By Jeffrey Snider @ Alhambra
The Central Focus of China
For most of the world’s inhabitants, so long as they reside connected to some form of modern economy inflation is an unwelcome event even in the smallest doses. Central banks have made it their very business to control it, or at least its form in consumer prices, in order that their assessment of the Great Depression might not be ever repeated. From that mistaken view of history, which only serves to carve out a more than technical role for economists within the political structure, almost everything a central bank does is in some way related to “controlled” price increases.
The obvious rebuke to that effort has been the obvious destruction caused by asset bubbles in the 21st century whereby central banking is and has been at its highest settings. In the latest “cycle”, that point has been pushed beyond excess to extreme levels and yet there is startlingly little of it (official count of consumer prices, anyway). Not only does that betray the philosophical arrangement that supports the entire monetarist framework (“easing”) it might actually and completely substantiate that central banks don’t really know what they are doing.
Continue reading Central Focus of China
By Jeffrey Snider @ Alhambra
For those inclined to see only the positive side, the current downdrift in at least manufacturing globally still holds no special distinction. Either it is to be dismissed as a trivial concern unconnected to the “real” economy or, more blatantly, it doesn’t matter because it only means more “stimulus.” Thus, the positive side can never lose as every negative account is effortlessly rejected or just as easily fixed.
Given the global PMI submerging of late, both sides of that equivocation have been offered in greater emphasis; if not manufacturing as “only” 12% then the surety by which global “stimulus” and “easing” will come and wash away the doldrums. China is most on that point in late 2015, especially as its slowdown is no longer arguable:
“We do think there is more easing to come in China. They are in the midst of a long-running easing cycle that is probably going to go on until late next year,” said Andrew Kenningham at Capital Economics.
There are, of course, any number of problems with such shorthand; as that is all it amounts to. The PBOC (or ECB, BoJ, BoE, FOMC) does something and it is just accepted that its exact form doesn’t make a difference nor how it is even supposed to get from A to B. A good deal of that generic appeal, if not all of it, is that nobody seems to want to know the details; better to simply assume than to pull back the curtain and be averted from all the sustained ugliness. It is far more than from A to B, obviously, as there are innumerable channels and pathologies standing in between that turns “stimulus” into wasted hope.
Continue reading Seeing Right Through “Stimulus”
By Monetary Metals
We’re going to be introducing some new formats. One of them is quick article links, with the good ones labelled Pure Gold and the bad ones labelled Soggy Dollars.
When a Fed-induced boom turns to bust: “In the lynch-mob atmosphere that inevitably follows the bust cycle of Fed-induced business cycles, it was not hard to convince Americans that the corporate bankruptcies and the subsequent recession were the handiwork of criminal executives.” Of course, this sentiment prevails today too. Look for the coming “corporate crime wave“.
A Soggy Dollar
The headline reads, “China Bought Gold With Proceeds From Record Sale Of US Treasurys”. It’s been in the news for a while: China is selling Treasurys (i.e. dollars). The PBoC is forced to sell dollars and buy yuan, to prevent a yuan crash as people are selling yuan. However, many mistake this for China “de-dollarizing” in favor [of] gold.
According to this article, China sold $83B of Treasurys (i.e. dollars). And how much gold did they buy? Less than $600M, or 0.7%.
The above title was assigned to this post while writing it and realizing I was blabbing a lot about myself and my own methods.
I finally had the time to do more than skim Robert Prechter’s most recent EW Theorist. I can see why they released it for free, because in it he ran a laundry list of calls that have gone well and one – the US stock market – that had not yet done so (and indeed has been the market that has defined him as a frustrated perma-bear to many) as of its publish date. Well, shortly thereafter that holdout market went well to join the rest of the world.
Here is the link again, if you have not read it: Most recent Elliott Wave Theorist
I should note that I do not currently subscribe, although I have at times in the past. I need to be very clear in my own thinking and trust my own methods, which have been working well, without too much of anyone else’s cross-talk. But I always find Prechter an interesting read when I do have access. He’s beyond interesting, really. He’s pretty much one of a kind.
Some of my observations…
- Prechter mentions exactly what I have harped on repeatedly; how economists (and financial services entities) tend to extrapolate things in linear fashion. He notes “we extrapolate them in fractal fashion”. I on the other hand, extrapolate them with a combination of technical, sentiment/psych and inter-market indicators. Ref. for instance the PALL-Gold ratio, which made a bearish signal months ago. I knew not why, but we certainly respected it and were prepared for the market damage that followed it.
- As noted in the previous post, the guy was right on with Crude Oil, over the long-term. EWI were also right on with Asia and Emerging Markets, while admitting that they have fumbled the US stock market, which “has just floated around as if in a dream”. Well, it woke up last month and I for one could not be happier because finally it is in motion. I care more about motion than direction.
- Gold bugs used to laugh at Prechter routinely. Indeed, I had to use my will to tune him out as his calls for gold’s top rose from 375 to 425 to an eventual 1900, when he was finally right. US stock bugs laugh at prechter the same way now. Anyway, he goes into detail on gold, silver and the miners, calling for a significant counter trend rally in the bombed out sector as well as in crude oil. But these things are within larger bear markets.
- Finally, he makes some good sense of Dow Theory, an art that I don’t pay much attention to, but appears valid and he shows why.
Anyway, the Theorist is well worth your 10 minutes of time if you’d like to pick it up, free of charge. Also covered are China, real estate, etc. It’s a take on markets as only Prechter can take it.
It has been a while since we went around DARPA’s creation (or was it Al Gore’s?) of networked thingamajigs…
By Steve Saville
Wrongheaded Thinking About China’s Devaluation
After China’s government announced a small reduction in the Yuan’s foreign exchange (FX) value early last month, US Presidential aspirant Donald Trump immediately leapt onto the nearest available podium and exclaimed:
“They [the Chinese] continuously cut their currency. They devalue their currency. And I have been saying this for years. They have been doing this for years. This isn’t just starting. This was the largest devaluation they have had in two decades. They make it impossible for our businesses, our companies to compete. They think we’re run by a bunch of idiots. And what’s going on with China is unbelievable, the largest devaluation in two decades. It’s honestly…a disgrace.”
Continue reading On China’s Devaluation
By Elliott Wave International
Why the yuan devaluation was not a “surprise” — and what Elliott waves suggest for China’s currency next
China’s economy is slowing. Its stock market began to crash back in July. And, the volatility rocking financial markets has been widely linked to the recent yuan devaluations by China’s central bank.
Speaking of that: “Surprise” is usually the word you see describing the devaluation. As in, “China’s central bank surprise devaluation of yuan.” But what if someone told you that it wasn’t a surprise — and, in fact, an expected event?
Below are three excerpts from analysis that our own Chris Carolan published in his Sunday-Tuesday-Thursday Asian-Pacific Short Term Update on July 30 (several days before China’s central bank first move to devalue the yuan against the U.S. dollar), then on August 9 and August 11 (bold added).
The Asian-Pacific Short Term Update July 30:
Continue reading China’s Yuan Devaluation…
By Alhambra Investment Partners
While everyone remains sure that the PBOC is actively trying to “allow” the yuan to depreciate as some kind of export catalyst, the “dollar” continues to show (not suggest) otherwise. Liquidity and “dollar” markets are still roiled rather than soothed, especially the US treasury market where the bid right at the open (what look very much like continued collateral calls) pushes more like a combination of October 15 and January 15.
As if to underscore the runaway nature, the PBOC apparently intervened against this “devaluation” just last night. From the Wall Street Journal:
Continue reading Wholesaling Out of China