Sunday 25 February 2024

Long term bond games will send investors into gold

The mighty US of A has $10,000,000,000 (trillion) of US dollar debt to sell this year.
image1

It is only February 2024, and the 20 yr and 30 yr bonds are not being swamped with demand. 


Chart 1 - Ugly auction, this trend will continue until Yellen bends the knee.

Bonds




Chart 2 - 10 yr interest rates near multi decade highs.

10 yr



It seems that with interest rates near 4.25% (10 yr) and the US dollar (DXY) near $105, this does not encourage foreign investors to buy long term US Treasuries. Therefore, either or both the interest rate needs to rise and/or the US dollar needs to fall to encourage investors to by 20 yr and 30 yr US Treasury auctions. 


Chart 3 - Rev Repo has fallen from $2.2 trillion to near zero.

Repo



The US Department of Treasury has been using the cash in the temporary reverse repo to transfer US debt to investors as TBills. This will be over by April 2024. Next, they can use the Treasury checking account (TGA) for another $800M. Then what? A much lower US dollar is an option.

Of course a trending lower US dollar will fuel gold move to higher, this of course will improve the profits of gold and silver stocks. 

Chart 4 - XAU building higher lows.

XAU




Chart 5 - GDXJ base building.

GDXJ





Also, US corporations are soon to hit a re financing wall with much higher interest rates (up 100%). Higher interest expenses will result in fewer people employed. Rising unemployment in an election year will not be attractive, hence another good reason to lower interest rates and the US dollar.


Chart 6 - Corporate interest expense to explode soon.

Corp






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Monday 29 January 2024

2024 soft landing working it

Can it last? Can the US Gov keep the plates spinning until US 2024 elections.
image1


Chart 1 - Gov debt holding up business activity. 

Gov Debt





Chart 2 - Gov doing all the hiring!


Employ





Chart 3 - ISM Services PMI holding up business, manufacturing recession continues (or going to Mexico)


PMI





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Tuesday 23 January 2024

Market moving macro in 2024

It is time for the FED to hire Jordan Belfort (Wolf of WallStreet fame) to sell US government debt.
image1 After all, Jordan Belfort is a man who can sell tea to China.


Chart 1 - The red line generates the income to pay interest on the blue line. If the rate of change of debt growth and the cost of debt are an ever increasing burden on the cash flow generated by growth, something is going to structurally break. Gold near $2,000 USD is a bargain (same price as 2011)!


Debt to GDP





Chart 2 - Here is a smarter chart of Chart 1 above. When the fat red line sinks and falls below zero, this is a period of time when the rate of change in debt growth is much faster than GDP (not adjusted for inflation). Gold says this matters. The gold price moves higher in such an environment. 


Debt Rate Of Change




Chart 3 - China CPI is in deflation (CPI below zero). The FED broke China! President Xi recently visited the USA and met with some heavy hitters to help re-inflate China. It is mostly likely to coordinate Chinese stimulus with US election year stimulus. China cannot afford the negative effects of prolonged deflation periods.  

ZH summary says it all.

Which means China now has two options: pretend that the failed policies it has been doing (or pretending to do) so far has been successful, which it likely will until there is just too much blood on the streets, or it will finally capitulate and unleash the biggest fiscal stimulus ever seen in China: we are talking multiple trillions here, and in dollars not yuan, consequences be damned, because we are nearing the point of peak panic where Beijing will do anything at all to buy social order and stability for just a few more months. And once all those tens of trillions in Chinese deposits start fleeing, that's when the real meltup in non-fiat assets - read gold, silver, crypto, fine art, wines, etc - will truly start.



SSEC



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Monday 25 December 2023

Stock market cycle look into 2024

The well promoted US recession of 2023 did not happen, but will it happen in 2024.
image1

Michael Howell of CrossBorder Capital says the liquidity is supportive of slow growth but no recession in 2024 or 2025.





Technical charts support this view, lets review:


Chart 1 - Shows three sine wave cycle should repeat for a fourth peak in 2025 Q1.


SPY Short Cycle





Chart 2 - Shows the Dow Jones working well through Gann Angles, Dow +45,000


Dow Gann






Chart 3 - Crazy how the Wall 900 period cycle fits highs and lows.


SPY Wall cycle





Chart 4 - Richard Wyckoff Cause and Effect still working until it does it. Will an 'Effect Fail' happen in 2024, the trend says unlikely. But who knows which events will shape the world in the next year.


Dow



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Tuesday 28 November 2023

Ethereum runs hot on new market liquidity

The US elections attract an easier market; this time there is another incentive to let the juice run.
image1


The US presidential cycle runs for 4 years; the years before and after the election are the most market-friendly to the bulls, as politicians promise the kitchen sink. Typically, the incumbent will do all they can to ensure the economy is doing well before the election; they do this by making the monetary condition easier. One way to do this is to lower the US dollar.



Chart 1: US dollar (DXY)

The blue lines are US election dates (November). Both 2016 and 2020 saw a move to get the US dollar down in the 12 months prior to the election.

DXY



During the next 13 months the US Government has to fund the US deficit to the tune of $8 trillion dollars of existing and new debt. This means they need to find $8T USD out in the market place to buy this debt. There are many tricks the FED and TREASURY can do to do this, and one trick to lower the price of the US dollar debt to foreign investor by lowering the currency it is sold in (say DXY near $90), otherwise known as currency debasement.

Bert Dohmen of the Wellington posted this (2023-11-27): 

We just read that the federal government is running its largest deficit as a percentage of GDP outside of WWII period. Another great achievement!


And next year we are likely to see the greatest money creation out of thin air in the entire history of the US. The Fed has to create ways to finance the record deficits by the creation of new money.


That of course has inflationary implications. And that will plunge the bond market again, making the bond disaster even worse. Remember, last time we wrote the global bond market is $128 TRILLION. That is 128 billion times a billion dollars.


We conservatively estimate that they have unrealized paper losses of at least 60%. Therefore, the loss on the global bond market would be a staggering $77 TRILLION!!!


Debasement of the currency is a likely event to massive indebted sovereign states. Investors can protect themselves from this by investing in anti US dollar investment vehicles like: Gold, Silver, Oil, Crypto.



Chart 2 - Ethereum cycle is ready to run on currency debasement.

ETH 1





Chart 3 - Ethereum Channel support and resistance forecast or equal move forecast.


ETH 2




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Tuesday 31 October 2023

Bitcoin working through channels

There is no need for complicated indicators when simple price channels will do.
image1

The trick is to have software to draw the parallel price channels with great accuracy. 

We can see here (Chart 1) how two A-B-C channels are forecasting current price support and resistance levels.  


Chart 1 - Bitcoin


BTC



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Friday 13 October 2023

The Dow is going Higher

The market professionals do not want the public positioned in the market better than they are.
image1

Market professionals use the news to scare the public out of their hard earned winning positions. 


Let's face it:
- All the FED tightening has been offset with Dept Treasury and Rev Repo antics.
- Higher US 10 yr rates have caused trillions of book losses on bond investments around the world.
- The FED has broken the most important market in the world, the US Treasury market (Bofa Bond Move index > 140, DXY > 107)
- Inflation is sticky due to food and energy elements, also from monetary stimulus from billions in new interest income.


Unless WW3 or US 10 yr explodes 3% higher (see KINK in chart 1 below), the worst news is over, and now the FED will try and repair the damage done to their own bond market. After all, the US bond market is GOD. US Recession fears are over played while there are ongoing fiscal spending deficits into a US election year. 


Chart 1 - Dow Jones Cycle. Unless there is a kink the Dow should travel sideways to higher.


Dow Cycle





Chart 2 - The FED can not contain inflation and must bend a knee to it own bond market, on the back of rising gold and silver prices gold stocks still have room to move higher during the current up cycle.


XAU Cycle





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Saturday 30 September 2023

Uranium Commodity Review

Uranium is taking off, or just doing another major cycle.
image1


Good fundamentals described here: 






Chart 1 - Second cycle up swing in play, say half way.


URA





Chart 2 - Support and Resistance described by parallel channels. 


URA 2




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Tuesday 19 September 2023

US GDP recovery

US GDP is bouncing back, so says the NY FED GDPNow forecast.
image1

Currently the US has theses stats [2023 Q2]:
- US debt to GDP is 120%
- US deficit to GDP is +8% 
- US federal interest expense up 100%

A recession is negative GDP.

The GFC 2008/09 recession was -3% of GDP. Today the deficit is 8% of GDP, currently there is 5% more spending then the GFC crisis. So maybe this is why the GDPNow forecast is forecasting a 3.9% forecast 2023 Q3, on the back of government spending.  



Chart 1 - NY Fed GDP now forecast for 2023 Q3


GDP Now





Chart 2 - If these good forecasts for US GDP continue then we will see a recovery in the US ISM PMI Manufacturing index.


PMI





Chart 3 - Silver is likely to recover on the back of recovering US GDP and US ISM PMI.


SILVER



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Saturday 2 September 2023

Japanese Yen Cycle Review

A regular cycle low has formed on the very important carry trade yen.
image1


Chart 1 - Regular cycle YEN low. As we know the Japanese investors are large investors in US debt, so lets review the US 10 yr cycle. 

Cycle




Chart 2 - In line with a cycle high in the US 10 year interest rate.


TNX




Chart 3 - A pullback in the US 10 year, is likely, so says the copper gold ratio, which will see a rebound in the YEN off the cycle lows. 


Gold




Chart 4 - Channel support lines are strong for the yen.

Support




Chart 5 - Sync with a shortage in US dollar funding. Going into US election year, more dollars will be printed you can assume, suggesting US dollar weakness and relief for the yen.

Dollar




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Tuesday 22 August 2023

Global M2 effect on Gold

Money supply growth leads to debt and paper market growth, and eventually the hard stuff catches up in value.
image1

What is M2? 


M2 is a measure of the money supply that includes cash, checking deposits, and other types of deposits that are readily convertible to cash, such as CDs.


Global money growth (M2) converted to US dollar terms, represents the world money supply that can be converted into US dollars and be used for trade and GDP growth. It is the grease that allows the market wheels to turn. Yes, there is a lag between the creation of M2 and its effect on the markets, but the charts below show that new global M2 tends to have an effect on gold and silver. 

When deflation pressures are strong more M2 is created, when inflation is hot M2 is reduced. 


Chart 1 - Global M2 to June 2023

M2



Chart 2 - Global M2 lows on Gold and Silver


Gold 2




Chart 3 - China has a deflation problem. China needs global M2 to grow. Makes you wonder why 101 year old Henry Kissinger and Yellen visited China recently in 2023 H1.

China




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Sunday 13 August 2023

Crude Oil near $300 plus

If the crude oil price follows its performance of the last 100 years, then a print of $300 plus oil in US dollar terms is on the table in the next decade.
image1

Of course, crude oil priced in US dollars means higher oil prices can be the result of bearish US dollar fundamentals more so than a bullish crude oil fundamentals.

Pulling commercial (light sweet) oil out of the ground can be classified into two groups: easy and hard. Easy is cheap oil production; hard is expensive oil production. The world has enjoyed cheap oil production for decades, and we are now moving into expensive oil production.

Buy the deep corrections are to be considered over the next decade.


Chart 1 - This tweet makes a point, plus it highlights the debate around future oil production. 


OIl 1




Chart 2 - Oil history and price channel forecasts

OIl 2





Chart 3 - Oil long term cycle

Oil 3




Chart 4 - No wonder central banks are buying all that gold. Gold follows oil.


OIl 4






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