Bonds | My Journey

2021-11-13

Escape Plan

“Escape for your life. Do not look back or stop anywhere in the valley.

Escape to the hills, lest you be swept away.”

Genenis 19:1-38

Twenty one months ago, my time has come to leave my nest, to embrace reality of harsh world we live in. As always, like a little bird, afraid to leave their comfortable lullaby of 9 to 5 nest. I had to fly into jungle of personal enterprise world. There were many butterflies flying around. Didn’t we hear them buzzing, “life time opportunity”, “things to do before you die”, and “go big or go home”?

I was born into a very humble (excuse me to make poor word better) family, who could never afford to have overseas study, let alone overseas travel. It’s still very vivid in my eyes, US university brochures, my father brought back home. In that silent, heart touching moment, my eyes could hear well, and stored the image safely in my brain vault. My parents only left me persistence and perseverance, no capital, but that’s more than I needed. Due to that persistence, Norwegian government invited me to come and experience Scandinavian life. It’s my next important stepping stone, confidence.

Twenty twenty, what a year of resident evil moment. Many asked, was it the end of human race when streets were so empty, puny human race was jailed to their own home, and stock index was falling? My persistence and experience told not to discourage, but took that opportunity. I might still believe the influenza that turned into Covid name event, is a man made. I’m talking about a coordinated orchestra event, at the end of financial curve inversion, after failing with ominous overnight rate spike in September 2019, not the virus. If it’s true, how powerful is financial could take a grip of human life. We do realize though, none of us is immune to any virus, nor the curse of death, nor possibly we can escape from them.

Entering reality of my own personal corporate world and competition is never been darker and colder. Very sure, rhodopsin, dark adaption, is never be a pleasant experience. I had to close my eyes, looked into my heart, what is my best mutant ability? X-MEN is never be a 1-MAN, everyone has their own unique and incomparable skill. The easiest way to look for is what interested us most, not our one year interest but our many decades of interest(s).

I surely know myself. Even though I can do very well, it’s not Information Technology that I interested most. What should people look from well known university brand name in their resume? I disbelieve it’s skill from that palace. It’s rarely economy books and theories can be used to make money from market competition. However it’s still important knowledge. Without knowing how economy theory works, we can’t make a lie about them, nor get fooled from it. It’s all about opportunity, to enter higher ladder corporate, for then to experience real cruel world in comfortable chair of salary to pay bill of liability, and take opportunity to build more confidence experience. Luckily the information technology gave me entry opportunity point to the ladder. There were many great leaders and they will always be my unforgettable mentors to me. In 2020, I’s drawing a line. I’m flying with my own wings, nothing can stop me now, no superiority, nor woke barrier, not even any sky can limit.

Meanwhile this music is playing in the background.

Let me summarized, what I needed were persistence/perseverance, confidence and opportunity. Year 2020, was the year of my opportunity. I forced myself to run as fast as I can. It’s never be perfect. I still missed lots of opportunities, hit many road blocks, that is life. Persistence, go fall and rise stronger, there is no way back.

Here is what I like most, The United States. The country has made me great, I owed them, and I think they will make me greater again.

The United States (especially their 10 years debt) is still the most liquid asset on earth. Its hegemony spell prohibits their front end from increasing to next 2 years, without crashing everything, and wasting their costly momentum effort.

This game is not complicated. White collar like banks, are just buying front end (mostly 2 years) and invest it back to longer end (mostly 10 years). Due to their leveraged greed, less liquid and certain 30 years, is currently getting hurt most, inversing the 10. What can fail them is USD bankruptcy but that should never be an option at this moment. Even China will blink, and continuously lie with their 3 red-lines from transferring their surplus into their current not-so-much troubled Real Estate sector. This asset changing moment cycle must be protected at all cost.

We shouldn’t be surprised with a possibility of commodity deflation moment before their run. Thanks God, it seems to be timid. When money is invested into long term, its long term yield will be under pressure, which will beg for long term support of central bank and short term rally in US golden child, FAT ANG. However to hedge their long term investment, they should go against USD risk or do investment in inflation protection like TIPS, estate or commodity. My thesis is supported with recent PBOC net buying and continuous growth of their mortgage book, rather than their 3 red lines. Please forgive China for their lying of everything, for having inflation death threat, it may not be a sin.

China Bonds Advance on PBOC's $16 Billion Liquidity Injection

I believe taper is less worrying with existing support of RRP:

Have a look back into yield curve picture, arching and moving to front end, shorter term rate, even its very long term 30 years is hardly able to follow. For me, I think it’s obviously a beautiful front end steepening indeed. Houston, we don’t have a problem, our mission after 12 years of easing trick, seems to start being fruitful. People are now starting to enter our trigger baits. We’ll keep baiting them to next 8 years, before we claim our mission to mars is successful.

Without having to explain detail of this math, I’d summarize my humble thesis and vision, before happening, in my own English version:

Next year is probably last average windows time to take big investment. It’s still able to raise to next 5-8 years, but they should never be better investment compared to ones taken from year 2020-2022. Last overshoot is always possible but that doesn’t justify better risk and return profile.
In 2 years something big will come and I don’t believe it’s a Minsky moment.
The Federal Reserve taper should help to transition RRP/negative yield with fiscal deadline to market upside and not allowing front end rate to raise. However even if inflation force would be uncontrolled, we should still have about enough 6 points until the rate could hit their long term downtrend.

The market rally screams same music:

I’m floating around in Ectasy, so don’t stop me, don’t stop me now…

I’m a shooting star leaping through the sky
Like a tiger defying the laws of gravity
I’m a racing car passing by like Lady Godiva
I’m gonna go, go, go
There’s no stopping me

I’m burnin’ through the sky, yeah 200 degrees
That’s why they call me Mister Fahrenheit
I’m travelling at the speed of light
I wanna make a supersonic man out of you
Like an atom bomb about to
Oh, oh, oh, oh, oh, explode!!!

What is the world thinking at the moment? My vision of current decade evolution is with Electric Vehicle (EV) infrastructure, not just the EV itself. Hundred millions of Electric (not-gas) stations grid to build, all over the world in 10 years. Low rate weapon to protect uncompetitive low growth of advanced countries, turns into climate change cooperative initiative to protect high margin business to survive and to end low margin uncompetitive fossil fuel. This effort to leave fossil fuel has hit their competitor most, no less than China. Economy growth related copper and nickel, as their similar industry had lack of capital expenditure, would then be their hidden Cleopatra. Other scarcity of cheap electricity and cheap food may also have to get censored from their expected 100% growth for every 3-5 years. I hardly believe copper, nickel, energy and food will undergo transitory theme, while US steel is hinged under protection from entering transitory.

In this squid game, life and death, profit or loss, I should start with my escape plan, not to quit the squid game because it’s always be my interest, but to start planning their golden parachute plan, before the game is even starting to plan their end, in which I believe so much temptation of greed will be happening in next following years. Why I think is important? We may work and accumulate income well for rest of life, however at the end of the day, it’s our competitiveness to keep them growing that will matter most. A stable 20-30% per year (or faster return) is enough to catapult into billion mark in long run. A sudden 50% drop at the start of retirement means 50% loss of whole life wealth accumulation. Do we know soon-to-see high inflation is a hidden harsh of regressive tax? Our best effort, even with real estate portfolio, is always prone to these thieves. Have a look at how RRP should survive and take wealth from their pension funds. I would also expect we will see a lost decade between year 2030 to 2040, when Sodom and Gomorrah sky may be most likely being turned dark for 10 years. Welcome to reality of financial squid game, win big, survive, or die. My x-ray lobster-eye satellites keep scanning them, stay tuned.

11,788 Squid Illustrations & Clip Art - iStock

Disclaimer: opinion is my own and never become any financial advise.

2019-12-05

Bonds, Foreign exchange, Investments

Sure, It’s a Plus! +

The + sign is getting obvious, there might be a start of a change to the world of economy. Australia continues to record current account surplus. It’s first time since 1975 or 45 years ago, and to continue rising.

The current account surplus is mainly related to commodity export to China and depressed currency. It should have high correlation to recent rebound in China PMI or highly probable China expansion.

How about other countries?

Emerging market and developing Asia seem to be the ones on way back down to deficit.

With US tries to control deficit, I may suspect China may have risk/difficulty to maintain their current account surplus, as seen a big flash drop in 2018.

Trade war will try to balance US and China trade and current account. They try to tango/stable two world strongest currencies, in simple term is trying to not manipulate currency, but to monopolize them. There seems to be an effort for China to stimulate their economy and effort to park the money in US to stable the pair.

USDCNY tries to stable at 7
source: marketwatch

Meanwhile, the impact seems to benefit some other countries like Australia. Negative sentiment of trade war, in addition to almost crash in property, is fueling local central bank easing to indeed catapult Australia to a condition we might never see in 45 years.

Everyone is waiting for fiscal initiative. One plausible outcome is a big tax cut. The stage 3 might put it back well to about 50 years ago, which seems to be correlated with the condition of current account surplus history.

With net overseas immigration continues to run hot, it may help to mitigate recent oversupply in Australia property. And when the fiscal does more such as infrastructure, it’s expected to be another plus.

From property perspective, investment properties (IP) are heavier than owner occupier, having more lending restriction and higher interest. If we look at gross rental yield, they return at average of 3% to 3.9% and quite stable in last decade despite price volatility. With current IP mortgage rate at about 3.5% from big banks and 3% with non conforming lenders, it’s quite clear that depreciation (tax benefit) suddenly turns investment property to be a surplus vehicle, as long as price is no longer down and rental yield is reduced less than mortgage rate, in which both of these two are happening. My argument in May 2019 is correct. There’s no benefit for investor to sell at this lower price, rather than to keep them for almost definite profit, even if the price doesn’t increase.

If we’d like to forecast how much tax benefit is diminished with price increase, assuming other conditions are stable, we may look at how much tax benefit is. This article shows that taxman contributes 24% of the cost, therefore we might expect price to rebound at about 24% from bottom to bring this vehicle back to normal, i=r+t or when we may expect volume to build.

It’s only a matter of time. The price has rebounded and only half way to go.

We may see clearly, that if RBA cut another rate, at current yield curve, one more rate cut to 0.5%, may ease short term lending pressure and form an inflationary yield curve. However even if RBA reduces the rate, I may doubt banks will pass the rate cut, considering recent profit pressure and may become a positive news for the bank instead.

I don’t say that economy is healthy enough (stubborn low inflation and wage increase), but many conditions have been definitely improving well, as long as RBA helps this recovery on track.

We do hope though, the plus is giving more benefit to the economy. Some evidences might show a surplus could be negative to local investment vehicle, such as shares, and may introduce some unintended consequences, like in Japan, which is still trying hard to stimulate their economy.

Japan Current Account — Japan has been recording current account surplus for decades.
source: tradingeconomics

However it seems the government is being careful, before doing a massive change and may take a safe measure, such as tax cut. The forecast from IMF shows that the surplus might be just an impulse and may quickly go back to deficit. This forecast is correct because it’s just based on simple past series math, but it may not be able to tell future, should the surplus condition persists. There is some argument that there might be some volatility in near future which may require financial sector to have bigger buffer.

The story might be related to a ‘big rescue‘ to US banks in September 2019 when their daily repo rate shot up very high. The Federal Reserve wouldn’t disclose who are the rescued ‘too big to fail‘ ones until next 2 years. The most coincident event during that time was a possible bubble burst of negative yield in long term US treasury. Many US banks have been participating to hold/engineer more treasury rather than what they park in Federal Reserve, causing short term liquidity crunch. In an event of global correction that could easily challenge other countries. It’s no coincident that many Australia banks are now in rush to raise their liquidity level.

Eventhough China seems to lead non US rebound, Germany is still contracting. People may still look for further evidence. Until then, US economy remains unchallenged.

Germany Manufacturing PMI — German PMI source: tradingeconomics

If indeed condition of surplus continues further, I would expect the fiscal policy to do more than just a tax cut initiative. We’ll see.

It’s my own opinion and not in any case of financial advise.

2019-11-09

Bonds, Foreign exchange, Investments, Property, Shares

Holy Grail

Many years, investors and traders have been trying to find and formulate their holy grail techniques. Most of them are failed and it’s not surprising. It’s market participants behaviors that are always trying to take advantages from those who are trying to find it. However I still find a dynamic adaptive learning to follow market participants is still doing well, rather than sets of quantitative formula or trying to redo past experience.

source: *The Damsel of the Sanct Grael* wikipedia

Since 2009, central bank balance sheet has been growing tremendously in a binary pattern. I always argued that we are not required to do any normalization yet until there’s any sign of global inflation. We were worry about US inflation in 2016, but at the end, US has to give up their inflation to bigger slow down of global growth.

In any of those events, our main concern is always about uneven money distribution which is related heavily to high grade investment vehicles supply issue. We see high quality bonds is getting scarce and drove their price to unprecedented negative yield. When we see junk bonds are being elevated too, people start to worry. There’s not enough supply for high quality vehicles which then raised another opportunity for their longer term. Companies also widely do buy back in effort to reduce their supply and cause unprecedented very high PER (Price to Earning Ratio). Funds may get more concern about what i called “new elevated normal” and due to their anchor to previous lower PER, they leave. If sufficient permanent balance sheet keeps permanent, as they are, this high PER could be the new normal, rather than previous failed effort to normalize it down. Isn’t it the behavior of economy policy makers?

We shouldn’t be surprised that ascending triangle of US shares, supported by Federal Reserve should be a conducive environment for them to continue up rising. Also if we looked our history, flat curve can cause rally as well, just like in 2002-2004. Did we just worry about US recession recently? I can tell that the recession is now officially gone in which I already predicted few months ago, as long as central bank remains supportive. Isn’t it amazing that money (rate cut and continuous 160B$ injection) can turn recession away, just like that? The impact should, of course, happen to US share market before it spills into other economy since US is still doing better than rest of world. We can see very clear that significant US 2y steepening makes their banks on right spot. Other countries like Australia big banks are now starting to raise their CET1 and Basel III, to possibly get their engine ready and catch up.

If we look Australian property market, after GFC 2008, actually Sydney property and many emerging property had been doing well. The GFC had caused people to panicky do saving and it caused these property market very healthy, which then caused rally from 2012 to 2015. This boom of profit margin attracted many developers (including from other states) to build Sydney and caused oversupply. It’s Sydney which has oversupply issue. Similar to money effort to save current risk to the jewel of US economy (IT industry) this year, there should be same effort to save Sydney property and I believe it will unevenly spill into other states which are not oversupplied, such as Victoria, with their tier-1 Melbourne CBD. With continuous effort to choke developer funding, it may evenly cause unevenly under-supply. It’s not difficult to measure number of cranes with our own little eyes.

China on the other side, was entering crisis in 2015 and may start to recover in 2020 ( 5 years ). It might be similar to pattern of US recovery from 2009 to 2014 ( 5 years ). Those are relatively matched with average length of maturity of their bonds. If it’s, inflation might start to happen in next couple years and people with negative yield may start to worry. US and China may really need to cooperate and introduce fiscal initiative. Powell said there might be a positive path towards negotiation. However we might interpret this as an opportunity for US to front run other world, rather than trade war deal. There’s still an effort to introduce #bluedotnetwork, an initiative from US Australia and Japan to challenge China BRI.

Other sign of inflation, may also be seen from recent plan of Aramco IPO. There’s an argument that the IPO might change the structure of Saudi people subsidy to rather fund their kingdom and US fiscal/global initiatives. Those masterminds behind the IPO are world rulers and leaders. They can decide market behaviors. My holy grail is to learn and follow their behaviors, the money.

Another sign of inflation is correction of negative yield bond rally in August which might cause short term funding issue. Eventhough the correction pattern may complete, it clearly shows that there was a pause in rally or having some structural change. It may continue to rally in medium term since it’s still above 2018 average, but it could also lead to global inflation. Christine Lagarde will take helmet of ECB (where most negative yield is) and she seems to be more fiscal supporter, unlike her predecessor.

Let’s have a look from RBA speech today. In past few years, RBA has been hard to maintain inflation to their mandate of 2% due to slow global growth, trade war and China efforts to combat their economy slow growth issue. The achievement from 2015 to 2018 were mostly only due to lower currency. If currency didn’t fall, we might not have much luck.

The recent inflation data were broadly as expected, with headline inflation at 1.7 per cent over the year to the September quarter. The central scenario remains for inflation to pick up, but to do so only gradually. In both headline and underlying terms, inflation is expected to be close to 2 per cent in 2020 and 2021.

source: RBA monetary policy decision November 2019

We don’t need holy grail to save the economy. The yield curve clearly shows, we just need to push up their belly and all kind of recessions and gloomy doom outlook could magically be gone. We know well, fiscal initiatives can help to push belly up (property), probably after pushing banks healthiness, supported by RBA with keeping rate lower than the market. Don’t be surprised with recent gloomy outlook from RBA to justify lower rate longer. Spring has really sprung, Australia banks are now reducing their dividend payment to grow. Just like natural cycle, flowers stop blooming after spring, they started to grow leaves and root. It’s a significant change to their previous years of high dividend. We hope this summer inflation is not that hot and return can be at their optimum.

We might not need to worry about lower volume of Australia property transaction/auction. I believe most of the low volume is because all big banks are now lowering their risk with some actions such as abandoning any Interest Only (IO). In the event of preparation to grow, this situation might be well perceived as an effort to increase healthiness. In 3 years, all IO will be gone massively from banks balance sheet and borrowers are already enforced to put more equity through Principal and Interest (P&I). Any weak hand will be funded with lower rate. Isn’t it healthy? I hope so.

We might not know when inflation start to bite. I will worry to non conforming lenders who are trying to expand their market share and being exposed to high risk borrower profile. I would advise their borrowers to monitor carefully their non conforming lender loans, probably in next 3-5 years.

Please be very aware, I may already have significant position written in this article. It definitely has conflict with my interests. Therefore this article is not in any case of financial advise.

2019-10-03

Bonds, Foreign exchange, Investments, Shares, Uncategorized

Global Recession?

People are talking about global recession, mainly referring to US (United States) economy and their impact to global economy. It is because people used to use history that when GDP is contracted over 2 quarters, I meant “when yield curve is inverted over 2 quarters“, we will most likely see a recession. Definition of a recession is below:

A recession is a macroeconomic term that refers to a significant decline in general economic activity in a designated region. It is typically recognized after two consecutive quarters of economic decline, as reflected by GDP in conjunction with monthly indicators like employment. Recessions are officially declared in the U.S. by a committee of experts at the National Bureau of Economic Research (NBER), who determines the peak and subsequent trough of the business cycle which demonstrates the recession

source: investopedia

It’s clear that the definition is historically and mainly applied to US economy and should reflect current US economy structure. It may not be 100% true. The definition shouldn’t emphasize all 100% population GDP but all 100% money GDP since money growth has taken over population growth with their enormous binary growth.

There’s an interesting thing is happening here. During this kind of recession risk, which is most likely a temporary turn of tightening into easing, it might already be predicted long before this decline is happening.

In my article 7 months ago, I would have to argue that we can predict the end of not so beautiful “normalization” or when the Fed tightening would have to stop or turn. I used excess reserve because it can connect dot between banks activity in relation to inverted yield curve, and its correlation to recession risk. In my article that time, I argued that the Federal Reserve would have to stop tightening after the excess balance sheet is left with 1.4T$. My math and prediction is correct with exact amount.

Since excess reserve is left with 1.4T$, market asked easing and the Fed had no choice but to end this premature normalization (in my previous articles, i used word of the end of a temporary normalization game). If the Fed has to start easing again and global economy is still not better, it means there might not be yet any real normalization need, like many economists argue.

Using a simple technical analysis from the same graph above, it clearly shows that the knowledge of this end of tightening and excess reserve numbers should have been been known since 2015 to 2017. It’s clearly showing that the risk of today recession is simply just a temporary turn from tightening into easing. It also supports that global economy can not afford higher rate and long term trend of rate is still pointing down. If long term trend of rate remains down and central banks remains accomodative, there shouldn’t be significant risk of recession. We have no doubt in past few years, central banks remains accomodative.

There could be a possibility that it’s not a time yet for normalization. The argument is because global growth is still declining while only US is rebounding. The rebound itself could be merely just a technical rebound due to excessive easing from the Federal Reserve or overshoot of easing between 2013 to 2015. It’s shown in a stubbornly strong USD even when US risks recession, which should show that other parts of the world are still weaker and global economy is not yet asking for normalization.

This situation could be made worst with recent push to long term bond play such as happening in negative yield. This capitalism may now negatively affect basic structure of economy itself. Trump may become one of the participants, having interest to introduce the trade war to benefit from government bonds. It could be a perfect time to introduce ultra long bond simply because market is so populated in this place. However if ultra long bond bursts together with other long term bonds, the ultra long bonds may need ultra long years to recover, just like its name.

Here now we know, Federal Reserve may temporarily have to stop tightening and back to easing. One day I believe there will be a time to do real normalization (not this time yet). That time could probably be when trade war ends and spark in inflation.

After market experienced yield crashed in Q1 2019 and already in 2 quarters, people start to talk about recession probability. It then raises a question, will we have a recession in 2020?

Based on arguments above, if numbers are so orchestrated, we do know it’s now leaving to yield curve to lead future. At the moment, Federal Reserve is so way behind curve. Stated in my last month article, market still remains asking for 2 basis points of rate cut and unfortunately next central bank meeting is still 3 weeks away (end of October 2019). The Fed has been trying to help with repo but I believe it’s not enough. Therefore we shouldn’t be surprised to see some share market correction. The same question again, will we have a recession? If it’s, share market should probably go down even further.

If my theories above are true, we might be able to avoid recession if Federal Reserve is willing to run at least as fast as market curve with at least a 2 basis points of rate cut this month. So far, market has been predicting monetary policy very well because monetary policy is very friendly to them. An example is in my article 5 months ago. where I predicted that RBA (Reserve Bank of Australia) would have to start cutting rate again. RBA then continuously cuts 3 rate cut after holding rate at 1.5% for almost 2 years. It’s in my opinion, the Fed should cut faster or possibly have emergency rate cut. They should, of course, try not to scare/shock market.

There’s an interesting thing happening. Australia is one country that has been running faster than the US in easing. RBA cuts their rate 3 times within past few months. If the Fed cuts 2 more rate basis points, RBA should at least cut 1 time, simply because Australia is smaller. RBA chief recently confirms that he doesn’t want to see strong AUD (which I believe is very risky to Australia property market trend) and he will maintain currency competitiveness. The issue is, if RBA cuts just one more, it may be most likely trigger an inflation in Australia and it could be one of few countries that leads global inflation, together with other AAA credit rating countries such as Canada, Denmark, Finland, etc. When inflation sparks, it may shock their share market. It’s then I believe, on next inflation cycle, probably at the end of trade war and burst of negative yield, we might see a true normalization effort, rather than the ‘not so necessary’ normalization efforts in past few years.

I’m back to the question of whether we will see recession in 2020. In my opinion, we shouldn’t see recession next year if central banks remain fully accomodative. The Fed should run at least as fast as market curve. In today situation, the Fed should cut with 2 basis points. Until that happens, we should continuously see some pressure in short term liquidity, seen clearly in share market. We hope the Fed is not too late to ease, considering effectiveness of monetary policy is now diminishing. The difficulty, of course, if the Fed is easing too much, inflation may pickup rapidly and we may experience bond crash like in 1994. I believe today correction of share market is not due to recession risk but merely because central bank policy is so behind market expectation. We should still expect share market pressure until the central bank is on or ahead market curve without inducing inflation spark threat.

Technically speaking, share market should worry of this negative divergence, until central banks put break on this as soon as possible.

This article is my own opinion and not in any case of financial advise.

2019-08-21

Bonds, Investments, Property, Shares, Uncategorized

A Fallen Angel

“In the beginning everything is good.”

Money is used to balance risk, spur economy, and encourage people to create value. It was good in the beginning until it began to cannibalize their own economy ecosystems. This is a story of a fallen angel.

Four years ago, we used to hear normalization but I always argue that normalization will not work well. It’s very obvious from the amount of changes in credit/money and world balance which is in a form of a binary. It may work in long term if all policies support beautiful normalization but unfortunately they don’t.

If we look at monetary side, monetary policies have been long introducing opium/easing to the market and now they have to fight the worst of their opium war. The bubble is now getting out of control. Indeed the greatest central bank, the Fed, may now have to surrender to market hostage. One of market that I’ve been closely watching most in past 4 years is down under, Australia. It’s easing more, its currency suffers most, thus it’s when share index is performing best, as usual. This year, it could be getting difficult since currency is already worst and housing recovery is near to their crash point, demanding more opium. It’s also not surprising that recent trade war outweighs since most of Australia economy surplus, both trades and account, is related to China. Accidentally this story may be similar and related to the story of opium war in HongKong, how the country began.

Fiscal policies, who should be our savior, is now becoming more politic supporter, rather than economy. Economy theory was rooted back from western/democratic economy, and it was valid until their economy got a bigger challenge. Policies were supposed to protect wealth, where rich is always growing richer. It’s until they are too powerful than the system itself and now start to re-engineering these systems for their own interests. Money always has a target to create an opportunity by any means. It’s when the angel is fallen.

Your heart became proud on account of your beauty, and you corrupted your wisdom because of your splendor. So I threw you to the earth; I made a spectacle of you before kings. Ezekiel 28:17

It successfully attacked Russian billionaires in Greece and now is targeting billionaires money from China in HongKong. HongKong is a very complex systems with its currency anchored to USD, complex China political influential through business, complex switch from export into service, and political issue from who will continue to support their foreign exchange reserve. The angel sees this opportunity, and now will do anything to monetize the opportunity, even at cost of human lives for his own desires.

Lucifer became so impressed with his own beauty, intelligence, power, and position that he began to desire for himself the honor and glory that belonged to God alone. This pride represents the actual beginning of sin in the universe—preceding the fall of the human Adam by an indeterminate time.

Dr. Ron RhodesReasoning from the Scriptures Ministries

Economy is evolving and it may need central bank to introduce market shock and dramatic approach to pop the bubble before it’s too late. The market knows central bank is always taking action based on history and will not risk stability, even for a temporary pain. It’s for sake of GDP growth which should never be negative/see a recession.

I see one of greatest bubbles in history in making. It’s negative yield which is now about 16 T$ and I believe it’s now out of control. Some countries are even growing worst, offering negative yield for their mortgage. Four months ago, we’ve been discussing potential rally/bubble from this and it seems to be true. During that time, I believed that the best time to switch into fixed income vehicle was not when yield curve was inverted (about a year ago) but when central banks around the world were starting to bow into market (Q1 2019) and they started to ease. I believe it should trigger market perception that central bank has less power to control and should be a sign of more inversion and negative yield rally.

Global supply of bonds with negative yields hits $16 trillion — source: bloomberg

In facts, all bond holders in almost every developed countries are now enjoying enormous return, as much as over 100% return, mostly from their long term maturity. A vehicle that has lowest risk should return lowest. However this vehicle is now returning relatively highest return at lowest risk. It defies economy theory books unless we agree with me that it’s all right to be wrong. Any significant movement should mean something, either fear or greed at same time. Austria 100 years bond returns 200% and we can see as well in many major developed countries. It’s no surprise that US is considering ultra long bond and it may trigger more rush into this bubble. It’s always be in my theories that those vehicles that are protected from most public access, would always have higher chance to enjoy bubble or great return.

In my opinion, the only way to revert the yield is either a drastic monetary cut rate/easing or introducing massive pro growth fiscal initiatives. For central bank, it’s a dilemma. It’s too late! It’s out of control! If they ease more, it basically tells the market they bow to market and loose the opium war. Central bank is now pouring gasoline into fire and expect the fire to distinguish sooner. At the same time, greedy smart money keeps pouring on into negative yields and might push this catastrophe bubble even higher. If central banks don’t ease, credit flow in banking systems will start to revert back from long term into shorter maturity and reducing amount of credit along the time. Even worst, at the moment, I think most of central banks are still behind curve. Market is no longer expecting Fed to cut 1 basis point but 3 or 4. As well as other countries, market is now expecting immediate 1 or 2 basis points of cut.

Where are the pro-growth initiatives? I would think pro-growth initiatives are being delayed until there is a deal from the trade war. We have been expecting these since 3 years ago but they never happen. We should see this as an indicator of what fiscal teams really have in their mind. Trump can save the world but I believe he prefers to win the war. The old decades of money recycle has stopped since 2008 and there’s no new deal until today on how to recycle back. I would think they should take HongKong as a hostage. I believe they will win, not because of making more, but making less loss.

After all, I would expect to wait for below signals while continue to ride negative yield related vehicles:

pro-growth initiatives,
inflation to crawl back, may be from next year,
bubble pop in negative yield and fixed income,
a peaceful world,

before I see a small scale of financial crisis with a possible recession to create a new opportunity. It’s rhetoric to say that a peaceful world could bring a short term pain for better future.

“After the war, the bubble should pop and I will begin to desire for a new opportunity.“

It’s my own opinion and not in any case of financial advise.

2019-07-26

Bonds, Foreign exchange, Investments, Property, Shares

Four Wise Monkeys

see no evil, hear no evil, talk no evil, and do no evil

Economy is a protection of wealthy. It’s always be mysterious, otherwise it won’t work. We might sometimes need to see no market, hear no market, talk no market and do no market. It’s true, market and communication have been long used to make money and protect the wealth. The only way to know the real market is using math, because 1+1 is still 2. No surprise that technical is still playing well, until a strong hand does poison it to monetize and protect their interests.

Recently we should be surprised that central banks outside US, have been orchestrating easing. They are who are US allies. Can we see the evil here? Can we hear the evil here? Can we talk the evil here? Or can we do the evil here? No matter why yield is inverted, let the issue stay here.

Greece, land of Russians billionaires to park their money, fell down a decade ago. Italy and other PIGS who try to save it, are still enduring longest economic depression, longer than US depression in 1929. It’s the cost of austerity where Greece central bank is unable to supply Euro, which is under monopoly of ECB, which is under influence of bigger shark.

HongKong, land of Chinese billionaires is starting to shake when China tries to put extradition law to this biggest tunnel of money out flow from China. Could it be part of global yield inversion? I see HongKong has one main big issue. It pegs its currency to USD while it should go together with other countries to depreciate against USD. Similar to Greece, HongKong is highly dependent to US and its USD. What do billionaires in HongKong think about their money in such extreme high risk when this country can go bankrupt at any time? Eerie is everywhere and exit door is too small.

Who is going to bail out HongKong? US or China? If they go to China, people may get instructed to riot. If they go to US, they can easily get overpowered by Chinese army. HongKong issue seems to already spread into Singapore economy and two of them dictate premium property in Asia. Does it scare RBA enough? RBA rate cut is showing how they respond to risk of biggest surplus of Australia, which is coming from China, both in trade and account. It could stem into overdue Asia Pacific correction since 1997, when I self-experienced scary social unrest and first time I did deep study of GFC to many different business views. It was due to company debts bubble and could now be property and government debts bubble, through trade war, currency, and policy changes.

There should be no safer place to park your money unless you pay for its safety. Negative yield everyone? Trump always emphasizes that US won’t protect anyone money unless they pay or would US have such an ability to make more money unless everyone pays? Monopoly tends to work well.

Of course this issue is much complicated than what we ordinary can see. At the end, we are just market opportunist who is trying to follow where those money is moving. We do not need to see who is that evil, or hear that evil. We do not need to talk about that evil nor do the evil too. I think global money is starting to morph into something new and I would be just following money using my own money theories.

It leads me to classic technical play. An example of technical play is below. We did know well why we were doing big short to this company in May 2018. It broke both fundamentals (loosing arm of Veritas and Verisign, attacked by Google, long contract cheats, high debt, etc) and bad technical. We recently hear so many drama and mysteries, but seeing technical below in few seconds is enough to answer our curiosity, about what will happen to this company. There’s a Geisha make up by activists. Fundamental may not go better soon but activist play may draw stock price.

Another example, we do not need to hear any recent good news about fundamental of this company as well. We just need to know that easing is on play. It may not be favorable in short term but long term play should be strong enough. Who can win against central bank monopoly of their currency? Let traders try and we will do play with both of them.

I am a fan of any play and behavior of market participants, but recently the 4 wise monkeys inspires me much to overweight technical. When we can’t see in dark, don’t forget to always turn on the light.

I may have personal interest in any part of my article, therefore it’s not in any case of financial advise.

What you see/hear/do here and when you leave here, let it stay here.

2019-07-16

Bonds, Foreign exchange, Investments, Property, Shares

Monopoly

Monopoly defines a stable society and a stable economy

Human endures many different paths of society, democracy, oligarchy, communism, etc. They do try to create a stable society in their own way and to preserve wealth.

Central banks have been long doing monopoly. They are monopolizing money printing. Local banks also have been long doing monopoly. They are the only ones can draw money from the central banks.

In public company, we do see many examples, Google and Adobe have been monopolizing their industry. Google search engine is no match to any. Adobe Photoshop is also no match to any other. We also do see merger and acquisition strategy which is simply an effort to create money from thin air after having bigger monopoly, 1+1=3. At the end, the monopoly can decide their price and PER ratio is no longer much working to them.

Monopoly may create higher PER/Price Earning Ratio

In technology, 5G, should also be in monopoly of the “greats” since they are a strategic global infrastructure. I mentioned in my article from early this year, we should just follow 5G monopoly. It simply works. Even in current high momentum of Telstra share price movement, we can clearly see a-not-so-invisible hand on play with the 5G monopoly, even though their NAS (Network and Application Services) is quite interesting to watch. Eventhough current technical may start to show a potential correction, previous strong hand plays is already detected and may surprise in future.

In Australia property, we should see big banks are starting to lower rate BUT something unique is being detected. We do see all big banks who has direct access to the currency monopoly, has been reluctant to pass full rate cut. In the mean time, currency supply from big banks and reverse carry trade should flood the market. We clearly see so many non confirming lenders are now offering 0.5% lower or more than big banks and attracts migrations from big banks to non-conforming lenders. It raises a question to me, why big banks who are monopolizing the currency access offers higher rate than the ones which can’t do monopoly. It should be clear that there are currently a lot of liquidity at the moment. I would have my own theory that they, who can do monopoly, should see profit margin and strength from property is deteriorating. Therefore they start to sell weak assets with help of their “grandfather”, in which in future they can simply make a policy change by orchestrating liquidity out from the market when good time for property comes back. In a normal action respond, it’s part of bounce back similar to death cat bounce.

How far monopoly can push their price before introducing too much competitors? In theory, Marginal Cost (MC) is equal to Marginal of Revenue (MR) and which is above Average of Total Cost (ATC). In property, marginal of revenue should have run down faster than decreasing of marginal of cost. For example when central banks cut rate from 1.5 to 1, the market rate should also decrease 4 to 3.5. While the profit margin is relatively same, the revenue and their profit margin should have gone down with fixed cost remains same. Therefore I believe it’s more profitable for big banks to run market rather than holding assets since cost to run market is lower. The other way around should happen when long term rate is starting to rebound or inflation is starting to kick in. That’s when I believe the big bank monopoly will start to reduce oxygen from the market.

Image result for monopoly economy — source: economicsonline

We would then think bigger picture. When will inflation starts to kick in? We do know US is having benefit from monopolizing their strength of currency and enjoy this benefit while other countries like Europe and China are still having issue. I would have to agree with Fed, as long as they are still the only one monopolizing one biggest strong currency, they should be reluctant to cut rate like other countries. I would believe, when reversal time is coming, other countries could no longer do currency war and may start to increase rate. I would think that’s the time when Fed will start to do the other way around. With negative yield exceeds 13T$, there could be a big spike of inflation during the reversal. Market may fall, but inflation sensitive may then recover quicker than the other.

In the meantime, as predicted before, as the strongest currency, they can maintain Wall Street to continue their trend and slowly destroy global money value, unseen. This is what I describe as a stable currency where magic is happening and binary is formed. Inflation should be still far away because it broke MA200 ($TNX). As long as USD is strong, inflation should be in control. I don’t think we would see the reversal and market crash in next year or two. It’s simply because central banks currently demonstrate their habit of monopolizing money destruction and ample of liquidity is everywhere.

Monopoly is to make money. Money follows the monopoly.

My money theory is not in any case of financial advise.

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2019-03-12

Bonds, Foreign exchange, Investments, Shares

Currency

When 2 countries are in war, its damage takes place in proximity. Similar thing is happening in recent US China trade negotiation. It should use proximity to measure how much each of them can afford to suffer more. We do know, human in war, none of them, actually wants to suffer much or having any destruction. I would say today issue is NOT about trade war but economy negotiation in which the trade is only the proximity. Money and currency would be ammunition and trade will be its proximity. In currency war, money is the ammunition and currency would be its proximity.

*USD M0*
*in my theory, it’s a binary form, normalization will not be able to return this back normal*

Let me show you. We used to hear trade in many obsolete economy theory. It sounds big, trades between US and China is 200B$ and growing. However China grew GDP from 2.5T to 8T in 4 years, that made this number small. Let alone trillions of debt created within few years inside US. Fed used to inject hundreds of B every year during QEs, that makes this trade number smaller. Do we believe recent trade deal is about tariff? I don’t. Indeed its tariff is only about 25% AND most importantly, it will not stop consumer from buying and government won’t allow negative effect or inflation number in consumer. In this intertwined global trades, consumers will not have much choice. Trade volume is just a proximity. There’s a larger deal behind, in value of hundred of trillions and recently is asking to have a STABLE YUAN. Growing trades simply can’t follow human created growth of money, shown in binary form (exponential is not enough) of money growth above. Japan with its aging economy, will not be able to keep momentum of economy velocity, without using money and currency.

One that may support my argument is to look into Australia. Australia currently records huge trade surplus against China and US records huge trade deficit, also against China. In reality, AUDUSD is going lower with RBA is now considering lowering rate, same like in Europe, TLTRO (Targeted Long Term Refinancing Operations). Trade and tariff issue is currently much lower and seems to have less correlation to what I believe more appropriate issue, money and currency.

Australia Trade Surplus Largest in 2 Years

captain marvel: higher, further, faster, binary

About normalization, I doubt it’s working well. Fed Excess Reserve was able to reduce from 2015 balance sheet overshoot but do we think Fed is able to reduce more? I am not convinced, and I believe many are not. Previous additional 1T$ excess increase from 2013 to 2015 is just an overshoot and today is only merely back to it. We also believe that rate normally should never come back to 10 years ago. My simple math thinks 1.4T$ is the amount Fed excess reserve has to keep in Fed or somewhere else. I don’t believe it can go much lower, let alone zero. It’s the end of the game.

I’m not worrying much about recent strength of USD, it’s just a currency. As long as all market participants commit to keep growth in check via currency depreciation, voila, I think we have a solution. Is that simple? Yes, what else? It just needs to negotiate interests and make a deal. If a society is all doing a robbery, the robbery becomes a norm. If human is a carnivore, carnivore diet becomes a norm.

There’s an interview with Yellen, former Federal Reserve chairman, about currency. I would have to argue many of her arguments. In today’s world, USD is still the most prominent currency and it’s still the largest and one of strongest. Fed received complaints from other countries when they did too much easing (2009-2014) and too much tightening (2015-2018). She also argued this local policy shouldn’t be considered as currency manipulation. It seems to be contradicting and doesn’t put her feet into others. China was and is still smaller than US. Discussed in my previous article, during QEs, none in this world could afford to have stronger currency, therefore China has to follow suit and have no choice. It drove local property appreciation in many places. Since it’s a smaller country with big GDP growth that time, China has to export inflation to somewhere else, to avoid local economy from overheating. China has too many people and it’s much more sensitive to inflation, compared to developed countries.

It raised Belt and Road Initiative (BRI). There are many arguments it could lead to debt trap. It is possible, but I think it’s not the main issue. The way we could make difference between rich and poor today is access to finance. Warren Buffet on his latest interview still thinks the gap will keep going larger and many of economists and governments do. Engaging more number to strengthen wealth of a poor doesn’t make the poor a manipulator. It works though in a crowdfunding systems. With a lot of economy (mainly neighbors) benefits to China, this BRI will raise power of other countries and then tightened global credit back to China. Simply put, US and USD dominance is now much lower than before because other countries are now much richer and it will be hard to take down China without taking down the rest of the world. It’s been seen since October 2018, US cycle momentum is now being dragged down by global economy down turn. I believe the downturn was due to damage done on medium rate due to previous massive QEs and it needs time to heal. I think it’s not a complicated thing and I strongly believe human can find a deal.

Xi acknowledged that everyone will be in more pain in our near future. Literally it doesn’t only mean to Chinese, but to human, especially to smaller who has less access to finance. Access to finance will be much harder with increasing rate or when world is going to normal, but it’s much easier when world was sick or the richest, US, was sick. We acknowledged, between 2009 to today was one in life time opportunity for many to go rich and HNWI (High Net Worth Individual) number explodes. Luckily, many countries had enjoyed BRI to ride Fed QEs and now they are much richer and they just need to spend wisely. Those countries which received access to finance during QEs through BRI should be thankful and it’s now up to them to grow their wealth wisely.

I don’t believe BRI debt propaganda is the most important. Ask big players like Italy, German and surrounding area, where many negative yields are running around, they do love it. They are not small countries and clever with economics than average human. Once in our life time, we might have an opportunity to grow rich faster (higher velocity) than the richest, in a binary form. After that it’s up to us on how to manage the wealth, created from increasing debt, whether we will fall down into unmanageable debt or continue to prosper.

It takes 2 to tango a stable currency, a binary, from 0 to 1

Could the binary save the end of game?

It’s my own opinion and not in any case of financial advise.

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2019-02-15

Bonds, Foreign exchange, Investments, Property, Shares, Uncategorized

Pinocchio

“World without money, there is no economy, no economist.”

I’m still a fan of inflation since 2015 and I will keep my view intact. Please show me evidence that recent effort of normalization is working beautifully? It didn’t, it doesn’t. Recent bloomberg article shows a world awash with $8.6 trillion in negative-yielding debt, is still easily flipped when central bank blinks. The number is staggering, enough tail-wind.

Since Federal Reserve rapidly increased rate, USD was getting stronger than ever. PBOC at same time was tightening and China economy is slowing down, we can ensure PBOC is injecting big amount of liquidity since 2015 and for sure is growing faster than previous decades. However, is China the greatest easing after all TODAY? Bloomberg recently reports China injects huge amount of money, indeed USD is still weaken against CNY. Is it enough to raise our eyebrows?

People may question 2 policies that may seem to contradict to each other. History shows that financial navigation/auto-pilot always needs 2 ‘contradicting’ policies. After crisis, they may push long term and raise short term bank reserve rate, a different time frame. Same like driving, policies need gas and break, to better control market to their path.

Trump tax cut injection and deficit in 2018 is also greatest in history. At the same time, asset under Federal Reserve balance is starting to mature their belly since 2015. Once matured, the principal is transferred back to treasury. It’s treasury, who is now issuing more debt to roll them over. It’s Trump. It’s just unfortunate that recently Trump doesn’t have much support from Democrat (politics in regard to next election), already shown in a small thing like border wall. Both are still stubbornly enough to make a compromise, to inflate the world, to keep modern economy alive!

Pinocchio: I can move! I can talk! I can walk. I’m alive!

If China manipulates currency, why USDCNY is unable to break 7.0 during USD supremacy era? If Fed Balance sheet was greater than in 2008, why USDCNY fails to break 7.0 with PBOC injecting money bigger than ever. An argument may say PBOC is manipulating exchange rate. Question to this argument, can we manipulate currency in past 2 decades? Does this argument think that global market (intertwined currency) is smaller than PBOC? It doesn’t make sense. China is still second largest and itself is not big enough to put world under their knees.

Everytime USDCNY is back to what it WAS in 2008 around 7.0, with China and world injecting more than ever in history, Wall Street is still loosing ground, seen in Q4 2018. USD was too strong, causing Wall Street to ask for help. 1y bond is recently flashing inversion alert, everytime USD is too strong. It shows that if USD is too strong, financial suffers. I still think that if this burden is not cleared yet, probably with some correction next year, financial and most likely property issue may not get cleared/perform yet.

Global growth is also unable to handle strong USD and oil was crashing. Everything is now going well AFTER Federal Reserve blinks to the market and not to their own numbers. It follows by many other central banks. Australia is also considering cutting rate and AUD was down. Typical currency war is still here today.

Since human is greedy and hunger of money, USD shouldn’t be allowed from going too strong, that what Wall Street is. World shouldn’t stop issuing more easing. China shouldn’t stop injecting liquidity, or else they will see all of those printed money since 2015 goes waste to drain. At the end, there must be inflation rather than slow down, to support my inflation theory since 2014/2015. Isn’t everyone working to push weak global economy growth UP? It’s not without risk that global slowdown could create next global crisis. However we are human who created the systems, can decide when is the next crisis. It’s easy for each of us to keep party rolling, very easy, since we all have common interest, MONEY. However it’s strange that it’s just too hard to make compromise between US vs China and between Trump vs Democrat, INTEREST.

Before October 2018, we used to hear a beautiful world normalization, and stronger US economy. Few months before October, I was arguing that in this intertwined economy, this hegemony shouldn’t last long. US is starting to slow down together with the global world slow down. It actually raises a question. Is US really the strongest economy in the world at the moment? If it’s, please explain to me USDCNY in past 2 decades and why it’s too hard to pass through 7.0?

I’m not saying that PBOC is cleaner. They both have their own agenda and their own defense. PBOC numbers also have a lot of irregularities. Communism is a living creature which can provide financial stability in expense of social pains. We are just a tiny molecule here who is just trying to study their behavior in seeking the truth. Indeed today, we are questioning central bank in-dependency from fiscal policy. My deep learning sometimes gets confused with too many contradicting signals. It definitely needs to weight down the contradictions.

Regardless of those human disagreements, let’s use numbers because that matters most here. Let’s look back in year 2000 when a dot com bubble burst which marked a start of IT evolution, the FANG. PBOC couldn’t hold USDCNY peg at 8.27 and greed had never been higher until year 2007 when PBOC tried again to hold USDCNY at 6.82. For sure PBOC (and no other central banks) could no longer again peg USDCNY at 6.82 when Fed conducted massive QEs. During that time in 2007, China GDP was still far very small compared to US GDP. As a simple rule, smaller GDP shouldn’t be able to strengthen their currency higher than higher GDP. It’s still raising a question, if China GDP was lower that time, why CNYUSD is getting stronger? Many argues trade surplus but why not considering account deficit? The issue is, trade surplus keeps going higher while account deficit can’t go lower. It causes the imbalance.

Between 2017 and October 2018, USD is loosing value much faster despite spectacular USD economy performance and USD divergence. Indeed world condemned some country and actually the rest of the world, to continue conducting biggest currency manipulation. USD has been loosing value in past 2 decades until today at same pace, despite spectacular USD divergence and beautiful normalization story. The intertwined credit of today is much higher than world trade balance between US and China. The value added product made in China is still far less than created trade account balance/deficit. The fact is Wall Street was unable to continue rally when USD was going stronger in October 2018.

Let’s read to this financial article from The New York Times. From all of its long story, I only can find that the writer argues from 2000 to 2014, China bought dollar and add 4T$ to reserve. None in this world could stand of not printing money when Fed did incredible ballooning 300% balance with QEs between 2009 to 2014. None can be crazier than issuing greatest CDS (Credit Default Swap) between 2000 and 2008. A simple theory is, whoever did first is always the biggest. Not just China, most countries in this world followed Fed printing during QEs, 2009 to 2014. Emerging countries (Asia, India, Venezuela, etc) are even worst than China and surprisingly they are not currency manipulators. They later got trouble with inflation, and not China. China is still smaller. China can’t just add 4T$ without US doing it first. It doesn’t support currency weakening effort. The writer then argues that in 2015, Chinese government kept pegged renmimbi to the dollar. Does the writer know that PBOC starts massive easing, injecting money greatest in their history and keep cutting rate since 2015 until today? At same time in 2015, Fed keeps raising rate faster than ever? It doesn’t make sense PBOC to keep renmimbi pegged against dollar to stop it FROM strengthening. It’s indeed should be an effort to stop it FROM weakening because inflation is very SENSITIVE to their 3 billion of society. This is the main reason of not allowing currency from weakening. Eventhough that massive efforts, China still fails to fight currency war from USD. At same time Wall Street is also part of symbiosis that requires China to help racing money value destruction.

Pinocchio, Pinocchio, please tell me the real truth!?

China for sure can’t compete the pace of information transmission. There should have been decades of efforts to make financial benefit. Don’t be surprised that most normal economist relying on these Pinocchio economy numbers usually fails. It’s no surprise that in decades China is building information wall. No chance to break out world dominance, no chance for HuaWei. It could be a no brain to collect few depressed 5G provider in the wake up of world monopoly, just some small side dish to inflation bet.

It doesn’t matter how hard number can explain, it won’t even be able to satisfy every part of human INTEREST. When I expand my deep learning to longer view or decades of numbers, it seems to be less prone from the irregularities because as the fairy said, “a lie keeps growing and growing until it’s as clear as the nose on your face.” At the end, Pinocchio said “I’d rather stay smart than be an actor“.

It’s my own opinion and not in any case of financial advice.

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2018-11-07

Bonds, Foreign exchange, Investments, Shares, Uncategorized

Wealth transfer using r-star by raising Π-star

Is the bubble going to pop up soon?

Are the funds/banks not healthy?

How is next year inflation?

How’s the wealth is being transferred?

Will we see any bankruptcy next year?

I’m still more optimistic than average economists but we should aware there will be rocky roads ahead, just like before easing, a normal higher volatility. Based on arguments above, I reiterate my views few months ago. Last October horror wasn’t able to derail my views.

I have not seen any major recession risk. Federal Reserve still holds large amount of reserve and public debt is increasing faster than ever. People may wonder why gold is not yet performing. It’s due to strong US divergence.
Democrat is expected to prefer infrastructure bill while republican is expected to prefer tax cut. Put them in balance in midterm will do both.
Normal higher volatility is back to a decade ago before easing put in place. Asset is expected to perform normally within higher rate.
I would expect more debt, inflation and higher volatility that will support inflation sensitive play.
More public debt auctions should be new normal and inflation will always be in focus. Economy will service more debt.
Only selected asset will perform.
Big players as usual will always try to hide inflation from hitting themselves, but it will pop up in this and there. R-star is expected to rise in stronger countries. Lower or negative R-star will continue to haunt emerging.

⁹After they had heard the king, they went on their way, and the star they had seen when it rose went ahead of them until it stopped over the place where the child was. Merry Christmas! It’s true past performance never dictates future return. However wealth transfer can dictates future return better because market participants have less choice. It’s just my own opinion and not in any chance of financial advise.]]>

Tagged inflation, return, star, unemployment, wealth

My Journey

No Financial Advise

Category Archives: Bonds

Escape Plan

Sure, It’s a Plus! +