frankly, the electorate is so irate with the status quo that if given a chance they would probably vote in a street hooker as a leader (even if it were just as a protest vote).
We are seeing this play out in Europe with Brexit and the rise of other anti-EU parties which is challenging Europe's post-WWII order.
But breaking up the EU is akin to demolishing the house because the lights don't work.
The electorate is voting to knock down the political foundations that provided Europe with peace and prosperity for decades. The sensible thing to do would be to reform the EU inside the European Parliament. But in a crisis not only do markets fail so also do democracies, after all, that is how Hitler and Mussolini came to power.

Tuesday, 14 March 2017

Will Trump Smash the Fed?

So the US economy is nearing its inflation target of 2% and the latest payroll data suggests that employment is also better than anticipated with 235K jobs created in February versus 175K jobs expected. Perhaps the stage is being set for a Fed rate hike normalisation quicker than that what the market anticipates.
But it is the record US public deficit which has now surpassed 20 trillion dollars that could come into focus going forward.
Will Congress raise the debt ceiling (the upper limit of money that the US government can borrow to meet its debt obligations) on March 15? The economy is experiencing modest growth expanding by 1.9% in the final quarter of 2016. Moreover, that reconciles with an increase in total tax receipts of 0.5% over the first four months of the year.
US Registers January Federal Budget Surplus of $51.3bn
The January US Federal Budget recorded a surplus of $51.3bn compared with a surplus of $55.2bn the previous year and compared with consensus forecasts of a surplus near $40.0bn. The US usually posts a budget surplus for January with strong tax receipts on seasonal grounds and before tax refundskick-in. For the first four months ...
Public debt is less burdensome when the economy is expanding but it would need more than lacklustre economic growth. Furthermore, when the Fed's fund interest rates are low the cost of servicing the debt is also low. But that is likely to change when the Fed starts moving towards its goal of interest rate normalisation. That also means highly leveraged governments and corporates could be burdened with higher debt costs going forward.

So the US economy is shouldering a cumbersome public deficit at a time when the Fed is keen on raising rates. Put another way, the US economy might need to grow more than just 2% or 3% to sustain debt payments. An economy boom would be ideal.

How then would an economic boom (GDP greater than 5%) be achieved when the population is ageing and the pool of young fit working-age group is diminishing.
Natural population growth is in decline as generation X struggles to pay off student debts and achieve financial independence in the gig economy. Without a stable income the next generation is less credit worthy, if they can't secure a mortgage, they don't buy houses, cars, and start a family. So the indigenous population declines and the working population ages and then retires.

Meanwhile, resources are diverted to the ageing population needs (but this is a sunset economy) which will transition from dusk to night, it has no long-term future in a failing economic model that leads to population decline with fewer younger people.
Short term fix, an injection of young blood (sustainable immigration) into the economy could reduce the negative impact of an ageing workforce, lower worker productivity and population stagnation or decline.

There is a correlation between an ageing, declining population and lower economic growth, Japan is s good case study. The human farmers (or chosen few who print the money) don't create the wealth or economic prosperity, instead, it is the sweat, toil, innovation and enterprise of their human livestock which creates real wealth and prosperity. In a few words, increasing the money supply doesn't create economic prosperity it just makes fiat currency (which has no intrinsic value) less valuable. So when the central bank (human farmers) issue more fiat currency that means, even more, currency is circulating in the economy and chasing the same or fewer goods and services (provided by their human livestock), which then leads to higher prices. Put another way more currency is needed to buy the same good or service which is the definition of inflation.

It would be inaccurate to say that the greatest monetary easing experiment in the history of finance (implemented by the central banks following the financial crisis of 2008) did not create inflation.
This unprecedented amount of monetary easing implemented by the central bank's quantitative easing program did indeed create hyperinflation or (asset bubbles) in government bonds, stocks, prime real estate and many other trophy assets owned by the super rich (super luxury yachts, paintings, classic vintage cars, precious stones..)
Monetary policy is being implemented by those at peak of the food chain for their own economic gain. The easy money circulated amongst the top hierarchy of the food chain has enabled this group to speculate and accumulate wealth beyond their wildest dreams. So the trickle up wealth effect of abusive monetary policy has facilitated an opaque transfer of wealth from the middle class to the chosen few. Perhaps it has even added to this demographic time bomb.

The trillions of dollars of newly created currency were not channelled into productive investments or public works. Today the infrastructure (roads, bridges, drains and sewerage systems, transport infrastructure, ports) of many G7 economies is in need of investments.
But when easy money can be made on the speculative casino inflating asset bubbles, buy today sell tomorrow and make a killing. So why bother doing anything tangible with capital when fortunes can be made on the financial casino, creating nothing making nothing. What's more, boosting shareholder value becomes not much more than corporate stock buybacks with the cheap money.

So the CEOs reduce CAPEX spending, thereby employing fewer people and employing capital in stock buybacks.
In short, a few people got very rich at the expense of everyone else. It is how just 62 of the richest people have as much as half of the world's wealth.
The 62 richest people have as much wealth as half the world
Growing inequality has added to the net worth of the world's richest billionaires, according to a new Oxfam report.
This type of wealth inequality could only have been financial engineered.
Trump has come to power riding the populous revolt anti-establishment wave.
There is an image of President Trump in the oval office speaking on the phone with a portrait of former President Andrew Jackson hanging on the wall behind him.
Andrew Jackson was a rich populist who bragged and invited ...
Andrew Jackson was a rich populist who bragged and invited scorn. Trump draws new interest in the 7th president.
What does the 45th president see in the 7th president?
The two presidents do have a few similarities, both wealthy populists battling against the establishment of the day.
Moreover, it was only recently that Andrew Jackson was removed from the $20 USD note.
Harriet Tubman To Replace Andrew Jackson On $20 Bill | The ...
Treasury Secretary Jack Lew announced Wednesday that Harriet Tubman will replace former President Andrew Jackson on the $20 bill. In a call with reporters
It just wasn't considered politically correct to have a former slave owner (which is like employing the service of domestic cleaner on the minimum wage today) on the note.
Was Jackson taken off the note due to his anti-central bank speech?
"Controlling our currency, receiving our public money, and holding thousands of our citizens independence, it would be more formidable and dangerous than the naval and military power of the enemy…."

But what do Trump and all his billionaire bankers have in common?
The gold curtains, Jacksons portrait hanging above him- is Trump communicating to us through symbols his intentions? Will the 45 president attempt to smash the central bank, introduce a gold back dollar, or is Trump just part of an elaborate psychological operation to lull the population back to sleep?
Time will tell.

Monday, 13 March 2017

The economic wheels continue to spin in the euro bloc

Eurozone economic indicators have overall been benign, the economic wheels continue to spin, albeit slowly. Eurozone GDP growth advanced 0.4% in the quarter three months to December of 2016.
Euro Area GDP Growth Rate | 1995-2017 | Data | Chart ...
Euro Area GDP Growth Rate 1995-2017 | Data | Chart | Calendar | Forecast The Eurozone economy advanced 0.4 percent on quarter in the three months to December of 2016 ...
While this may not seem like fireworks the euro bloc is no longer the worse performing economy of the major advanced developed economies. At the bottom of the list came Japan with its economy barely growing in the final quarter of 2016, posting just 0.2% growth. The UK economy outperformed the EU's by a slight margin growing 0.5% in Q4, 2016.
Then there is a gap with the top performers shooting ahead. The second best-performing economy was the US which expanded by 1.9% in the final quarter of 2016.
At the top of the list, leaving all other economies well behind in its rear mirror is China with its economy expanding by 6.8% during the same period.

Nevertheless, let's not discount the fact that euro bloc economy is battling some fierce political headwinds. A nationalist popular sentiment is sweeping the continent. First with Brexit, then with the French presidential elections scheduled to be held on May 7 will most likely be the euro bloc's pivotal point. The EU's existence (post-WWII order in Europe) together with the fate of the euro stands in the balance. Indeed, should the French electorate put in power Le pen's far right Nationalité (National Front) party the EU project and the euro are doomed. That is the sharp reality.

But the Euro is also a pillar of support for the entire western financial banking system. Euro sovereign bonds are the collateral that commercial banks pledge to raise finance.
If the Euro were to collapse so too would the value of Euro bonds which was valued at 20.3 trillion euros in 2014.
Europe's 20.3 Trillion-Euro Bond Market Shrinks as Banks ...
Europe's 20.3 trillion-euro ($26.1 trillion) bond market is shrinking as financial institutions repay debt, according to Citigroup Inc. analysts in London.
This doom scenario would play out something like this;
Investors (commercial banks) would be left holding worthless euro bonds and in a desperate attempt to raise their capital base they would freeze credit, (perhaps even call up loans) and sell other assets too. The great unwinding of stocks and real estate would follow leading to a Great Depression scenario, the collapse in the value of all asset classes, real estate, bonds, equities.
Europe's largest bank, Deutsche Bank with its €46 trillion derivatives book exposure would soon be declared insolvent. The almost simultaneous collapse of the euro, euro bonds and Europe's largest bank would blow the collateral chains off the entire western banking system, thereby making the 2008 financial crisis (triggered by Lehman brothers) look like a picnic.

With bank closures, credit frozen just in time Inventory management system would breakdown.
Then the situation would rapidly deteriorate.
Grocery stores would run out of food supplies within days. The hungry, angry mass of people would take to the streets (what would they have to lose), social order would collapse within weeks.
How are bankrupt governments going to pay the salaries for law and enforcement officers to keep the peace and maintain law and order?
Frankly, it would be a mad max scenario.

That is why I don't believe it is going to happen. Think about it, if the forex market, the precious metals market, the LIBOR market is rigged then everything worth fixing is "fixed."
The western elites would have too much to lose from a Le pen victory, EU disintegration, euro collapse and a financial apocalypse. So my two cents worth is that Le pen won't be permitted to win.
However, having said all the above I am also a little spooked by the article below.
Germans told to stockpile food and water for civil defence ...

For the first time since the Cold War the German government is advising citizens to stockpile food and water for use in a national emergency. Some opposition MPs said ...
The worse trait you could have as an investor/trader is being over confident. Remember the golden rule; no trade position in your portfolio should be big enough to crush you if it goes horribly wrong.

While I don't believe Le pen will win, and the contrarian trade (risk on EU assets, particularly European banking) could be the play of 2017. However, it would also be prudent to hedge against that position in the unlikely event of a disaster (EU disintegration and collapse of the euro). Don't become another statistic-another trader/banker jumping from a high window.

So let's assume Le pen fails to secure an election victory in the May French Presidential elections.
If the eurozone economy has managed to push against the political headwinds of anti-EU parties and still posted a modest economic growth in Q4, 2016 what would the bloc's economy do when those headwinds are lifted?
Put another way EU assets could be undervalued, assuming a Le pen failure.

ECB President Draghi's less dovish tone this week underscores the fact that a sense of urgency has gone.
Draghi said the "balance of risks to growth has improved" and noted that The ECB had "removed reference to signal a sense of urgency."

So it will be very interesting to see how all this plays out (since the outcome will have an impact on everyone). Meanwhile, euro and euro stocks continue to recover as I write this piece.

Monday, 27 February 2017

Scotland, Brexit, Fed,US

Scotland is “flirting again with secession”. The likelihood that Scotland would hold a second Scottish independence referendum might have seemed fairly remote one month ago but the idea of a Scottish devolution from the UK is being discussed again.
Just two weeks ago (On February 13) I wrote a sceptical piece about Brexit.
“Nationalism, regionalisms, tribalism. Will we see the UK independence from the EU soon, then Scotland's independence from the UK later, Catalonia independence from Spain? This could be a can of worms.”

Meanwhile, on the foreign exchange market pound sterling was dumped in Asia overnight and the selling has continued in Europe (as I write this piece).
It is widely being reported in the mainstream that UK Prime Minister Theresa May’s team was preparing for Scotland to potentially call for an independence referendum in March.
Bloomberg reports unidentified government sources stating that “May could agree to a new Scottish vote, but on condition, it is held after the UK leaves the European Union,”

Pound Drops as May Reported to Brace for New Scottish Referendum
The pound fell against all its major peers after The Times reported that U.K. Prime Minister Theresa May’s team is preparing for Scotland to potentially call for an independence referendum.

Recently the House of Commons approved the bill (article 50) which would authorise May to trigger the nation’s withdrawal from the bloc.

The House of Lords (upper house) is currently examining (debating) the bill (as I write this piece). What's more, if the Lords recommend amendments to the bill the House of Commons (lower house)  would be required to consider those amendments. In other words, this could be a strategy to delay (frustrate) article 50 becoming law. Put another way the bill could bounce back and forth like a ping-pong ball and while peers in the House of Lords and MP in the House of Commons debate the bill the UK still remains in the EU.
So a delaying strategy could be playing out which might be prudent for forex traders to keep in mind.
Moreover, the House of Lords could even overrule article 50, bearing in mind that the UK is a constitutional monarchy. The sovereign head of state (Queen or King on the throne) can overrule a bill passed by the House of Commons if it is deemed not to be in the national interest (but this has not happened for several hundred years).  In a few words, it might be just too politically sensitive for the upper and lower houses of parliament to clash.  

So my two cents worth is that the peers are likely to deploy a delaying strategy.
Think about it.Do you really think the UK establishment want their nation, the union jack (first introduced in 1606),  to dissolve?
Across the pond, the Dow has managed to remain in positive territory for the eleventh day in a row. However, it was not a convincing close, bearing in mind that the Dow spent all but the last 5 minutes of the entire session in negative territory.
Nonetheless, it was still the longest winning run since 1992 as investors looked ahead to tomorrow’s speech by President Trump to a joint session of Congress.

For approximately one month now markets have been awaiting further details on the so-called “phenomenal” tax plan that the President promised us on the 9th February when he was at a meeting of airline executives.
This statement helped push the Dow conclusively through the 20,000 and up another 3% at a time when the Trump trade was losing its lustre.
We’ve seen similar signs of weakness in the past few days, which weren’t helped by comments last week by new Treasury Secretary Steve Mnuchin when he stated that any tax changes might take several months to outline, let alone implement.

However, the USD has managed to finish the week in positive territory despite a decline in yields which was starting to weigh on the USD.
Market participants are now betting on the next Fed rate rise in  May or June rather than March
The decline in yields combined with some level of risk aversion due to political uncertainty in Europe has helped push gold prices to their highest levels in 4 months.
The weakness in yields is also preventing the euro with the spread between US and German yields at their widest in one and half years, despite German inflation being only slightly less than US inflation.
Concerns about political risk in Europe, particularly in France have driven German 2 year yields to a surreal -0.95%. But with German inflation currently at 2%, that means a real yield of -3%. This is likely to wreak havoc on pension funds.

Regarding macro data US January core durable goods orders are expected to come in at 0.5%, unchanged from December.
Moreover, standby for some hawkish talk from the Dallas Fed President and new FOMC voting member Robert Kaplan, when he speaks later today in Oklahoma. Kaplan has been fairly vocal in recent comments about the need to act fairly soon raising the prospect that he could vote for a hike in March even if the wider committee does not.

Wednesday, 22 February 2017

An unusual cocktail of optimism, upbeat data and political instability

The Eurozone economy continues to make headway as the economy in the single bloc currency grew to a 6 year high in February, according to the latest PMI data from IMS Markit released on February 21.

The latest data from Markit is flattering.
"Job creation was the best seen for nine and a half years, order book growth picked up and business optimism moved higher, all boding well for the recovery to maintain strong momentum in coming months."
In February Eurozone Services PMI Activity Index posted 55.6 ( that is a 69 month high), manufacturing sector did even better with Eurozone Manufacturing PMI at 57.2 (70 months high)
Germany and France saw new orders rise at the steepest past since May 2011.
Germany's upturn was spurred on by manufacturing while France saw the biggest jump in service activity.
So the Business optimism detected towards the end of 2016 appears to be now building momentum in early 2017, despite all the political uncertainty in the bloc.

However, political uncertainty in Europe is being played out in the foreign exchange market with the Euro dipping below $1.05.
It might be prudent for traders/investors to keep their optimism in check. In a few words, the Euro is likely to face one of its biggest challenges since its conception with the French elections 7 May fast approaching. Should far-right French presidential candidate Marine Le Pen secure election victory traders/investors could be staring down the barrel of a financial apocalypse. Le Pen wants to leave the EU and the Euro. But that might be the catalyst for a financial fusion (meltdown) starting with the almost certain collapse of the Euro, then peripheral spreads blow up, next, the collapse of Deutsche Bank with $46 trillion derivatives exposure. If DB (Europe's largest bank) goes down the drain who will honour its derivative losses (which could amount to $ trillions). Put another way the other banks on the other side (winning side) of DB trades could be left holding worthless paper.
DB is too big to fail but equally, it's too big to save, even for (cash strapped) governments.

In other words, a Le Pen victory could be the financial fusion that blows the collateral chains off the European banking system.
So with the stakes so high a rigged French election looks likely, unless the “fixers” are planning a reset and need an excuse.
No doubt the secretive Bilderberg Group would be able to write the conclusion, frankly, the rest of us are all left speculating.

The EU CPI reading for January is scheduled for toady. Fears of deflation in the eurozone are well behind in the rear mirror and the ECB target of 2% now looks like a reality. The depreciation of the euro and recovery of oil prices could all add to a higher inflation reading.

Meanwhile, on the financial markets, the German Dax is testing its 12,000 resistance price level (as a write this piece)

It is an unusual cocktail of optimism, relatively upbeat data mixed with political turmoil. Indeed, Even U.K. Q4 GDP has been revised up to 0.7% from 0.6% preliminary, despite the risk of Brexit.

Across the pond, the Trump administration is locked in a bitter fight with Intel, mainstream media and the globalist elites (the shadow government). Nevertheless, household and business optimism remains buoyant. New job creation in the US is an under-reported story.
Thousands of new auto jobs are expected in west Alabama for current and future automotive parts suppliers for companies like Mercedes-Benz US International.
“There's a couple of new suppliers building plants just down the street from us. That's going to provide more employment opportunities for the local area," according to MBUSI President and CEO Jason Hoff. Those jobs are expected to come available in the next 18 to 24 months.
Thousands of new auto jobs expected in west Alabama

Thousands of automotive jobs are coming to west Alabama but to get those jobs, you will require technical skill and training.
Delta Air will be adding 25K jobs
Delta CEO Ed Bastian said in a statement Thursday that the Atlanta-based company is growing its ranks as it expands and upgrades its hubs at several of the nation's airports. Hiring could be contingent on the support of the government in establishing "a level playing field."

Briefcase: Delta Air to add 25K jobs

Delta CEO announces job growth plan
Newport News Shipyard to add 3,000 jobs
Just a year ago the company laid off 700 workers at the shipyard due to diminishing workload.
The shipbuilder is seeing an increase in contracts (business is cyclical) that started end of September, so they are hiring.
For the latest job hiring stories (that the mainstream likes to under-report) see the link below.
DailyJobFix - Job Hiring 2017, Job Search/Postings ...

DailyJobFix / Job Hiring 2017/2016 - Source for Online Jobs, Job Listings / Posting. Looking for a Job / Job Hunting? Daily List of Jobs, / Places hiring near Me / You
It is still early days to know the full impact of Trump's policies but it's fair to say (remaining apolitical) so far, so good. Time will tell.

Monday, 6 February 2017

The next game in town, front loading Trump's regulations

In these puzzling times, traders might not be able to rely on trading strategies that worked well in the past.
For example, the bad new is good news idea that made some traders quick bucks during the heydeys of massive monetary easing may not apply going forward.
Post-2008 financial crisis that play went something like this; traders bought on the bad news (they piled their chips sky-high on risk assets), then waited for the central bank's quantitative easing (QE) bond buying program which flushed the market with an insane amount of liquidity. So with more cash chasing a finite number of assets that meant prices had only one way to go up, up and that led to a price earning ratio that screamed bubble too.
Front loading the central bank's next move was the best (maybe only) game in town. Commercial banks probably figured out why bother making productive investments and taking risks when fast money can be made on the world's biggest casino. Moreover, with the commercial banks rigging the market and having their puppet heading the major central banks (the revolving doors between Goldman Sachs and every major western central bank is obvious) it was a one-way bet. It would be naïve to think that a handful of connected traders working for the commercial banks were not given a heads up every time the bull market was about to be injected with monetary drugs.
Wall Street's money machine served the choose few so well but it impoverished the many. Financial engineering has resulted in a stratospheric wealth distribution curve (just 62 people on the planet are as wealthy as half the world's population). But that was then.
So will a former casino owner, Trump now US President be able to put right the world's largest casino?
The knight on the white horse has risen to power because the populous figured out that something is wrong (they may not understand the mechanics of why). Trump is perceived to be a leader that cares for the growing rank of poor-he will “stop the carnage.”
Then putting a halt to this type of financial engineering would be a genuine start.
But with a cabinet stuffed with all the President's billionaires
All The President's Billionaires: A Guide To Trump's ...

As a member of Forbes' wealth team I write web and magazine stories about billionaires, plus help put together The Forbes 400 and World's Billionaires lists.
and neo-conservative generals surely any inquiring mind is now wandering whether Trump is just an elaborate psychological operation (PSYOP) to lull the populous back to sleep.
Think about it. The billions of dollars of corporate investments in plant and machinery announced by numerous manufacturers (so far) are not much more than a public relations exercise. Many of these companies are downsizing and laying off workers.
So who have really been the biggest winners thus far from a Trump administration?
America's 10 Richest Gain $16 Billion During Trump's First Week.
What about Trump's pledge to “drain the swamp”. That too was just sweet words-Ex Goldman Sachs alumni occupy every important financial position in Trump's cabinet. Indeed, the market riggers are in situ.
What's more, Trump is currently ordering a review of the Dodd-Frank act which will significantly scale back the regulatory system that was put into place in 2010 following the financial crisis of 2008.
Trump to Order Review of Dodd-Frank, Halt Obama Fiduciary Rule

President Donald Trump will order a sweeping review of the Dodd-Frank Act rules enacted in response to the 2008 financial crisis, a White House official said, signing an executive action Friday designed to significantly scale back the regulatory system put in place in 2010.
In short, this would give more freedom to an already powerful group of financial service operators on Wall Street. Critics argue that it would take away protection from the average investors and the global banking financial system.
Trump argues that the law had damaged the country’s “entrepreneurial spirit” and limited access to needed credit. Bank stocks are moving up the news (as I write this piece).
The Fiduciary rule which requires advisers on retirement to work in the best interests of their client is also coming under review.
The idea is “to open up investor options.” Relaxation of the fiduciary rule is likely to raise the profitability of brokers.
In short, this is the most disruptive administration in memory. Thirty-year-old multilateral trade agreements are being ripped apart, old alliances are being tested to the limited.
Moreover, practically everything done by the previous administration is being dissolved.
However, the fractional reserving banking system is being supported along with the fiat debt monetary system. Put another way the elites at the peak of the food chain remain in control, in fact, they are consolidating their position.
But the era of massive monetary easing is probably over, in other words, bad news may indeed be negative for risk assets going forward. Corporate earnings drought doesn't support the current bubbly stock prices, so risk asset prices could be vulnerable to bad news, particularly in an era where central banks appear to be playing a retreating role.
The opportunity/risk is this market could be front loading the Trump administration's next move.
Already trader's witnessed this week that Trump's anti-liberal views (Muslim ban) sent the Trump rally tanking. The political risk is that the current administration becomes even more authoritarian in an attempt to squash dissent which then fuels a US antifascist uprising. This existential risk requires ongoing monitoring.
Meanwhile, the opportunities came from regulations that lifted burdens on businesses which gave the banking sector a boost.
But the real shock could come from Trump's foreign policy. Perhaps we are already seeing the first U-turn from this administration regarding Israeli settlements. The neocons are pushing for war, particularly with China and Russia, (Trump has surrounded himself with neocon generals).
Already we are seeing hostile posturing towards China. Will it be carried through to Russia too?
Perhaps betting on the lifting of Russian sanction might be too optimistic. Time will tell.

Wednesday, 18 February 2015

Oil Is A Slippery Trade

The recent spike in oil underscores how the market is stacked in favour of players with deeper pockets. I believe what we are seeing here is a classic example of a bear squeeze.

Firstly, let’s examine the fundamentals. As we know, the price of oil is driven by the demand for the black stuff and its supply. Looking at the demand side there’s a raft of economic data and recent spate of corporate results which tend to point in one direction, the global economy is beginning to slowdown. The Euro zone is moving in slow motion with many parts of the trading bloc still remaining in an economic quagmire. Japan continues to remain stagnant with lacklustre growth and it looks like it will experience another lost decade. China is definitely in deceleration mode as inventory overload continues to add up and domestic demand shows no signs of picking up momentum.

The US economic recovery, supposedly the strongest link in the chain, might not be what it’s cracked up to be. Recent disappointing retail figures underscore the fact that consumers aren't splashing their savings, from cheaper gas, at the retail stores. In fact, a recent survey showed that households are diverting their savings into rising health care costs. So, cheaper fuel at the pumps isn't juicing consumption. In view of the above, then we can see that on the demand side, there really isn't much that is going to push oil prices moving forward.

If the prospects of higher demand for oil isn't pushing oil price higher then it must be a supply side speculation story. Yes, that view would hold water bearing in mind that inventories are rising at record levels. The glut of oil on the market is now becoming so great that storage is an issue. There are talks about filling up huge tankers and docking them out at sea, like floating oil deposits on the high seas. With oil inventories building up, it’s most likely going to take time for these surplus inventories to work their way out of the system.

Moreover, there is no indication from the largest producer of OPEC, the Saudis, that they are planning to cut output. In fact we are seeing the contrary.

“Two other OPEC delegates, one of whom is from a Gulf producer, said they could not rule out prices dropping to as low as $30-$35 due to weak demand combined with global refinery maintenance in the first and second quarters of 2015,” as reported in CNBC on February 2.

OPEC last November decided against cutting its production despite misgivings from its non-Gulf members. OPEC oil ministers, who decide the group's output policy, are not scheduled to meet until June 5. So, we have no indication whatsoever there’s going to be a change in the supply side issue. Even the recent death of Saudi Arabia's King Abdullah last month has not led to a change in the Saudi oil output policy, which is to continue pumping unabated. Therefore, with global demand for oil stagnating and supplies remaining constant, it can only mean more of a glut of oil on the market moving forward. In view of the fundamentals, there is very little reason to expect oil prices to rise going forward.
So what is this recent spike in oil price down to?

What we might be seeing is a bear or short squeeze.

In other words, oil price is moving sharply higher not due to fundamentals but as a result of it being heavily shorted, then a few big pocket players gang up and bid the price higher. That then forces more short sellers to close out of their short positions, often at huge loses. You get a situation where the deep pockets players bet against the smaller players and it is obvious who wins in the end. It is like a game of poker where you know your opponent has a weak hand, but to see his cards you have got to put more money on the table, which you cannot afford to raise or risk. The deep pocket players know that they have this advantage.

It’s a slippery game and the reality is that more often than not the retailer gets shafted. Only the short sellers with deep pockets can afford to risk runaway losses on their short positions and may prefer to close them out even if it means taking a substantial loss.

The only way to counter act this is to stick to a trading discipline, don't let your losses run. There is no love in marrying your trading position. Better to be a slippery fish than a startled rabbit staring into the headlights when the market moves against you.

You need to keep this in mind; if a trading position looks too overcrowded, it’s time to bug out, evacuate your position swiftly.

Why? Because that’s when the deep pocket players bet against the rest of the market. That’s how a few players get even fatter.

This is what might happen with oil prices over the next trading week. The small retailers come rushing in thinking that oil is about to make a comeback. Mainstream, which is control and managed by the deep pockets will help spin the illusion. They might even engineer the oil price movement to trigger a technical buy signal, again it is all a spin.

But the reality might be oil price moving high on short covering. Then when the herd rush in to buy, thinking that oil is staging a comeback, the deep pockets bet against them again, this time the other way. They take short positions and profit from the fall. Remember it’s a zero sum game. Your green is someone else's losses. Perhaps oil isn't making a comeback, but rather it’s about to tank. It's a tricky game.... At the time of writing this piece oil is at 51.02 USD.

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