Against the establishment

  • Closes tonight at midnight
  • Lost track: Is this good or bad?
  • One for the Cup?
  • The new saint
  • Antipodean friends
  • Gold Symposium

What did you get up to this weekend?

If you’re normal, you may have played a bit of sport (your editor didn’t do that).

You may have caught up with some old friends for dinner or a few drinks (your editor didn’t do that, either).

Perhaps you spent time relaxing at home (your editor did that).

Maybe you had to run the kids to and from sports events (boy, did we do that!).

What about watching five or six hours of YouTube videos? What’s that, you say? You had better things to do? Oh dear.

Well, that was the main thing your editor did this weekend. We spent a ridiculous amount of time watching YouTube videos of British politicians Nigel Farrage and Daniel Hannan debating the evils of the European Union, and the positives of Brexit.

It doesn’t matter that the Brexit vote was more than two months ago.

We’re not entirely sure why we spent over five hours watching all those videos. The only reason we can think of is that we were in the mood for a shot of anti-establishmentism, after we closed down ticket sales to our Great Repression conference last week.

Of course, neither Farrage nor Hannan are on our speaker list. But we have enlisted libertarian Senator David Leyonhjelm to attend and speak.

We’re not usually in favour of politicians turning up at investment conferences. That’s usually because they don’t have anything interesting to say, except to blow smoke up their own…egos.

But we figured the Great Repression theme warranted an invite to the Senator. He accepted. And now he’s inked in to speak on day two of the conference.

If you’ve registered to attend, make sure you’re in your seat for his speech. It’s sure to be entertaining.

Markets

Over the weekend, the Dow Jones Industrial Average gained 72.66 points, or 0.39%.

The S&P 500 index added 9.12 points, for a 0.42% gain.

In Europe, the Euro Stoxx 50 index closed higher by 62.25 points, or 2.06%. Meanwhile, the FTSE 100 index gained 2.2%, and Germany’s DAX index added 1.42%.

In Asian markets, Japan’s Nikkei 225 index is up 173.66 points, or 1.03%. China’s CSI 300 index is up 0.18%.

In Australia, the S&P/ASX 200 index is up 47 points, or 0.87%.

On the commodities markets, West Texas Intermediate crude oil is trading for US$44.15 per barrel. Brent crude is trading for US$46.55 per barrel.

Gold is US$1,323 (AU$1,747) per troy ounce. Silver is US$19.37 (AU$25.57) per troy ounce.

The Aussie dollar is worth 75.74 US cents.

Closes tonight at midnight

What more can we say? The track record, in our view, is second to none. If you want to get access to Quant Trader, you better do so now.

Subscriptions to the service, at a specially discounted price, close at midnight tonight. Stop dwelling, and get to it. Go here.

Lost track: Is this good or bad?

The big news on Friday night was the US jobs numbers report.

Market analysts expected the US economy to add 180,000 new jobs. As it turns out, the US economy only added 150,000 new jobs.

The market reaction?

To this bad news (job growth slower than forecast), the market naturally gained more than 70 points.

What’s at play?

The US Federal Reserve, that’s what.

Remember the wonderful game the Fed and the markets are playing right now. It’s a game, seemingly, without any beginning or end.

It is, to coin an overused expression, a proverbial chicken and egg situation.

The market rises on the prospect of no interest rate increases, to which the Fed says the economy can now cope with an interest rate increase, which causes the market to fall, and the Fed to say that an interest rate increase can wait…which causes the market to rise.

Yes, like you, our brain hurts, too.

But the Fed is doing a good job of it. By good job, we don’t actually mean the Fed is actually doing a good job. We just mean that they appear to be getting the result they desire.

The chart of the US blue-chip S&P 500 index shows you what we mean:



chart image

Source: Bloomberg
Click to enlarge


The point from the red arrow onwards shows you that the Fed has succeeded in getting the market to conform. The volatility, and swings between highs and lows, has almost disappeared.

For the Fed, this is the perfect market. If only, they must be thinking from their monolithic office building in Washington DC, the market could stay this way…and then increase steadily by 8–10% per year.

Proof of the lack of volatility is in the chart that follows, too. This is the VIX — the ‘fear index’.



chart image

Source: Bloomberg
Click to enlarge


The VIX is only marginally above the recent low, which it last hit in mid-2014. But, as you can see from the chart, periods of low volatility tend not to last long.

In fact, it’s reasonable to say that the lower the volatility goes, the more imminent that an increase in volatility becomes. It’s an odd way of looking at it…but it’s also an incredibly useful way to look at it.

The Fed is next due to meet on 21 September. The prospects for an interest rate increase haven’t changed that much. The odds still favour the Fed not raising rates.

But as always, anything can happen. The market is high — near the record high, in fact. The Fed clearly must believe it’s handling things well. Could hubris strike?

Is it so crazy to think that the Fed may just go ahead and raise interest rates anyway?

The Fed could surmise that it’s better to beat the market down a percent or three when it’s trading at a high, than beating it down when it’s already in the doldrums.

The stock and bond markets don’t see that a rate rise is on the cards, but if the US stock market stays at roughly the same level that it is today, we, for one, would not be surprised at all if the Fed increased rates by another 0.25%.

One for the Cup?

The Fed wants to raise rates, but the Reserve Bank of Australia (RBA) is still more inclined to cut rates than raise them.

The RBA’s next meeting is tomorrow. For this month, a rate cut is a major outside bet. The market has no more than a 2.5% probability of a rate cut.

Is that good or bad news for the Aussie economy? We’ve lost track. Perhaps it doesn’t matter.

But looking further ahead, more rate cuts could be on the way. In November, when the RBA board meets in Melbourne in celebration of the Melbourne Cup, the market has priced in a 33.5% chance of a cut to 1.25%.

The road to zero stretches beyond us. We’re sure our guest speakers at the Great Repression investment conference in Port Douglas will at least ponder the prospects of a rate cut during their presentations.

The new saint

That’s Saint Teresa to you.

They said she (Mother Teresa) worked miracles in the slums of Calcutta (or Kolkata).

And now Pope Francis has confirmed it.

And that’s not just a throwaway line. Not any old chump can become a saint. It’s lofty company. In order to be canonised as a saint, a person must have performed at least two verified miracles.

The Indian Express explains Saint Teresa’s two miracles:

In 1997, Monica Besra a tribal woman in West Bengal was under acute pain due to a tumour that had been diagnosed in her abdomen. After having visited a number of hospitals and doctors, she had not been cured. In May 1998 she was admitted to the home run by the Missionaries of Charity order in the town of Patiram.

The tumour had caused her stomach to swell up by now. Doctors considered her condition to be fragile and surgery was put off for another three months.

On September 5, 1998, as the Missionaries of Charity order was witnessing the first death anniversary of Mother Teresa with prayers in the chapel, Monica Besra felt a beam of light emanating from the photograph of Mother Teresa. In the evening, two sisters of the order tied a medallion with Mother Teresa’s picture around Besra’s waist and prayed over her. That night she slept peacefully after months of painful sleeplessness. When she woke up in the morning, her tumour was gone.

As for the second:

In December 2008, a Brazilian man, Marcilio Haddad Andrino recovered from multiple abscesses in his brain. When he was diagnosed with the abscesses, he and his wife placed a relic of Mother Teresa near his head and prayed to her regularly.

When in December 2008 he was rushed to the hospital on account of a severe headache he had, Andrino claimed to have experienced a miracle which led to his eventual cure. He reported to have felt a sense of peace and the headache suddenly disappeared. When the doctors examined him the following day his abscesses were seen as receding and he was declared to be cured.

Both miracles are especially wondrous as she was responsible for them after her death in 1997.

Antipodean friends

Speaking of Brexit earlier, Aussie Prime Minister Malcolm Turnbull has stuck out the hand of friendship.

As reported by the Press Association:

At the start of the meeting with the [UK] Prime Minister in Hangzhou, Mr Turnbull told here: “Britain’s made a very momentous and historic choice to leave the European Union and we have already been engaged in discussions with you about what the free trade arrangements may look like after that.

“Australia is determined to provide Britain with all the support and assistance that we can.”

Anyone would think that the UK had just suffered a major natural disaster…rather than beginning the process of achieving independence from the statists and control-freaks in Brussels.

But seeing as both Japan and the US have today told Britain that it will be hard to sign trade deals, it seems Britain needs all the help it can get.

Gold Symposium

The 2016 Port Phillip Publishing investment conference, The Great Repression, is being held in Port Douglas from 26-28 October. Tickets are no longer available for this event.

However, if you’re after a warm-up, prior to coming to our conference, or you just can’t make it, why not check out the annual Precious Metals Investment Symposium?

As usual, it’s in Sydney. It’s from 10-11 October. It’s run by our dear friend, Kerry Stevenson. Port Phillip Publishing has been happy to support this event for years.

And the good news is that Kerry has kindly offered a discounted price for Port Phillip Publishing subscribers. What will you learn if you attend?

Here’s what Kerry says:

The Precious Metals Investment Symposium is the largest precious metals event of its kind and will take place on Monday 10th and Tuesday 11th October at the Four Point by Sheraton hotel overlooking Darling Harbour.

The event brings together the bullion companies and mining companies and this year we have a spectacular line up of international keynote speakers who will discuss what investors need to look out for in a volatile market where government debt is increasing rapidly and the answers to increase wealth are sometimes difficult to work out. This is an event not to be missed for people keen to understand where to invest and create wealth.

Kerry has kindly agreed to provide a $100 discount for Port Phillip Publishing subscribers. Instead of paying $299, you’ll pay just $199.

To take advantage of this great offer, just go here. But you must remember to enter the promo code portphillip in order to get your discount.

On the order form, just click ‘Enter promotional code’, and type portphillip into the box. This will update the price. The discount only applies to the ‘Early Bird — Investor Pass’ tickets.

To register, go here.

Cheers,
Kris