ECONOMY: the 70 worst
I've written numerous times in the past: central banks were invented in order to tax the citizens without having to apply to specific taxes that governments should be accountable to the voters. Central banks in fact achieve this result by producing inflation, which is perceived late and slow, especially, it is possible to charge the blame on external factors, and make it seem like a natural disaster. In order to do their work undisturbed, and that transfer resources from savers to large debtors and creditors (government and bank-financial system) via inflation, central banks have been cleverly equipped with a "mandate" that the appointment of defenders purchasing power of money. So that the masses can not suspect that the real mandate is exactly the opposite.
When inflation gets out of hand, as the present stage, and wins over the front pages of newspapers, central banks should give their best to continue the deception, and therefore must "speak" against inflation, and sometimes act via interest rates, to give the impression they are doing what would be appointed to do. In addition, to continue producing pretending to fight inflation, it is essential that feed misleading debates about the origins of it. Not surprisingly, today the masses are convinced that the "cause" of inflation is oil, as if the latter's price had risen to a sort of divine curse. Consequently, the mass is also convinced that as soon as the price of oil falls, inflation will fall all over.
Meanwhile, it is argued that at this stage captiously inflation is not a bad thing because it serves to counter the recessionary tendencies: Many even claim that negative real interest rates are good. She moves away so the public the idea that it is the low interest rates and monetary policy have produced inflation, which in turn has also produced the recessive trend in place.
Already in 2001/2002, the inflationary were ready to monetize the deflationary impact arising from the bursting of the tech bubble, mortgages and inflation. As it was Predictably, as soon as it is consumed the "veil" inflation has emerged in all its power. Now they want to do the same inflationary cover under the "veil" of depression resulting from the bursting of the housing bubble and financial reach to say that inflation is a medicine necessary to ensure that the prices of assets and the real economy in avvitino a downward spiral.
In fact, inflation today is from a period of many years. The main cause, produced by the action of central banks, is the excess of dollars, and in particular the asset-based credit bubble that has distorted the unprecedented global economic system. The massive creation of U.S. dollar has opened a Pandora's box from which emerged a global credit expansion, again, historically unprecedented size and global clipboard. And 'This is the main cause of rising oil prices, which will continue to have serious economic, financial and geopolitical.
Comparisons with the 70, do not capture key aspects of inflation odierna.Infatti, there are three interrelated dynamics that drive the current inflationary forces:
1) The massive flow of dollars flooding the world, despite the devaluation of the dollar The credit crunch and the U.S. recession, this year the U.S. will produce a deficit of 700 and spends billions of dollars continue to flood the economy global, especially Asian ones, providing resources that will be used to buy oil and other strategic resources.
2) speculation encouraged by central banks through the rescue in case of failures, which by its nature goes in search of rising prices.
3) the confluence of the flow of global liquidity in the national credit systems in countries with exchange rates "almost" fixed to the dollar, which has had a huge stimulatory effect on very large populations (China, India) and has therefore created a policy of inflation unprecedented scale for energy, food, raw materials in general. How should
esssere obvious now, hyperinflation energy and food leading to global chaos. The current orientation inflation, worsened dramatically with the rescue operations carried out during late 2007-early 2008 by central banks to help their masters bankers, has made spectacular otherwise normal price movements and abnormal. The world monetary policy (which are responsible for major central banks), which helps the transformation of the 700 billion U.S. deficit in global speculative a powerful weapon, is leading to disaster. At a minimum, we can say that it provides the further future inflation for goods of first necessity and no one can do without, in other words, efforts to monetize the financial losses provide a boost to global trade surplus with the U.S. dollar in tangible and essential.
Inflation also affects the result that the super-indebted consumers americani.I negative real interest rates produce inflation and reduce real incomes of consumers who are no longer able to honor their debts even if the rates are very low. It may seem ironic that the low rates indebitatissimi detrimental to the consumer, but it is perfectly logical. For example, the collapse in the price of SUVs and trucks has led to a negative equity loans in the auto sector: the credit quality of households is therefore directly affected dall'infazione, creating an additional burden for millions of people who bought house in the suburbs. And because of this, the real cost of borrowing is mortgage going to do in interest rates to 2% of Fed.Soprattutto families are suffering more because of the lower and lower yields on their savings, which is now added to the shearing stock. In the 70
consumer prices went up, but incomes, house prices. The current situation is much worse: only rising consumer prices, while income and reduction case.Lo financial bubble burst on Wall Street is leading to a big shift in spending patterns of the economy, is putting the crisis in wages, income and profits in some sectors, while others (few) are benefiting. The failure of alchemy Wally has led to a degree of imbalance and vulnerability far worse than inflation of the 70 even though the official inflation rate is two-digit time (because there was still time China manufacturing).
Those who study the history of the great inflations applicant is the chorus calling for yet a little more beneficial because of inflation ... so it is not surprising that the mass action it deems appropriate that the Fed produced "a little bit more than inflation ". Instead, as history shows clearly, inflation is the road to ruin, and this road has now become clearly visible.
RAW MATERIALS: Raw record
if the Fed had raised interest rates, perhaps by half, bringing them to a (still very bad in real terms) rate of 2.5%, it is virtually certain that the dollar would have jumped him and below the oil would fall well below 130 closing the week instead of above 140. The stock exchange after an initial fall, he would back and SP500 was concluded by the parties of 1350 instead of 1270. Error
fed then? no, because the Fed wants to produce inflation, and not touching rates but merely statements of facade adds to inflation by bringing down the dollar and rising oil. This is the heart of probema, everything else is secondary. The momentary various excuses to explain the new record in the cruel, do not hold: consider the usual Nigerian blocks, or assumed a lower production Libya, not to mention the incoherent statements Algerian who chairs the argument that the OPEC oil will reach 170 this summer if the ECB raises rates. Blatant nonsense, according to this gentleman motivated by the fact that the euro would rise and below him the oil. In fact, the ridicule that the ECB will increase (+0.25), the exchange will be irrelevant because it was already obvious and wretched that Trichet has already hastened to say that it will be the beginning of a cycle of increases. Certainly Trichet did so for political reasons, but the point is that if the euro rises it is only because the dollar falls, and this because there is an excess of dollars in the world, and global monetary policy amplifies rather than limit it. Who does not understand this, can never predict the long-term trends of the main financial variables.
E 'was then another week of increases for all commodities led by oil and, for the first time since some time now, gold (+3%).
It concludes with: oil at 140 (August) natural gas 13.2 (August) to 931 Gold (August) silver 17,7 (September) platinum in 2062 (October) palladium-471 (September) to 388 copper ( September).
inflationary scenario forecast gold to rise in asset
Location: 40% physical gold to 14.1 eu / gr. (Closes at 18.90 = +33%) trading
Location: nothing
CHANGES: another fall Dollar
The general index of the dollar loses 1% and drops to 72.3. The dollar fell against all, even in this round against the yen because the stock market crash has put the block of carry trades based on the usual relationship that had recently skipped. This indicates that the fear in the markets came back to become the main protagonist, and not by chance that we reviewed the Swiss franc super star. The Eurodollar
ends just below 1.58 approaching the high end of the range (1.60 to 1.53) in place now for two months, which is taking place on several occasions described the corrective phase (abc) to the end of which start the new trend in sequence order. The euro-dollar, which, until the Fed had been under 1.56 and earlier this week had been affected by the above-mentioned statement of Trichet, was the first to interpret the Fed's statement as a sign of laxity in the face of explicit anti-inflationary statement, and with his jump of about 1 is given in ' hours later he pulled the oil (after the increase in U.S. stocks had fallen from 136 to 132) it back to 136, which in turn has contributed to the sharp reversal of the shareholder (initially rose after the Fed). The next day was rather the oil that has shot to 140 on the statements above OPEC's president, dragging the dollar downward, making Eurodollar almost reach to 1.58 and giving the coup de grace to the bag. For now, the play
correlations sees dollar-oil-gold-stock-returns always move together, the initiative may emanate from any of the branches, and then all the others are below: in the same direction-dollar-bag yields ( For example, all downhill as this week), oil and gold in the opposite (rising if the other down). It 'important to note that the leadership can easily change: it may be oil, but it can also be the dollar or the stock market to move first and drag the others.
forecast inflationary scenario: ribassoPosizione dollar assets: 60% in euro allocated as indicated in the section on performance, trading position, nothing
BOND: effect refuge
Bots USA 3 months down to 1.66% at 2 years -27 cts. to 2.63%, -25 cts. 5 years to 3.35%, the tenth -20 cts. -21% to 3.97 cents in 30 years at 4.52%. The futures rate on three-month deadline in December 2009 the quoted 4.07% (-21cts.), The difference between 2 and 10 years rose to 133 cents ..
The facility will be above the target Fed (2%), the three-month Libor is still, however, to 2.8% (+0 cts). Spreads with Fannie and Freddie, are expanded to 76 cents. more than the Treasury. Increase the spreads of corporate bonds, an increase of 3 cents. rates on mortgages at all times.
In Europe, the ten-year bund is 4.52%, the differential with the U.S. rose to 55 cents. the Bund, while the differential on the two-year (4.44%) is 181 cts. Euribor rates still on top: 3 months to 5.01%, one month to 4.5% higher than a year to 5.46%.
And finally the Japanese ten-year fell 1, 62% and were sold (with an average increase of 16 cents. In return) the bonds of emerging countries, another clear sign of the increase in risk premia.
forecast inflationary scenario: negative returns (net of inflation) asset
Location: 50% to 3.5% net (bot 15:12:08) +10% to 2.92% net (deposit iwpower)
trading Location: none
BAGS: Black Thursday
Second week of sharp decline for the stock. The Dowe was the first major indices to new lows and is now in absolute 19% by October 2007. The banking sector has returned to 2002 levels. The technology so far among the most resistant, have started to drop, someone realized that they too will suffer stagflation looming.
Going to the usual analysis on the SP500, the week ends on the lowest level in more time here envisioned as a target for the bearish wave starts at 1440. Unfortunately, I have not fully exploited: the confusion arising prior to the Fed, had led me to think that the double bottom in 1304 could be the end of the wave, and I preferred to be satisfied (+117 points) coming in 1323. Instead the film prefigured many times has fully realized and then the week ends in 1278.
What I expect now?
From 1440 up to mid-May to the fall in the course is in its sixth week, and basically seems to take place in five waves as happened in the first two rebates (one made in November (170 points) and ended in January (250 points) ): at least 168 points on Friday he did, and then we would be in line with that of November, for the moment.
More specifically we had a first wave of 67 points from 1440 to 1373 in late May, then a second upward until 1406, and a third in the fall of 75 points completed in mid-June in 1331. Then there was the fourth wave to rise up to 1367, and finally the current fifth wave that has already passed to other entities (95 points). If you consider the whole movement downward to the third wave, there is an amplitude of 109 points (1440-1331). So it can be assumed for the fifth a similar size, which brings us to 1367 to 1258, corresponding to the minimum level of March and thus a crucial support.
The complication that there has been in the development of this fifth wave underway, and that made me miss the exit, was due to the complex in the last days of a series of microwave intermediate: the first ended in 1304, the second in 1336, and now the third that has touched 1272 (64 points) and the latter then the size of the first (63 points from 1367 to 1304). E 'therefore probable that this series of microwave continues next week with a fourth upwards by about 30 points which could then review area in 1300, and finally the fifth to fall until at least March (1256).
next week so I expect an extension to this level and from there the upside, as long prefigured here, also because technical indicators suggest the most likely keeping the aspect supporto.Mi then, with the month of July, retracement area in 1350-1370 (re-entry area for sale with the goal of riding the next fall until 1100 (August-October) and stop at 1450).
Alternatively, you can envisage the scenario of the collapse of minimum extension until March 1200. More generally, the decline started in 1440 could rise to be the same size space-time of the fall from October to January, which was 300 points, in which case we would have a descent to about 1,140 by mid-August, followed by a rebound phase (1270-1300) and finally the retest of the lows (similar to the one that occurred between January and March) and then we would always area in mid-October 1100.
For basic support one or the other scenario, see the forecast for next week. In any case, the asset program is clear: re-entry during July 1350 to 70 in the first scenario, which will benefit gold in the second scenario, coupled with the possibility of returning for sale on the rebound that followed in the area in 1270 bringing the index before re-test lows in October. But there will be time to focus, where appropriate.
It ends with Dow at 11,346 -4.2% (-14.5% ytd) SP500 1278 to -3% (-13%) in 1855 Nasdaq100 -3.6% (-11%) Russell -3 , 8% (-9%) Transport-5, 5% (+7%) semiconductor -3.7% (-10%), Broker-5, 5% (-28%) Banks -5.6% (-33 %). The relationship between put and call down to 1.1 VIX volatility index rose to 23.5. The Japanese
Nikkey 13,544 -3% (-12% YTD), the Dax down 2.4% in 6422 (-20.5%) the French CAC in 4397, the footsie English in 5530, Italy at the without the slightest hope to Intel Corp and Mibtel 29,198 to 22,628 (-22% YTD, the stock clock of our own - in nominal terms-reported back 4 years).
Among the emerging China -3% (-49%, that has halved since the beginning of years, someone points out that the consensus urged to invest in China?) India -5.1% (-32%) Brazil -0.4% (+0.5%) Russia -3% (+1%).
forecast inflationary scenario: overall decline in (net of inflation) asset
Location: Location trading
nothing, nothing
WEATHER: Tap the ECB will be a week
short because of 'Independence Day holiday Friday in the U.S., but that does not mean that there will be volatility. With the data on the labor market on Thursday (at the same time the conference Trichet and ISM services) and those sull'ISM manufacturing and orders to factories in the days before and with the end of the semester and the beginning of July, it is very likely. According to recent announcements of layoffs, pay slips and employment will continue to shrink, and the expectation of the market (-55 thousand) is easier it is disappointed, though - as is known - is a figure easily manipulated by the government, could be used by the PPT to intervene in support of the scholarship and the dollar.
More general, since missing a month to the next meeting of the Fed, the market knows that nothing should happen on U.S. rates before that date and then will focus on the data to build expectations and other central banks. On Thursday, the ECB is expected to raise 0.25 but doubt remains about what will happen next. Trichet warned that the rise in July may be a one-time adjustment, but the market does not seem to believe (rightly) with the galloping inflation rates should go at least 4.5 to 4.75 by year-end (and therefore other 1:00 to 2:00 increases). However, if the dollar continues to fall, it is likely that the ECB seeks to limit, the more so if the macro data for future European show a significant deterioration. But since the Fed would eventually understand that should raise rates, this move in turn will give more room for the ECB. From 2% (Fed) - 4% (ECB) at year-end we could be at least 2.5% -4.5%.
The conjunction of weak U.S. data and a Trichet which leaves open the possibility of other increases, it should project the euro to 1.60 and beyond. Technically, it's been three months of consolidation, with exactly the same waves that occurred between November and January: we could then have a July-August the same effect already seen in February-March. In this case, oil always still up (150) and always held down again (at least 1200 of SP500: see scenario on the same alternative to the previous chapter), with the gold to share much.
other hand, a maneuver in support of their U.S. dollars, based on U.S. data and a better Trichet dismissive about the future, could extend the current consolidation phase Eurodollar Pull back towards 1.54. In this case, it might even reach the reversal on oil (130) and the corrective wave bullish on the stock exchange (1370 to SP500: see the same scenario based on the previous chapter), while gold may return to part 850.
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