Australian dollar rockets into the Biden boom!

See the latest Australian dollar analysis here:

Macro Afternoon

DXY is at the edge of breakdown and EUR breakout:

The Australian dollar likewise:

Gold puked again as oil took off:

Metals mania:

Mining mania:

EM mania:

Junk mania:

Treasuries were soft:

Stocks unstoppable:

What a blowoff we have on our hands now. Risk has not only ceased to matter it has ceased to exist. The global economy is rolling over as the Atlantic pandemic runs riot:

So far the slowdown is mostly Europe:

But the US will slow as well in due course:

Yet, for the market, that only supports more of this:

And this:

President-elect Joe Biden plans to nominate former Federal Reserve Chairwoman Janet Yellen, an economist at the forefront of policy-making for three decades, to become the next Treasury secretary, according to people familiar with the decision.

Yellen is not a proponent of MMT in theory but in practice it’s easy to imagine her managing an ongoing integration of monetary and fiscal policy despite a Republican senate. She is also the inventor of the notion that the Fed should let the economy “run hot” rather than panic about inflation. So, more of this:

Which means ahead we get more of this:

To be honest, I can’t see any of this stopping now until we do get some of this:

But with the Fed fighting it all the way the only way is up for all risk assets including the Australian dollar.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

    • The main comparison they make is for 2016 compared to now. While I can see that oil is far too cheap now and will of course rise, are today’s conditions really comparable to 2016? My worry is that this rally is a bubble and will be short lived compared to 2016.

      • Further to above: Gold plunged in 2011-2013 on the Fed’s announcement of winding back QE – in some ways reminiscent of this week’s big drop. Oil correspondingly rose on the expectation of a recovering economy. So clearly, the ratio is valid – oil goes up when gold goes down. But how long will this current market eurphoria last, and so how far and for how long will oil go up and gold go down?

        Nevertheless, it’s interesting that the oil to gold ratio is completely out of whack at 400:1 in April 2020.

        The golobalised world runs on oil, (which no amount of renewables can replace – in fact, the move to renewables will require more oil to build/install/decommission etc) and oil is set to become increasingly scarce in the coming years, but to date the state of the economy has had more impact on oil prices than the cost of searching/drilling/refining/transporting it. This might of course change when the economy actually wakes up to increasing scarcity and factors it into oil prices.

          • Yep, Lol. Of concern is that the market has yet to factor in oil’s decline (currently misrepresented as renewables and technology replacing it) and what effect that will have on the oil price once it’s actually factored in.

            Of course, if oil rises in what for years will be a stuffed economy, it’ll just crash it again……

        • Lols – Zerohedge and Energy Skeptic – why not just post Alex Jones and Glenn Beck and be done with the charade ?

          Here is a tip tiger – 76 of the ENTIRE global oil supply including petroleum goes towards consumer transport – cars primarily.

          That’s petrol ICE engines, including transporting the petrol, to stations, refining for that purpose etc

          EU announced they would be ending ICE sales in 2030 – they just brought that forward to 2025 – 76% of all oil….

          The single biggest collapse in the oil price PRIOR to Covid was the Chinese transition from diesel buses to electric.

          There are now 400 electric vehicle manufacturers in China and they are leading the world on a crazy scale on electrics which will provide them an huge economic advantage and the EU is playing catch up as fast as they can.

          You are talking straight out your cloaca.

          • Obviously you didn’t read the links so here is an excerpt from on op ed in the Wall Street Journal entitled “If You Want ‘Renewable Energy,’ Get Ready to Dig” that points out the physical impossibility of renewable energy (mainly wind and solar power) and battery storage transitioning the world to a “new energy economy.” The transition would require “the biggest expansion in mining the world has seen and would produce huge quantities of waste.”

            Wind turbines, solar panels, and storage batteries are made from nonrenewable materials that wear out and must be decommissioned, generating millions of tons of waste. For example, to meet the Paris accord benchmarks, the solar power required by 2050 would result in the disposal of solar panels equivalent to over doublet he tonnage of the world’s current plastic waste.

            According to Mark Mills, building one wind turbine requires 900 tons of steel, 2,500 tons of concrete, and 45 tons of non-recyclable plastic and solar power requires even more cement, steel, glass, and other metals—notably rare earth minerals. Global demand for rare-earth minerals would need to increase by between 300 percent and 1,000 percent by 2050 to meet the Paris renewable goals….

            Furthermore, mining and manufacturing require the consumption of fossil fuels. To supply half the world’s electricity using wind turbines would require nearly two billion tons of coal to produce the concrete and steel and two billion barrels of oil to make the blades. And, most (over 90 percent) of the world’s solar panels are built in Asia with electric power heavily fueled by coal.

            As for ICE cars:

            Comparing Batteries to Gasoline and Oil

            A single electric-car battery weighs about 1,000 pounds and manufacturing it requires mining and processing over 500,000 pounds of raw materials. Using gasoline, one can extract one-tenth as much total tonnage to deliver the same number of vehicle-miles over the battery’s seven-year life.

            About $200,000 worth of Tesla batteries, weighing over 20,000 pounds, are needed to store the energy equivalent of one barrel of oil. A barrel of oil weighs 300 pounds and can be stored in a $20 tank. Even an unlikely 200 percent improvement in lithium battery economics and technology would not close the gap.

            https://damnthematrix.wordpress.com/2020/11/15/the-physical-impossibility-of-renewable-energy-meeting-the-paris-accord-goals/

            Like all civilisational crashes we’ll ignore ignore the facts and remain in denial until the bitter end. Enjoy your delusion.

          • Blah blah – you just make stuff up – and what isn’t made up is absurd bollocks from ultra extremist fringe websites that you gulp down – and entirely ignore all science to the contrary – its pathetic.

            Only fossil fuels can work – yet here is a list of 100 cities that were almost 100% renewable 2 years ago.

            https://www.originenergy.com.au/blog/did-you-know-there-are-now-more-than-100-cities-mostly-powered-b/

            That means – you are entirely full of it. Done – dusted – everything you have said is now irrelevant on one link.

            Thanks for coming.

            But I know global warming denialists like you wont give up easily – so consider this – steel manufacturing is moving to Hydrogen based EAF’s – this means no more coal – same will be used for concrete – entirely renewable, zero emissions.

            Derp a derp !

            I was at the Rio earth summit in 1980’s – so take a back seat son.

        • I reckon I spent ten years debating global warming with lunatics who would dig up endless reams of spurious data about sun spots, rigged readings, “it happened before” – ive got zero interest in debating data which has been debunked again, and again and again – whether its global warming denial or renewables denial – which is just the new version of global warming denial.

          Put simply – your analysis only works if you use coal to manufacture the renewables – that is no longer the case.

          China leads the Asian manufacturers – and they are the world leaders in renewable energy by such a massive margin its not even worth debating.

          Everything you present is just cherry picked lies fed by your global warming denialism. Its honestly laughable if it were not so mundane and just the same – exactly the same dribble we have heard for decades by global warming denialists like yourself.

          Ridiculous levels of childishness – truly ridiculous.

          • Insults aside – a good part of your content (it’s always interesting that those most on the attack are often those most on the back foot) – but I don’t know why you assume I’m a climate denier. The reverse.

            However, much as I would like renewables to save the planet and ourselves from frying/extinction shortly so we could all 9 billion of us (and rising) continue on our merry polluting, consuming ways, unlike you and many like you, accepting climate change (which I’ve done and fought for probably since before you were born) doesn’t prevent me from facing other unpalatable facts.

            The facts are that despite five decades of hopium and vast expenditure on research and develpment, renewables make up a tiny fraction of the world’s energy expenditure which continues to rise, year in year out. If they were going to cut it they’d have to be up to at least 50% by now.

            The facts are that nothing can replace FFs and oil in particular in the time frame left. As the links I provided show, the amount of mining/manufacturing and decomissioning so-called renewables (which are nothing of the sort) required would actually fry the planet.

            What you can’t face is that the only solution to addressing CC is an abandonment of capitalisim, degrowth, and doing with less in small, local communities, getting by with a fraction of what we currently do – probably returning to the roaring 20s amount of consumption. Which of course will crash the flimsy house of cards we call globalisation. So be it.

            Denial is a very potent human attribute. You need to face facts and do your own research instead of flying off the handle dishing out insults.

      • “oil is far too cheap now and will of course rise”

        Why? There is so much oil now we are virtually swimming in it and it’s usage should be slowly eroding from here on in. Or are you suggesting that the cartel structure and the world’s governments will ensure it rises?

        • Nup. See post and links below. While obviously the oil corporations must know that oil is in decline, and the IEA (International Energy Agency) reports reflect this, it’s currently being accepted as being caused by the world’s imminent move to renewables. Mass delusion.

          But as with so much in a complex world – it’s complicated.

          • Don’t disagree with the renewables. It’s your view oil supply is an issue. Every time it gets to $50, the taps turn on to gush oil everywhere. Are they not going to turn the taps on anymore?

    • PalimpsestMEMBER

      A very interesting chart. Although oil as a fuel is being displaced by renewables (except in the Smart Country), that is a process that takes time. Shipping and other heavy transport is not yet able to switch and the domestic transport fleet (cars, utes) will take some years to change over. Oil has a number of other uses where substitution will take some time. Therefore, although demand is currently low, a rebound in economic activity – possible starting in about 6-12 months if vaccines are deployed, could produce some spike in oil demand.
      The argument that Gold will fall is harder to understand given QE and the debasement of fiat. However, that’s exactly what the market seems to be doing today. Has technology fundamentally broken that traditional nexus. It’s possible but maybe not yet.

      • “could produce some spike in oil demand.”

        Which in turn drives a spike in price which should in turn bring the usual surge of the other side of the equation: supply.

        • They can’t just turn the taps on like a water tap. Moreover, of the much-touted oil-supply-saviours – US fracking and tar sands – many have actually never turned a profit and are now going into receivership; Russia has nuclear-powered ships/drilling rigs poised to enter the arctic as soon as the ice melts; Trump is opening up pristine national parks in Alaska to oil exploration; oil is now drilled miles offshore into ever-deeper oceans; and oil companies just buy back their own shares and don’t bother to search any more….UK, Norway. Australia, and many the other oil-rich nations peaked long ago and are in decline.

          It’s no coincidence that the giant conventional oil wells which powered the extraordinary rise of civilisation from the 1930s – 1980s peaked in 2006 and have collectively been in decline since, with no true giants being discovered since Mexico’s Cantrell in 1976, and except Saudi’s Ghawar (which is currently pumping more and more water into it’s wells – a sure depletion sign) are all depleting.

          Oil, which in the US in the 1930s just gushed out of the ground for less than $10/barrel, now needs to make from between $50 -$80 a barrel to make a profit. Once oil wells are closed off it is expensive, difficult and often impossible to restart them, and if there’s not much oil left, or water has got in…….

          So while there will always be plenty of oil in the world if it’s too expensive to produce it’ll stay in the ground. Many now think that unconventional oil (fracking/tar sands) peaked in 2018 – so just delayed the peak by 12 years. Time will tell, but oil’s days are inevitably numbered and renewables can’t replace the energy density, storage and transportability of oil – nature’s once-only and irreplaceable bonanza of compressed ancient sunlight that the world squandered in the shortest time possible.

      • “A very interesting chart. Although oil as a fuel is being displaced by renewables (except in the Smart Country), that is a process that takes time. ”
        I hear this a lot , but see very little evidence of it at ground level. I travel a lot for work and dont see it in other countries either.
        I have only ever been in one city where one small sector had been completely taken over by electrics, that was motor scooters/motorcycles, in Shenzhen China. I was told it was a government regulation. Car’s all stil petrol powered as well as anything larger.

        • China will be able to move relatively quickly to universal use of scooters/motorbikes when hit by future oil shocks though it’s dependence on cheap oil is as great or greater than any other country.

      • The current euphoria surrounding renewables and that technology will save us due to pressing concerns over CC, is delusional. The transition from FFs to renewables has been accepted en masse because the the only other alternative to frying the planet is doing with less and degrowth – totally unacceptable to everyone from corporations, politicians and struggling Mum and Dads as it would crash the economy and with it the dreams of 7.5 billion souls..

        The reality is that oil has never been more indispensable to the global economy. For eg: it takes 10 calories of oil to produce one calorie of food. Our soils (due to be completely gone within 60 years) have become so degraded that food can only be produced with ever more FF fuels inputs in giant outdoor factories. So the world will starve without oil just for starters. An article from this morning’s MB Links highlights capitalism’s extreme misuse of oil:

        https://consortiumnews.com/2020/11/23/lee-camp-keep-calm-just-die/

        For more on oil’s centrality to globalisation, coming scarcity, and the current magical thinking regarding the fast-approaching renewables and technological utopia (always just over the horizon):

        http://energyskeptic.com/2020/giant-oil-field-decline-rates-and-their-influence-on-world-oil-production/

        https://www.zerohedge.com/energy/narrative-problem-after-peak-oil

    • Smelling like the blow-off phase to me too. Could run for six months or six hours, impossible to say. Likely 18 months(TM).

      Hope we’re not caught still holding the ball when the siren sounds!

  1. happy valleyMEMBER

    Well, that happy clappy mini-me RBA getting interest rates down to zero, worked a treat at containing the AUD. What next from the happy clappies? Try -5% pa interest because we have “unquestionably strong” (aka dodgy) banks?

    • When you join a full-on tank and air support battle with only two guys and one pocket knife between them, things don’t work out all that well.

    • Its almost like there is no other way to measure the AUD except against the green back – USD must be doing really well…..

      Is China tanking yet ? Looks at iron ore demand……

  2. We’ve been broken down
    To the lowest turn
    Bein’ on the bottom line
    Sure ain’t no fun

    But if we should be evicted
    Huh, from our homes
    We’ll just move somewhere else
    And still carry on

    Oh
    (Hold on) hold on (Gold off)
    (Hold on) hold on (Gold off)
    Ooh, aah, baby
    hold on (Gold off)
    (Hold on) ooh ooh aah

    The only way is up, baby
    For house prices, stocks and AUD now
    The only way is up, baby
    For house prices, stocks and AUD

    https://www.youtube.com/watch?v=vjD3EVC1-zU

  3. The90kwbeastMEMBER

    I know this blog hates Bitcoin but it’s back over $USD 19k, up 100% now since September… anyone been game enough to play with bitcoin the past 4-6 months?

    And also deal with the associated Capital Gains Tax reporting obligations you now have that are impossible to determine because no exchange gives you the information to do that well? lol

    • I’ve been watching the prices all year but no transactions. I hodled my early 2017 bull market purchases (worst timing to get into crypto, was thinking in 16 I needed to research crypto but life got in theway until Sept 17) and topped up a little btc and eth last year once it had clearly bottomed. I’m just keeping it as a spec investment so if they are the future my low income not yet a property owning self actually has some assets in the new world order.

    • waiting for 25-30% pullback then will jump in if that happens. Weekly RSI can’t hold that high for too long but monthly RSI still has plenty of room to move. Looking around $14000

    • Narapoia451MEMBER

      Bought at 6k, sold at 13.5 thinking a drop was coming, wish I’d bought more initially but still profits.

      Learned from 19 not to buy when frothy so waiting to see if it’ll drop

    • All you need is a list of transactions you have made to determine CGT obligations.
      The exchange really can’t do it for you because there are multiple ways you can do it depending on desired outcomes.

  4. SoCalSurfCreeperMEMBER

    I’m not so sure about the US slowing down materially. Maybe a bit. More than 1 million people passed through US airports each day Friday, Saturday and Sunday. COVID is less a part of daily conversation and more just a part of life. We could be set up for a massive boom. The house market is absolutely insane, with prices rising almost 2% a month in my local area.

    • In HnH territory where son lives (Seddon), houses are going up fast

      He is looking at moving back to around Golden Mountain (Glen Waverley) to find better value upsizing opportunities.

      • SoCalSurfCreeperMEMBER

        Prices have dropped in urban cores but accelerated in suburban / exurban areas of large cities and in smaller cities. Phoenix, Seattle and San Diego metros are leading the increases. A lot of it is supercharged by low rates, but this ridiculous everything boom (bubble?) has to reinforce the real estate frenzy. San Diego is now running 1.8% month on month and is up 9.4% year on year so it’s accelerating.

        Aside: I’ve seen a lot more Aussie and New Zealand meat. Prices are competitive.

    • Biden and democrats ENTIRE campaign for the past 4 years has been built around – opening the borders, BLM, proper response to Covid –

      They will shut down, no choice – and stimulate.

      Can’t see US recovering at all at this point its entirely a financialized economy based around endless printing.

      There comes a point when the charade no longer works and that is pretty much here with Europe and Asia switching to cryptos to avoid US dollar and create a fair global trade system based around block chains.

    • I think a lot of people in Aus dont realy get this.
      When you live and work in a covid affected Zone it just becomes part of life very quickly. The minor irritant of wearing a mask some places , and frequent hand sanitizer use aside.
      Everyone very quickly assumes (rightly or wrongly idk) that for healthy people under 60 its nothing to be afraid of, cos they know lots of people who were positive and very few or none that got sick.
      The main reason for virus avoidance being the heavy restrictions which come with a positive test, loss of income etc, also the social stigma of being a spreader, concern for the elderly.

  5. Honest question, Is MB and the Nucleus crew concerned that this might be a rerun of the 2016 bull run or even the 1996 run and that the feb 2020 lows was indeed the pullback. 96 especially as it extender for another 100% or so over 3-4years way beyond what anyone thought possible. If the view is that it will roll over again shouldn’t have this already happened already and new highs would not have been reached. Are there any thoughts that this could be very risky to just sit in defensive waiting for an entry point?

    • The answer is “yes”. It could quite possibly be a bull market which is why we have been steadily pivoting more bullish. Though we’re still oriented towards buying dips given virus risks short term.

      My own view today is this:

      – the vaccine boom is real
      – it will be boosted by catch-up growth in 2021
      – stimulus is highly supportive, especislly CBs and will stay that way. There’s no inflation except in houses and stocks
      – conversely, I worry fiscal will tighten too fast

      I also think China will tighten next year, via reform as much as anything, and that will hold things back, especailly iron ore and Australia.

      My base case now is a boom ahead. Value rotation for six months. Periodic bond back-ups to buy long maturity and growth stocks.

      But the boom perhaps only lasting a year or two as policy errors take centre stage vis fiscal especially.

      • No vaccine will be distributed on any meaningful scale within 3 months – right now 10% of many US cities are living hand to mouth from food banks – its literally an African famine.

        Boom times.

        Tip – look outside the indexes and Wall St – United States is collapsing in slow motion.