Market Talk – July 27th, 2015
Asia saw a dramatic collapse today of some 8.5%. That is how London started their session today looking at Asia. European futures were obviously all lower and they did not look back from the open. The US session just accelerated the fall which saw strengthened the recent flight to quality helping to cement the ultimate peak in government debt/low in short-term rates.
Oil was under-pressure yet again today (Brent 53.45 -2.2%) which hit the Russian Rouble closing down 1.6% on the day. We also saw the Turkish Lira lose another 1.2% on the day – sadly a daily occurrence amid the recent violence.
Given the flight to quality in the bond market and the Fed in play this week, today’s curve move tells the picture. We saw 2 yrs better by 2bp (0.65%) whilst 5 yrs were lower by 5bp and 10’s by 4bp respectively. 5yr notes were last traded and 1.57% and 10’s last seen at 2.22%. All this purpose and yet volumes are still a shadow of yesterday’s markets. Even with the renewed bond market interest, daily volumes for Bunds are still only around 400k contracts warning there is no real depth to these markets.
Bund/TY 10yr spread closed this evening at 153bp which, given the strength of the Euro today was a very impressive performance for US Treasuries.
Gold was relatively well behaved today trading in a rather tight ($17 range). Early attempts at maintaining the 1100 level were dashed as the US opened.
Asia saw a dramatic collapse today of some 8.5%. That is how London started their session today looking at Asia. European futures were obviously all lower and they did not look back from the open. The US session just accelerated the fall which saw strengthened the recent flight to quality helping to cement the ultimate peak in government debt/low in short-term rates.
Oil was under-pressure yet again today (Brent 53.45 -2.2%) which hit the Russian Rouble closing down 1.6% on the day. We also saw the Turkish Lira lose another 1.2% on the day – sadly a daily occurrence amid the recent violence.
Given the flight to quality in the bond market and the Fed in play this week, today’s curve move tells the picture. We saw 2 yrs better by 2bp (0.65%) whilst 5 yrs were lower by 5bp and 10’s by 4bp respectively. 5yr notes were last traded and 1.57% and 10’s last seen at 2.22%. All this purpose and yet volumes are still a shadow of yesterday’s markets. Even with the renewed bond market interest, daily volumes for Bunds are still only around 400k contracts warning there is no real depth to these markets.
Bund/TY 10yr spread closed this evening at 153bp which, given the strength of the Euro today was a very impressive performance for US Treasuries.
Gold was relatively well behaved today trading in a rather tight ($17 range). Early attempts at maintaining the 1100 level were dashed as the US opened.
Buy the Rumor and Sell the News
The more people open their minds and observe our model, the more their eyes open and begin to see the how the world economy is interconnected. Our model on the Dow pinpointed a high for the week of July 20 with a Directional Change and a two-week trend into the first week of August. Curiously enough, gold crashed as the Dow rose and it held key support as the Dow was giving up its lunch.
This is not about fundamental news. Good traders have always known to buy the rumor and sell the news, exactly as we just saw with gold and China. If the trend is bearish, good news is never good enough, and in a bull market, bearish news is disregarded. Beware of fundamental analysis who trade by short-term for it is the trend that remains your friend. The fundamentals come into play only for the long-term trends. Markets move in anticipation of what might happen even if it never materializes.
The more people open their minds and observe our model, the more their eyes open and begin to see the how the world economy is interconnected. Our model on the Dow pinpointed a high for the week of July 20 with a Directional Change and a two-week trend into the first week of August. Curiously enough, gold crashed as the Dow rose and it held key support as the Dow was giving up its lunch.
This is not about fundamental news. Good traders have always known to buy the rumor and sell the news, exactly as we just saw with gold and China. If the trend is bearish, good news is never good enough, and in a bull market, bearish news is disregarded. Beware of fundamental analysis who trade by short-term for it is the trend that remains your friend. The fundamentals come into play only for the long-term trends. Markets move in anticipation of what might happen even if it never materializes.
The Flight From Gold – A Fall From Grace
Why have gold investors taken flight from gold as it falls from grace? The sophistry that has fueled gold is being exposed. The gold promoters spun their latest tale by raising unrealistic high hopes for China as their savior as they were buying gold and would use it to back their currency. They tout that the emerging middle class will become big buyers of the precious metals, in addition to China emerging as a superpower, quietly stockpiling its own version of Fort Knox in the vaults of the People’s Bank of China in Beijing. They were even claiming that its stockpile was nearing 2,000 tons to rival that of the USA at 3,000 tons.
All gold sophistry manages to evaporate by leaving behind more losers than winners. They convince people to buy and never sell; the announcement from China shattered that illusion spun by the gold promoters once again. China’s central bank bought only 604 tons of gold over the past six years, amounting to just 1.6% of its reserves. The dream that the yuan would emerge as a gold backed currency exploded. The gold promoters predicted at least three times that amount. These people are worse than used car salesmen are, for at least that trade is now regulated. Nobody regulates the gold promoters so they are the last bastion of the unsupported claims to the “sell anything crowd” we used to call snake-oil salesmen.
Even the sophistry about manipulations has contributed to the demise of gold and its fall from grace. If gold is manipulated and prevented from ever rallying, then why buy gold if it can only go down? This simple logic has been emerging from emails we get all the time. You can fool a fool, but you cannot fool everyone all the time.
The sophistry painted the picture that gold is artificially lowered to somehow support the dollar, despite the fact that gold is such a tiny fraction of the dollar market. Again, the sophistry has hurt a lot of people but this is highly dangerous for it is destroying the investor base for the metals.
Silver has been even weaker than gold. Crude entered a full-blown Waterfall. Gold actually held up better but its trend is completely in sync with the world’s deflationary trend. The hunt for taxation is causing cost-push inflation as prices rise out of necessity, not demand. The net disposable income is collapsing and these politicians are out to destroy the future. The hunt for any asset, including gold, has transformed what was a freely movable asset into one that is driven underground.
On Friday, Gold Nearest Futures held our Weekly Bearish Reversal at 1084 closing at 1085.5; this has allowed for a little bounce. But this number also is critical for a monthly closing. So pay attention. Breaking 1084 should confirm that gold would break the $1,000 level.
Why have gold investors taken flight from gold as it falls from grace? The sophistry that has fueled gold is being exposed. The gold promoters spun their latest tale by raising unrealistic high hopes for China as their savior as they were buying gold and would use it to back their currency. They tout that the emerging middle class will become big buyers of the precious metals, in addition to China emerging as a superpower, quietly stockpiling its own version of Fort Knox in the vaults of the People’s Bank of China in Beijing. They were even claiming that its stockpile was nearing 2,000 tons to rival that of the USA at 3,000 tons.
All gold sophistry manages to evaporate by leaving behind more losers than winners. They convince people to buy and never sell; the announcement from China shattered that illusion spun by the gold promoters once again. China’s central bank bought only 604 tons of gold over the past six years, amounting to just 1.6% of its reserves. The dream that the yuan would emerge as a gold backed currency exploded. The gold promoters predicted at least three times that amount. These people are worse than used car salesmen are, for at least that trade is now regulated. Nobody regulates the gold promoters so they are the last bastion of the unsupported claims to the “sell anything crowd” we used to call snake-oil salesmen.
Even the sophistry about manipulations has contributed to the demise of gold and its fall from grace. If gold is manipulated and prevented from ever rallying, then why buy gold if it can only go down? This simple logic has been emerging from emails we get all the time. You can fool a fool, but you cannot fool everyone all the time.
The sophistry painted the picture that gold is artificially lowered to somehow support the dollar, despite the fact that gold is such a tiny fraction of the dollar market. Again, the sophistry has hurt a lot of people but this is highly dangerous for it is destroying the investor base for the metals.
Silver has been even weaker than gold. Crude entered a full-blown Waterfall. Gold actually held up better but its trend is completely in sync with the world’s deflationary trend. The hunt for taxation is causing cost-push inflation as prices rise out of necessity, not demand. The net disposable income is collapsing and these politicians are out to destroy the future. The hunt for any asset, including gold, has transformed what was a freely movable asset into one that is driven underground.
On Friday, Gold Nearest Futures held our Weekly Bearish Reversal at 1084 closing at 1085.5; this has allowed for a little bounce. But this number also is critical for a monthly closing. So pay attention. Breaking 1084 should confirm that gold would break the $1,000 level.
Schäuble wants Brussels to Tax Directly – Good Night Europe
Banks Become the Target of the Hunt for Taxation
A very serious issue in banking has arisen that bears watching. Our model has been warning is that the bankers are losing control of government and are now becoming their target. While the likelihood of this new legislation coming out of the Senate and over the House may not be so great, nonetheless, this bill illustrates just how desperate the search for money has become. Politicians are the worst enemy of the people for never do they look at their impact upon society and the future. It is always about them and the immediate need – never long-term.
This is the first time in modern history where Capitol Hill has produced powerful members of Congress whom are looking at taking on the Federal Reserve and its member banks. The banking industry is scrambling to kill a provision in the Senatehighway funding bill that would reap billions of dollars in revenue by cutting a century old system of loopholes for banks.
Banking industry lobbyists say that they were blindsided by the sneaking inclusion of the provision that would cost banks dearly. This would help policymakers cover the highway bill’s cost by cutting the regular dividends the Federal Reserve pays to its member banks. Actually, when banks join the Federal Reserve system, they are required by law to buy stock in the central bank equal to 6% of their assets. However, this stock does not appreciate in value for it is non-tradeable on the market. The Fed pays out a 6% dividend payment so the banks earn 6% income of 6% of its assets. That is pretty good money right now.
This latest Senate proposal claims it will save $17 billion by slashing what now appears to be an “overly generous” payout. This may not even be legal given the Federal Reserve Act of 1913 and the mandatory nature that banks must but stock in the Fed that they cannot sell. Since this is limited to banks with more than $1 billion in assets, the proponents argue that this will only impact “large banks”.
Obviously, Congress is in a deflationary mode, always looking to raise taxes. The banks are gradually in decline as being exempt from everything. The lawmakers are constantly in search of politically palatable ways to raise taxes or cut costs to cover the expenses of additional legislation.
A very serious issue in banking has arisen that bears watching. Our model has been warning is that the bankers are losing control of government and are now becoming their target. While the likelihood of this new legislation coming out of the Senate and over the House may not be so great, nonetheless, this bill illustrates just how desperate the search for money has become. Politicians are the worst enemy of the people for never do they look at their impact upon society and the future. It is always about them and the immediate need – never long-term.
This is the first time in modern history where Capitol Hill has produced powerful members of Congress whom are looking at taking on the Federal Reserve and its member banks. The banking industry is scrambling to kill a provision in the Senatehighway funding bill that would reap billions of dollars in revenue by cutting a century old system of loopholes for banks.
Banking industry lobbyists say that they were blindsided by the sneaking inclusion of the provision that would cost banks dearly. This would help policymakers cover the highway bill’s cost by cutting the regular dividends the Federal Reserve pays to its member banks. Actually, when banks join the Federal Reserve system, they are required by law to buy stock in the central bank equal to 6% of their assets. However, this stock does not appreciate in value for it is non-tradeable on the market. The Fed pays out a 6% dividend payment so the banks earn 6% income of 6% of its assets. That is pretty good money right now.
This latest Senate proposal claims it will save $17 billion by slashing what now appears to be an “overly generous” payout. This may not even be legal given the Federal Reserve Act of 1913 and the mandatory nature that banks must but stock in the Fed that they cannot sell. Since this is limited to banks with more than $1 billion in assets, the proponents argue that this will only impact “large banks”.
Obviously, Congress is in a deflationary mode, always looking to raise taxes. The banks are gradually in decline as being exempt from everything. The lawmakers are constantly in search of politically palatable ways to raise taxes or cut costs to cover the expenses of additional legislation.
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