Big deal?

  • Batten down the hatches
  • Forget global warming, here comes global cooling
  • Something big is coming

Certainty reigns.

According to the latest numbers provided by Bloomberg, there is a 94% chance the US Federal Reserve will raise interest rates in December.

It’s the most certain we’ve seen the markets in a long while on the question of interest rates.

If the Fed really has been gagging to raise rates, it’s never had a better time to do so. Given the near certainty, we should be able to assume that the market has fully priced a rate rise into all asset prices — including stocks and bonds.

So, it’s a done deal, right?

As it stands now, yes, that appears to be so. But then again, the Fed’s next meeting isn’t until 14 December. That’s a heck of a long time.

Anything could happen between now and then. And even at that point, the US will still be more than a month away from the inauguration of its 45th president, Donald J Trump.

And when we say ‘anything’ could happen, we’re specifically talking about the Italian constitutional referendum, scheduled for 4 December.

In simple terms, the referendum at hand is to decide whether to strengthen the powers of the Italian government, by weakening the powers of Italy’s upper house.

This would make it easier for the government to pass laws (especially laws imposed on the country by the European Union).

If the government loses the referendum, Prime Minister Matteo Renzi has promised to ‘do a Cameron’. That is, resign.

What impact could that have on the world’s markets? Maybe it won’t have any impact. But then again, maybe it will. After all, unknown to most, Italy has one of the world’s largest issuance of sovereign bonds, at 1.88 trillion euros.

That’s ahead of Germany at 1.51 trillion euros, and France at 1.85 trillion euros.

On 4 December we’ll find out whether it’s a big deal or not…and whether Italy is in need of a new prime minister…

Markets

Overnight, the Dow Jones Industrial Average fell 54.92 points, or 0.29%.

The S&P 500 fell 3.45 points, or 0.16%.

In Europe, the Euro Stoxx 50 index fell 23.36 points, for a 0.77% fall. The FTSE 100 lost 0.63%, and Germany’s DAX index lost 0.66%.

In Asian markets, Japan’s Nikkei 225 index is down 14.83 points, or 0.08%. China’s CSI 300 index is down 0.24%.

In Australia, the S&P/ASX 200 is up 10.83 points, or 0.2%.

On the commodities markets, West Texas Intermediate crude oil is trading for US$45.48 per barrel. Brent crude is US$46.52 per barrel.

Gold is US$1,226.68 (AU$1,640.45) per troy ounce. Silver is US$16.97 (AU$22.70) per troy ounce.

The Aussie dollar is worth 74.77 US cents.

Batten down the hatches

Climate change is coming to kill you. Oh, and it’s going to send the price of property crashing.

That’s according to the Sydney Morning Herald.

Sydney’s coastal homeowners face their property values being reduced, as the future risk of increasingly extreme weather events grows, a climate risk consultant says.

Dr Karl Mallon, director of science and systems for Sydney-based consultants Climate Risk, said Australia’s quintessential problem is that “you can build a house which is insurable tomorrow, but is wholly unsustainable 30 years down the track”.

If we may say so, there are many reasons Australia’s property prices will fall (although, not according to one controversial analyst), but so-called climate change isn’t one of them.

Aussie property prices will fall, mostly, because prices are too high. They will fall if or when interest rates rise, and if or when unemployment rises, and if or when banks are unable to extend as much credit to borrowers.

This comes on the back of a report from the Climate Council. It scarily notes:

Australia has been hit with a series of destructive storms in recent years. In September 2016, a vicious extra-tropical cyclone roared over South Australia, and just a few months earlier, a deep east coast low sent a record-high storm surge pounding into the New South Wales coast. In 2015, Brisbane suffered its wettest day in 175 years, which was preceded six months earlier by the worst hailstorm in 30 years.

Scary indeed. That is, until you stop and think about these things rationally.

First, weather record-keeping in Australia is relatively new. In most states, records don’t go back much further than the mid-19th century.

If you’re talking about ‘climate change’ rather than ‘weather patterns’, 160–200 years isn’t (we’re afraid to say), a particularly large sample size.

Second, while the reference to 175 years certainly sounds impressive and frightening, a report from the Brisbane Times notes:

Forecaster Kev Hutchins from the Bureau of Meteorology said it was also the city’s wettest calendar day of any month since 1989.

Ah, we see. So there have been wetter days, only they have been in other months. Not so scary then.

But, this was the worst hailstorm in 30 years. So, 30 years ago, there was a hailstorm that was worse…is that what we can glean from the report?

It certainly seems that way.

But there’s more. Be fearful my dear friend, the waves are coming to get you. More from the Climate Council report:

The June 2016 extra-tropical (east coast low) brought intense rainfall and coastal flooding to the NSW coastline, with widespread damage in Sydney. A wave height of 17.7m, the highest on record for NSW, caused severe coastal erosion, leading to significant loss of exposed property and housing, which culminated in an insurance bill of $235 million.

However, such wave events may not be that rare, or necessarily increasing in nature at all. A report on Swellnet.com last year notes that:

Wave buoy data such as this is often recorded several times per year across Southern Ocean wave buoys (Cape Sorell, Cape du Couedic) during the biggest swells of the year, but such events are rare on the Australian east coast.

Rare, but they do happen. There doesn’t yet appear to be any direct evidence that so-called climate change is responsible.

Besides, the United Nations’ Intergovernmental Panel on Climate Change says that there isn’t anywhere near conclusive proof that flooding and climate change are linked. From its 2012 report:

There is limited to medium evidence available to assess climate-driven observed changes in the magnitude and frequency of floods at regional scales because the available instrumental records of floods at gauge stations are limited in space and time, and because of confounding effects of changes in land use and engineering. Furthermore, there is low agreement in this evidence, and thus overall low confidence at the global scale regarding even the sign of these changes.

On the issue of long-term increases in cyclone activity, the same IPCC report declares:

There is low confidence in any observed long-term (i.e., 40 years or more) increases in tropical cyclone activity (i.e., intensity, frequency, duration), after accounting for past changes in observing capabilities. It is likely that there has been a poleward shift in the main Northern and Southern Hemisphere extratropical storm tracks. There is low confidence in observed trends in small spatial-scale phenomena such as tornadoes and hail because of data inhomogeneities and inadequacies in monitoring systems.

So, that worst hailstorm in 30 years may not be so significant after all.

If the IPCC’s own climate change-obsessed boffins admit the evidence is cloudy at best, it’s hard to see how anyone can claim the presence of climate change is anywhere near ‘settled’.

Forget global warming, here comes global cooling

One analyst who won’t have a bar about climate change, or global warming, is resources analyst, Jason Stevenson.

As Jason wrote to his Resource Speculator subscribers in May 2015:

The earth has experienced global cooling, global warming, and various ice ages over millions of years. When the climate changes by even one degree Celsius the ecosystem is impacted significantly. These climate changes have been the cause and the end of numerous species and several civilisations.

Dr Shaopeng Huang, of the University of Michigan, studied ground boreholes from every continent in the world. He found that the world cooled at least an average of 1.5 degree from 1450–1850.

Going back further, did you know that average temperatures during the Roman Empire (100 BC — 400 AD) and Athens Empire (approximately 1100 BC) were both severaldegrees warmer than today?

A Swedish scientific paper, studying tree-rings, found that the Roman Empire experienced average temperatures that were one degree warmer than today. Professor Mike Lockwood, of Reading University, confirmed this study by looking back at certain isotopes in ice cores.

According to Dr Robert Carter, of James Cook University, ice core drillings record a major warming period around 1100 BC. Temperatures were significantly warmer than at present.

And, warmer than what the Roman Empire experienced. Indeed, as we’ll experience in the years to come, this was also followed by a very rapid cooling period. Global temperature should drop by 1–2 degrees Celsius in the next two decades.

In fact, climate change was rapid and extreme enough to have drawn the attention of the ancient philosophers.

Plato (424–347 BC) argued that global warming occurs at regular intervals, often leading to great floods. 300 years later, in the first century AD, an ancient Roman named Columella also discussed global warming. He said that it turned areas once too cold for agriculture into thriving farm communities.

These days, we’re told that man creates global warming. What we’re not generally told is that the data used by the politicians and mainstream only goes back to 1850 — a time when the latest cycle of global warming started.

More foolishly, many mainstream models believe that the sun has little bearing on the world’s temperature. But the truth is quite the opposite. In fact the key to understanding climate change is learned by studying the sun.

Observing the number of sunspots over time will show its active nature. (Don’t try to do this by looking right at the sun at home!) The higher the number of sunspots, the more heat it projects through the solar system. The Journal of Atmospheric and Solar-Terrestrial Physics states that sun spots explain 95% of temperature change over the past 400 years.

Think of the sun as a human body; it needs to rest and sleep to pump out energy. This is why the sun has a cycle, typically averaging 11 years in length. Importantly, solar cycles contain minimum and maximum periods of sunspot activity. You can see this on the chart below, showing the number of sun spots recorded from 1870 through 2010.

Interestingly, the solar cycle increased steadily from 1870 into 1960 — coinciding with the main temperature period used in the “man-made” global warming models. This is shown in the red box.



chart image

Click to enlarge


You can see that the past three solar cycles have been declining. The current cycle isn’t shown on the graph above, however we experienced a solar maximum last year. And guess what? NASA’s data shows that there were 33% less sunspots than the 2001 peak; and 50% less sunspots than the 1990 peak.

Jason received rave reviews about his recent presentation at the Great Repression investment conference.

Aside from looking at traditional resources, such as zinc, copper, gold, and coal, Jason also has a keen interest in ‘soft commodities’. A subject he plans to explore further in 2017.

But for now, Jason has a whole bunch of Aussie-listed speculations on his buy list. For details, check them out here.

Something big is coming

Can’t go into details.

But next Wednesday, we’re doing something we haven’t done in over a year.

No, we’re not launching another new trading service.

But it is exciting. And you won’t want to miss it.

As I say, I can’t go into details today. If I can, I’ll provide more info tomorrow. Stay tuned.

Cheers,
Kris