Market Talk – February 2, 2016
Once again, oil influenced markets around the world. Having dropped 6% yesterday, we were confronted with another 5.5% drop in prices today, closing below the psychological $30 level. Shanghai was the exception in Asia (closing up 2.3%) but this was a relief from previous weak sessions, rather than a specific excuse! ASX lost 1% after the RBA’s decision to leave rates unchanged. Some argued this was the reason oil started the sell-off, but again this is dealers looking to put a reason against every move. Nikkei lost 114 points (0.6%) and HSI down 0.7%.
In late U.S. trading, all Asian Indices are around 1.5% lower than their closes. Europe opened weaker following Asia’s lead but it certainly was not helped as BP announced its worst annual loss ($6.5Bn) in 20 years. Shares were last seen down 8.7% intraday. Meanwhile, the financial world was not looking at the rise as UBS reported 2015 net profits up 79%, but spoilt that claiming that current conditions (volatility, low rates, and a strong Swiss) are proving difficult and saw their shares punished when they fell 7% in today’s trading. All core Indices closed down DAX -1.8%; FTSE -2.3% and CAC -2.5%.
It was very much the same story in the U.S. with oil, energy, and financials setting the trend. The Dow closed down 290 points following oil, and concerns of global growth continue to disturb market sentiment. With the street so nervous, all data released is to be watched very closely. Tomorrow in the States we will see the release of the ADP where we saw last month beat estimates (+192k) and was released well above consensus at 257k. The market could certainly do with some positive sentiment tomorrow ahead of Fridays NFP.
As usual, the beneficiary in all of this was the bond market and today U.S. 10s had an impressive run. Closing this evening at 1.86% (-9bp) and the German bund closed 0.0.305% (-4.5bp). Closing the U.S./bund spread at 155.5bp. We did see a flattening of the U.S. curve today with 2s lagging (closing 0.735% -6bp) whilst 30yr Bonds closed 2.66% (-10bp). Meanwhile, the peripherals closed: Italy 10yr 1.48% (+1bp), Greece 9.16% (+10bp), Turkey 10.62% (+2bp) and UK Gilt 1.54% (-8bp).
Currency markets saw the usual run into the US Dollar and especially away from the EM currencies. The Rouble, Brazilian Peso and Turkish Lira all suffered losses as safe-haven were sort. In Russia the Rouble lost 2.25 whilst the 5yr note rose 14bp to close 10.55%. The Real lost 0.8% to 3.9902 per USD after poor Industrial Production release also.
There is lots of rumors around late this evening that China could suffer a ratings cut if the current mood and volatility continues. These are rumors but it just highlights that dealers are frightened of their own shadow when we see unexplained volatility such as we have experienced recently.
There is lots of rumors around late this evening that China could suffer a ratings cut if the current mood and volatility continues. These are rumors but it just highlights that dealers are frightened of their own shadow when we see unexplained volatility such as we have experienced recently.
USA: Where Politicians Are Free to Rig the Game
As to be expected, the Republicans are up to dirty tricks to try to prevent Trump from being the candidate. After the Iowa Caucus, reports are surfacing from volunteers who say that their precincts were being combined into one large mob to push the vote to Cruz. Iowa was always a rigged game, and generally only 1 in 6 people eligible to vote bother to show up. The political elite have typically tried to manipulate the election results, showing that Joseph Stalin was not so off base by saying voters never decide elections.
Reports are coming in stating that combining precincts neutralized the “caucus” process entirely. Rep. Steven King was in on it, tweeting that Carson was out of the race, which was not true. Ben Carson is outraged.
Trump has a long, hard, road ahead and they will do everything possible to rob the election from him in the primary. If they cannot rob the election from him, he will be assassinated. Unfortunately, they have far too much to lose to allow any outsider to enter their game. All career Republican politicians are endorsing Cruz and Democrats are endorsing Hillary. They are circling the wagons and ready to do whatever it takes to prevent anyone from the outside to enter Washington.
More Delusional Gold Theories?
1931
COMMENT: Every gold analyst says you are wrong and that gold stocks rose during the Great Depression as the only hedge. Would you care to comment. I bet not.
REPLY: Some of these people are not interested in the truth, and quite frankly, deserve what they will get. Why are they always so nasty? I suppose because they have been wrong. I really do not know what spin they now claim I have said. I really do not pay attention since most of their theories are just delusional.
Above is the chart we originally published in 1986 and the raw chart was in “The Greatest Bull Market in History.” Here is the same data in a modern chart. Since gold was “money” during the commodity boom into 1919, gold DECLINED against all commodities. From its high in 1916, it declined about 8.6 years into a low in 1924. Commodities peaked in 1919 and fell into 1932. So there was amajor divergence between gold and silver. That’s right — gold declined when silver rose. Guess that one is not in their bag of theories either. If gold is “money” then, guess what, it will DECLINE against everything else and rise ONLY in depression/austerity.
So why is gold not rising with austerity or as a hedge against inflation? Gold must go through a realignment which it is accomplishing. It must align with the stock market and commodities in general because it is NOT money; it is on the private asset side at this time.
Gold shares rose WITH STOCKS going into 1929, which is something else they omitted from their bag of theories. Gold shares began to decline in 1930, but then they caught wind of the coming sovereign debt default in 1931 (see newspaper above). Then Roosevelt devalued the dollar, revaluing gold from $20.67 to $35.00 in 1934. So I really do not understand this nonsense for it is more delusional than Jeb Bush winning the elections.
Now out of real desperation, they claim gold will be reset at $5,000 to $100,000 and silver $400-$500. I really do not understand where they come up with this stuff, as if government will surrender all power and bow before them after laying down their weapons. Government would NEVER do such a thing, and in case they have not noticed, we are moving to electronic money; not bullion. Even if this wild theory were correct, government would confiscate the gold and make it a criminal act to even own it so they make the profit – not you. That’s what Roosevelt did; confiscated first and revalued second.
This must be analysis inspired by peyote. There is just no other explanation. If there is a reset, it will not be a return to the past, it will be more like back to the future — electronic.
The 2016 gold report will be out soon. We will make an announcement once it is available.
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