Pink diamonds and American art trigger signals

Tuesday, 20 November 2018
Melbourne, Australia
By Bernd Struben

  • Advantage Trump
  • Looking beyond the charts
  • ‘Shocking Number of Australians Cheating Welfare’

Don’t go expecting a complete market meltdown, as in 2008.

Phil Anderson, Cycles, Trends & Forecasts

Diversification, wisdom has it, is a key tool for reducing your risk in the stock market. And there’s certainly some truth to that.

But some days even a portfolio diversified across Australia, Europe and Asia is likely to lose money.

Monday was one of those days. And Asian markets are again trading in the red today. As at writing the ASX 200 is down 0.70%.

Over in the US the biggest falls were again in the tech sector.

The once beloved FAANG stocks got hit particularly hard. In intraday trading Facebook was down 5.9% at one stage. Amazon.com fell 5.3% while Netflix lost 6.0%, Google faired a bit better, but still was down 3.9%.

The tech giants’ struggles were reflected in the NASDAQ, which lost 3.03% overnight our time.

That all but erases the gains on the NASDAQ for 2018. The index is up a meagre 0.31% since 2 January. More worryingly, it’s now down 13.3% since 31 August.

So is this the beginning of the next almighty crash?

Not according to cycles guru Phil Anderson.

As noted in the opening quote above, he says you shouldn’t expect to see a 2008 kind of meltdown.

Instead Phil predicts a mid-cycle slowdown.

Subscribers to Cycles, Trends & Forecasts will be familiar with what that means. While we could see some panic in the markets, the slowdown shouldn’t be overly painful or long-lived. The real pain won’t come until closer to 2026…the end of the cycle.

It’s all part of Phil’s meticulously researched Grand Cycle Theory. This is the same theory that’s enabled Phil to make astonishingly accurate forecasts in the past.

As for the future, Phil made his forecast for a 2019-20 mid-cycle slow down more than a decade ago. And he’s sticking by it.

Earlier this month I shared the following excerpt from Phil, explaining what you should look for heading into the mid-cycle slowdown:

Here’s what happens when we go into the mid cycle peak, based on prior cycles:

    • The bond market starts to fuss. Just a little bit at first, but it gradually builds momentum.
    • Interest rates start to rise.
    • The yield curve in the US starts to flatten, and then threatens to invert.
    • Paintings offered for sale at auction houses break records.
    • Record IPOs line up to list on the world’s various bourses.
    • The world’s tallest, biggest and longest open up.

We all know the bond market’s been fussy and interest rates in the US are heading higher.

But in 5 November’s Port Phillip Insider, we looked at another one of these signs. Namely the opening of the $20 billion, 55-kilometre bridge linking China to Hong Kong. The world’s longest sea bridge.

Since then, other signs have begun flashing.

This headline comes from The Australian, ‘Pink diamond sells for $69m at Geneva auction smashing record’. The article continues:

An exceptionally rare 19-carat pink diamond fetched $69 million (€44m) at auction in Geneva overnight, Christie’s said, setting a new per carat record for a stone of its kind…

“$2.6 million per carat. That is a world record per carat for a pink diamond,” said Francois Curiel, head of Christie’s in Europe.’

That’s the kind of stone that comes with its own security guards.

But that’s a diamond. Phil specifically mentions paintings. Which is why this headline from Bloomberg caught my eye on Sunday, ‘Christie’s Tops Sotheby’s in Monster Week for Auction Sales’.

The Christie’s haul was padded by the $90.3 million sale of David Hockney’s “Portrait of an Artist (Pool with Two Figures)” — who eclipsed Jeff Koons as the most expensive living artist to sell at auction. A new record for American art was also set by the company with the $92 million sale of Edward Hopper’s “Chop Suey.”

Paintings offered for sale at auction houses break records.

Check.

The stars are aligning to usher in the mid-cycle slowdown. But don’t rush for the exit. If Phil’s right the biggest part of the boom is still ahead.

To find out how me makes his remarkable forecasts, just go here.

Now to the markets.

Markets

Overnight, the Dow Jones Industrial Average closed down 395.78 points, or 1.56%.

The S&P 500 fell 45.44 points, or 1.66%.

In Europe the Euro Stoxx 50 index finished down 20.41 points, or 0.64%. Meanwhile, the FTSE 100 fell 0.19%, and Germany’s DAX closed down 96.46 points, or 0.85%.

In Asian markets, Japan’s Nikkei 225 is down 248.37 points, or 1.14%. China’s CSI 300 is down 1.88%.

In Australia, the S&P/ASX 200 is down 39.86 points, or 0.70%.

On the commodities markets, West Texas Intermediate crude oil is US$56.76 per barrel. Brent crude is US$66.79 per barrel.

Turning to gold, the yellow metal is trading for US$1,223.99 (AU$1,677.39) per troy ounce. Silver is US$14.43 (AU$19.78) per troy ounce.

One bitcoin is worth US$4,830.74. That’s down 13.0% since this time yesterday. This puts bitcoin at its lowest price since October 2017, back when it was rocketing higher every week.

And it’s not just bitcoin. A check of the top 100 cryptos on CoinMarketCap reveals 99 are trading lower today. USD Coin is the sole exception. The US dollar-backed stablecoin is up 1.0%.

What can you expect next for the bitcoin and the wider crypto market? To stay up to date, click here.

Turning to fiat money, the Aussie dollar is worth 72.97 US cents.

Advantage Trump

Over the past few weeks we’ve had a stab at unravelling the ongoing trade ructions between the US and China.

While the situation is still messy and developing, I believe this will end far sooner than most pundits predict. That will be a welcome relief to struggling stock markets around the world.

As you likely recall, back in March Trump tweeted that, ‘Trade wars are good and easy to win.’

I’m not sure about the goodness of trade wars. But if nothing else, Trump’s spat with Xi Jinping has shone the spotlight on some very imbalanced trade practices that help subsidise China. Among those, China still gets all the benefits that go along with being listed as a developing nation.

It’s also farfetched to say that trade wars are easy to win. But the US is certainly in a superior position to win any drawn out tariff battle.

According to EconPol Europe, Chinese consumers are already bearing the brunt of the tariffs to the tune of US$18.4 billion (AU$25.2 billion).

From Bloomberg:

President Donald Trump is succeeding in making China pay most of the cost of his trade war.

That’s the conclusion of a new paper from EconPol Europe, a network of researchers in the European Union. U.S. companies and consumers will only pay 4.5 percent more after the nation imposed 25 percent tariffs on $250 billion of Chinese goods, and the other 20.5 percent toll will fall on Chinese producers, according to authors Benedikt Zoller-Rydzek and Gabriel Felbermayr…

The Trump administration selected products with the highest “price elasticity,” or high availability of substitutes, according to Zoller-Rydzek and Felbermayr. The Chinese products hit by Trump’s tariffs can mostly be replaced by other goods, forcing exporters to cut selling prices to keep buyers…

With the economic costs shifted to China, the U.S. levies will lead to a $18.4 billion net gain for the American government, the researchers wrote.

If Xi’s people are coming up with similar numbers, it will be one more force driving the Chinese to the bargaining table.

Keep your eye on the G20 meeting in Buenos Aires.

Trump and Xi are scheduled to meet for dinner on 1 December, at the end of the two day summit.

And according to the South China Morning Post, both nation’s trade negotiating teams will now meet there as well, rather than in Washington DC as previously planned.

According to their source, who wanted to remain anonymous, ‘The change, if confirmed, suggests that stakes will be raised for the leaders’ meeting, with more weighty matters likely to be on the agenda.’

Now I wouldn’t expect any miracles here. But if Xi and Trump leave Buenos Aires indicating a deal is achievable, that could usher in an early start to a much needed ‘Santa Rally’.

Looking beyond the charts

That’s all from me today.

In our special guest essay below, the Billionaire’s Trader takes a step beyond the charts to dig into the bigger picture.

Trying to piece together all the moving parts of the big picture is good fun. And when you get it right, it can be tremendously rewarding.

But a word of caution from the Billionaire’s Trader. As he writes below, sometimes the picture is so big that it may take decades to play out.

Who has time for that?


How Much Knowledge Do You Need to Make Money?
By The Billionaire’s Trader

With US markets getting pummelled again (the S&P 500 down 1.7%), it’s a good time to think about the macro-economic situation around the world…and how that plays into your trading.

I’ve spent a lot of time over the last few weeks revealing a lot of details about my technical trading system. But that could make you wonder if I have any depth of knowledge beyond that.

I spent many years early in my career delving deeply into economic theory. I came to the conclusion that the Austrian Economists were on the right track and the Keynesians were a tool of governments to give them cover to tax, borrow and spend to buy votes.

However, I soon learned that while it’s good to have a macro-economic view, it can cloud your decision making. It may be spot on in the big picture, but because the ‘big picture’ is so big, it may take decades to play out.

Since former US President Richard M Nixon took the US dollar off the gold standard in 1971, we have witnessed a generation-long experiment in credit creation. That experiment is still going on. Who knows how it will end, if at all.

With the US dollar acting as the world’s reserve currency, when the US Federal Reserve prints money, it steals a little bit of money (inflation) from everyone, not just US residents.

So the pool of wealth they can draw on is immense. That means the Fed would have to print a heck of a lot of money for the US to experience hyperinflation Zimbabwe-style. 

But the fact remains that since the crash in 2008, we’ve seen the central banks of the world embark on a journey I never thought possible. Certainly not when I was reading every economic text book I could get my hands on in my 20s. 

I was taught the gold price should skyrocket if the US printed money. It didn’t. 

I was taught that 0% interest was the lowest interest rates could go. It wasn’t.

I was taught that in a capitalist society, governments don’t buy their own debt and stocks to prop up the market. They do.

The Japanese Central Bank is now a top 10 shareholder in most of the stocks in Japan’s Nikkei index. They have ordained that the long-term borrowing cost for one of the most indebted governments in the world should be 0% — or 0.1% to be exact.

Nothing makes much sense anymore based on a rational view of free markets. If you accept that our markets are anything but free, and that the people in charge are pedalling as fast as they can to stop everything coming apart at the seams, then the path the markets have taken since the crash makes a lot more sense.

Each major central bank around the world plays a game of pass the parcel to keep the game going. First the US printed like crazy. Then Japan, the UK, and Europe stepped up to grow the balance sheets of the top central banks.

They share the burden, and ensure the devaluation of their currencies against each other proceeds in an orderly manner.

The level of imbalances that have grown as a result of forcing interest rates down to zero and below to save the system, are now so great that it’s becoming impossible for the central banks to unwind their balance sheets in an orderly manner.

It seems that ‘Catch 22’ has set in permanently.

There is now so much debt that if interest rates rise even a little bit, the whole edifice starts to wobble. Close to home, the Australian property has ridden that wave since 1971. It now faces its ‘day of reckoning’. 

Such gloom.

But…does that mean we’re close to another crash?

Who knows!

The direction of markets comes down to whether the US Fed blinks in the face of falling markets.

If it keeps raising rates, the markets will fall which means they’ll find it harder to keep raising rates. That is the one sentence analysis of the world.

So, how on earth can you make any decisions at all when you’re faced with such a situation?

I’ll tell you how: You ignore it. At least from a trading perspective. From a knowledge and intrigue perspective, that’s different. Do like me. Watch it, read it, and shake your head. Then get on with the business of trying to make money from trading.

All you really need to concern yourself with is the following:

  • What were the most recent quarterly and monthly pivots?
  • What was the most recent wave?
  • Where are the buy and sell zones?

Then wait for a short-term pivot in the direction of trend, take profit quickly, create a free option…and sit back to see what happens. 

If you do that, who cares about all of the above macro stuff? 

With all that said, here’s how I’ve helped traders put that into practice in the past…

You don’t need to know the future to make money



chart image

Source: ?
Click to enlarge

When I sent out an alert to short sell Westpac Banking Corporation [ASX:WBC] on 3 March 2017, with a 5% stop loss, do you think I knew that I was selling it near the exact high before a multi-year sell off?

I’d love to say yes, but I didn’t have a clue.

All I knew was that Westpac was struggling to move higher in the sell zone of a major wave. Yes, I was bearish on the banks fundamentally, but I’ve been bearish on the banks for a long time, and been wrong on their direction.

In the end, it was the technical set up that counted because it allowed my clients to enter a position with a very small stop loss. Once the stock dropped 5%, they could take part profit and if they had held on, they could still be in the position as it’s now a ‘free option’.

Since then, the Westpac share price has fallen from around $35, to today’s price of around $25. That’s a $10 move…without leverage. Add in some leverage, and you could multiply that potential gain a few more times.

If you’ve taken part in the free ‘Speed Trading’ Masterclass series over the past few days, you’ll know more of the background into my technical trading system.

At 2pm today, you should have received details on how you can join me in an exciting new project. If you missed that email, check it out now. I’m excited about the current set-up in this market, and I’m excited about the opportunities open to traders.

Check your email, if you were part of the Masterclass.

Until then,
The Billionaire’s Trader


Before you log off, don’t forget to check out the latest from The Australian Tribune:

‘Shocking Number of Australians Cheating Welfare’

Australia has one of the most generous welfare programs in the world. Although you’re unlikely to hear that from the socialist left-wing, who argue for ever more handouts for all.

But alongside Australia’s generous aid package for those in need comes an unfortunate tendency by the unscrupulous to steal from the system.

And it’s happening far…’

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd