China Property Price Outlook

By Callum Thomas

This chart comes from the latest Monthly Chartpack, which I just sent out to clients.  It shows Chinese property price growth through May against our composite leading indicator.  The composite leading indicator incorporates money supply growth, government bond yields, swap rates, and property stock relative performance.  The key point is despite some stabilization in the May property price date, the leading indicator is still pointing to a further softening in the Chinese property market.  As the property market drives the broader macro/risk outlook for China (and commodities + EM), this is a key chart.  Where it could be wrong would be if the seemingly over-confident consumer drove the market higher, and in Chinese asset markets we have plenty of case studies where “animal spirits” can surprise!  So it’s a complex and evolving outlook, and one that I am spending a lot of time and focus on as a key driver for global markets this year and next.

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Social Security Deterioration, Report 17 Jun 2018

By Keith Weiner

[biiwii comment: gold & silver fundamental report follows 1st segment]

We have been writing about capital destruction. This week let’s look at an event which is currently making news. Social Security will begin tapping into its trust fund this year. This happens, as the Social Security Board of Trustees states antiseptically, “four years earlier than projected in last year’s report.” In other words, the economy is growing by every conventional measure, yet Social Security is spending more than its tax revenues years earlier than projected. According to those same inaccurate projections, the trust fund won’t run dry until 2034.

Everyone opines on Social Security. Some, like Max Richman of The Hill, claim that, “modest and manageable measures…” will, “keep Social Security solvent.” Others, like Charles Blahous at the Manhattan Institute, say the opposite, it’s “bad and getting worse.”

There are several aspects to this that are worth understanding. We will unpack this mess.

Continue reading Social Security Deterioration, Report 17 Jun 2018

Weak Week After June Opex

By Rob Hanna

I noted a few years ago here on the blog that the week after June options expiration has done especially poorly in recent years. The table below is updated and shows all such weeks dating back to 1999.


Those are some pretty weak numbers. Below is a 5-day profit curve.


As you can see, it has been quite a streak of bearishness. Twelve out of the last fourteen years have closed down. So it would seem we may be entering a week seasonal period.

I will note that this week has not always exhibited such bearishness. Between 1979 – 1989 this week posted gains every year. (But S&P options, and hence opex week, did not exist until 1984.) Overall, I am viewing it as a mild bearish headwind for the time being.

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Support 100% ad-free by making a donation of your choice!

Or better yet, subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas to get even more bang for your buck. You can also keep up to date with plenty of actionable public content at by using the email form on the right sidebar. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at

Turnabout is Fair Play

By Tim Knight

I had a very busy, productive weekend, but in the midst of it, I commiserated with a number of fellow bloggers about the state of the market. Specifically, about how the hopeful days that started January 29th terminated far too swiftly on February 9th, and how we were grinding around at VIX-will-be-single-digits-again-land.

Their response, to a man, was pretty much “this is how bear markets start, with a shot across the bow, and then a big recovery rally to apply the smirk to bulls’ faces more firmly than ever and to break any remaining bearish hearts.” We’ll see if that holds true. For the moment, at least, it’s nice to wake up to some red. Here we see the NASDAQ has taken its entire end-of-week mega-rally and unwound it for really no reason in particular except for simmering trade wars.

Somewhat more severe is the ES, which didn’t just unwind its action from late last week but instead has actually bested it.

Continue reading Turnabout is Fair Play

‘Blow For Blow’: U.S.-China Trade Spat Devolves Into Name-Calling…

By Heisenberg

…As Chocolate Cake Diplomacy Faces Biggest Test Yet

Well, it looks like Donald Trump’s “great friendship” with Xi Jinping (forged as it was, not in fire, but over “the most beautiful piece of chocolate cake you’ve ever seen”), is going to be put to the test over the next couple of weeks.

On Friday, in the official statement that accompanied the announcement of his decision to move ahead with tariffs on Chinese goods despite the trade truce Steve Mnuchin struck with Chinese Vice Premier Liu He last month, Trump said the following:

My great friendship with President Xi of China and our country’s relationship with China are both very important to me.

Kind words for one’s “rapist”:

Xi, according to Bloomberg, is now set to go “blow for blow” with Trump on trade – and hopefully that means something different than it means when Trump goes “blow for blow” with Russian hookers.

Continue reading ‘Blow For Blow’: U.S.-China Trade Spat Devolves Into Name-Calling…

Why the Yield Curve Changes Direction Ahead of a Recession

By Steve Saville

Conventional wisdom is that an inversion of the yield curve (short-term interest rates moving above long-term interest rates) signals that a recession is coming, but this is only true to the extent that a recession is always coming. A reversal in the yield curve from flattening to steepening is a far more useful signal.

What a yield curve inversion actually means is that the interest-rate situation has become extreme, but there is no telling how extreme it will become before the eventual breaking point is reached. Furthermore, although there was a yield-curve inversion prior to at least the past seven US recessions, Japan’s most recent recessions were not preceded by inverted yield curves and there is no guarantee that short-term interest rates will rise by enough relative to long-term interest rates to cause the yield curve to become inverted prior to the next US recession. In fact, a good argument can be made that due to the extraordinary monetary policy of the past several years the start of the next US recession will NOT be preceded by a yield curve inversion.

Previous US yield curve inversions have happened up to 18 months prior to the start of a recession, and as mentioned above it’s possible that there will be no yield curve inversion before the next recession. Therefore, we wouldn’t want to be depending on a yield curve inversion for a timely warning about the next recession or financial crisis. However, the yield curve can provide us with a much better, albeit still imperfect, recession/crisis warning in the form of a confirmed trend reversal from flattening to steepening. This was discussed in numerous TSI commentaries over the years and was also covered in a blog post last December.

Continue reading Why the Yield Curve Changes Direction Ahead of a Recession

The Great Fallacy

By Doug Noland

Credit Bubble Bulletin

A big week in the world of monetary management: The Federal Reserve raised rates 25 bps, the ECB announced plans to wind down its historic QE program, and the Bank of Japan clung to its “powerful monetary easing” inflationist scheme. A tense People’s Bank of China left rate policy unchanged, too weary to follow the Fed’s path.

The renminbi declined a notable 0.5% versus the dollar this week. More dramatic, the euro was hammered 1.9% on Draghi’s game plan. Also on Thursday’s dollar strength – and even more dramatic – the Argentine peso sank another 6.2% (down 34% y-t-d). The session saw the Brazilian real drop 2.2%, the Hungarian forint 2.6%, the Czech koruna 2.2%, the Polish zloty 2.0%, the Bulgarian lev 1.9%, the Romanian leu 1.9% and the Turkish lira 1.7%.

The FOMC, raising rates and adjusting “dot plots” higher, was viewed more on the hawkish side. The ECB, while announcing plans to conclude asset purchases by the end of the year, was compelled to add dovish guidance on rate policy (“…expects the key ECB interest rate to remain at present levels at least through the summer of 2019…”). Blindsided, the market dumped the euro. The Fed and ECB now operate on disparate playbooks, each focused on respective domestic issues. Anyone these days focused on faltering emerging market Bubbles, global contagion and the rising risk of market illiquidity?

Continue reading The Great Fallacy

A Bull in a China Shop


Following is the opening segment of this week’s edition of Notes From the Rabbit Hole, NFTRH 504. For months now we have been tracking a divergence in the key cyclical Semiconductor Equipment segment (I am short AMAT & LRCX) to the broader Semi sector and this week put more context to the divergence.

A Bull in a China Shop

In light of the developing trade war between the US and China, let’s review the all-important Semiconductor sector and in particular, the Semi Equipment segment, which is a key economic early bird (and canary in a coal mine).

Various sectors took hits on Friday as Trump moved forward with Tariffs on China. But most of those sectors and industries are follow-on aspects of the economic cycle, which got its start when the early bird chirped in early 2013.

With China in Trump’s crosshairs and China a very key player in Semi Fab Equipment, there is a fundamental reason that the Equipment companies are faltering. From SEMI by way of a post at in March.

“SEMI predicts Samsung will lead the pack in fab equipment spending in both 2018 and 2019, even though it will invest less each year than in 2017. By contrast, China will dramatically increase its year-over-year (YOY) fab equipment spending for the next two years – by 57 percent in 2018 and 60 percent in 2019 – to support fab projects from both overseas and domestic companies. The China spending surge will thrust it past Korea as the top spending region in 2019.”

The rate of Semi Fab spending growth was easing and a heavy reliance was being put on China to pick up the slack. Here is a screenshot from that post…

Continue reading A Bull in a China Shop

Treasury 10Y-2Y Slope Flattens To 35.5 BPS…

By Anthony B. Sanders

…Eurodollar 3M Futures Spread Falls To Lowest Level Since 2000 (Europe’s Troubles In One Chart)

The US Treasury 10Y-2Y slope keeps falling … as The Fed keeps raising their target rate. It has flattened to 35.5 basis points.


Meanwhile, the 3 month Eurodollar spread to  the lowest level since 2000.

Continue reading Treasury 10Y-2Y Slope Flattens To 35.5 BPS…

Donald Trump Won’t Sign Terrible GOP Immigration Bill Of His Filthy Hateful Dreams

By Doktor Zoom

You would be forgiven for thinking that maybe House Republicans had found even a speck of human decency in their hearts, considering headlines that claimed they were considering a “compromise bill” on immigration that would even “end family separation.”

But of course, that’s the sort of half-truth that covers a giant dungheap with a big banner with a picture of a rose on it, and the slogan “You don’t smell anything!” In any case, Trump said on “Fox & Friends” that, of the two immigration bills the House is considering, he “certainly wouldn’t sign the more moderate one.”

Even the “more moderate” bill is pretty terrible. It was crafted by Paul Ryan and the House Freedom crackers as a “compromise” between a hard-right bill pushed by Bob Goodlatte and a narrow DACA-fix proposal that hasn’t even made it to the floor. How bad is this bill? Trump’s personal immigration bill consigliere, Stephen Goddamn Miller, has been consulting on the damn thing.

And what’s in it? Pretty much the same crap as the very worst of the multiple Senate bills that failed earlier this year, as Vox explains:

Continue reading Donald Trump Won’t Sign Terrible GOP Immigration Bill Of His Filthy Hateful Dreams

Trump Approves Tariffs On $50 Billion In Chinese Goods, Escalating Trade War

By Heisenberg

Here we go.

On Wednesday afternoon, as the dollar was surging on the back of a hawkish hike from the Fed, WSJ reported that Donald Trump would in all likelihood make good on his threat to go ahead with tariffs on billions in Chinese goods, with an announcement likely coming on Friday.

That decision (were it to pan out) would confirm reports from a couple of weeks ago when Trump, seemingly swayed by the isolationist/protectionist contingent’s rebuke of a trade truce struck by Steve Mnuchin during a meeting with Chinese Vice Premier Liu He, reversed course on an implicit agreement to hold off on further escalations.

WSJ’s post helped catalyze a reversal in the greenback, which renewed its ascent on Thursday following the dovish spin Draghi put on an otherwise hawkish ECB decision.


Fast forward to Thursday afternoon and these headlines hit:

Continue reading Trump Approves Tariffs On $50 Billion In Chinese Goods, Escalating Trade War

The Nasty Bite of FANG

By Tim Knight

Another day, another NASDAQ lifetime high. And what’s the driver? It used to be QE, but the central banks around the world have already turned off that spigot. The explanation is easier had by one acronym: FANG. Let’s take a look at the four components:

First there is Facebook, which got smacked down hard by the whole privacy scandal earlier this year, but now it just pennies away from its own lifetime high (or double top, depending on which way the wind blows).

Amazon has become almost a joke in how it lines Bezos’ pockets with another $100 million per day. AMZN makes lifetime highs every single day with two notable exceptions: Saturday and Sunday. The P/E is about 216 right now.

Continue reading The Nasty Bite of FANG