Macro Afternoon

A much better than expected start to the trading week here in Asia with the PBOC keeping the Yuan very weak, still well above the 7 handle against USD, with most stock markets putting in light rises or scratch sessions.

The Shanghai Composite has finally found some momentum, jumping over 1.2% to 2808 points while the Hang Seng Index is just hanging on to a scratch session, currently at 25944 points. This keeps it above the January lows at 25000 points but even a cursory glance at the daily chart shows it remains in trouble with very poor momentum:

Japanese share markets are closed for yet another holiday, which is probably good given the big bids in Yen with the USDJPY pair remaining well below the 106 handle, dragging the AUDJPY with it. The bearish descending triangle pattern on the four hourly chart broke on Friday night with the next target at the longer term level nearer 104:

The ASX200 is also just treading water, closing a handful of points higher with no news or impetus to take on risk to start the week well, closing 0.1% higher at 6590 points, still unable to breach the 6600 barrier. The Australian dollar is steady against USD but remains elevated versus NZD and dropping against Yen, giving FX traders something to do I guess!

S&P and Eurostoxx futures are up around 0.8% or so with the S&P500 four hourly chart still showing the potential to breakout above the 2930 point zone after stabilising somewhat which could turn this away from being a dead cat bounce:

The economic calendar begins the week very slowly with the usual Treasury auctions and not much else.

Comments

    • Stocks I sold earlier this year are still above what I sold them for, despite the falls. It’s been a yo-yo. Up and down last few weeks. But as far as I’m concerned I sold out at a long term peak price. Is there more upside? Probably, and I have a smaller exposure to it now, but actually since they are denominated in $USD falls in AUD means that falls in total stock value may not be as bad.

      Hard to pick a winner here, I think I should have some small exposure to gold though.

      • well I was selling expecting some falls so I can jump back in again. I still have substantial exposure though.. ANd it started to look that way with Futures dropping just below $1500 with DOW futures at around 80 points. Then within few minutes gold futures jumped to $1513 and DOW futures over 100 points negative. Not sure what triggered this as I can’t see any news that points to this. Unless TT is right and China is about to send troops into HK but I don’t think that would have been large enough event to trigger such movement in the futures.

    • I only started stacking in March this year and I began with Silver. I managed to acquire a few fractional gold coins (1/4oz). Got a good collection of proof Kookaburras and just filling in the gaps now. Probably a good 30oz of random coins like Maples, Roos etc. My stack of bars is growing. Got a crush on Perth Mint 10ozs but hoping to buy my first kilo bar later this week. Gold is a bit pricey so will stick with Silver.

      • freddy lasthope

        I stopped stacking when I put it all in a sports bag to move house and it tore through the bottom of the bag. I liked that bag. Ended up finding a finding a few more which I’d forgotten about when the removal lads were moving our art deco sideboard. They were huffing and struggling, then heard this odd sliding sound followed by a few big “clunks” on the floorboards. I’d forgotten about stashing a few up in the base frame. Their faces, they couldnt see what made the noise, they thought they’d broken the sideboard somehow. They looked puzzled when I picked them up, I said they were antique doorstops. Anyway Ive since traded it all to some random dude for a vintage Star Wars toy collection at a loss…

  1. OK, I’m sharing so others can also share, particularly wrt bonds, as we’ve all expressed some interest in these lately.

    I sold a lot of bond funds today, for a nice little profits. I also bought a little USD.

    However, I did not net move out of bonds – I’ve really rotated out of shorter-end to longer-end AUD bonds; I’ve also picked up a little more VIF, for increased exposure to US treasuries.

    I chose to sell composite bond funds (eg. CRED and BNDS), to free up funds to rotate more to AUS and US govt bonds; of the govt funds, I chose to sell the ones with lower (younger) weighted maturities (as these tend to be structured for quarterly or monthly income above that of govt bonds); or ones that I’ve been noticing are under-performing for some reason (eg. RGB).

    Of directly-held AUS govt bonds, I picked up more; but I now only own 10-20 year bonds, with the majority of weight now around 14-19 years, and have sold everything < 10 years; the longer-dated bonds these have seen great capital gains lately, and it's my gut feel that they will continue to see the lion's share of AUS bond gains going forth, as they seem under-priced to me (however, this is just my opinion, and I'm not nearly as experienced as many!).

    I've effectively reduced % coupon payments (by dropping short-end bonds and bond funds) in order to speculatively chase greater net capital gains on directly-held bonds.

    I bought some 20-year bonds a few weeks ago and wish I bought more – they went up 5.6% today!

    Gold is still very much on my radar, after I picked up some stocks via the MNRS ETF last week; some unhedged Aussie gold miners might be a good idea…

    My thoughts are now very much around the following:

    1. What will the 10-20 year bonds do in the event of a global rout, and run back to the USD? Will they get dumped or bid?
    2. What will the 10-20 year bonds do the the event of AUS QE?
    3. As I'm expecting gold to get dumped with an eventual run back to the USD, I'm carefully watching gold and its macro factors, with a view to picking up more paper gold and gold stocks…I've still got a little cash to deploy…

    For me, there's plenty more research and thinking to be done around the above points, with new thoughts to come, I'm sure…!

    Feel free to comment or critique – I'm not precious about being wrong.

    • Are you able to buy Inflation protected US bonds? My guess is next crisis will also trigger very high inflation and (hope I am right on this one) bonds can be impacted by inflation. Returns would probably be minimal but we will be in the capital preservation mode now.

      • C.M.BurnsMEMBER

        what’s the reasoning for a soverign debt crysis leading to high inflation ? is it via massive devaluation of the currency ?

        the problem with that is, that currencies are priced relative to other currencies. But just about all nations have massive build ups of sovereign debt… so if we have a global sovereign debt crisis > currency crashes, there still have to be some currencies that are valued more than others.

      • if everyone cuts as coordinated effort (they’ll call it currency wars but really all CBs agreed to do it and they agreed on schedule who goes when) then gold will be the anchor against which all currencies will devalue. 1 Oz will cost $30k usd (just an example) and now we have massive inflation. I go and buy a house with 3000 shares in SAR.
        If this turns out to be correct then watch for paper gold and physical to decouple.

      • also all Govs will unleash massive fiscal stimulus all over so that will also trigger inflation. If we all get free money we will all bid higher at next Sat auction.

      • I think we’ll see big deflation before before we see big inflation, hence conventional bonds for now (amongst other things in the short and long term), and maybe inflation-linked bonds later, when inflation looks like it might pickup (and interest rates, which is quite possibly almost never…).

        My 2c

  2. Elon Musk endorses Andrew Yang.

    Tesla CEO Elon Musk said he supports Democratic presidential candidate Andrew Yang, calling universal basic income ‘Obviously needed’

    https://www.businessinsider.com.au/tesla-ceo-elon-musk-2020-election-endorsement-andrew-yang-president-2019-8?r=US&IR=T

    Hell yeah! I am not sure if Elon ever demanded mass immigration – SpaceX is not allowed to hire foreigners and SpaceX still managed to invent reusable rockets without “skilled” immigrants on illegal wages.

    Until today, I thought Elon wants UBI in the future. But he knows that we need it now. Elon used to be poor himself.

    • I think Elon realises that if we didn’t spend all our time energy “just surviving” we’d be more free to explore ideas and invent and that would be a far greater benefit to humanity than the current status quo. If I could survive on UBI, I’d probably become a musician and give that a go. Because music is so primal and it has the ability to unite people from all backgrounds and creeds.

      • I think Elon realises poor people need to be handed money if they’re ever going to buy his cars

      • Bingo.

        Michael West could do important investigative journalism full time instead of having to work as a professor on the side.

        Doug Demuro could review historically important cars instead of just new cars that get 2 million views per video: https://youtu.be/ZAYhU3ypIsc?t=316

        James Dyson sold his house to invent the bagless vacuum cleaner. Leith and David took a big risk with this website – thankfully it worked out but UBI should exist in case this website did not work out.

        UBI would allow a lot more men to have a go at inventing stuff – knowing full well that they have something to fall back on if the invention is not a commercial hit.

  3. Just fired off my submission re Currency (Restrictions on the Use of Cash) Bill 2019. Kept it to two pages. Copied it to Richard Marles, Assistant Treasurer Michael Sukkar and Shadow Assistant Treasurer Stephen Jones.

    Its not too late. Smash out a ONE pager if you have to. Just make yourself heard in the war on cash.

    • Weird the boys here haven’t really covered it. I know Leith thinks it’s a great idea, but as North and Adams have pointed out, it’s the first step in driving interest rates deeply negative and forcing you to spend it or slowly lose it.

      The global financial sector is marching us towards depression or war. All the while they rake in trillions.

      • freddy lasthope

        Hard cause to get behind as a person with a mortgage and not that much cash and likely to get a bigger mortgage because family and need to upsize etc. I’m meant to take up arms for old people with trailer loads of a cash to prevent rates falling further? MKay. About time they found themselves on the menu to be honest, we’ve been on it all our lives.

      • The Traveling Wilbur

        Well stop selling valuable Lego pieces you should have hodl’d over then. Can’t ask for sympathy if you start having a go and then stop.

      • @Freddy, I’ve got savings in an account that are earning jack sheet interest and each time these idiots drop rates house prices get another nudge up. $50-$100k. It’s not just screwing the olds, it’s screwing the young too.

    • proofreadersMEMBER

      @Aaron – do you or does anyone else in MB land, know how long this bill or the proposal for this bill has been in the pipeline?
      Who are its main proponents/supporters, including among the regulators?

    • +1 just listened. Life hack for all the drinkers on MB, buy your booze with cash not card (while you still can) re any future like insurance claims.

      • Mining BoganMEMBER

        How much? A slab or a major buy?

        That time I put a couple of grand on the card at Brown Hill Estate gonna come back and hurt me. Although, the whole family who run the place did come out and wave goodbye like the Clampetts makes the risk worthwhile…that and they make good wine. Still got a bottle of 2013 maybe Fimiston shiraz somewhere. Gonna have to dig it out when I get home as a reward for dealing with entitled retiree sh!t for a week.

      • Just a story from the podcast. I look like a real boozer as I like my Shiraz, cab and riesling 10+ years old so need a decent stash in the back of the garage.

    • What saddens me is the complete and utter failure of our corrupt political class and the nonexistent and utterly fvcken captured regulators. And yet they voted them back and and quick as a flash, set about weakening standards. Australia got the government it deserves.

      • It is tragic. Even Adele was rather blase when discussing some of the actions of the banks. It is so normalised that the economy comes first that we will accept criminal behavior and the intentional wrecking of people’s lives. We’re like addicts who think that as long as we don’t overdose then it doesn’t really matter what we stick into our veins or we manage to fund the habit.

      • I was gobsmacked that the Liberals won. But it just said to me, that Australian’s are greedy and self centered and wish for their house prices to keep going up. They don’t care about pricing out others.

  4. A repost from morning links.
    Food production and consumption habits need to change if we are to minimise the effects of climate change.
    https://www.abc.net.au/news/science/2019-08-08/ipcc-report-climate-change-land-use/11391180

    Here’s a PBS Newshour intverview on the topic.
    https://youtu.be/4xsNHVd75b8
    “The Intergovernmental Panel on Climate Change is warning of a devastating global feedback loop around how humans produce and consume food. A new report urges immediate action on agricultural practices that contribute to greenhouse gas emissions, which exacerbate climate change and, in turn, make soil less productive. William Brangham talks to the World Resources Institute’s Janet Ranganathan.”

    • The Traveling Wilbur

      Going to Ekka tomorrow. Having steak for breakfast, lunch and dinner. OK, *maybe* not breakfast.

      Don’t disagree with you, just reminding you this is what you’re up against. Not me going to Ekka. How good steak tastes.

      Now if I can just get this internet based sow/bull breeding programme research done without further interruption please.

      • Definitely. Everyone’s inner Ron Swanson comes out when this idea pops up. People hear it and they panic thinking that everyone has to be a vegan. The proposal is for reduction in meat consumption. Not a banning of. Better farming methods. Fewer kms from farm to table. And a reduction in food waste.

      • The Traveling Wilbur

        Yep. Better tasting, fresher, less-handled and happier (someone told me it makes them taste better) beef is what you want. Personally, I reckon the ideal beast is left alone in sheltered pasture and then cleanly dispatched at a distance with a 303 when it’s not looking.

        But someone, someone is then going to try and tell me that soy-beef tastes better and take my steak away. Not supporting that.

  5. Bring back the nap!
    https://www.bbc.com/worklife/article/20190809-why-overtired-japan-is-turning-to-office-siestas

    The closest thing I’ve ever had to a good political idea was inspired by The Hon. Ricky Muir. It was an idea to begin The Sleep Enthusiasts Party. Its aim is to get people sleeping. It’s good for health, relationships, it reduces stress, improves decision making and it would minimize the amount of brain junk from staring at screens into the evening. All candidates have to campaign in pyjamas and must always have bed hair. The party would pursue polices that assist the well-being of all as having a roof over one’s head and knowing that there will be some money next week is conductive to sleeping well. MASA – Make Australia Sleep Again.

  6. The Traveling Wilbur

    I think I might stay up all night drinking while waiting for the AUD 2yr and 6yr to invert. 7points. .007 for that pair and bond inversion (heh).

    • Reading the commentary here I am concerned that I am not cautious enough. Skyfall not just a Bond film but an economic forecast. Hard to weigh central bank rate cuts coming vs slowing growth and Brexit.

      • Everyone’s an influencer. The reality is much different. Ermo is a day trader for ComBank, Haroldus is the local Anglican minister, The Travelling Wilbur does nails and eyebrow tinting and I’m a tattooist that specializes in American traditional. My black and white portraits are OK, but definitely don’t come in for any new school tatts. I can’t draw well enough or make the colours pop.

      • The Traveling Wilbur

        Thuglife.

        And french polish. I’m not just some dilettante. Take my craft seriously I do.

    • Yes I love the way he started the neoliberal rot by deregulating the financial industry and selling the CBA

      and of course I love the way he reinvented himself as a china shill later in life

      Safely ensconced in his potts point pied a Terre with his gay lover

    • Yes I love the way he started the neoliberal rot by deregulating the financial industry and selling the CBA

      and of course I love the way he reinvented himself as a china shill later in life

      Safely ensconced in his potts point pied a Terre with his g4y lover

    • C.M.BurnsMEMBER

      There are some key differences. The former are both very clever politicians. They are also atheists or close enough to it (but wrap themselves in the flag of conservatism for branding).

  7. I see that they’ve closed Hong Kong’s airport down. On HK social media it is being claimed that there are about one million protestors in and around the airport (which, if true, just goes to show how efficient HK’s MTR system is). Also there are rumours that there is some “movement” from the PLA’s garrison in HK.

    From what I can gather actually a lot of the anger motivating the crowds now is about the way the HK police have over-reacted to young students protesting peacefully. You can see lots of protestors wearing eyepatches which apparently is in reaction to a protestor being blinded after being struck by a policeman.

      • Mining BoganMEMBER

        Yes they are and they’re lovely.

        But they’re hopelessly entitled and blissfully unaware of the big picture.

        Edit: I can see why Scummo romped it in up here. It wasn’t like this when I was up in February. Franking credits is what done it. They’re obsessed with them.

      • The Traveling Wilbur

        It was getting a chance to shaft ‘the stupid lefties’ wot dun it. A no-risk-freebie. Given what Scummo was promising.

      • Mining BoganMEMBER

        Oh, that too. They want to see the tanks roll over greenies. When old mate from Kingaroy way was telling us about the 160 wind towers on his property and the solar farms about the place I thought there was going to be a mass stroke event…not a reusa style one either.

      • Point of order, mr chair, a 2×4 is exactly that, a 2×4. An extra thick 2×4 is by definition no longer a 2×4. The member for Wino may want to say extra dense, in turn…

    • The Traveling Wilbur

      Buy your extended family home dna-test-kits for Christmas. You might get lucky and discover you’re adopted.

      Or something you can blackmail someone with.

  8. Mining BoganMEMBER

    Here’s my best oldie story of the week.

    Apparently if you can get a doctor to sign a form saying you’re incapacitated then on rubbish day you don’t have to put the bins out. The truck will pull up, driver hops out and runs up the driveway, brings the bins out, empties them then puts said bins back. Entitled oldie got wind of this so got it organised. Sits on the front porch and waves at the garbo as he/she does their job.

    This same oldie is a helpful neighbour. On bin days he goes and puts his neighbours bins out for them. Three houses worth of bins he lugs out. Yet he gets the garbo to hop in and out of a truck at his place just because it’s a free service.

    This is Straya.

  9. Sold a good bit of my old PC gear on Facebook Marketplace. Went like fire. Bought a 4K 32″ screen with the proceeds. Even MB looks an order of magnitude better. Best $500 I’ve spent in many a year. Highly recommended move, that one.

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