Market cooling; global cooling? Buy commodities.

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Quotable

“The friend of the present order of things condemns all political speculations in the gross.”

--Thomas Malthus

Commentary & Analysis

Market cooling; global cooling?  Buy commodities.

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I don’t want to jump into the debate whether or not there is “global warming,” the old phrase; the new doublespeak phrase is “climate change.”  (Gee gosh, the climate changes? Shocking!) I realize even suggesting there is a debate identifies me as a “climate denier,” one who should be burned (ironically) at the stake. As much as Europeans hate to hear this, there some uncultured rubes such as me who remain skeptical of “climate science.”  And in fact, even a Google search will show there are “accredited” scientists who also remain skeptical (I am sure Google will do what is right and expunge such heretics from its search engine as quickly as possible. Winston Smith, truly a model of efficiency at the Ministry of Truth, would have already taken care of that).

But by some accounts, Martin Armstrong’s summary below to be exact, the globe is cooling.  And that factoid, should it be a factoid, means this: long-term investors should be buying commodities. READ MORE...

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Yields going higher? That’s our guess.

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Quotable

“A well-thought-out story doesn’t need to resemble real life. Life itself tries with all its might to resemble a well-crafted story.”

― Isaac Babel

Commentary & Analysis

Yields going higher?  That’s our guess.

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As a trader considering the fate of interest rates it pays to remain open to all “well-crafted stories.”  Why?  Because, based on many years of empirical evidence in the bag, we agree with the old saw: No one can forecast interest rates.

This is not to suggest many market mavens do indeed get the rate call correct; but most employ the gift of hindsight and the magic of publishing to make it happen.  I’m still looking for a way to open a trading position on hindsight--that would be the Holy Grail. 

The lead narrative for Black Swan Capital is interest rates are headed higher, at least over the near-term (one- to three-month time frame months).  The inputs for this narrative include the usual mix of fundamentals, sentiment, and technical factors.  That being said, I thought comments by Lena Komileva, chief economist at G + Economics, printed in today’s Barron’s magazine summed it up well; in two concise sentences she explains why we are long rates, or short long bonds...READ MORE

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Time to sell gold? The Mr. Elliott we know thinks so…

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Quotable

“Nothing whets the intelligence more than a passionate suspicion, nothing develops all the faculties of an immature mind more than a trail running away into the dark.”

― Stefan Zweig, The Burning Secret and other stories

 Commentary & Analysis

Time to sell gold?  The Mr. Elliott we know thinks so…

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Our rendition of an Elliott Wave chart shown on the next page says it’s time to sell gold; i.e. once minor corrective rally Wave ii completes—that may be today). Targets lower are 1,210; then 1180-level.  And if the US dollar catches a major bid, there is scope to test the swing low of 1,123 from mid-December 2016 (gold vs. dollar weekly chart page 3).  Note: The 55-week gold to US dollar index correlation is a whopping -84.3%; i.e. as gold goes up, the dollar goes down, and vice versa...READ MORE

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Hawks unleashed could rock the markets

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Quotable

“For theories and schools, like microbes and corpuscles, devour one another and by their strife ensure the continuity of life.”

­__Marcell Proust

Commentary & Analysis

Hawks unleashed could rock the markets

       Run pug run; hawks are in the house!

       Run pug run; hawks are in the house!

The chief hawk in this narrative is Stanford Economics Professor John Taylor (JT); aka the creator of the Taylor Rule for monetary policy.  Should President. Trump pull a surprise out of his hat this week (Would it be a surprise if President Trump didn’t surprise?), and appoints JT head of the US Federal Reserve Bank market will most likely get rocked in a big way as the monetary hawks emerge from their well-guarded cages. 

According to the Taylor Rule, the current target for the fed funds rate should be about 2.94% instead of the paltry 1.15% it is now.  Mr. Taylor’s appointment wouldn’t suggest an immediate 200 basis point rate hike from the Fed; but it would suggest future rate hikes will be faster and more furious than now anticipated.

Thus, here is how the market would likely react: ....READ MORE

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US $: It ain’t over till it’s over.

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Quotable

“It is in the nature of the human being to seek a justification for his actions.”

― Aleksandr Solzhenitsyn

 Commentary & Analysis

US $: It ain’t over till it’s over.

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Despite the rising probability, along with increasing sentiment and real positioning, suggesting the US dollar cyclical bull market rally is over (ending with the peak in early January 2017 labeled 5 of III below), the jury is still out.  Why do I say that?  Well, below are some rationales to consider:

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Mr. Market, what are you telling us about the dollar?

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Quotable

“Be ready to change your strategy with the environment. (The environment, not your strategy, is the data).”

__Mark Weinstein

 Commentary & Analysis

Mr. Market, what are you telling us about the dollar?

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Watching the currency market over the past couple of days has been akin to watching paint dry.  In my case the paint drying analogy is probably because I have a few different scenarios in my mind and find all of them plausible (see, Orwell’s Doublethink lives in the minds of traders).  My continuous question as I watch currency price action: Mr. Market, what are you telling us about the dollar? 

Three simple scenarios now rattling in my head....READ MORE

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The Fabulous Shrinking Renminbi…

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Quotable

“Such a power [of issuing paper currency], in whomsoever vested, is an intolerable evil. All variations in the value of the circulating medium are mischievous: they disturb existing contracts and expectations, and the liability to such changes renders every pecuniary engagement of long date entirely precarious…Not to add, that issuers may have, and in the case of a government paper, always have, a direct interest in lowering the value of the currency, because it is the medium in which their own debts are computed.”

__John Stuart Mill

 Commentary & Analysis

The Fabulous Shrinking Renminbi…

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Over the last several years, many writers and assorted cranks, those with little understanding of the global financial system in its current form, have warned “soon [whatever nebulous time-frame that may be] the Chinese currency will replace the US dollar.”  Back in early 2000’s we considered such a warning as either total hogwash, or at the least a bit of hyperbole.  In fact, back in late 2010 we penned a report for our subscribers titled: “The Chinese yuan will soon replace the US dollar as world reserve currency: Not in this lifetime!”  More on that shortly. 

I would like to first summarize a recent article in the International Economy magazine, Summer 2017 edition, titled: “Bye, Bye Renminbi,” written by Benn Steil and Emma Smith.  It is enlightening for those still concerned the Chinese currency will “soon” replace the US dollar as the world reserve currency...READ MORE

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Three scenarios in front of the Fed and horses to ride…

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Quotable

“There is no danger of the public ever finding any key to the secrets of winning.  The crazy gambling urge and speculative hysteria makes that a certainty.  But if the public play ever did get wise to the facts of life, the principle of ever-changing cycles would move the form away from the public immediately.”

--Robert Bacon, Secrets of Professional Turf Betting

 Commentary & Analysis

Three scenarios in front of the Fed and horses to ride…

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As I sit in my office here in southeast Florida, I wait impatiently for the arrival of two pending storms—hurricane Maria (hoping the forecasts are correct this time) and Janet (aka the Federal Open Market Committee interest rate decision tomorrow).  Below are our three best guesses of what the Fed will do (couched as plausible scenarios) and associated currency trade ideas.  READ MORE...  

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