We’ve all got our own take on what’s happening these days. Each of us taking the information we receive – and interpreting it the best we can. Ideally we get “some” of it right, and in turn are able to put some money in the bank.
Here’s my take – bare bones.. take it for what it’s worth.
- The business cycle has topped or is still in the “process of topping” as equities continue to grind across the top. The actual “level” of the SP 500 ( I track /ES futures ) is STILL at the exact same level ( give or take a point ) as the peak back in May so…..if you’d been nimble enough to “sell at the top” in May….then “buy the dip” late June (and taken advantage of these last few weeks) – all power to you. You are a star.
- The suggestion of “slowing” in China coupled with the problems brewing in their credit markets ( now looking to be of much larger concern than I originally had thought) suggest WITHOUT QUESTION that China will experience a slow down moving forward.
- As seen through the complete “destruction” of the Australian dollar ( which usually serves as a good indication of global risk) there is no question that slowing in China will have considerable global reach.
- Gold and commodities in general have taken their beating and look to have bottomed.
- The Federal Reserve will continue on it’s quest to destroy the US Dollar (which correlates well with the idea that commodities and the “cost of things” should be on the rise).
- U.S equities will continue to grind across the top and lower, then lower and yet lower as we are now entering a period of “rising interest rates” which ultimately hurts corporate borrowing, and in turn corporate profits.
I’ve suggested for some time now that ” we are on the other side of the mountain”. These things always take longer than most anyone can imagine, but the bigger building blocks are most certainly sliding into place.
Can the U.S survive an environment where interest rates are rising, and global growth is falling?
Well here we are. It’s Wednesday and the highly anticipated FOMC statement is due out around 2 p.m.
I consider this a “risk event” and advise trading with caution – even AFTER the statement has been made public.
It’s my feelings that “this one in particular” should act as the catalyst or “trigger” for the next larger scale move in markets, as traders look for further clarification ( or any clarification for that matter ) as to what on Earth the Federal Reserve is planning to do next.
With the clouded daily talk of “tapering vs no tapering” and the fact that U.S equities have been trading virtually flat for the past 2 weeks, it looks pretty clear to me that equity traders ( completely “jacked up” on QE ) have put on the brakes and entered “holding patterns” until the smoke clears here this afternoon.
Firm statements confirming that “yes indeed” the Fed is planning to start its tapering in September will send the market down fast, as equally mention of continued QE of 85 billion per month “should” keep things buoyant (although in this case I wouldn’t really count on that either).
This has gone far enough, and further suggestion of “continued easing” should be interpreted as “being needed” which is essentially suggesting that the “so-called recovery” is still very much in need of assistance. With USD “still” wallowing here at its near term lows – we will likely see some kind of “knee jerk reaction” to the statement, and then see markets digest the news and move accordingly.
I am 100% cash as this is most certainly a “risk event” so……my plans are to wait until “after” the statement, evaluate market reaction – THEN jump on it.
Watch Twitter here this afternoon, or perhaps even here at the site for a quick “afternoon update” and suggestion as to how to take advantage.
Trading forex for a living can make for a pretty stressful life at times. When you consider that it’s your own hard-earned money at risk, each and every decision carries considerable weight. You really can’t get away with anything, and there is rarely a chance that you are able to just “call in sick”, so when the opportunity presents itself to “get away for a day” – you jump on it.
I thought some of you might be interested to see “exactly” where I spend my days when not here staring into the soul sucking eyes of my computer screens.
This is Akumal. This is where you will find me on “pre fed announcement” days ( if you look close I’m just there under the palms in the front right corner). This is where I spend my “off days” swimming with the massive sea turtles snacking on sea grass only a 5 minutes snorkel off the beach. I have never been to Akumal – without seeing these majestic and beautiful creatures. (click for a larger view)
The Markets will unlikely have much to offer me today, and being 100% in cash again offers the rare opportunity to consider “who gives a hoot anyway”!
I encourage anyone who toils daily in the glorious world of finance / investment to “clear your heads” and take the time away “if” you can get it.
The USD is long overdue for a counter trend move higher, which is likely to start – literally this minute.
As usual ” they never make this easy” as “of course” you’ve got FOMC / Bernanke talking AGAIN here early this week.
At times I do marvel at the manipulation as even just this morning I’ve read a couple of headlines where “The IMF ( International Monetary Fund) Suggests Tapering A Bad Idea” coupled with usual market chatter leaking out (via U.S Media) that “Tapering To Start As Early As Sept”.
It’s pretty impossible for the IMF and the U.S Federal Reserve to even have opposing views – as the IMF’s largest contributing and “influential” member country / representative IS the U.S and Ben Bernanke so……here we see it again – complete and total nonsense keeping things as confusing as possible.
Any move higher in USD will likely be fast n furious ( as to wipe out short termers ) and likely short-lived so I would advise caution here. Catching a counter trend move is always risky, and it’s clear that USD is in a well-defined downtrend.
I’m playing it across the board, as well remaining LONG JPY as these trades are well in profit now.
Wouldn’t that be a headline I’d love to see.
Seriously though ( and as simple as it sounds ) wouldn’t it make a lot more sense to print 85 billion dollars per month and just give the money directly to the people?
Literally – just start printing cheques for 10’s of thousands of dollars at a time and send them directly to the consumers who will in turn “use” the money to ??
Yes! Stimulate the economy! Buy things, pay off credit card loans, make home improvements, take holidays, purchase cars, start new businesses, eat in restaurants, get educated. Everything the government “claims” that QE is supposed to be achieving only much faster and WITHOUT THE ADDED BURDEN OF DEBT!
Financial Crisis Solved!
As it stands the 85 billion per month is more or less just kept in reserve at the top 5 or 6 big banks on Wall Street, and really only manifests as a couple more zero’s /decimal points on a computerized balance sheet. These banks record “record”profits, stock prices are grossly over inflated, and an entire country sits on the sidelines watching it play out on CNBC. For the most part – no better off.
You know why the government won’t do this? Because the Central Bank ( and the elite running the show ) don’t want you to get out of debt! They want to create more of it! And more, and more, and more! Until eventually “your” savings account becomes “their” savings account. The Central Bank is so powerful, so full of influence on levels (I’m talking serious “global domination type levels) that even the U.S government falls below them (more on this later).
The government needs to print “its own” money (without the sick system of “borrowing” it from a Central Bank) and inject said money – directly into the economy.
Financial Crisis Solved!
Fiat money is money that derives its value from government regulation or law. The term fiat currency is used when the fiat money is used as the main currency of the country. The term derives from the Latin fiat (“let it be done”, “it shall be”).
The term “fiat money” has been defined variously as:
- any money declared by a government to be legal tender.
- state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.
- money without intrinsic value.
It’s important to remember that the actual money we hold in our hands has “no intrinsic value” and more or less serves as a “marker” for the exchange of some kind of good or service. Essentially “fiat money” is only worth what a given person feels he/she can exchange it for that “is” of some material value. The control of the “production” of this money is in the hands of Central Banks NOT a given government, and It’s herein where the true problem lies.
In the United States for example, each time the Central Bank prints a U.S Dollar and then “loans” that dollar to the U.S government ( by way of purchasing a U.S Bond which pays the bank a small rate of interest in return) more and more government debt is created!
Someone already “owes interest” on the newly created dollar bill before it’s even hit the street! As the entire system from the absolute top down ( as when your own local bank lends “you” money that they don’t really even have ) is created for the sole purpose of “creating debt”!
Why on Earth you ask? Would a government give the power of the “control / production / creation” of money to an outside / independent bank? A bank whose sole purpose is to create profit for its own small group of investors? A bank that essentially sits “above” the actual government itself in creating money from out of thin air and then demanding interest be paid?
He he he…….we may come full circle here – as you recall the previous reference to “us humans” as little ants. If things are starting to fall into perspective now …how macro can you go?
Could the ancient astronaut theory hold true?
That thousands of years ago celestial vistors came to our planet in search of materials needed for their very survival – and in realizing the difficulties in extracting these materials from the ground, developed modern man to essentially do the hard work for them? https://forexkong.com/2012/11/08/mining-could-it-be-in-our-genes/
This would certainly save me the trouble of explaining where Gold fits in to the “macro” eh? Eh?
In “attempting” to keep these posts “on Earth” – so far I’ve managed to reduce humanity to tiny insignificant biological entities, devouring resources, and essentially destroying all other known elements of life – as fast as “humanly” possible.
Life has existed on Earth for more than 3.5 billion years, yet in only the last 150 – we’ve pretty much managed to eradicate most of it. Could this essentially be the consequence of an innate “human desire” to find and possess Gold?
Pulling human beings out of the equation, biology on Earth takes care of itself with “absolute perfection”. Every creature there for a reason as it benefits another. Every process a part of something larger, and every system a part of something smaller. All stacked on top of itself to allow for everything – and I do mean everything to exist as it “should”…as a perfect part of something else.
If there was one thing on Earth that makes absolutely no sense at all…………….wouldn’t it be us?
If it wasn’t for the fact that the U.S dollar is the world’s “current” reserve currency – I’d likely have a wider range of things to write about, and I need to be bit careful here.
Frankly – I’m bored stiff of the debate. If it where the “Aussie” or the “Loonie” or the “Kiwi” whatever…same thing..as this is the current situation, and you’ve got to look at it for what it is.
The world’s reserve currency has changed many, many times in history – and will most certainly change again. If you can’t wrap your head around that well…..you’ll need to dismiss “human history” as well.
The current “news headlines” making light of the American Dollar’s day-to-day “strength or weakness” have little bearing on the larger macro changes at hand, as these things take years, and years , AND YEARS to come to fruition.
A simple example. You wouldn’t have blamed the CEO of a large American company back in the 80’s for crunching the numbers, and realizing that “outsourcing her manufacturing to China” would save investors millions – you’d have praised her!
Then another CEO caught on, then another and another…yet another – then “another” until finally – BOOM!
20 years later and America has more or less sold out it’s entire domestic manufacturing industry! Oops.
Good night Detroit!
Point being…….these things take years to manifest in a literal “news headline slap in the face” , and this “is the point”. The “macro” is there behind the scenes and will “always” provide valuable insight when looking to assess and evaluate the “micro”.
The question remains…How Macro Can You Go?
Let’s get my “macro” out-of-the-way first as even my interest in foreign exchange ranks somewhere in the middle of my “top ten” – as far as my actual macro interests go.
I am a firm believer in the theory that we are all “equally as big as we are small”. Considering the fact that there are more stars in our universe than grains of sand on the entire planet Earth – I think it’s fair to assume that “we” (let alone myself as an individual) are relatively insignificant in the grand scheme of things no?
No wait – I’ve got it wrong. You’re a New Yorker ( and likely never been more than a couple hundred miles from your place of birth) “all too certain” the universe actually revolves around you! Yes, yes of course. There will always be those with a “complete and total inability” to understand anything outside their own tiny sphere of influence. I believe that’s called ignorance.
In any case – yes – as big as we are small.
Much like the unsuspecting ants I hold so dear to my heart. Quietly working away and completely unaware – until of course the moment one of my cleaning ladies mops “turns their world upside down”.
Didn’t really “see that one coming” then did we?
Until confronted with something so much larger than ourselves – we humans are really no different.
Let’s bring this back down to Earth – and have a look at some “macro financial” here next.
In case you haven’t gathered by now – I’m a bit more “macro” than I am “micro”.
You may scoff at this while envisioning “yourself” the ultimate “macro thinker” (as I’m sure that most people do – given the constraints / limitations of a given environment or specific set of circumstances) but one can’t rule out that until you’ve been pushed outside this “comfort zone” or this “area of acute knowledge” you really can’t say for certain that you’ve got a handle on things at all.
I’m pretty sure the aboriginal people of the Amazon equally assumed they “knew everything” until the first airplanes were seen overhead. Can you imagine the wheels turning?
Point being – human nature “should” dictate that we all feel a certain sense of “macro” until of course – something finally comes along to challenge it. Last I looked – this was called learning.
The question is – How Macro Can You Go?
How macro are you even “willing to go” ? as ideas outside your comfort zone generally bring about a sense of discomfort, feelings of vulnerability, fear, anxiety and stress. No one “wants” to consider things they “don’t know” and no one likes the feeling of “not knowing everything”. This is human. This is normal.
The question is – How Macro Can You Go?
As psychology and the phycology of trading is of much deeper interest to me than the day-to-day math, it’s quite likely this series of posts may run on for quite some time. The summer months are slow and my position / view of markets is widely known.
I may take the time to explore the “macro” via the U.S Dollar, monetary policy, commodities and some of the more “impactful” things happening in the news.
I appreciate your patience and invite your comments.